A Dance with Rogues

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Spoilers follow.

In addition to being a simple bludgeoning weapon, the Light Hammer is essential to Simon Lyonson and the Princess' escape during the second half of the Bank Raider quest. It can be found in a crate in the basement of the Betancuria Castle and is used along with some Rope and Pegs to scale the walls of a large well that leads into the courtyard.