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May 6, 2015 7:06 AM EDT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of MAY, 2015

Commission File Number: 001-35278

PRIMERO MINING CORP.
(Translation of registrant's name into English)

Suite 1640, One Bentall Centre
505 Burrard Street, Box 24
Vancouver, British Columbia
V7X 1M6 Canada
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

[           ] Form 20-F   [ x ] Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [           ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [           ]

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes [           ] No [ x ]

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-

 

SUBMITTED HEREWITH

Exhibits

 99.1 Condensed Consolidated Interim Statements for the period ended March 31, 2015
     
  99.2 Management’s Discussion and Analysis
     
  99.3 CEO Certification
     
  99.4 CFO Certification
     
  99.5 News Release dated May 6. 2015

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  PRIMERO MINING CORP.
  (Registrant)
     
Date: May 5, 2015 By: /s/ Wendy Kaufman
    Wendy Kaufman
  Title: Chief Financial Officer

  


   Primero Mining Corp. - Exhibit 99.1 - Filed by newsfilecorp.com
   








PRIMERO MINING CORP. 
March 31, 2015 


Table of contents 



  
  

    Condensed 
      consolidated interim statements of operations and comprehensive income 
      (loss) 
    1 
      

  

     
     

  

    Condensed 
      consolidated interim statements of financial position 
    2 
      

  

     
     

  

    Condensed 
      consolidated interim statements of changes in equity 
    3 
      

  

     
     

  

    Condensed 
      consolidated interim statements of cash flows 
    4 
      

  

     
     

  

    Notes 
      to the condensed consolidated interim financial statements 
    5-22 
      






PRIMERO MINING CORP. 
Condensed Consolidated Interim Statements of Operations and 
Comprehensive Income (Loss) 

(In thousands of United 
States dollars, except for share and per share amounts) 
(Unaudited) 



  
  

      
     
     
      

     
     
    2014 
     

  

      
     
     
      
     
     
    (As restated, 
     

  

      
     
     
    2015 
     
     
    Note 1
    ) 

  

    Three months 
      ended March 31 
    Notes 
     
    $
     
     
    $
     

  

      
     
     
      
     
     
      
     

  

    Revenue 
    4 
     
    73,310 
     
     
    48,269 
     

  

      
     
     
      
     
     
      
     

  

    Operating expenses 
     
     
    (42,767
    ) 
      
     
    (27,683
    ) 
  

  

    Depreciation and 
      depletion 
    7 
     
    (19,073
    ) 
     
    (11,105
    ) 

  

    Total cost of sales 
     
     
    (61,840
    ) 
     
    (38,788
    ) 

  

      
     
     
      
     
     
      
     

  

    Earnings from mine operations 
     
     
    11,470 

     
     
    9,481 
     

  

    Exploration expenses 
     
     
    (121
    ) 
     
    (17
    ) 

  

    General and administrative expenses 
     
     
    (8,013
    ) 
     
    (13,335
    ) 

  

      
     
     
      
     
     
      
     

  

    Earnings (loss) from operations 
     
     
    3,336 
     
     
    (3,871
    ) 
  

  

    Transaction costs and other expenses 
     
     
    (3,906
    ) 
     
    (7,267
    ) 

  

    Foreign exchange gain (loss) 
     
     
    2,418 
     
     
    (358
    ) 
  

  

    Finance income 
     
     
    167 
     
     
    118 
     

  

    Finance expense 
    11 
     
    (2,870
    ) 
      
     
    (524
    ) 
  

  

    Gain on derivative liability 
    9 
    
     
    1,329 
     
     
    - 
     

  

    Mark-to-market gain on convertible 
      debentures 
    9 
     
    8,205 
     
     
    - 
     

  

    Impairment in value of investment in Fortune Bay 
     
     
    (534
    ) 
     
    - 
     

  

    Share in results of Santana Minerals 
     
     
    (79
    ) 
     
    (602
    ) 

  

      
     
     
      
     
     
      
     

  

    Earnings (loss) before income taxes 
     
     
    8,066 
     
     
    (12,504
    ) 
  

  

    Income tax 
      (expense) recovery 
     
     
    (4,482
    ) 
     
    4,251 
     

  

      
     
     
      
     
     
      
     

  

    Net income 
      (loss) for the period 
     
     
    3,584 
     
     
    (8,253
    ) 

  

      
     
     
      
     
     
      
     

  

    Other comprehensive income (loss), net of tax 
     
     
      
     
     
      
     

  

    Items that may be subsequently 
      reclassified to profit or loss: 
     
     
    
     
     
    
     

  

      Exchange differences on translation of foreign 
      operations, 
     net of tax of $nil (2014 - $nil) 
    		
     
     
    (514
    ) 
     
    204 
     

  

      Reclassification of unrealized loss 
      on investment in Fortune 

           Bay to impairment, 
      net of tax of $nil 		
     
     
    456 
     
     
    - 
   
  

  

    Total 
      comprehensive income (loss) for the period 
     
     
    3,526 
     
     
    (8,049
    ) 

  

      
     
     
      
     
     
      
     

  

    Basic income (loss) per share 
     
     
    0.02 
     
     
    (0.06
    ) 

  

    Diluted income (loss) per share 
     
     
    0.02 
     
     
    (0.06
    ) 

  

    Weighted average number of common shares outstanding 
     
     
    
     
     
    
     

  

      Basic 
     
     
    161,783,009 
      
     
     
    128,112,079 
     

  

      Diluted 
     
     
    161,872,810 
     
     
    128,112,079 
     




  
  

    See accompanying notes to the condensed consolidated 
      financial statements. 
    2






PRIMERO MINING CORP. 
Condensed Consolidated Interim Statements of Financial Position 

(In thousands of United States dollars) 
(Unaudited) 



  
  

      
     
     
    March 
      31, 
     
     
    December 
      31, 
     

  

      
    Notes 
     
    2015 
     
     
    2014 
    
     

  

      
     
     
    $
     
     
    $
     

  

    Assets 
     
     
      
     
     
      
     

  

    Current assets 
     
     
      
     
     
      
     

  

       Cash and cash equivalents 
     
     
    57,619 
     
     
    27,389 
     

  

       Trade and other receivables 
     
     
    1,472 
     
     
    59 
     

  

       Taxes receivable 
     
     
    32,397 
     
     
    33,272 
     

  

       Prepaid expenses 
     
     
    7,457 
     
     
    6,633 
     

  

       Inventories 
    8 
     
    19,947 
     
     
    20,366 
     

  

    Total current assets 
     
     
    118,892 
     
     
    87,719 
     

  

      
     
     
      
     
     
      
     

  

    Non-current assets 
     
     
      
     
     
      
     

  

       Restricted cash 
    6 
     
    6,469 
     
     
    17,646 
     

  

       Mining interests 
    7 
     
    881,408 
     
     
    881,480 
     

  

       Deferred tax asset 
     
     
    1,718 
     
     
    611 
     

  

       Long-term stockpile 
    8 
     
    16,297 
     
     
    14,309 
     

  

       Long-term prepayments 
     
     
    879 
     
     
    - 
     

  

       Investment in Santana Minerals 
     
     
    302 
     
     
    384 
     

  

       Investment in Fortune Bay 
     
     
    594 
     
     
    671 
     

  

    Total assets 
     
     
    1,026,559 
     
     
    1,002,820 
     

  

      
     
     
      
     
     
      
     

  

    Liabilities 
     
     
      
     
     
      
     

  

    Current liabilities 
     
     
      
     
     
      
     

  

       Trade and other payables 
     
     
    43,779 
     
     
    50,743 
     

  

       Income tax payable 
     
     
    4,218 
     
     
    1,670 
     

  

       Other taxes payable 
     
     
    3,179 
     
     
    6,593 
     

  

       Derivative liability 
    9 (i)
     
    154 
     
     
    - 
     

  

      
       Current portion of long-term debt 
    9 

     
    51,919 
     
     
    5,616 
    
     

  

    Total current liabilities 
     
     
    103,249 
     
     
    64,622 
     

  

    Non-current liabilities 
     
     
      
     
     
      
     

  

       Other taxes payable 
     
     
    11,874 
     
     
    11,295 
     

  

       Deferred tax liability 
     
     
    49,767 
     
     
    50,374 
     

  

       Decommissioning liability 
     
     
    31,409 
     
     
    32,566 
     

  

       Long-term debt 
    9 
     
    71,068 
     
     
    89,771 
     

  

       Derivative liability 
    9 (i)
     
    - 
     
     
    1,405 
     

  

       Other 
      long-term liabilities 
     
     
    4,962 
     
     
    4,802 
    
     

  

    Total liabilities 
     
     
    272,329 
     
     
    254,835 
     

  

    Equity 
     
     
      
     
     
      
     

  

    Share capital 
    10 (a) 
     
    861,795 
     
     
    858,761 
     

  

    Warrant reserve 
    10 (b) 
     
    34,782 
     
     
    34,782 
     

  

    Contributed surplus 
    10 (c) 
     
    21,211 
     
     
    21,526 
     

  

    Accumulated other comprehensive income 
     
     
    (5,219
    ) 
     
    (5,161
    ) 

  

    Deficit 
     
     
    (158,339
    ) 
     
    (161,923
    ) 

  

    Total equity 
     
     
    754,230 
     
     
    747,985 
     

  

    Total liabilities and equity 
     
     
    1,026,559 
     
     
    1,002,820 
     


Commitments and contingencies (Note 16)



  
  

    See accompanying notes to the condensed consolidated 
      financial statements. 
    3







PRIMERO MINING CORP. 

Condensed Consolidated Interim Statements of Changes in Equity 


(In thousands of United States dollars, except for number of common 
shares) 
(Unaudited) 





  
  

         
     
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     
     
    Retained    
     
     
      
     

  

      
     
     
      
     
     
      
     
     
      
     
     
      
     
     
    Accumulated 
     
     
    earnings/ 
     
     
      
     

  

      
     
     
      
     
     
      
     
     
      
     
     
      
     
     
    other 
     
     
    (deficit) 
     
     
      
     

  

      
     
     
    Share 
      capital  
     
     
    Warrants 
     
     
    Contributed 
     
     
    comprehensive 
     
     
    (As restated, 
     
     
      
     

  

      
    Notes 
     
    Shares    
     
     
    Amount    
     
     
    reserve 
     
     
    surplus 
     
     
    income    
     
     
    Note 
    1
    ) 
     
    Total 
      equity 
     

  

      
     
     
      
     
     
    $
     
     
    $
     
     
    $
     
     
    $
     
     
    $
     
     
    $
     

  

    Balance, January 1, 2014 
      
     
     
    115,726,035 
     
     
    553,518 
     
     
    34,237 
     
     
    15,518 
     
     
    (4,644
    )
     
    62,461 
     
     
    661,090 
     

  

    Shares issued for 
     
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

       Acquisition of Brigus 
      Gold Corp. 
    2    
     
    41,340,347 
     
     
    279,049 
     
     
    545 
     
     
    6,983 
     
     
    - 
     
     
    - 
     
     
    286,577 
     

  

       Exercise of stock options 
    10 (d) 
     
    1,496,542 
     
     
    11,079 
     
     
    - 
     
     
    (3,393
    ) 
     
    - 
     
     
    - 
     
     
    7,686 
     

  

       Flow-through agreement    
    10 
      (a) 
     
    1,000,000 
     
     
    7,105 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    7,105 
     

  

    Foreign currency translation 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    204 
     
     
    - 
     
     
    204 
     

  

    Share-based payment 
    10 (c) 
     
    - 
     
     
    - 
     
     
    - 
     
     
    699 
     
     
    - 
     
     
    - 
     
     
    699 
     
  

  

    Loss 
      for the period 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    (8,253
    ) 
     
    (8,253
    ) 

  

    Balance, March 31, 2014 
     
     
    159,562,924 
     
     
    850,751 
     
     
    34,782 
     
     
    19,807 
     
     
    (4,440
    ) 
     
    54,208 
     
     
    955,108 
     

  

    Shares issued for 
     
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

       Exercise of stock 
      options 
    10 
      (d) 
     
    425,202 
     
     
    3,065 
     
     
    - 
     
     
    (854
    )
     
    - 
     
     
    - 
     
     
    2,211 
     

  

       PSUs settled in shares 
    10 (e) 
     
    81,477 
     
     
    350 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    350 
     

  

       Exercise of warrants
     
     
    4,790 
     
     
    47 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    47 
     

  

       Flow-through agreement 
    10 (a) 
     
    1,481,482 
     
     
    4,548 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    4,548 
     

  

    Foreign currency translation    
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    (265
    )
     
    - 
     
     
    (265
    )  

  

    Unrealized loss on Fortune Bay investment 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    (456
    ) 
     
    - 
     
     
    (456
    ) 

  

    Share-based payment 
    10 
      (c) 
     
    - 
     
     
    - 
     
     
    - 
     
     
    2,573 
     
     
    - 
     
     
    - 
     
     
    2,573 
     

  

    Loss 
      for the period 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    (216,131
    ) 
     
    (216,131
    ) 

  

    Balance, December 31, 2014 
     
     
    161,555,875 
     
     
    858,761 
     
     
    34,782 
     
     
    21,526 
     
     
    (5,161
    ) 
     
    (161,923
    ) 
     
    747,985 
     

  

    Shares issued for 
     
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

       Exercise of stock 
      options 
    10 
      (d) 
     
    300,000 
     
     
    1,120 
     
     
    - 
     
     
    (294
    )
     
    - 
     
     
    - 
     
     
    826 
     

  

       PSUs settled in shares 
    10 (e) 
     
    388,742 
     
     
    1,914 
     
     
    - 
     
     
    (2,118
    ) 
     
    - 
     
     
    - 
     
     
    (204
    ) 

  
  

    Reclassification of 
      unrealized loss 

         on investment in Fortune Bay 		
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    456 
     
     
    - 
     
     
    456 
     

  

    Foreign currency translation 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    (514
    ) 
     
    - 
     
     
    (514
    ) 

  

    Share-based payment 
    10 
      (c) 
     
    - 
     
     
    - 
     
     
    - 
     
     
    2,097 
     
     
    - 
     
     
    - 
     
     
    2,097 
     

  

    Net 
      income for the period 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    3,584 
     
     
    3,584 
     

  

    Balance, March 31, 2015 
     
     
    162,244,617 
     
     
    861,795 
     
     
    34,782 
     
     
    21,211 
     
     
    (5,219
    ) 
     
    (158,339
    ) 
     
    754,230 
     




Total comprehensive income was $3,526 for the three months 
ended March 31, 2015 (March 31, 2014 - comprehensive loss of $8,049, as 
restated).



  
  

    See accompanying notes to the condensed consolidated 
      financial statements. 
    4







PRIMERO MINING CORP. 
Condensed Consolidated Interim Statements of Cash Flows 

(In thousands of United States dollars) 
(Unaudited) 



  
  

      
     
     
     
     
     
    2014 
     

  

      
      
     
      
     
     
    (As restated, 
     

  

      
      
     
    2015 
     
     
    Note 1
    ) 

  

    Three months 
      ended March 31 
    Notes    
     
    $ 
     
     
    $
     

  

      
      
     
      
     
     
      
     

  

    Operating activities 
      
     
      
     
     
      
     

  

    Earnings (loss) before income taxes 
      
     
    8,066 
     
     
    (12,504
    ) 

  

    Adjustments for: 
      
     
      
     
     
      
     

  

           Depreciation and depletion 
    7 
     
    19,073 
     
     
    11,105 
     

  

           Share-based 
      payments - Stock Option plan 
      
     
    352 
     
     
    153 
     

  

           Share-based payments - Phantom 
      Share Unit plan 
      
     
    2,275 
     
     
    7,989 
     

  

           Payments made 
      under the Phantom Share Unit Plan 
      
     
    (1,513
    ) 
     
    (2,626
    ) 

  

           Unrealized loss on investment in 
      Santana Minerals 
      
     
    79 
     
     
    602 
     

  

           Unrealized gain 
      on derivative liabilities 
      
     
    (1,329
    ) 
     
    - 
     

  

           Mark-to-market gain on 
      convertible debentures 
      
     
    (8,205
    ) 
     
    - 
     

  

           Loss on 
      write-down of inventory 
      
     
    - 
     
     
    1,225 
     

  

           Unrealized foreign exchange gain    
      
     
    (1,169
    ) 
     
    220 
     

  

           Other 
      
     
    534 
     
     
    372 
     

  

           Taxes paid 
      
     
    (5,847
    ) 
     
    (433
    ) 

  

    Other adjustments 
      
     
      
     
     
      
     

  

    Transaction costs (disclosed in financing activities) 
      
     
    3,639 
     
     
    - 
     

  

    Finance income (disclosed in investing 
      activities) 
      
     
    (48
    ) 
     
    (118
    ) 

  

    Finance expense
         
     
    2,870 
     
     
    524    
     

  

    Operating cash flow before working capital 
      changes 
      
     
    18,777 
     
     
    6,509 
     

  

    Changes in 
      non-cash working capital 
    12
     
    (3,513
    ) 
     
    (13,943
    ) 

  

    Cash provided by (used in) operating activities 
      
     
    15,264 
     
     
    (7,434
    ) 

  

      
      
     
      
     
     
      
     

  

    Investing activities 
      
     
      
     
     
      
     

  

    Expenditures on mining interests 
      
     
    (19,907
    ) 
     
    (20,285
    ) 

  

    Acquisition of Brigus Gold Corp (net) 
      
     
    - 
     
     
    (7,773
    ) 

  

    Interest received 
      
     
    48 
     
     
    118 
     

  

    Increase in long-term stockpile 
      
     
    (1,988
    ) 
     
    - 
     

  

    Cash used in 
      investing activities 
         
     
    (21,847
    ) 
     
    (27,940
    ) 

  

      
      
     
      
     
     
      
     

  

    Financing activities 
      
     
      
     
     
      
     

  

    Repayment of debt 
    9(iv) 
     
    (40,000
    ) 
     
    (2,611
    ) 

  

    Proceeds on exercise of options 
      
     
    826 
     
     
    7,686 
     

  

    Issuance of $75 million convertible debt
      
     
    75,000 
     
     
    - 
     

  

    Transaction costs on issuance of convertible debt 
      
     
    (3,639
    ) 
     
    - 
     

  

    Payments on capital leases 
      
     
    (1,867
    ) 
     
    - 
     

  

    Funds released from reclamation bond 
    6 
     
    8,544 
     
     
    - 
     

  

    Proceeds on issuance of flow-through shares    
      
     
    - 
     
     
    8,037 
     

  

    Interest paid 
         
     
    (2,971
    ) 
     
    (1,837
    ) 

  

    Cash provided by financing activites 
      
     
    35,893 
     
     
    11,275 
     

  

      
      
     
      
     
     
      
     

  

    Effect of foreign exchange rate changes on cash 
      
     
    920 
     
     
    (240
    ) 

  

      
      
     
      
     
     
      
     

  

    Increase (decrease) in cash 
      
     
    30,230 
     
     
    (24,339
    ) 

  

    Cash, beginning of 
      period 
         
     
    27,389 
     
     
    110,711 
     

  

    Cash, end of period 
      
     
    57,619 
     
     
    86,372 
     


Supplemental cash flow information (Note 12)



  
  

    See accompanying notes to the condensed consolidated 
      financial statements. 
    5







PRIMERO MINING CORP. 
Notes to the Condensed Consolidated Interim Financial Statements 

(In thousands of United States dollars, except for number of 
common shares) 
(Unaudited) 



  
  

    1. 
    
      
Corporate Information and basis of 
    preparation

  

     
     

  

    
    
      
Primero Mining Corp. (Primero or the Company) is a 
      publicly traded company, listed on both the Toronto and New York Stock 
      Exchanges. Its registered office is Suite 1500, 1055 West Georgia Street, 
      Vancouver, British Columbia. The Company owns two producing properties, 
      the San Dimas gold-silver mine in the San Dimas district of Mexico and the 
      Black Fox gold mine in Timmins, Ontario, Canada. The Company owns two 
      properties adjacent to the Black Fox gold mine – Grey Fox and Pike River, 
      which together with the Black Fox mine and the Black Fox mill, comprise 
      the Black Fox Complex. The Company also has one project in the development 
      stage, Cerro del Gallo, and one exploration property, Ventanas, both 
      located in Mexico.

  

     
     

  

    
    
      
These condensed consolidated interim financial statements 
      have been prepared in accordance with International Accounting Standard 
      34, Interim Financial Reporting (IAS 34) as issued by the International 
      Accounting Standards Board (IASB). It does not include all the necessary 
      annual disclosures in accordance with International Financial Reporting 
      Standards (IFRS) and should be read in conjunction with the Company’s most 
      recently issued annual consolidated financial statements which include 
      information necessary or useful to understanding the Company’s business 
      and financial statement presentation.

  

     
     

  

    
    
      
The Company’s significant accounting policies, judgements 
      and estimates were presented in Note 2 of the audited annual consolidated 
      financial statements for the year ended December 31, 2014 and have been 
      consistently applied in the preparation of these condensed consolidated 
      interim financial statements except for the accounting policy changes 
      disclosed in Note 3.

  

     
     

  

    
    
      
These condensed consolidated interim financial statements 
      were approved by the Company’s Board of Directors on May 5, 
2015.

  

     
     

  

    
    
      
(i) Restatement of comparative 
  information

  

     
     

  

    
    
      
As a result of the finalization of the purchase price 
      allocation in the fourth quarter of 2014 relating to the acquisition of 
      Brigus Gold Corp. (Brigus) (note 2), depletion expense was adjusted from 
      the date of acquisition and a $13.2 million decrease was recorded in the 
      Company’s fourth quarter 2014 statement of operations and comprehensive 
      loss relating to the period from March 5 to September 30, 2014. 
      Accordingly, in presenting the comparative operating results for the 
      quarter ended March 31, 2014, the Company reduced depletion by $1.2 
      million and recognized a corresponding reduction in income tax recovery of 
      $0.4 million.


6 





PRIMERO MINING CORP. 

    Notes to the Condensed Consolidated Interim Financial Statements 

  (In thousands of United States dollars, except for number of 
  common shares) 

  (Unaudited) 


The following table summarizes the 
corrections on each of the affected financial statement line items for the 
period presented. 



  
  

     
      
     
    As previously 
     
     
    Restatement 
     
     
      
     

  

     
      
     
    reported 
     
     
    adjustment 
     
     
    As restated 
     

  

     
    March 31, 2014 
     
    $ 
     
     
    $
     
     
    $
     

  

     
      
     
      
     
     
      
     
     
      
     

  

     
    Depreciation and depletion 

     
    (12,321
    ) 
     
    1,216 
     
     
    (11,105
    ) 

  

     
    Income tax recovery 
     
    4,633 
     
     
    (382
    ) 
     
    4,251 
     

  

     
    Loss for the period 
     
    (9,087
    ) 
     
    834 
     
     
    (8,253
    ) 





  
  

    
    
      
(ii) Reclassification of comparative 
      information

  

     
    
      
 

  

    
    
      
Certain amounts in the 2014 consolidated financial 
      statements have been reclassified to conform to the current year 
      presentation. These reclassifications had no effect on loss for the period 
      as previously reported.

  

     
    
      
 

  

    2. 
    
      
Acquisition of Brigus Gold Corp.

  

     
    
      
 

  

    
    
      
On March 5, 2014, the Company acquired all of the issued 
      and outstanding common shares of Brigus. Brigus was a gold producing 
      company, whose principal assets were the Black Fox mine and adjacent 
      properties, Grey Fox and Pike River, located in the Township of Black 
      River–Matheson, Ontario, Canada, and the Black Fox mill (together the 
      “Black Fox Complex”).

  

     
    
      
 

  

    
    
      
As part of the transaction, Primero acquired each 
      outstanding Brigus common share for 0.175 of a Primero common share (the 
      “Exchange Ratio”). In addition, Brigus shareholders received 0.1 of a 
      common share in a newly incorporated company, Fortune Bay Corp. (“Fortune 
      Bay”) for each Brigus common share as part of the Arrangement. Fortune Bay 
      holds Brigus’ non-Ontario assets and was capitalized on March 5, 2014 with 
      Cdn$10 million in cash by Primero. Upon completion of the Arrangement, 
      Brigus shareholders held, in aggregate, a 90.1% interest in Fortune Bay 
      and Primero held the remaining 9.9% interest. Upon completion of the 
      Arrangement, each outstanding warrant to purchase a Brigus common share 
      became exercisable to purchase 0.175 of a Primero common share and 0.1 of 
      a Fortune Bay common share.

  

     
    
      
 

  

    
    
      
The Company determined that the acquisition of Brigus was 
      a business combination in accordance with the definition in IFRS 3 
      Business combinations and as such has accounted for it in accordance 
      with this standard using the acquisition method with Primero as the 
      acquirer. On March 28, 2014, Brigus changed its name to Primero Gold 
      Canada Inc.

  

     
    
      
 

  

    
    
      
The fair value assigned to the identified assets and 
      liabilities was finalized during the fourth quarter of 2014 and is 
      presented below. Transaction costs of $7.5 million relating to the 
      acquisition were expensed in accordance with IFRS 3, Business 
      combinations; these transaction costs are recognized within 
      “transaction costs and other expenses” in the consolidated 
      statement of operations and comprehensive loss for the year ended December 
      31, 2014.


7 





PRIMERO MINING CORP. 

    Notes to the Condensed Consolidated Interim Financial Statements 

  (In thousands of United States dollars, except for number of 
  common shares) 

  (Unaudited) 





  
  

     
      
     
    $000s 
     

  

     
    Purchase price 
     
      
     

  

     
    Common shares 
     
    279,049 
     

  

     
    Cash 
     
    15,030 
     

  

     
    Share-based compensation 
     
    6,983 
     

  

     
    Warrants 
     
    545 
     

  

     
      
     
    301,607 
     

  

     
      
     
      
     

  

     
    Net assets acquired 
     
      
     

  

     
    Assets 
     
      
     

  

     
    Cash 
     
    7,257 
     

  

     
    Restricted Cash 
     
    18,524 
     

  

     
    Accounts receivable 
     
    848 
     

  

     
    Inventories 
     
    15,567 
     

  

     
    Investment in Fortune Bay (a) 
     
    1,127 
     

  

     
    Prepaid expenses 
     
    482 
     

  

     
    Mining interests (c) 
     
    302,551 
     

  

     
    Goodwill (b) 
     
    98,961 
     

  

     
      
     
      
     

  

     
    Liabilities & Equity 
     
      
     

  

     
    Accounts payable 
     
    (30,370
    ) 

  

     
    Finance leases 
     
    (15,511
    ) 

  

     
    Decommissioning liability 
     
    (15,746
    ) 

  

     
    Convertible debentures 
     
    (45,168
    ) 

  

     
    Derivative liability 
     
    (3,696
    ) 

  

     
    Senior secured notes 
     
    (22,713
    ) 

  

     
    Deferred tax 
      liability 
     
    (10,506
    ) 

  

     
      
     
    301,607 
     




  
  

     
    (a) 
    
      
During the quarter ended March 31, 2015, the Company 
      performed an assessment of its investment in Fortune Bay and recognized an 
      impairment loss of $534 in the condensed consolidated interim statement of 
      operations and comprehensive loss with a corresponding reduction in 
      accumulated other comprehensive income.

  

     
    (b) 
    
      
In the third quarter of 2014, the Company determined that 
      it could not support the value assigned to goodwill and recorded an 
      impairment charge of the full $99.0 million

  

     
    (c) 
    
      
In the fourth quarter of 2014 the Company recorded an 
      impairment charge of $75 million resulting from its growing understanding 
      of the mine parameters, including a decline in mineable ounces and 
      depletion of the open pit in 2015.


8 





PRIMERO MINING CORP. 

    Notes to the Condensed Consolidated Interim Financial Statements 

  (In thousands of United States dollars, except for number of 
  common shares) 

  (Unaudited) 





  
  

    3. 
    
      
Functional currency change and recent pronouncements 
      issued

  

     
     

  

    
    
      
Functional and presentation currency

  

     
     

  

    
    
      
On January 1, 2015, Primero Gold Canada Inc. (PGCI) and 
      Primero Mining Corp. (PMC) amalgamated as one company under the name 
      Primero Mining Corp. (new PMC). PGCI, which holds the Black Fox Complex 
      assets, uses the U.S. dollar as its functional currency, while the 
      functional currency of the former parent company, PMC, was the Canadian 
      dollar.

  

     
     

  

    
    
      
On March 12, 2015 Canada Revenue Agency approved the 
      election of U.S. dollar as the functional currency of new PMC. As a result 
      of the change in underlying conditions relevant to new PMC, effective 
      March 31, 2015 the functional currency of former PMC was changed from the 
      Canadian dollar to the U.S. dollar.

  

     
     

  

    
    
      
Recent pronouncements issued

  

     
     

  

    
    
      
The Company has reviewed new and revised accounting 
      pronouncements that have been issued but are not yet effective and 
      determined that the following may have an impact in the future on the 
      Company. The Company is currently evaluating the impact of adopting these 
      standards on its consolidated financial statements.

  

     
     

  

    
    
      
In May 2014, the IASB issued IFRS 15 - Revenue from 
      Contracts with Customers (IFRS 15) which supersedes existing standards and 
      interpretations including IAS 18, Revenue. IFRS 15 establishes a single 
      five-step model framework for determining the nature, amount, timing and 
      uncertainty of revenue and cashflows arising from a contract with a 
      customer. The standard is effective for annual periods beginning on or 
      after January 1, 2017, with early adoption permitted.

  

     
     

  

    
    
      
Primero will be required to adopt IFRS 9, “Financial 
      Instruments” on January 1, 2018. IFRS 9 is the result of the first phase 
      of the IASB’s project to replace IAS 39, “Financial Instruments: 
      Recognition and Measurement”. The new standard replaces the current 
      multiple classification and measurement models for financial assets and 
      liabilities with a single model that has only two classification 
      categories: amortized cost and fair value.


9 





PRIMERO MINING CORP. 
Notes to the Condensed Consolidated Interim Financial Statements 

(In thousands of United States dollars, except for number of 
common shares) 
(Unaudited) 



  
  

    4. 
    
      
Revenue

  

     
     

  

    
    
      
Revenue is comprised of the following 
  sales:




  
  

     
      
     
    2015 
     
     
    2014 
     

  

     
    Three months 
      ended March 31 
     
    $
     
     
    $
     

  

     
    Gold 
     
    65,295 
     
     
    39,604 
     

  

     
    Silver 
     
    8,015 
     
     
    8,665 
    
     

  

     
      
     
    73,310 
     
     
    48,269 
     




  
  

    
    
      
Silver Stream agreement - The Company is entitled to sell 
      50% of silver production above a 6.0 million (3.5 million – March 31, 
      2014) ounce annual threshold at market prices. The contract year for the 
      purposes of the threshold runs from August 6 of a year to August 5 of the 
      following year. The threshold for the year ended August 5, 2015 has not 
      been met (4.3 million ounces have been delivered under the contract as at 
      March 31, 2015), while the threshold for the year ended August 5, 2014 was 
      met in early March. During the three months ended March 31, 2015, the 
      Company sold Nil (2014 - 192,500) ounces of silver at market prices for 
      revenue of $Nil (2014 - $3.9 million).

  

     
     

  

    
    
      
Gold Stream agreement – As part of the acquisition of 
      Brigus the Company assumed a gold purchase agreement related to the Black 
      Fox Mine. Under the agreement, the Company is obligated to sell 8% of the 
      future gold production at the Black Fox mine and 6.3% at the adjoining 
      Pike River property (Black Fox Extension). During the three months ended 
      March 31, 2015, the Company recorded revenue of $0.9 million (2014 - $0.2 
      million) under the contract terms.

  

     
     

  

    5. 
    
      
Income taxes

  

     
     

  

    
    
      
Advanced Pricing Agreement (APA)

  

     
     

  

    
    
      
On October 17, 2011 the Company’s Mexican subsidiary 
      filed an APA with the Mexican tax authorities on the appropriate price for 
      the intercompany sale of silver under the silver purchase agreement. On 
      October 4, 2012, the Mexican tax authorities ruled on the APA. The ruling 
      confirmed that the Company's Mexican subsidiary appropriately recorded 
      revenue and taxes from sales under the silver purchase agreement at 
      realized prices rather than spot prices effective from August 6, 
    2010.

  

     
     

  

    
    
      
Under Mexican tax law, an APA ruling is generally 
      applicable for up to a five year period. For Primero this applies to the 
      fiscal years 2010 to 2014. Assuming the Company continues to sell silver 
      from its San Dimas mine on the same terms and there are no changes in the 
      application of Mexican tax laws relative to the APA ruling, the Company 
      expects to pay taxes on realized prices for the life of the San Dimas 
      mine. Should this judgment change, there could be a material change in the 
      Company’s results of operations, financial condition and cash 
  flows.


10 





PRIMERO MINING CORP. 
Notes to the Condensed Consolidated Interim Financial Statements 

(In thousands of United States dollars, except for number of 
common shares) 
(Unaudited) 



  
  

    6. 
    
      
Restricted cash

  

     
     

  

    
    
      
In 2015, the Company changed its form of financial 
      assurance on its closure obligations at the Black Fox Complex. At March 
      31, 2015, restricted cash of $6.5 million (C$8.2 million) represented 
      collateralized cash held for a letter of credit securing C$20.5 million of 
      closure bonds held with the Ontario Ministry of Northern Development 
      (OMND) in connection with the site closure obligations at the Black Fox 
      Complex. At December 31, 2014, the restricted cash balance of $17.6 
      million represented fully cash collateralized letters of credit of C$19.0 
      million and cash on deposit of C$1.5 million with the OMND securing the 
      same closure obligations for the Black Fox Complex.

  

     
     

  

    7. 
    
      
Mining interests

  

     
     

  

    
    
      
Mining interests include mining and exploration 
      properties and related plant and equipment:






  
  

     
      
     
      
     
     
      
     
     
    Plant, 
     
     
      
     
     
      
     

  

     
      
     
    Mining properties 
     
     
    Land and 
     
     
    equipment and 
     
     
    Construction 
     
     
      
     

  

     
      
     
    and leases 
     
     
    buildings 
     
     
    vehicles 
     
     
    in progress 
     
     
    Total 
     

  

     
      
     
    $
     
     
    $
     
     
    $
     
     
    $
     
     
    $
     

  

     
    Cost 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

     
      
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

     
    At January 1, 2014 
     
    580,683 
     
     
    55,414 
     
     
    73,510 
     
     
    29,966 
     
     
    739,573 
     

  

     
    At 
      December 31, 2014 
     
    769,036 
     
     
    68,755 
     
     
    174,752 
     
     
    39,703 
     
     
    1,052,246 
     

  

     
    At March 31, 2015 
     
    782,979 
     
     
    68,156 
     
     
    175,781 
     
     
    45,236 
     
     
    1,072,153 
     


Accumulated depreciation and 
depletion





  
  

     
    At January 1, 2014 
     
    70,804 
     
     
    7,442 
     
     
    25,074 
     
     
    - 
     
     
    103,320 
     

  

     
    At 
      December 31, 2014 
     
    113,695 
     
     
    10,685 
     
     
    46,386 
     
     
    - 
     
     
    170,766 
     

  

     
    At March 31, 2015 
     
    129,006 
     
     
    10,517 
     
     
    51,221 
     
     
    - 
     
     
     190,745 
     


Carrying value





  
  

     
    At January 1, 2014 
     
    509,879 
     
     
    47,972 
     
     
    48,436 
     
     
    29,966 
     
     
    636,253 
     

  

     
    At 
      December 31, 2014 
     
    655,341 
     
     
    58,070 
     
     
    128,366 
     
     
    39,703 
     
     
    881,480 
     

  

     
    At March 31, 2015 
     
    653,972 
     
     
    57,640 
     
     
    124,560 
     
     
    45,236 
     
     
    881,408 
     


A summary of mining interest by 
property is as follows: 





  
  

     
      
     
    Mining 
     
     
      
     
     
    Plant, 
     
     
      
     
     
      
     
     
      
     

  

     
      
     
    properties 
     
     
    Land and 
     
     
    equipment 
     
     
    Construction 
     
     
    March 31, 
     
     
    December 31, 
     

  

     
      
     
    and leases 
     
     
    buildings 
     
     
    and vehicles 
     
     
    in progress 
     
     
    2015 
     
     
    2014 
     

  

     
      
     
    $
     
     
    $
     
     
    $
     
     
    $
     
     
    $
     
     
    $
     

  

     
    San Dimas 
     
    402,464 
     
     
    45,234 
     
     
    49,551 
     
     
    41,734 
     
     
    538,984 
     
     
    543,621 
     

  

     
    Black Fox Complex 
     
    172,001 
     
     
    8,359 
     
     
    74,483 
     
     
    3,502 
     
     
    258,344 
     
     
    255,136 
     

  

     
    Cerro Del Gallo 
     
    79,507 
     
     
    4,047 
     
     
    282 
     
     
    - 
     
     
    83,836 
     
     
    82,437 
     

  

     
    Corporate 
     
    - 
     
     
    - 
     
     
    244 

     
     
    - 
     
     
    244 
      
     
     
    286 

     

  

     
    Total 
     
    653,972 
     
     
    57,640 
     
     
    124,560 
     
     
    45,236 
     
     
    881,408 
     
     
    881,480 
     


All property of the San Dimas mine is 
pledged as security for the Company’s obligations under the silver purchase 
agreement and certain assets of the Black Fox Complex are pledged as security 
for the gold purchase agreement (Notes 4 and 9). 


11 





PRIMERO MINING CORP. 
Notes to the Condensed Consolidated Interim Financial Statements 

(In thousands of United States dollars, except for number of 
common shares) 
(Unaudited) 



  
  

    
    
      
The carrying value of property, plant, and equipment 
      under finance leases at March 31, 2015 was $20.0 million (December 31, 
      2014 - $22.4 million). The lessors hold first security rights over the 
      leased assets.

  

     
     

  

    
    
      
Depreciation and depletion expense for the three months 
      ended March 31, 2015 was $19.1 million (2014 - $11.1 million), of which 
      $0.5 million represents the change in the inventories balance in the three 
      months ended March 31, 2015 (2014 – $1.3 million).

  

     
     

  

    8. 
    
      
Inventories




  
  

     
      
     
    March 31 
     
     
    December 31 
     

  

     
      
     
    2015 
     
     
    2014 
     

  

     
      
     
    $
     
     
    $
     

  

     
    Current portion of inventory 
     
      
     
     
      
     

  

     
    Gold and silver 
     
    6,966 
     
     
    6,950 
     

  

     
    Stockpiled ore 
     
    1,541 
     
     
    585 
     

  

     
    Work-in-progress 
     
    4,959 
     
     
    6,140 
     

  

     
    Supplies 
     
    6,481 
     
     
    6,691 
    
     

  

     
      
     
    19,947 
     
     
    20,366 
     

  

     
    Long-term stockpile 
     
    16,297 
     
     
    14,309 
     

  

     
      
     
    36,244 
     
     
    34,675 
     




  
  

    9. 
    
      
Current and long-term 
debt




  
  

     
      
     
    March 31 
     
     
    December 31 
     

  

     
      
     
    2015 
     
     
    2014 
     

  

     
      
     
    $
     
     
    $
     

  

     
    Current debt 
     
      
     
     
      
     

  

     
          
       Senior unsecured convertible debentures (i) 
     
    46,668 
     
     
    - 
     

  

     
           Finance lease liabilities (ii)
     
    5,250 
     
     
    5,616    
     

  

     
      
     
    51,919 
     
     
    5,616
     

  

     
    Long-term debt 
     
      
     
     
      
     

  

     
          
     Senior unsecured convertible debentures (i) 
     
    -
     
     
    46,315
     
  

  

     
          
       5.75% convertible unsecured debentures (iii) 
     
    66,795 
     
     
    - 
     

  

     
           Finance lease 
      liabilities (ii) 
     
    4,273 
     
     
    5,629 
     

  

     
           Line of credit (iv) 
     
    - 
     
     
    37,827 
     

  

     
      
     
    71,068 
     
     
    89,771 
     

  

     
      
     
    122,987 
     
     
    95,387 
     





  
  

     
    (i) 
    
      
As part of the acquisition of Brigus, the Company assumed 
      $50 million of senior unsecured debentures. The debenture bears interest 
      at 6.5% and matures March 31, 2016. The Company made a change of control 
      offer for Brigus’ senior unsecured convertible debentures on April 4, 
      2014. Investors holding $1.9 million of the debentures accepted the 
      Company’s offer and these debentures were repaid on May 16, 2014, leaving 
      $48.1 million of principal outstanding as at March 31, 2015.

  

     
     
     

  

     
    
    
      
In accordance with IAS 39, Financial Instruments: 
      Recognition and Measurement, the debentures are considered to contain an 
      embedded derivative relating to the conversion option. The conversion option was valued upon initial 
      recognition at fair value using an option pricing model and was separated 
      from the debt component of the debentures. The debt component of the 
      debentures was measured upon initial recognition, based on the present 
      value of the cash flows associated with the debentures. Subsequent to 
      initial recognition, the embedded derivative component is re-measured at 
      fair value at each reporting date while the debt component is accreted to 
      the face value of the debentures using the effective interest rate through 
      periodic charges to finance expense over the term of the debentures. 
      Accretion relating to the debentures for the three month period ended 
  March 31, 2015 was $0.4 million (2014 - $0.1 million).


12 





PRIMERO MINING CORP. 
Notes to the Condensed Consolidated Interim Financial Statements 

(In thousands of United States dollars, except for number of 
common shares) 
(Unaudited) 



  

     
    (ii) 
    
      
The Company is obligated under various finance leases for 
      equipment as well as a milling facility on the Black Fox Complex. All 
      finance lease agreements provide that the Company can purchase the leased 
      equipment at the end of the lease term for a nominal amount. Interest 
      payable on the various leases range from a fixed rate of 4.75% to 6.60%. 
      The are no restrictions placed on the Company as a result of these leases, 
      however, the lessors hold first security rights over the leased 
    assets.

  

     
     
     

  

     
    (iii) 
    
      
On February 9, 2015, the Company closed its offering (the 
      Offering) of $75 million aggregate principal amount of 5.75% convertible 
      unsecured subordinated debentures (the 5.75% Debentures) maturing on 
      February 28, 2020. The Debentures bear interest at a rate of 5.75% per 
      annum, payable in U.S. dollars semi-annually on August 28 and February 28 
      each year, commencing on August 28, 2015. The 5.75% Debentures are 
      convertible into the Company’s common shares at a conversion price of 
      approximately $6.55 per share, representing a conversion rate of 152.6718 
      common shares per $1,000 principal amount of Debentures. Upon conversion, 
      holders will be entitled to receive accrued and unpaid interest up to, but 
      excluding, the date of conversion.

  

     
     
     

  

     
    
    
      
The 5.75% Debentures are not redeemable prior to February 
      28, 2018. On and after February 28, 2018 and prior to February 28, 2020, 
      the 5.75% Debentures may be redeemed by the Company, in whole or in part 
      from time to time, on not more than 60 days and not less than 30 days 
      prior notice, at a redemption price equal to their principal amount plus 
      accrued and unpaid interest, if any, up to but excluding the date set for 
      redemption, provided the simple average of the daily volume-weighted 
      average trading price of the common shares on the New York Stock Exchange 
      for the 20 consecutive trading days ending five trading days prior to the 
      date on which notice of redemption is provided is at least 125% of the 
      conversion price.

  

     
     
     

  

     
    
    
      
In accordance with IAS 39, Financial Instruments: 
      Recognition and Measurement, the 5.75% Debentures are considered to 
      contain embedded derivatives relating to the conversion and redemption 
      options. The Company has elected to classify the convertible debenture as 
      a financial instrument measured at fair value for reporting purposes given 
      that the debentures contain multiple embedded derivatives. Fair value 
      changes are recorded through the statement of income and comprehensive 
      loss. Transaction costs associated with the debentures of $3.7 million 
      were expensed during the quarter ended March 31, 2015.

  

     
     
     

  

     
    (iv) 
    
      
The Company closed a $75 million revolving credit 
      facility, provided by two Canadian banks, on May 23, 2014. The line of 
      credit has a three-year term and bears interest at a floating interest 
      rate equal to LIBOR or the the prime rate of Canada or the bankers’ 
      acceptance rate (depending on the choice of credit availment by the 
      Company) plus an applicable margin, which was 
approximately 5.25% per annum during the three month period ended March 31, 
2015. The line of credit is secured by substantially all of the Company’s 
assets. As at December 31, 2014, the Company had drawn $40 million under the 
line of credit. Net transaction costs of $2.2 million have been netted against 
the drawn amount resulting in a carrying balance of $37.8 million at December 
31, 2014.


13 





PRIMERO MINING CORP. 

  Notes to the Condensed Consolidated Interim Financial Statements 

(In thousands of United States dollars, except for number of 
common shares) 
(Unaudited) 


On March 13, 2015, the Company made a 
payment on the outstanding balance of the line of credit utilizing the proceeds 
from the Offering (Note 9(iii)). Following the payment of the line of credit, 
the remaining unamortized transaction costs amounting to $1.9 million are 
reclassified as prepayment for pre-arranged services and will be amortized over 
the remaining term of the facility as a finance expense. 



  
  

    10. 
    
      
Shareholders’ equity

  

     
     
     

  

    
    (a) 
    
      
Share capital

  

     
     
     
  

    
    
      
The authorized share capital consists of unlimited common 
      shares without par value and unlimited preferred shares, issuable in 
      series with special rights and restrictions attached.

  

     
     
     

  

    
    
      
The Company received $11.7 million (net of transaction 
      costs) from the proceeds of two flow- through financings in 2014 to fund 
      exploration costs at the Grey Fox and Pike River properties. Primero 
      raised Cdn$9 million in March 2014 by issuing 1,000,000 flow through 
      shares and Cdn$8 million in December 2014 by issuing 1,481,482 
      flow-through shares. All of the March 2014 financing was spent by December 
      31, 2014 and all of the December 2014 financing is expected to be spent by 
      December 31, 2015.

  

     
     
     

  

    
    (b) 
    
      
Warrants

  

     
     
     
  

    
    
      
As at March 31, 2015 and December 31, 2014, the Company 
      had 20.8 million warrants outstanding which are exercisable to purchase 
      20.8 million common shares at a price of Cdn$8.00 until July 20, 
    2015.

  

     
     
     

  

    
    (c) 
    
      
Contributed Surplus

  

     
     
     
  

    
    
      
During the three month period ended March 31, 2015, the 
      Company recorded compensation expense relating to stock options and the 
      2013 PSU Plan of $2,097. Contributed surplus relating to exercised stock 
      options of $294 and settlement of 2013 PSUs in shares of $2,118 were 
      credited to share capital net of cash payments of $204.

  

     
     
     

  

    
    (d) 
    
      
Stock options

  

     
     
     
  

    
    
      
Under the Company’s stock option plan (the Plan), the 
      number of common shares that may be issued on the exercise of options 
      granted under the Plan is equal to 10% of the issued and outstanding 
      shares of the Company at the time an option is granted (less any common 
      shares reserved for issuance under other share compensation 
      arrangements).

  

     
     
     

  

    
    
      
A summary of the Company’s stock option activities for 
      the three month period ended March 31, 2015 and the year ended December 
      31, 2014 is presented below.


14 





PRIMERO MINING CORP. 
Notes to the Condensed Consolidated Interim Financial Statements 

(In thousands of United States dollars, except for number of 
common shares) 
(Unaudited) 



  
  

     
      
     
      
     
     
    Weighted 
     

  

     
      
     
    Options 
     
     
    average 
     

  

     
      
     
    outstanding 
     
     
    exercise price 
     

  

     
      
     
    # 
      
     
     
    C$ 
      
     

  

     
    Outstanding at January 1, 
      2014 
     
    7,963,990 
     
     
    5.85 
     

  

     
    Granted 
     
    3,682,393 
     
     
    6.75 
     

  

     
    Exercised 
     
    (1,921,744
    ) 
     
    5.50 
     

  

     
    Cancelled 
     
    (172,500
    ) 
     
    6.90 
     

  

     
    Expired 
     
    (297,915
    ) 
     
    7.70 
     

  

     
    Outstanding at December 31, 2014 
     
    9,254,224 
     
     
    6.17 
     

  

     
    Granted 
     
    1,540,589 
     
     
    4.19 
     

  

     
    Exercised 
     
    (300,000
    ) 
     
    3.47 
     

  

     
    Cancelled 
     
    (53,500
    ) 
     
    6.43 
     

  

     
    Expired 
     
    (32
    ) 
     
    18.84 
    
     

  

     
    Outstanding at March 31, 2015 
     
    10,441,281 
     
     
    5.96 
     


The following table summarizes the 
weighted average assumptions used in the Black-Scholes valuation model for the 
determination of the cost of stock options issued during the three month period 
ended March 31, 2015 and 2014. 



  
  

     
      
     
    2015 
     
     
    2014 
    
     

  

     
    Risk free interest rate 
     
    0.53% 
     
     
    1.33% 
     

  

     
    Expected life in years 
     
    3.50 
     
     
    3.50 
     

  

     
    Volatility 
     
    58.62% 
     
     
    53.00% 
     

  

     
    Expected dividends 
     
    0% 
     
     
    0% 
     

  

     
    Forfeiture rate 
     
    5.00% 
     
     
    5.00% 
     

  

     
    Weighted average 
      fair value of options issued 
     
    C$1.69 
     
     
    C$2.91 
     


As at March 31, 2015, the following 
stock options were outstanding and exercisable: 





  
  

     
      
     
    Awards Outstanding     
     
     
    Awards Exercisable     
     

  

     
      
     
      
     
     
      
     
     
    Weighted 
     
     
      
     
     
      
     
     
    Weighted 
     

  

     
      
     
      
     
     
    Remaining 
     
     
    average 
     
     
      
     
     
    Remaining 
     
     
    average 
     

  

     
    Range of exercise 
     
      
     
     
    contractual 
     
     
    exercise 
     
     
      
     
     
    contractual 
     
     
    exercise 
     

  

     
    price per share 
     
    Quantity 
     
     
    life 
     
     
    price 
     
     
    Quantity 
     
     
    life 
     
     
    price 
     

  

     
    $
     
    # 
     
     
    (in 
      years) 
     
     
    C$ 
     
     
    # 
     
     
    (in 
      years) 
     
     
    C$ 
     

  

     
    $2.60 - $5.00 
     
    2,000,425 
     
     
    4.64 
     
     
    4.02 
     
     
    295,079 
     
     
    3.41 
     
     
    3.05 
     

  

     
    $5.01 - $8.00 
     
    7,592,372 
     
     
    0.95 
     
     
    6.14 
     
     
    7,124,772 
     
     
    0.76 
     
     
    6.05 
     

  

     
    $8.01 - $11.00 
     
    824,306 
     
     
    1.00 
     
     
    8.77 
     
     
    824,306 
     
     
    1.00 
     
     
    8.77 
     

  

     
    $11.01 - $15.00 
     
    6,242 
     
     
    4.17 
     
     
    12.96 
     
     
    6,242 
     
     
    4.17 
     
     
    12.96 
     

  

     
    $15.01 - $19.13 
     
    17,936 
     
     
    1.70 
     
     
    16.40 
     
     
    17,936 
     
     
    1.70 
     
     
    16.40 
     

  

     
      
     
    10,441,281 
     
     
    1.67    
     
     
    5.96    
     
     
    8,268,335 
     
     
    0.88    
     
     
    6.24    
     




15 





PRIMERO MINING CORP. 
Notes to the Condensed Consolidated Interim Financial Statements 

(In thousands of United States dollars, except for number of 
common shares) 
(Unaudited) 



  
  

     
    (e) 
    
      
Phantom share unit plans


The Company has three phantom share 
unit plans: 



  
  

     
    (i) 
    
      
Phantom Share Unit Plan (“PSUP”). A cash-settled plan. 
      The amount to be paid for vested units is based on the volume weighted 
      average price per share of the Company traded on the Toronto Stock 
      Exchange over the last twenty trading days preceding the vesting 
    date.

  

     
     
     

  

     
    (ii) 
    
      
Directors PSU plan (“Directors PSUP”). A person holding 
      Director PSUs is entitled to elect to receive, at vesting either (1) a 
      cash amount equal to the number of Directors’ PSUs that vest multiplied by 
      the volume weighted average trading price per common share over the five 
      preceding trading days, or (2) the number of common shares equal to the 
      number of Directors’ PSUs. If no election is made, the Company will pay 
      out such Directors’ PSUs in cash.

  

     
     
     

  

     
    (iii) 
    
      
2013 PSU plan (“2013 PSUP”). A person holding PSUs issued 
      under this plan is entitled to receive, at vesting either (1) a cash 
      amount equal to the number of 2013 PSUs that vest multiplied by the volume 
      weighted average trading price per common share over the five preceding 
      trading days, (2) the number of common shares equal to the number of PSUs, 
      or (3) a combination of cash and equity. The choice of settlement is 
      solely at the Company`s discretion.

  

     
     
     

  

     
    
    
      
Units issued under the PSUP and Directors PSUP are 
      accounted as cash-settled awards, while units issued under the 2013 PSUP 
      are treated as equity-settled awards.


PSUP and Directors PSUP 


A summary of the unit activity for the 
three month period ended March 31, 2015 and the year ended December 31, 2014 
under the PSUP and the Directors PSUP is presented below. 





  
  

      
     
    2015 
     
     
    2014 
    
     

  

    Opening balance 
     
    1,515,143 
     
     
    2,825,968 
     

  

    Redeemed 
     
    (328,829
    ) 
     
    (1,490,119
    ) 

  

    Granted 
     
    223,883 
     
     
    358,432 
     

  

    Cancelled 
     
    - 
      
     
     
    (179,138
    ) 

  

      
     
    1,410,197 
     
     
    1,515,143 
     


All of the units issued under the PSUP 
and Directors PSUP have been measured at the reporting date using their fair 
values. The total amount recognized in the statement of operations and 
comprehensive income during the three months ended March 31, 2015 in relation to 
the PSUP and Directors PSUP was $0.6 million (2014 - $7.5 million) recognized 
under general and administrative expenses. The total liability recognized at 
March 31, 2015 in respect of the PSUP and Directors PSUP was $4.1 million 
(December 31, 2014 - $4.4 million), of which $1.6 million (December 31, 2014 - 
$3.7 million) is classified as a current liability, reported within trade and 
other payables, with the remaining $2.5 million (December 31, 2014 - $0.7 
million) classified as a long-term liability, reported within other long-term 
liabilities. At March 31, 2015, 622,934 cash-settled units were vested, and will 
be paid out prior to their December 31, 2015 expiry date.


16 





PRIMERO MINING CORP. 
Notes to the Condensed Consolidated Interim Financial Statements 

(In thousands of United States dollars, except for number of 
common shares) 
(Unaudited) 


During the three months ended March 31, 
2015, the Company did not issue any units under the PSUP (2014 – 172,091 units), 
and issued 223,883 units under the Directors PSUP (2014 – 186,341 units).


2013 PSUP 


A summary of the unit activity for the 
three month period ended March 31, 2015 and the year ended December 31, 2014 
under the 2013 PSUP is presented below. 



  
  

     
      
     
    March 31 
     
     
    December 31 
     

  

     
      
     
    2015 
     
     
    2014 
    
     

  

     
    Opening balance 
     
    1,152,464 
     
     
    412,094 
     

  

     
    Redeemed 
     
    (456,964
    ) 
     
    (140,103
    ) 

  

     
    Granted 
     
    1,427,426 
     
     
    969,878 
     

  

     
    Cancelled 
     
    (28,633
    ) 
     
    (89,405
    ) 

  

     
      
     
    2,094,293 
     
     
    1,152,464 
     


During the three months ended March 31, 
2015, the Company issued 1,427,426 2013 PSUP units (2014 – 969,878).


The 2013 PSUP is accounted for as an 
equity-settled plan. All of the outstanding units have been measured at the 
reporting date using their grant date fair value, calculated as the grant date 
closing price of Primero shares on the TSX. The total amount of expense 
recognized in the statement of operations and comprehensive income for the three 
months ended March 31, 2015 in relation to the 2013 PSUP was $2.2 million (2014 
- $3.4 million).


17 





PRIMERO MINING CORP. 
Notes to the Condensed Consolidated Interim Financial Statements 

(In thousands of United States dollars, except for number of 
common shares) 
(Unaudited) 



  
  

    11. 
    
      
Finance expenses

  

     
     

  

    
    
      
Finance expense comprise the 
following:




  
  

     
      
     
    2015 
     
     
    2014 
     

  

     
    Three months 
      ended March 31 
     
    $
     
     
    $
     

  

     
    Interest on 6.5% convertible debentures 
     
    771 
     
     
    57 
     

  

     
    Interest on 5.75% convertible debentures 
     
    591 
     
     
    - 
     

  

     
    Interest on line of credit 
     
    545 
     
     
    - 
     

  

     
    Interest on Goldcorp promissory note 
     
    - 
     
     
    285 
     

  

     
    Accretion on 6.5% convertible debentures 

     
    353 
     
     
    - 
     

  

     
    Accretion on asset retirement obligation 
     
    182 
     
     
    161 
     

  

     
    Amortization of line of credit transaction 
      costs 
     
    260 
     
     
    - 
     

  

     
    Others 
     
    168 
     
     
    21 

     

  

     
      
     
    2,870 
     
     
    524 
     




  
  

    12. 
    
      
Supplementary cash flow information

  

     
     

  

    
    
      
Changes in non-cash working capital comprise the 
      following:




  
  

     
      
     
    2015 
     
     
    2014 
     

  

     
    Three months 
      ended March 31 
     
    $
     
     
    $
     

  

     
    Trade and other receivables 
     
    (317
    ) 
     
    656 
     

  

     
    Taxes receivable 
     
    (89
    ) 
     
    (4,069
    ) 

  

     
    Prepaid expenses 
     
    225 
     
     
    (2,645
    ) 

  

     
    Inventories 
     
    419 
     
     
    (1,923
    ) 

  

     
    Trade and other payables 
     
    (3,751
    ) 
     
    (3,918
    ) 

  

     
    Taxes payable 
     
    - 
      
     
     
    (2,044
    ) 

  

     
      
     
    (3,513
    ) 
     
    (13,943
    ) 




  
  

    13. 
    
      
Financial instruments

  

     
     

  

    
    
      
The Company’s financial instruments at March 31, 2015 
      consist of cash, restricted cash, trade and other receivables, an equity 
      investment in Fortune Bay, trade and other payables, and debt.

  

     
     

  

    
    
      
At March 31, 2015, the carrying amounts of cash, 
      restricted cash, trade and other receivables, and trade and other payables 
      are considered to be a reasonable approximation of their fair values due 
      to their short-term nature.

  

     
     

  

    
    
      
The Company’s equity investment in Fortune Bay is 
      designated as available for sale and is held at fair value. Any unrealized 
      gains or losses on available for sale assets are recognized in OCI. 
      Cumulative losses recorded under Accumulated other comprehensive income 
      are reclassified from equity to the statement of operations when there is 
      objective evidence that the asset is impaired. During the period ended 
      March 31, 2015, the Company recorded an impairment loss of $0.5 million in 
      the statement of operations and comprehensive loss relating to its 
      investment in Fortune Bay (see Note 2(i)). Fortune Bay is a 
      publicly-listed company and the fair value is based on the trading price 
      of its shares as at the date of the statement of financial 
  position.


18 





PRIMERO MINING CORP. 
Notes to the Condensed Consolidated Interim Financial Statements 

(In thousands of United States dollars, except for number of 
common shares) 
(Unaudited) 


The fair value of the 6.5% convertible 
debentures upon initial recognition was based on the present value of the future 
cash flows to be paid under the terms of the debentures. Subsequently, the 
convertible debentures are being carried at amortized cost.


Derivative instruments - Embedded 
derivatives


Financial instruments and non-financial 
contracts may contain embedded derivatives, which are required to be accounted 
for separately at fair value as derivatives when the risks and characteristics 
of the embedded derivatives are not closely related to those of their host 
contract and the host contract is not carried at fair value. The Company 
regularly assesses its financial instruments and non-financial contracts to 
ensure that any embedded derivatives are accounted for in accordance with its 
policy. There were no material embedded derivatives requiring separate 
accounting at March 31, 2015 or December 31, 2014, other than those discussed 
below. 


The convertible debentures assumed with 
the acquisition of Brigus (Note 2 (i)) are considered to contain an embedded 
derivative liability which was initially recognized at fair value using an 
option pricing model, and is subsequently measured at fair value each period 
during the term of the debentures. During the three month period ended March 31, 
2015, an unrealized derivative gain of $1.3 million (2014 - $2.3 million gain) 
was recognized in relation to this derivative liability. 


The 5.75% convertible unsecured 
debentures issued by the Company on February 9, 2015 (Note 9 (iii)) are 
considered to contain multiple embedded derivatives. These debentures and all 
related derivatives were accounted for as one instrument which was initially 
recognized at fair value and will subsequently be measured at fair value for 
each period during the term of the debentures. During the three month period 
ended March 31, 2015, an mark to market gain of $8.2 million was recognized in 
relation to this derivative liability. 


Fair value measurements of financial 
assets and liabilities recognized on the Condensed Consolidated Interim 
Statements of Financial Position 


The categories of the fair value 
hierarchy that reflect the significance of inputs used in making fair value 
measurements are as follows: 


Level 1 – quoted prices in active 
markets for identical assets or liabilities; 
Level 2 – inputs other than 
quoted prices included in Level 1 that are observable for the asset or 
liability, either directly (i.e., as prices) or indirectly (i.e., derived from 
prices); and 
Level 3 – inputs for the asset or liability that are not based 
on observable market data. 


At March 31, 2015, the levels in the 
fair value hierarchy that the Company’s financial assets and liabilities are 
measured and recognized on a recurring basis are as follows: 



  
  

     
      
     
    March 31, 2015 
     
     
    December 31, 2014 
     

  

     
      
     
    Level 1 
     
     
    Level 2 
     
     
    Level 1 
     
     
    Level 2 
     

  

     
      
     
    $
     
     
    $
     
     
    $
     
     
    $
     

  

     
    Investment in Fortune Bay (a) 
     
    594 
     
     
    - 
     
     
    671 
     
     
    - 
     

  

     
    5.75% convertible unsecured debentures (b) 
     
    66,795 
     
     
    - 
     
     
    - 
     
     
    - 
     

  

     
    Derivative liability on 6.5% convertible debentures (c)
     
    - 
     
     
    154 
     
     
    - 
     
     
    1,405 
 


19 





PRIMERO MINING CORP. 
Notes to the Condensed Consolidated Interim Financial Statements 

(In thousands of United States dollars, except for number of 
common shares) 
(Unaudited) 



  
  

     
    (a) 
    
      
Fortune Bay is a publicly-listed company and the fair 
      value is based on the trading price of its shares as at the date of the 
      statement of financial position.

  

     
    (b) 
    
      
The fair value of the 5.75% convertible debentures is 
      calculated using the market price on the TSX Exchange as at the date of 
      the statement of financial position.

  

     
    (c) 
    
      
Calculated using an option pricing model with the 
      following inputs: share price $3.36, conversion price $14.00, expected 
      life 1.00 years, volatility 69.77% and a discount rate of 
  8%.




  
  

    
    
      
At March 31, 2015, there were no financial assets or 
      liabilities measured and recognized on the condensed interim consolidated 
      statements of financial position at fair value that would be categorized 
      as Level 3 in the fair value hierarchy (December 31, 2014 – 
  $nil).

  

     
     

  

    14. 
    
      
Related party transactions

  

     
     

  

    
    
      
As at December 31, 2013, Goldcorp owned 31,151,200 of the 
      Company’s common shares, approximately 27% of the Company’s total shares. 
      On March 26, 2014 Goldcorp sold all these shares and as such subsequent to 
      that date, Goldcorp no longer held an equity interest in Primero and was 
      no longer a related party.

  

     
     

  

    
    
      
During the year ended December 31, 2014 the Company paid 
      an additional $0.4 million to maintain its 19.99% ownership percentage in 
      Santana Minerals as the result of a rights issue.

  

     
     

  

    
    
      
Other than payments to key management, there were no further related party transactions for the 
    three months ended March 31, 2015.

  

     
     

  

    15. 
    
      
Segmented information

  

     
     

  

    
    
      
The Company operates in two geographic areas, Mexico (the 
      San Dimas mine and the Cerro del Gallo project) and Canada (the Black Fox 
      Complex). The Company’s operating segments reflect its different mining 
      interests and are reported in a manner consistent with the internal 
      reporting used to assess each segment’s performance. Significant 
      information relating to reportable operating segments is summarized 
      below:


20 





PRIMERO MINING CORP. 
Notes to the Condensed Consolidated Interim Financial Statements 

(In thousands of United States dollars, except for number of 
common shares) 
(Unaudited) 





  
  

     
      
     
      
     
     
    Cerro del 
     
     
    Black Fox 
     
     
      
     
     
      
     

  

     
    As at March 31, 2015 
     
    San 
      Dimas 
     
     
    Gallo 
    
     
     
    Complex 
     
     
    Corporate 
     
     
    Total 
     

  

     
    Mining interests 
     
    538,984 
     
     
    83,836 
     
     
    258,344 
     
     
    244 
     
     
    881,408 
     

  

     
    Total assets 
     
    617,160 
     
     
    86,048 
     
     
    296,327 
     
     
    27,024 
     
     
    1,026,559 
     

  

     
    Total liabilities 
     
    82,527 
     
     
    5,745 
     
     
    61,633 
     
     
    122,424 
     
     
    272,329 
     






  
  

     
      
     
      
     
     
    Cerro del 
     
     
    Black Fox 
     
     
      
     
     
      
     

  

     
    As at December 31, 2014 
     
    San 
      Dimas 
     
     
    Gallo 
    
     
     
    Complex 
     
     
    Corporate 
     
     
    Total 
     

  

     
    Mining interests 
     
    543,621 
     
     
    82,437 
     
     
    255,136 
     
     
    286 
     
     
    881,480 
     

  

     
    Total assets 
     
    611,759 
     
     
    84,969 
     
     
    305,587 
     
     
    505 
     
     
    1,002,820 
     

  

     
    Total liabilities 
     
    86,689 
     
     
    396 
     
     
    55,993 
     
     
    111,757 
     
     
    254,835 
     






  
  

     
      
     
      
     
     
    Cerro del 
     
     
    Black Fox 
     
     
      
     
     
      
     

  

     
    Three months ended March 31, 2015 
     
    San 
      Dimas 
     
     
    Gallo 
    
     
     
    Complex 
     
     
    Corporate 
     
     
    Total 
     

  

     
    Revenue 
     
    54,640 
     
     
    - 
     
     
    18,670 
     
     
    - 
     
     
    73,310 
     

  

     
    Income tax expense (recovery) 
     
    5,370 
     
     
    - 
     
     
    (888
    ) 
     
    - 
     
     
    4,482 
     

  

     
    Net income (loss) 
     
    7,530 
     
     
    554 
     
     
    (981
    ) 
     
    (3,518
    ) 
     
    3,584 
     






  
  

     
    Three months ended March 31, 2014 
     
      
     
     
    Cerro del 
     
     
    Black Fox 
     
     
      
     
     
      
     

  

     
    (As 
      restated, Note 1) 
     
    San 
      Dimas 
     
     
    Gallo 
    
     
     
    Complex 
     
     
    Corporate 
     
     
    Total 
     

  

     
    Revenue 
     
    41,498 
     
     
      
     
     
    6,771 
     
     
    - 
     
     
    48,269 
     

  

     
    Income tax expense (recovery) 
     
    (3,619
    ) 
     
    247 
     
     
    (730
    ) 
     
    (148
    ) 
     
    (4,251
    ) 

  

     
    Net income (loss) 
     
    14,342 
     
     
    (788
    ) 
     
    (2,612
    ) 
     
    (19,195
    ) 
     
    (8,253
    ) 




  
  

    16. 
    
      
Commitments and 
contingencies




  
  

    (a) 
    
      
An Ejido is a communal ownership of land recognized by 
      the federal laws in Mexico. While mineral rights are administered by the 
      federal government through federally issued mining concessions, access to 
      surface rights is also required for mining operations. An Ejido controls 
      surface rights over its communal property through an assembly where each 
      of the Ejido members has a voting right. An Ejido may sell or lease lands 
      directly to a private entity and it may also allow individual members of 
      the Ejido to obtain title to specific parcels of land and thus the right 
      to sell or lease the land.

  

     
     

  

    
    
      
The San Dimas mine uses Ejidos’ lands pursuant to written 
      agreements with Ejidos. Some of these agreements may be subject to 
      renegotiation and changes to the existing agreements may increase 
      operating costs or have an impact on operations. In cases where access to 
      land is required for operations and an agreement cannot be reached with 
      the land owner, Primero may seek access under Mexican law which provides 
      for priority rights for mining activities.

  

     
     

  

    
    
      
Three of the properties included in the San Dimas mine 
      and for which Primero holds legal title are subject to legal proceedings 
      commenced by Ejidos seeking title to the property. None of the proceedings 
      name Primero as a party and Primero therefore has no standing to 
      participate in them. In all cases, the defendants are previous owners of 
      the properties, either deceased individuals who, according to certain 
      public deeds, owned the properties more than 80 years ago, corporate 
      entities that are no longer in existence, or Goldcorp companies. Some of 
      the proceedings also name the Tayoltita Property Public Registry as 
      co-defendant.

  

     
     

  

    
    
      
While Primero cannot intervene in these proceedings, in 
      the event that a final decision is rendered in favour of the Ejido, 
      Primero may seek to annul the decision or commence an action as an 
      affected third party on the basis that it is the legitimate owner and is 
      in possession of the property.


21 





PRIMERO MINING CORP. 
Notes to the Condensed Consolidated Interim Financial Statements 

(In thousands of United States dollars, except for number of 
common shares) 
(Unaudited) 



  
  

    
    
      
If Primero is not successful in its challenge, the San 
      Dimas mine could face higher costs associated with agreed or mandated 
      payments that would be payable to the Ejidos for use of the properties. 
      There has been no material change in this contingency during the three 
      months ended March 31, 2105.

  

     
     

  

    (b) 
    
      
As at March 31, 2015, the Company had entered into 
      commitments to purchase plant and equipment totaling $0.8 million (2013 - 
      $0.9 million).

  

     
     

  

    (c) 
    
      
Due to the size, complexity and nature of the Company’s 
      operations, various legal and tax matters arise in the ordinary course of 
      business. The Company accrues for such items when a liability is both 
      probable and the amount can be reasonably 
estimated.


22 












PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 



This management’s discussion and analysis (“MD&A”) of the 
financial condition and results of operations of Primero Mining Corp. (“Primero” 
or the “Company”) should be read in conjunction with the condensed consolidated 
financial statements of the Company as at and for the three months ended March 
31, 2015. Additional information on the Company, including its Annual 
Information Form for the year ended December 31, 2014, can be found under 
Primero’s profile at www.sedar.com. 


Management is responsible for the preparation of the financial 
statements and MD&A. The financial statements have been prepared in 
accordance with International Financial Reporting Standards (“IFRS”) as issued 
by the International Accounting Standards Board. All dollar figures in this 
MD&A are expressed in US dollars, unless stated otherwise. 


This MD&A contains forward-looking statements and should be 
read in conjunction with the risk factors described in the “Risks and 
uncertainties” and “Cautionary statement on forward-looking information” 
sections at the end of this MD&A. 


This MD&A has been prepared as of May 5, 2015. 


OVERVIEW OF THE BUSINESS 


Primero is a Canadian-based precious metals producer with 
operations in both Mexico and Canada. The Company is focused on building a 
portfolio of high quality, low cost precious metals assets in the Americas 
through acquiring, exploring, developing and operating mineral resource 
properties. The Company owns two producing properties, the San Dimas gold-silver 
mine, located in Mexico’s San Dimas district, on the border of Durango and 
Sinaloa states, and as of March 5, 2014, with the acquisition of Brigus Gold 
Corp. (“Brigus”), the Black Fox mine located in the Township of Black 
River Matheson, Ontario, Canada. The Company owns properties adjacent to the 
Black Fox mine - Grey Fox and Pike River, which together with the Black Fox mine 
and the Black Fox mill, located on the Stock Mill property, comprise the Black 
Fox Complex. 


In addition, the Company owns one development-stage project; 
the Cerro del Gallo gold-silver-copper project, located in the state of 
Guanajuato in central Mexico. Further, the Company has one exploration property, 
Ventanas, located in Durango State, Mexico.


The Company’s shares are listed on the Toronto Stock Exchange 
(“TSX”) under the symbol “P” and on the New York Stock Exchange (“NYSE”) under 
the symbol “PPP”. In addition, Primero has common share purchase warrants which 
trade on the TSX under the symbol “P.WT”, as well as convertible debentures 
“P.DB.U” and “P.DB.V”.


1 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

KEY TERMS IN THE DOCUMENT


Gold equivalent ounces include silver ounces produced 
converted to a gold equivalent based on a ratio of the average commodity prices 
received for each period. The ratio for first quarter (Q1 2015) was based on 
realized prices of $1,186 per ounce of gold and $4.20 per ounce of silver (Q1 
2014 - $1,295 per ounce of gold and $6.44 per ounce of silver). 


Total cash costs per gold equivalent ounce are defined 
as costs of production (including refining costs) divided by the total number of 
gold equivalent ounces produced. This is a non-GAAP measure.


Total cash costs per gold ounce on a by-product basis 
are calculated by deducting the by-product silver credits from operating costs 
and dividing by the total number of gold ounces produced. The Company reports 
total cash costs on a production basis.


All-in sustaining cost per ounce is a non-GAAP 
performance measure that the Company believes more fully defines the total cost 
associated with producing gold; however, this performance measure has no 
standardized meaning. Accordingly, it is intended to provide additional 
information and should not be considered in isolation or as a substitute for 
measures of performance prepared in accordance with GAAP. The Company reports 
this measure on a gold ounces produced basis. Refer to “Non-GAAP measure – 
All-in sustaining costs per gold ounce” for a reconciliation of all-in 
sustaining costs per gold ounce. 


In the gold mining industry these are common performance 
measures but do not have any standardized meaning. As such, they are unlikely to 
be comparable to similar measures presented by other issuers. In reporting total 
cash costs per gold equivalent and total cash costs per gold ounce on a 
by-product basis, the Company follows the recommendations originally made by the 
Gold Institute standard and for all-in sustaining costs follows the 
recommendation from the World Gold Council. The Company believes that, in 
addition to conventional measures, prepared in accordance with GAAP, certain 
investors use this information to evaluate the Company’s performance and ability 
to generate cash flow. Accordingly, it is intended to provide additional 
information and should not be considered in isolation or as a substitute for 
measures of performance prepared in accordance with GAAP. Refer to “Non-GAAP 
measure – Cash costs per gold ounce” for a reconciliation of cash costs per gold 
ounce on both a by-product and gold equivalent basis to reported operating 
expenses (the most directly comparable GAAP measure).


Adjusted net income (loss) and adjusted net income (loss) 
per share are non-GAAP measures. Adjusted net income (loss) is net income 
(loss) adjusted for unusual items. These non-GAAP measures have no standardized 
meaning and they are therefore unlikely to be comparable to other measures 
presented by other issuers. The Company believes that, in addition to 
conventional measures prepared in accordance with GAAP, certain investors use 
this information to evaluate the Company’s performance. Accordingly, it is 
intended to provide additional information and should not be considered in 
isolation or as a substitute for measures of performance prepared in accordance 
with GAAP. Refer to “Non-GAAP measure – Adjusted net income (loss)” for a 
reconciliation of adjusted net income (loss) to reported net income (loss). 


2 






PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 


  
  

      
     
    Three Months 
      Ended March 31, 
     

  

      
     
    2015 
     
     
    2014¹ 
     

  

         
      Key Performance Data 
     
      
     
     
      
     

  

    Tonnes of ore milled 
     
    448,589 
     
     
    238,566 
     

  

    Produced 
     
      
     
     
      
     

  

     Gold equivalent (ounces) 
     
    61,073 
     
     
    39,758 
     

  

     Gold (ounces) 
     
    54,365 

     
     
    32,278 
     

  

    Silver (million ounces) Sold 
     
    1.93 
     
     
    1.51 
     

  

     Gold equivalent 
      (ounces) 
     
    61,651 

     
     
    37,249 
     

  

     Gold (ounces) 
     
    55,037 
     
     
    30,583 
     

  

     Silver (million ounces) 
    
     
    1.90 
     
     
    1.34 
     

  

    Average realized prices 
     
      
     
     
      
     

  

     Gold ($/ounce)² 
    $
    1,186 
     
    $
    1,295 
     

  

     Silver ($/ounce)² 
    $
    4.20 
     
    $
    6.44 
     

  

    Total cash costs (per gold 
      ounce) 
     
      
     
     
      
     

  

     Gold equivalent basis 
    $
    699 
     
    $
    686 
     

  

       By-product basis 
    
    $
    639 
     
    $
    543 
     

  

    All-in sustaining costs (per gold ounce) 
    $
    1,044 
     
    $
    1,381 
     

  

      
     
      
     
     
      
     

  

         Financial 
      Data 
     
      
     
     
      
     

  

    (in thousands of US dollars 
      except per share amounts) 
     
      
     
     
      
     

  

    Revenues 
     
    73,310 
     
     
    48,269 
     

  

    Earnings from mine operations 
      3 
     
    11,470 

     
     
    9,481 
     

  

    Net income (loss) 3 
     
    3,584 
     
     
    (8,253
    ) 

  

    Adjusted net income (loss) 
      3 
     
    1,139 
     
     
    (2,048
    ) 
  

  

    Basic income (loss) per share 
     
    0.02 
     
     
    (0.06
    ) 

  

    Diluted income (loss) per 
      share 
     
    0.02 
     
     
    (0.06
    ) 
  

  

    Adjusted net income (loss) per share 
     
    0.01 
     
     
    (0.02
    ) 

  

    Operating cash flows before 
      working capital changes 
     
    18,777 

     
     
    6,509 
     

  

    Assets 
     
      
     
     
      
     

  

     Mining interests 
     
    881,408 
    
     
     
    1,068,865 
     

  

     Total assets 
     
    1,026,559 
     
     
    1,258,647 
     

  

    Liabilities 
     
      
     
     
      
     

  

     Long-term liabilities 
     
    169,080 
     
     
    134,286 
     

  

     Total liabilities 
     
    272,329 
    
     
     
    303,539 
     

  

    Equity 
     
    754,230 
     
     
    955,108 
     

  

    Weighted average shares 
      outstanding (basic)(000's) 
     
    161,783 
    
     
     
    128,112 
     

  

    Weighted average shares outstanding 
      (diluted)(000's) 
     
    161,873 
     
     
    128,112 
     


3 






PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 


  
  

    1 
    
      
Includes the results for the period for which the Black 
      Fox Complex assets, acquired on March 5, 2014, were owned by Primero 
      (March 5, 2014 to March 31, 2014).

  

     
     

  

    2 
    
      
Average realized gold and silver prices reflect the 
      impact of the gold purchase agreement with Sandstorm at the Black Fox mine 
      and the silver purchase agreement with Silver Wheaton Caymans at the San 
      Dimas mine (see “OTHER LIQUIDITY CONSIDERATIONS”).

  

     
     

  

    3 
    
      
Adjustment to 2014 figures – as a result of the 
      finalization of the Black Fox purchase price allocation the depletion at 
      Black Fox was adjusted relating to the period March 5, 2014 to March 31, 
      2014. Earnings from mine operations increased by $1.2 million, net loss 
      and adjusted loss decreased by $0.8 million. (see Note 1(i) to the 
      condensed consolidated interim financial 
statements).


Q1 2015 
HIGHLIGHTS



  
  

    • 
    
      
The Company reported net income of $3.6 million in the 
      first quarter of 2015 ($0.02 per share) compared to a net loss of $8.3 
      million in Q1 2014 ($0.06 per share). 

  

      
    
      
 

  

    • 
    
      
Adjusted net income was $1.1 million ($0.01 per share) 
      for Q1 2015, compared to an adjusted loss of $2.0 million ($0.02 per 
      share) for the same period in 2014. 

  

      
    
      
 

  

    • 
    
      
The Company acquired Brigus on March 5, 2014 and the 
      operating results from the Black Fox mine were included from that date 
      forward. Earnings from mine operations increased $2.0 million in Q1 2015 
      compared to Q1 2014 due to higher production and sales offset by lower 
      prices realized for gold and silver. 

  

      
    
      
 

  

    • 
    
      
As a result of successful measures applied at San Dimas 
      that resulted in increased throughput and the acquisition of Brigus on 
      March 5, 2014, the Company produced 61,073 gold equivalent ounces in the 
      first quarter of 2015, compared to 39,758 gold equivalent ounces in Q1 
      2014 (a 54% increase). Gold production increased 68% from 32,278 ounces in 
      Q1 2014 to 54,365 ounces in Q1 2015. In addition, the Company produced 
      1.93 million silver ounces in Q1 2015, compared to 1.51 million silver 
      ounces in Q1 2014. 

  

      
    
      
 

  

    • 
    
      
The Company incurred total cash costs per gold equivalent 
      ounce of $699 for Q1 2015 compared to $686 for Q1 2014. On a by-product 
      basis, total cash costs per gold ounce were $639 for Q1 2015 compared to 
      $543 for Q1 2014. 

  

      
    
      
 

  

    • 
    
      
All-in sustaining costs per ounce were $1,044 for Q1 2015 
      compared to $1,381 in Q1 2014, due to lower spending in Q1 2015.

  

      
    
      
 

  

    • 
    
      
Operating cash flows before working capital changes of 
      $18.8 million ($0.12 per share) in Q1 2015 were significantly higher than 
      in Q1 2014 of $6.5 million ($0.05 per share) as a result of the improved 
      earnings from mine operations. Working capital outflows in Q1 2015 were $3.5 
      million, significantly lower than 2014 outflows of $13.9 million. In 2014, 
      trade payables acquired with Brigus were paid and no valued added tax 
      (“VAT”) refunds were received in Mexico in Q1 2014. In Q1 2015 3 months of 
      VAT refunds were received; 10 months still remain outstanding. 
    

  

      
    
      
 

  

    • 
    
      
On February 9, 2015, the Company issued $75.0 million in 
      5.75% convertible unsecured subordinated debentures maturing on February 
      28, 2020. This debenture is recorded at fair value and will be marked to 
      market on a quarterly basis – an $8.2 million gain was recorded in Q1 
      2015. Transaction costs incurred on the issuance of $3.6 million were also 
      expensed in the quarter. 

  

      
    
      
 

  

    • 
    
      
In March 2015, the Company paid the total outstanding 
      balance of $40 million related to its revolving line of credit. 
  


4 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

REVIEW OF CONSOLIDATED 
FINANCIAL INFORMATION 



  
  

      
     
    For the 
      three months ended March 31, 
     

  

    (In thousands of US dollars) 
     
    2015 
     
     
    2014¹ 
     

  

    (unaudited) 
    
     
      
     
     
      
     

  

      
    
    $
     
    
    $
     

  

    Revenue 
     
    73,310 
     
     
    48,269 
     

  

      
     
      
     
     
      
     

  

    Operating expenses 
     
    (42,767
    ) 
     
    (27,683
    ) 

  

    Depreciation and depletion 
     
    (19,073
    ) 
     
    (11,105
    ) 

  

    Total cost of sales 
     
    (61,840
    ) 
     
    (38,788
    ) 

  

    Earnings from mine operations 
     
    11,470 
     
     
    9,481 
     

  

    Exploration expenses 
     
    (121
    ) 
     
    (17
    ) 

  

    General and administrative expenses 
     
    (8,013
    ) 
     
    (13,335
    ) 

  

    Earnings (loss) from 
      operations 
     
    3,336 
     
     
    (3,871
    ) 

  

    Transaction costs 
     
    (3,906
    ) 
     
    (7,267
    ) 

  

    Finance expense 
     
    (2,870
    ) 
     
    (524
    ) 

  

    Mark-to-market on convertible debentures 
     
    8,205 
     
     
    - 
     

  

    Foreign exchange gain (loss) 
    
     
    2,418 
     
     
    (358
    ) 

  

    Other 
     
    883 
     
     
    (484
    ) 

  

    Earnings (loss) before income 
      taxes 
     
    8,066 
     
     
    (12,504
    ) 

  

    Income tax (expense) recovery 
     
    (4,482
    ) 
     
    4,251 
     

  

    Net income (loss) for the period 
     
    3,584 
     
     
    (8,253
    ) 




  
  

    1 
    
      
Adjustment to 2014 figures – as a result of the 
      finalization of the Black Fox purchase price allocation the depletion at 
      Black Fox was adjusted relating to the period March 5, 2014 to March 31, 
      2014. Earnings from mine operations increased by $1.2 million, income tax 
      expense increased by $0.4 million and net loss decreased by $0.8 million. 
      (see Note 1(i) to the condensed consolidated interim financial 
      statements).


5 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

The table below sets out variances in the key drivers of net 
income for the three months ended March 31, 2015 compared with the three months 
ended March 31, 2014: 



  
  

      
     
    Q1 
      2015 compared 
     

  

    In millions of US 
      dollars 
     
    to Q1 
      2014 
     

  

      
    
    $
     

  

    Increased gold volumes sold 
    
     
    29 
     

  

    Decrease in gold price 
     
    (3
    ) 

  

    Decrease in silver revenue 

     
    (1
    ) 

  

    Higher depletion and 
      depreciation from higher production 
    
    (8 
    ) 

  

    Higher operating expenses 
      from higher production 
    
    (12 
    ) 

  

    Higher operating expenses 
     
    (3
    ) 

  

    Higher earnings from mine 
      operations 
     
    2 
     

  

    Lower general and 
      administrative expenses 
     
    5 
     

  

    Higher finance expenses 
     
    (2
    ) 

  

    Lower transaction costs 
     
    3 
     

  

    Foreign exchange gain 
     
    3 
     

  

    Mark-to-market gain on 
      debentures 
     
    8 
     

  

    Higher income tax expense 
     
    (8
    ) 

  

    Other 
     
    1 
     

  

    Increase in net income 
     
    12 
     


Three months ended March 31, 2015 compared to three months 
ended March 31, 2014



  
  

    • 
    Revenues increased to $73.3 million in Q1 2015 
      from $48.3 million in Q1 2014 with Black Fox accounting for $11.9 million 
      and San Dimas for $13.1 million of the increase, respectively. 

  

      
      

  

    • 
    Operating expenses were $42.8 million in Q1 
      2015, $15.1 million more than Q1 2014, $8.9 million of which was related 
      to Black Fox operating for three months in comparison to 26 days of 
      operations in 2014. Operating expenses at San Dimas increased by $5.7 
      million, mainly due to higher production and higher security costs. 

  

      
      

  

    • 
    Depreciation and depletion was $19.1 million in 
      Q1 2015, compared to $11.1 million in Q1 2014. San Dimas was $4.1 million 
      higher in Q1 2015 than Q1 2014 due mainly to increased production and 
      Black Fox was $3.9 million higher for the same period reflecting a full 
      operating three month period for Black Fox. Depreciation and depletion at 
      Black Fox for Q1 2015 was $6.0 million consistent with the depreciation 
      and depletion recorded in Q4 2014. 


6 






PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 


  
  

    • 
    General and administrative expenses were $8.0 
      million in Q1 2015, compared with $13.3 million in Q1 2014 due mainly to 
      lower share-based payment expense, as shown below: 

  




  
  

     
      
     
    For the three 
      months ended March 31, 
     

  

     
    (In thousands of US dollars) 
     
    2015 
     
     
    2014 
     

  

     
      
    
    $
     
    
    $
     

  

     
    Share-based payment 
     
    1,948 
     
     
    7,012 
     

  

     
    Salaries and wages 
     
    3,332 
     
     
    2,702 
     

  

     
    Legal, accounting, consulting 
      and other consulting services 
    
    1,924 
    
    
    1,472 
    

  

     
    Other general expenses 
     
    809 
     
     
    2,149 
     

  

     
    Total 
     
    8,013 
     
     
    13,335 
     




  
  

    • 
    
      
The value of units in the Company’s cash-settled phantom 
      share unit (“PSU”) plans, are marked to market each period based on the 
      Company’s share price. The share price appreciated in Q1, 2014 resulting 
      in higher share-based payments, whereas in Q1 2015 the share price 
      declined. 

  

      
    
      
 

  

    • 
    
      
Finance expense was $2.9 million in Q1 2015, compared 
      with $0.5 million in Q1 2014, primarily due to $1.7 million of interest 
      expensed on both debentures, and $0.8 million of interest and amortization 
      of expenses on the line of credit. 

  

      
    
      
 

  

    • 
    
      
In Q1 2015, transaction costs of $3.6 million were 
      incurred and expensed on the issuance of the $75.0 million 5.75% 
      convertible debenture. In Q1 2014, $6.7 million in transaction costs were 
      expensed in relation to the acquisition of Brigus. 

  

      
    
      
 

  

    • 
    
      
The newly issued 5.75% convertible debentures are 
      accounted for at fair value and are marked to market each period based on 
      the trading price of the debentures. For Q1 2015, a gain of $8.2 million 
      was recorded. 

  

      
    
      
 

  

    • 
    
      
Foreign exchange gains of $2.4 million were recorded in 
      Q1 2015 largely due to the impact of the appreciation of the U.S. dollar 
      relative to the Canadian dollar in the quarter on Canadian dollar 
      liabilities, in particular asset retirement obligations. 

  

      
    
      
 

  

    • 
    
      
The Company recorded an income tax expense of $4.5 
      million in Q1 2015, compared with a tax recovery of $4.2 million in Q1 
      2014. The details are as follows: 




  
  

     
      
     
    For the 
      three months ended March 31, 
     

  

     
      
     
    2015 
     
     
    2014 
     

  

     
    (In thousands of US dollars) 
    
    $
     
    
    $
     

  

     
      
     
      
     
     
      
     

  

     
    Tax expense (recovery) 
    
     
      
     
     
      
     

  

     
    San Dimas 
     
    5,370 
     
     
    (3,619
    ) 

  

     
    Black Fox and other 
     
    (888
    ) 
     
    (632
    ) 

  

     
     
     
    4,482 
     
     
    (4,251
    ) 


7 







PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 


  
  

    • 
    A reconciliation of San Dimas taxes is as 
      follows: 




  
  

     
            
                          
                          
                          
                          
                     For the three 
      months ended March 31, 
     

  

     
      
     
    2015 
     
     
    2014 
     

  

     
    (In millions of US dollars) 
    
    $
     
    
    $
     

  

     
      
     
      
     
     
      
     

  

     
    Net income before tax 
     
    13 
     
     
    11 
     

  

     
    Expected taxes 
     
    4 
     
     
    3 
     

  

     
    Mining royalty tax 
     
    1 
     
     
    1 
     

  

     
    Intercompany interest deduction 
     
    (3
    ) 
     
    (3
    ) 

  

     
    Withholding taxes on 
      intercompany loan 
     
    1 
     
     
    1 
     

  

     
    Foreign exchange and inflation adjustment 
     
    2 
     
     
    (6
    ) 

  

     
    Total expense (recovery)
     
    5 
     
     
    (4
    ) 


8 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

REVIEW OF OPERATIONS 


San Dimas mine





  
  

      
     
      
     
     
    Three 
      months ended 
     

  

      
     
    31-Mar-15 
     
     
    31-Dec-14 
     
     
    30-Sep-14 
     
     
    30-Jun-14 
     
     
    31-Mar-14 
     

  

    Key Performance 
      Data 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

    Tonnes of ore mined 
     
    263,747 
     
     
    253,531 
     
     
    229,589 
     
     
    196,025 
     
     
    218,032 
     

  

    Tonnes of ore milled 
     
    257,670 

     
     
    261,859 

     
     
    219,656 
     
     
    218,830 
     
     
    198,570 
     

  

    Average mill head grade (grams/tonne) 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

     Gold 
     
    5.01 
     
     
    4.49 
     
     
    4.34 
     
     
    4.97 
     
     
    4.76 
     

  

     Silver 
     
    250 
     
     
    224 
     
     
    216 
     
     
    230 
     
     
    260 
     

  

    Average recovery rate (%) 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

     Gold 
     
    96% 
     
     
    95% 
     
     
    95% 
     
     
    94% 
     
     
    93% 
     

  

     Silver 
     
    93% 
     
     
    92% 
     
     
    92% 
     
     
    92% 
     
     
    91% 
     

  

    Produced 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

     Gold equivalent 
      (ounces) 
     
    46,569 
     
     
    41,875 
     
     
    37,385 
     
     
    46,248 
     
     
    35,662 
     

  

     Gold (ounces) 
     
    39,861 
     
     
    35,806 
     
     
    29,176 
     
     
    32,895 
     
     
    28,182 
     

  

     Silver (million ounces) 
      Sold 
    
    1.93 
    
    
    1.74 
    
    
    1.41 
    
    
    1.49 
    
    
    1.51 
    

  

     Gold equivalent (ounces) 
     
    45,256 
     
     
    39,178 
     
     
    40,221 
     
     
    45,737 
     
     
    31,926 
     

  

     Gold (ounces) 
     
    38,642 
     
     
    33,767 
     
     
    31,713 
     
     
    31,542 
     
     
    25,260 
     

  

     Silver at fixed price (million ounces) 
    
     
    1.90 
     
     
    1.56 
     
     
    1.17 
     
     
    0.82 
     
     
    1.15 
     

  

     Silver at spot (million 
      ounces) 
     
    - 
     
     
    - 
     
     
    0.29 
     
     
    0.76 
     
     
    0.19 
     

  

    Average realized price (per ounce) 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

     Gold 
    $
    1,207 
     
    $
    1,207 
     
    $
    1,275 
     
    $
    1,286 
     
    $
    1,300 
     

  

     Silver¹ 
    $
    4.20 
     
    $
    4.20 
     
    $
    7.43 
     
    $
    11.56 
     
    $
    6.44 
     

  

    Total cash costs (per gold 
      ounce) 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

     Gold equivalent basis 
    $
    582 
     
    $
    654 
     
    $
    690 
     
    $
    551 
     
    $
    632 
     

  

     By-product basis 
    $
    479 
     
    $
    576 
     
    $
    526 
     
    $
    252 
     
    $
    455 
     

  

    All-in sustaining costs (per ounce) ² 
    $
    659 
     
    $
    897 
     
    $
    919 
     
    $
    626 
     
    $
    893 
     

  

    Revenue ($000's) 
    $
    54,640 
     
    $
    47,289 
     
    $
    51,273 
     
    $
    58,803 
     
    $
    41,499 
     

  

    Earnings from mine operations ($000's) 
    $
    14,615 
     
    $
    6,478 
     
    $
    10,599 
     
    $
    20,350 
     
    $
    11,768 
     




      

        1 
        
Average realized silver prices reflect the impact of the 
          silver purchase agreement with Silver Wheaton Caymans (see “Other 
          liquidity considerations”).

      

      

         
         
      

      

        2 
        
For the purposes of calculating all-in sustaining costs 
          at individual mine sites, the Company does not include corporate general 
          and administrative expenses.

      




9 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

REVIEW OF OPERATIONS 


The San Dimas mine produced 39,861 ounces of gold and 1.93 
million ounces of silver in the first quarter of 2015, 41% and 28% higher for 
gold and silver respectively, in comparison to the first quarter of 2014. The 
increase in production was due to a number of factors: 



  
  

    • 
    higher mill throughput with the completion in 
      2014 of the mill expansion to 2,500 tonnes per day (TPD). Average 
      throughput in Q1 2015 increased by approximately 23% over Q1 2014, 
      averaging 2,863 TPD (based on 90 days availability) 
  

  

    • 
    increased recoveries of 3% for gold and 2% for 
      silver following the commissioning of two leach tanks and a thickener 
      during the second half of 2014 

  

    • 
    an increase in long-hole mining allowing the 
      mine and mill to operate more efficiently during Q1 2015 

  

    • 
    other operational improvements in crushing, 
      flotation and mining dilution. 


Total cash costs on a gold equivalent and by-product basis in 
Q1 2015 were $582 and $479 per ounce, respectively, compared with $632 and $455 
per ounce, respectively, in Q1 2014. The lower cash costs per ounce on a gold 
equivalent basis were mainly due to higher production. On a by-product basis, 
costs were somewhat higher due to lower silver credits from a lower realized 
price and higher contractor costs.


The Company incurred all-in sustaining costs per gold ounce for 
the San Dimas mine of $659 in Q1 2015, compared with $893 per ounce in Q1 2014 
due to lower sustaining capital expenditures in Q1, 2015. 


10 






PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

REVIEW OF OPERATIONS 
Black Fox mine 





  
  

      
     
      
     
     
    Three 
      months ended 
     
     
    For the period 
     

  

      
     
    31-Mar-15 
     
     
    31-Dec-14 
     
     
    30-Sep-14 
     
     
    30-Jun-14
     
     
    March 5, 2014 - 
     

  

      
     
      
     
     
      
     
     
      
     
     
      
     
     
    March 31, 2014 
     

  

    Key Performance Data 
    
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

    Open pit mining 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

    Tonnes of ore mined 
     
    275,865 

     
     
    228,798 
     
     
    232,985 
     
     
    247,029 
     
     
    55,422 
     

  

    Strip ratio 
     
    5.87 
     
     
    10.00 
     
     
    6.78 
     
     
    8.10 
     
     
    12.66 
     

  

    Average gold grade 
      (grams/tonne) 
     
    1.99 
     
     
    1.91 
     
     
    2.61 
     
     
    1.85 
     
     
    2.17 
     

  

    Underground mining 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

    Tonnes of ore mined 
     
    11,525 
     
     
    51,719 
     
     
    20,880 
     
     
    41,739 
     
     
    8,096 
     

  

    Average gold grade (grams/tonne) 
     
    4.84 
     
     
    5.92 
     
     
    5.78 
     
     
    4.33 
     
     
    5.65 
     

  

    Open pit and 
      underground 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

    Tonnes of ore milled 
     
    190,919 
     
     
    221,063 
     
     
    223,083 
     
     
    209,948 
     
     
    39,996 
     

  

    Average mill head grade 
      (grams/tonne) 
     
    2.49 
     
     
    3.00 
     
     
    3.24 
     
     
    2.69 
     
     
    3.36 
     

  

    Average gold recovery rate (%) 
     
    95% 
     
     
    96% 
     
     
    96% 
     
     
    95% 
     
     
    95% 
     

  

    Produced 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

     Gold (ounces) Sold 
     
    14,504 
     
     
    20,334 
     
     
    22,288 
     
     
    17,166 
     
     
    4,096 
     

  

     Gold at spot price 
      (ounces) 
     
    14,537 
     
     
    19,491 
     
     
    18,432 
     
     
    15,720 
     
     
    5,008 
     

  

     Gold at fixed price (ounces) 
     
    1,858 
     
     
    1,148 
     
     
    1,556 
     
     
    1,334 
     
     
    315 
     

  

    Average realized gold price 
      (per ounce)2 
    $
    1,137 
     
    $
    1,157 
     
    $
    1,212 
     
    $
    1,224 
     
    $
    1,272 
     

  

    Total cash costs (per gold ounce)¹ 
    $
    1,077 
     
    $
    799 
     
    $
    688 
     
    $
    998 
     
    $
    1,154 
     

  

    All-in sustaining costs (per 
      ounce) 
    $
    1,552 
     
    $
    1,374 
     
    $
    1,202 
     
    $
    1,771 
     
    $
    1,480 
     

  

    Revenue ($000's) 
    $
    18,670 
     
    $
    23,882 
     
    $
    24,230 
     
    $
    20,866 
     
    $
    6,770 
     

  

    Earnings (loss) from mine 
      operations ($000's) 3 
    $
    (3,145
    ) 
    $
    (1,143
    ) 
    $
    2,604 
     
    $
    4,294 
     
    $
    (2,287
    ) 





  
  

    1 
    
      
For the purposes of calculating all-in sustaining costs 
      at individual mine sites, the Company does not include corporate general 
      and administrative expenses.

  

     
     

  

    2 
    
      
Average realized gold prices reflect the impact of the 
      gold purchase agreement with Sandstorm (see “Other liquidity 
      considerations”).

  

     
     

  

    3 
    
      
Adjustment to 2014 figures – as a result of the 
      finalization of the Black Fox purchase price allocation the depletion at 
      Black Fox was adjusted. Earnings from mine operations increased by $1.2 
      million in Q1 2014, $5.0 million in Q2 2014, $7.0 million in Q3 2014 and 
      decreased by $13.2 million in Q4 2014. (see Note 1(i) to the condensed 
      consolidated interim financial statements).


11 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

The Company acquired the Black Fox Complex in March 2014. 
During the second half of 2014 and continuing through 2015, an optimization plan 
was outlined for Black Fox that included increasing investment in exploration, 
development and underground mining equipment. The objective was to increase 
throughput from the higher grade underground mine to ultimately replace tonnage 
from the lower grade open-pit.


Delineation and definition drilling results continue to support 
the Company's plan of conducting an underground mining program at Black Fox 
using long-hole stoping as the predominant mining method.


In Q1 2015, production was predominantly from the open pit 
producing approximately 12,800 of the 14,504 ounces. Production in Q2 2015 will 
also be focused on the open pit as Black Fox prepares to mine the underground in 
the second half of the year. The open pit is expected to be depleted in 
September 2015. 


For the first half of 2015 Black Fox will remain focused on 
increasing its inventory of long-hole stopes in the west, central and east 
regions of the underground mine. The Company has also implemented a mining 
optimization program similar to the one implemented at San Dimas. This program 
continued in the first quarter 2015 focusing on reducing costs and increasing 
productivity by improving fleet utilization, overall equipment efficiencies and 
labour productivity. 


In Q1 2015 Black Fox sold 1,858 ounces of gold under a gold 
purchase agreement to Sandstorm Gold Inc. (“Sandstorm”) at an average price of 
$518 per ounce, and 14,537 ounces of gold at an average price of $1,254 per 
ounce, resulting in an overall average price for all gold sales from the Black 
Fox mine of $1,137 per ounce. Total cash costs per gold ounce and all-in 
sustaining costs per gold ounce were $1,077 and $1,552 respectively for the 
quarter.


12 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

OUTLOOK FOR 2015 OPERATING RESULTS 



The Company expects to maintain its production estimate to be 
between 250,000 and 270,000 gold equivalent ounces, up to 20% higher than 2014, 
due to increased production from San Dimas and a full year contribution from 
Black Fox. 


Cash costs for 2015 are expected to be in the range of $650 to 
$700 per gold equivalent ounce, or between $1,000 and $1,100 per ounce on an 
all-in sustaining cost basis. Total capital expenditures during 2015 are 
expected to be approximately $66.7 million excluding capitalized exploration 
costs of $18.6 million (further details on 2015 capital expenditures are shown 
under “Financial Condition Review” later in the document).


The Company's 2015 production outlook is summarized in the 
following table, with a comparison to 2014 actual results: 



  
  

      
     
    Black Fox 
     
     
    San Dimas 
     
     
    Estimated 2015 
     
     
    Actual 2014 
     

  

    Attributable gold 
      equivalent production (gold equivalent ounces) 
     
    75,000-85,000 
     
     
    175,000-185,000 
     
     
    250,000-270,000 
     
     
    225,054 
     

  

    Gold Production (ounces) 
     
    75,000-85,000 
     
     
    145,000-155,000 
     
     
    220,000-240,000 
     
     
    189,943 
     

  

    Silver Production (million 
      ounces) 
     
    N/A 
     
     
    6.5-7.5 
     
     
    6.5-7.5 
     
     
    6.15 
     

  

    Total cash costs (per gold equivalent ounce) 
    $
    820-$870 
     
    $
    590-$640 
     
    $
    650-$700 
     
    $
    687 
     

  

    All-in Sustaining Costs (per gold 
      ounce) 
    $
    1,075-$1,125 
     
    $
    840-$890 
     
    $
    1,000-$1,100 
     
    $
    1,222 
     


Material assumptions used to forecast total cash costs for 2015 
include: an average silver price of $5.21 per ounce (calculated using the silver 
purchase agreement contract price of $4.20 per ounce and assuming excess silver 
beyond contract requirements is sold at an average silver price of $18 per 
ounce); and foreign exchange rates of 1.10 Canadian dollars and 13 Mexican pesos 
to the US dollar. 


The Company’s 2015 outlook for revenues and operating expenses 
are directly correlated to our production outlook and cash cost outlook with the 
assumption that production will match sales quantities. Depreciation and 
depletion should increase relative to 2014 because of the expected increase in 
production.


At San Dimas, production is expected to increase in 2015 based 
on higher throughput and higher grades. At the Black Fox mine, production is 
expected to increase slightly in 2015 based on a higher proportion of higher 
grade underground ore. The Company will continue producing predominantly from 
the open-pit until mid-2015 when production from the underground is expected to 
increase to approximately 1,000 TPD in the third quarter. As a result production 
at Black Fox is expected to be weighted towards the second half of the year, the 
Company will process low grade material from its stock pile in order to keep the 
mill operating at capacity. 


Finance expenses are expected to increase from 2014 as they 
will include approximately $3.6 million of expenses relating to the 5.75% 
convertible unsecured subordinated debentures. In addition, these debentures 
have been accounted for at fair value which means there will be mark to market 
gains or losses recorded on the debenture quarterly. 


13 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

Income tax expenses are mainly attributable to income from the 
San Dimas mine. Income taxes are based on 30% of San Dimas’ net income before 
tax but the impacts of foreign exchange can have significant impacts on the 
amounts. In addition, San Dimas pays a mining royalty tax and accrues for 
withholding tax on intercompany interest. 


14 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

FINANCIAL CONDITION REVIEW 



A key financial objective is to make sure the Company has 
access to funds to achieve its medium term (three year) objectives. The 
Company’s strategy is to ensure liquidity is available to finance exploration 
and development requirements at its mining operations and growth projects as 
well as to repay financial obligations. The Company manages its liquidity by 
ensuring that, even in a low gold price environment, its operations can manage 
spending and provide adequate cash flow. 


The net assets of the Company are as follows:



  
  

      
     
    As at March 31, 

     
     
    As at December 31, 
     

  

    ($000's except ratios and share amounts) 
     
    2015 
     
     
    2014 
     

  

    Cash and cash equivalents 
     
    57,619 

     
     
    27,389 
     

  

    Other current assets 
     
    61,273 
     
     
    60,330 
     

  

    Non-current assets 
     
    907,667 
     
     
    915,101 
     

  

    Total assets 
     
    1,026,559 
     
     
    1,002,820 
     

  

      
     
      
     
     
      
     

  

    Current liabilities (excluding short-term 
      debt) 
     
    51,330 
     
     
    59,006 
     

  

    Non-current liabilities 
      (excluding long-term debt) 
     
    98,012 

     
     
    100,442 
     

  

    Short-term debt 
     
    51,919 
     
     
    5,616 
     

  

    Long-term debt 
     
    71,068 
     
     
    89,771 
     

  

    Total liabilities 
     
    272,329 
     
     
    254,835 
     

  

      
     
      
     
     
      
     

  

    Total shareholders' equity 
     
    754,230 
     
     
    747,985 
     

  

    Total equity 
     
    754,230 
     
     
    747,985 
     

  

      
     
      
     
     
      
     

  

    Total common shares 
      outstanding 
     
    162,244,617 
     
     
    161,555,875 
     

  

    Total options outstanding 
     
    10,441,281 
     
     
    9,254,224 
     

  

    Total warrants outstanding 

     
    20,800,000 
     
     
    20,800,000 
     

  

      
     
      
     
     
      
     

  

    Key financial ratios 
     
      
     
     
      
     

  

    Current ratio 
     
    1.15 
     
     
    1.36 
     

  

    Total liabilities-to-equity 
    
     
    0.36 
     
     
    0.34 
     

  

    Debt-to-total capitalization 
     
    0.14 
     
     
    0.11 
     


The Company’s net assets (equity) as at March 31, 2015 were 
$754 million compared to $748 million as at December 31, 2014. The current ratio 
has decreased in the quarter as a result of the reclassification of the 
liability of the Brigus debenture from long-term to short-term as it is due 
March 31, 2016.


15 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

Analysis of cash flows for the three months ended March 31, 
2015 and 2014 



  
  

      
     
    Three 
      months ended 
     

  

    (In thousands of US dollars) 
     
    March 
      31, 
     

  

      
     
    2015 
     
     
    2014 
     

  

    Cash Flow: 
    
    $
     
    
    $
     

  

    Provided by (used in) 
      operating activities 
     
    15,264 

     
     
    (7,434
    ) 
  

  

    Used in investing activities 
     
    (21,847
    ) 
     
    (27,940
    ) 

  

    Provided by financing 
      activities 
     
    35,893 

     
     
    11,275 
     

  

    Effect of exchange rate changes on cash 
     
    920 
     
     
    (240
    ) 

  

    Increase (decrease) in cash 
    
     
    30,230 

     
     
    (24,339
    ) 
  

  

    Cash, beginning of period 
     
    27,389 
     
     
    110,711 
     

  

    Cash, end of period 
     
    57,619 
     
     
    86,372 
     


Operating activities 
Primero generated 
$15.3 million of cash flows from operating activities in Q1 2015, compared with 
cash flows used of $7.4 million in Q1 2014. Cash flows from mine operations were 
higher resulting in operating cash flow before working capital changes of $18.8 
million in Q1 2015 ($0.12 per share), compared to $6.5 million in Q1 2014 ($0.05 
per share). Changes in non-cash working capital were a cash outflow of $3.5 
million in Q1 2015 compared with an outflow of $13.9 million in Q1 2014. There 
were increased payments of payables at Black Fox and delayed VAT refunds at San 
Dimas during Q1, 2014. 


Investing activities 
Cash used in 
investing activities in Q1 2015 amounted to $21.8 million as compared to $27.9 
million in Q1 2015. Capital expenditures between periods were comparable as 
shown in the table below. In addition, in Q1 2014, the Company used $7.8 million 
for the Brigus acquisition. 


16 






PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 


  
  

      
     
    Three months ended 
    
     
     
    Three months ended 
    
     
     
      
     

  

    Capital Expenditures 
     
    March 31, 2015 
     
     
    March 31, 2014 
     
     
    Estimated 2015 
     

  

    San Dimas Underground 
      Development 
    $
    4.3 
      million 
    
    $
    3.8 
      million 
    
    $
    15.2 
      million 
    

  

    San Dimas Sustaining Capital 
    $ 
    0.6 million 
    
    $ 
    5.2 million 
    
    $ 
    10.8 million 
    

  

    San Dimas Projects 
    $
    1.0 million 
     
    $
    4.0 million 
     
    $
    15.4 million 
     

  

    San Dimas Sub Total 
    $
    5.9 million 
     
    $
    13.0 million 
     
    $
    41.4 million 
     

  

    Black Fox Underground 
      Development 
    $ 
    3.9 million 
    
    $ 
    1.3 million 
    
    $ 
    13.4 million 
    

  

    Black Fox open pit Capitalized development 
      and stripping 
    
    - 
    
    $ 
    0.4 million 
    
    
    - 
    

  

    Black Fox Sustaining Capital 
    
    $ 
    0.6 million 
    
    $ 
    0.8 million 
    
    $ 
    4.5 million 
    

  

    Black Fox Projects 
    $
    0.8 million 
     
     
    - 
     
    $
    3.4 million 
     

  

    Grey Fox Development Studies 
    
    - 
    
    
    - 
    
    $ 
    1.3 million 
    

  

    Black Fox Sub Total 
    $
    5.3 million 
     
    $
    2.5 million 
     
    $
    22.6 million 
     

  

    Cerro del Gallo Development 
    $
    0.5 million 
     
    $
    1 million 
     
    $
    2.7 million 
     

  

    Total 
    $
    11.7 million 
     
    $
    16.5 million 
     
    $
    66.7 million 
     

  

     
     
     
     
     
     
     
     
     
     
  

  

    Capitalized 
     
      
     
     
      
     
     
      
     

  

    Exploration 
     
      
     
     
      
     
     
      
     

  

    Expenditures 
     
      
     
     
      
     
     
      
     

  

    San Dimas Diamond Drilling
    $ 
    1.3 million 
    
    $ 
    1.4 million 
    
    $ 
    3.1 million 
    

  

    San Dimas Drifting 
    $
    0.2 million 
     
    $
    0.7 million 
     
    $
    1.9 million 
     

  

    San Dimas Regional Diamond Drilling 
    $ 
    0.9 million 
    
    $ 
    0.5 million 
    
    $ 
    0.9 million 
    

  

    San Dimas Sub Total 
    $
    2.4 million 
     
    $
    2.6 million 
     
    $
    5.9 million 
     

  

    Black Fox Diamond Drilling
    $ 
    1.7 million 
    
    $ 
    0.2 million 
    
    $ 
    5.0 million 
    

  

    Grey 
      Fox & Regional Exploration 
    $ 
    2.9 million 
    
    $ 
    0.3 million 
    
    $ 
    7.3 million 
    

  

    Black Fox Complex Sub Total 
    $ 
    4.6 million 
    
    $ 
    0.5 million 
    
    $ 
    12.3 million 
    

  

    Cerro del Gallo Geology Mapping 
    $ 
    0.3 million 
    
    $ 
    0.4 million 
    
    $ 
    0.4 million 
    

  

    Total 
    $
    7.3 million 
     
    $
    3.5 million 
     
    $
    18.6 million 
     

  

      
     
     
     
     
      
     
     
      
     

  

    TOTAL CAPITAL 
    $
    19.0 million 
     
    $
    20 million 
     
    $
    85.3 million 
     


17 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

In 2015 the Company has prioritized its expenditures and plans 
to reduce exploration across its assets. Inline with the Company's focus on 
maximizing cash flow, its total capital expenditures for 2015 are expected to 
decline to approximately $66.7 million, excluding capitalized exploration costs. 
Exploration spending for 2015 is focused on delineation drilling and future 
spending to expand the program will depend on cash flows and other capital 
requirements (if any).


Financing activities 

The Company 
received net $35.9 million in cash from financing activities in Q1 2015, 
compared with $11.3 million in cash in Q1 2015. The Company received $75.0 
million in gross proceeds from the issuance of the 5.75% convertible debentures, 
$8.5 million from the release of restricted cash and $0.8 million proceeds from 
options being exercised. A total of $3.6 million in transaction costs were paid 
associated with the closing of the debentures. The Company also repaid $40 
million of debt, associated with the outstanding balance of its revolving line 
of credit leaving the full $75 million undrawn and available for corporate 
purposes in the future. This compares to Q1 2014 with $7.7 million received from 
the exercise of stock options and $8.0 million was received from a flow-through 
financing. 


Debt 



  
  

      
     
    March 31 
     
     
    December 31 
     

  

    (In thousands of US dollars) 
     
    2015 
     
     
    2014 
     

  

      
    
    $
     
    
    $
     

  

    Current debt 
     
      
     
     
      
     

  

                
                     Senior unsecured 
      convertible debentures (i) 
     
    46,668 
     
     
    - 
     

  

                    
                 Finance lease liabilities 
     
    5,250 
     
     
    5,616 
     

  

      
     
    51,919 
     
     
    5,616
   

  

    Long-term debt 
     
      
     
     
      
     

  

                
                     Senior unsecured 
      convertible debentures (i) 
     
    - 
     
     
    46,315 
     

  

            
                         5.75% 
      convertible unsecured debentures (ii) 
     
    66,795 

     
     
    - 
     

  

                
                     Finance lease 
      liabilities 
     
    4,273 
     
     
    5,629 
     

  

                    
                 Line of credit (iii) 
     
    - 
     
     
    37,827 
     

  

      
     
    71,068 
     
     
    89,771 
     

  

      
     
    122,987 
     
     
    95,387 
     




  
  

    (i) 
    
      
Upon the acquisition of Brigus, Primero assumed $50 
      million of convertible senior unsecured debentures and made a change of 
      control offer to purchase the debentures at 100% of their principal 
      balance. $1.9 million were redeemed. The remaining $48.1 million 
      debentures bear interest at a rate of 6.5% per annum, payable 
      semi-annually on March 31 and September 30, are convertible by the holders 
      into common shares of the Company at any time at a conversion price of 
      $14.00 per common share and mature on March 31, 2016. The debentures allow 
      for forced conversion by the Company if the market price of the Company’s 
      shares is at least 125% of the conversion price. During the first quarter, 
      the Company paid $1.6 million of interest relating to the convertible 
      debentures.

  

     
     

  

    (ii) 
    
      
On February 9, 2015, the Company issued $75.0 million in 
      5.75% convertible unsecured subordinated debentures maturing on February 
      28, 2020. Interest is payable semi-annually on February 28 and August 28 
      with the first interest payment due August 28, 2015. The Company repaid 
      its outstanding balance on its line of credit of $40 million in March 2015 
      and plans to use the remaining proceeds as required for capital at San 
      Dimas and Black Fox.


18 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

The 5.75% debentures are convertible 
into the Company’s common shares at a conversion price of approximately $6.55 
per share, representing a conversion rate of 152.6718 common shares per $1,000 
principal amount of Debentures. Upon conversion, holders will be entitled to 
receive accrued and unpaid interest up to, but excluding, the date of 
conversion. 


The 5.75% debentures are not redeemable 
prior to February 28, 2018. On and after February 28, 2018 and prior to February 
28, 2020, the 5.75% debentures may be redeemed by the Company, in whole or in 
part from time to time, on not more than 60 days and not less than 30 days prior 
notice, at a redemption price equal to their principal amount plus accrued and 
unpaid interest, if any, up to but excluding the date set for redemption, 
provided the simple average of the daily volume-weighted average trading price 
of the common shares on the New York Stock Exchange for the 20 consecutive 
trading days ending five trading days prior to the date on which notice of 
redemption is provided is at least 125% of the conversion price.



  
  

    (iii) 
    
      
On May 23, 2014, the Company closed a 3-year $75.0 
      million revolving line of credit. The line of credit has a three-year term 
      and bears interest at a floating interest rate equal to LIBOR or the prime 
      rate of Canada or the bankers’ acceptance rate (depending on the choice of 
      credit availment by the Company) plus an applicable margin, which was 
      approximately 5.25% per annum during the three months ended March 31, 
      2015. The line of credit is secured by substantially all of the Company’s 
      assets. As at March 31, 2015 the line of credit has an undrawn balance of 
      $75.0 million.


Off-Balance Sheet Arrangements 


The Company does not have any off-balance sheet arrangements, 
other than the availability of the undrawn revolving line of credit 


Shareholders’ equity 


Shares issued 
During the three month 
ended March 31, 2015, the Company issued 688,742 common shares upon the exercise 
of stock options and settlement of PSUs. 


Outstanding Share Data 

As at March 31, 
2015, the Company had 162,244,617 common shares outstanding, which includes 
87,467 common shares related to PSUs that vested on March 31, 2015 (161,555,875 
as at December 31, 2014). As at the date of this MD&A, the Company had 
162,264,348  common shares outstanding. 


Options 

As at March 31, 2015, the 
Company had 10,441,281 options outstanding with a weighted average exercise 
price of Cdn$5.96; of these 8,268,335 were exercisable at a weighted average 
exercise price of Cdn$6.24. As at the date of this MD&A, the total number of 
options outstanding was 10,444,781 of which 8,268,335 are exercisable.


Common Share Purchase Warrants 
As at 
March 31, 2015, December 31, 2014 and the date of this MD&A, the Company had 
20.8 million warrants outstanding which were exercisable to purchase 20.8 
million common shares at a price of Cdn$8.00 until July 20, 2015. 


19 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

PSUs exercisable into shares 
As at 
March 31, 2015 and the date of this MD&A, the Company had 409,946 Directors 
PSUs outstanding, which vest and expire between December 1, 2015, and December 
31, 2017. A director holding Director PSUs is entitled to elect to receive, at 
vesting either (1) a cash amount equal to the number of Director PSUs that vest 
multiplied by the volume weighted average trading price per common share over 
the five preceding trading days, (2) the number of common shares equal to the 
number of Directors’ PSUs (subject to the total number of common shares issuable 
at any time under the Directors’ PSU Plan, combined with all other common shares 
issuable under any other equity compensation arrangements then in place, not 
exceeding 10% of the total number of issued and outstanding common shares of the 
Company), or (3) a combination of cash and shares. If no election is made, the 
Company will pay out such Directors’ PSUs in cash.


As at March 31, 2015 and the date of this MD&A, the Company 
had 2,094,293 PSUs outstanding under the 2013 PSU Plan (“2013 PSUs”), which vest 
and expire between May 10, 2015, and February 17, 2018. A person holding 2013 
PSUs is entitled to receive at vesting, at the Company’s option, either (1) a 
cash amount equal to the number of 2013 PSUs that vest multiplied by the volume 
weighted average trading price per common share over the five preceding trading 
days, (2) the number of common shares equal to the number of 2013 PSUs (subject 
to the total number of common shares issuable at any time under the 2013 PSU 
Plan, combined with all other common shares issuable under any other equity 
compensation arrangements then in place, not exceeding 10% of the total number 
of issued and outstanding common shares of the Company) or (3) a combination of 
cash and shares.


Commitments and contingencies 


The following table summarizes the contractual maturities of 
the Company’s financial liabilities and operating and capital commitments as at 
March 31, 2015: 





  
  

      
     
      
     
     
      
     
     
      
     
     
      
     
     
    December 31 
     

  

      
     
    March 31, 2015 
     
     
    2014 
     

  

      
     
    Within 
     
     
      
     
     
    Over 
     
     
      
     
     
      
     

  

      
     
    1 year 
     
     
    2-5 years 
     
     
    5 years 
     
     
    Total 
     
     
    Total 
     

  

      
    
    $
     
     
    $
     
     
    $
     
     
    $
     
     
    $
     

  

    Trade and other payables and accrued 
      liabilities 
     
    41,479 
     
     
    - 
     
     
    - 
     
     
    41,479 
     
     
    44,178 
     

  

    Share based payments 
     
    1,585 
     
     
    3,163 
     
     
    - 
     
     
    4,748 
     
     
    4,414 
     

  

    6.5% Convertible debentures and interest 
     
    51,252 
     
     
    - 
     
     
    - 
     
     
    51,252 
     
     
    52,812 
     

  

    5.75% Convertible debentures and interest 
     
    4,915 
     
     
    91,884 
     
     
    - 
     
     
    96,799 
     
     
    - 
     

  

    Line of credit and interest 
     
    - 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    42,689 
     

  

    Finance lease payments 
     
    5,250 
     
     
    4,273 
     
     
    - 
     
     
    9,523 
     
     
    11,245 
     

  

    Minimum rental and operating lease payments 
    
     
    3,591 
     
     
    3,438 
     
     
    - 
     
     
    7,030 
     
     
    7,939 
     

  

    Reclamation and closure cost obligations 
     
    - 
     
     
    13,747 
     
     
    47,625 
     
     
    61,372 
     
     
    57,194 
     

  

    Commitment to purchase plant and equipment 
     
    784 
     
     
    - 
     
     
    - 
     
     
    784 
     
     
    886 
     

  

      
     
    108,856 
     
     
    116,504 
     
     
    47,625 
     
     
    272,986 
     
     
    221,357 
 


The Company expects to discharge its commitments as they come 
due from its existing cash balances, cash flow from operations, collection of 
receivables, and its revolving line of credit. 


20 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

Other liquidity considerations 


San Dimas 


In 2004, the then owner of the San Dimas mine entered into an 
agreement to sell all the silver produced at the San Dimas mine for a term of 25 
years to Silver Wheaton Caymans Ltd. (“Silver Wheaton Caymans”) in return for an 
upfront payment comprising cash and shares of Silver Wheaton Corp. and a per 
ounce payment of the lesser of $3.90 (adjusted for annual inflation), or the 
market price. The Company was required to assume this agreement, with 
amendments, when it acquired the San Dimas mine in 2010. The amendments provided 
that for each of the first four years after the acquisition date (i.e., until 
August 5, 2014), the first 3.5 million ounces per annum of silver produced by 
the San Dimas mine, plus 50% of the excess silver above this amount, must be 
sold to Silver Wheaton Caymans at the lesser of $4.04 per ounce (adjusted by 1% 
per year) and market prices. From August 6, 2014 and for the life of the mine, 
the first 6.0 million ounces per annum of silver produced by the San Dimas mine, 
plus 50% of the excess silver above this amount, must be sold to Silver Wheaton 
Caymans at the lesser of $4.20 per ounce (adjusted by 1% per year) and market 
prices. All silver not sold to Silver Wheaton Caymans is available to be sold by 
the Company at market prices. 


Black Fox Complex 


On November 9, 2010, Brigus entered into a gold purchase 
agreement with Sandstorm to sell a portion of future gold production from the 
Black Fox mine and the adjoining Pike River property (the “Black Fox Extension”) 
for an upfront cash payment of $56.3 million and ongoing per ounce payments of 
the lesser of $500 per ounce of gold (subject to an inflationary adjustment 
beginning in 2013, not to exceed 2% per year) and market prices. On November 5, 
2012, Brigus elected to repurchase a portion of the stream by paying $24.4 
million to Sandstorm, which resulted in Sandstorm being entitled to 8% of the 
future production at the Black Fox mine and 6.3% at the Black Fox Extension. The 
Company was required to assume the gold purchase agreement when it acquired 
Brigus in March 2014. 


Cerro del Gallo


The Company has potential future financial commitments related 
to its acquisition in December 2013 of Goldcorp’s 30.8% interest in the Cerro 
del Gallo project. These commitments are contingent payments based on meeting 
certain milestones or market conditions. The contingent payments include: 



  
  

    • 
    
      
$8 million after achieving commercial production on the 
      phase I heap leach operation (the “First Contingent Payment”); 

  

    • 
    
      
$5 million if the date of the First Contingent Payment 
      occurs before December 19, 2018 and the gold price averages $1,500 or more 
      per ounce for a consecutive 30 day period within one year following the 
      date of the First Contingent Payment, and not later than December 19, 2018 
      (“the Second Contingent Payment”); 

  

    • 
    
      
$14 million on announcement of a decision by Primero to 
      construct a carbon-in-leach mill for Phase II (“the Third Contingent 
      Payment”), 

  

    • 
    
      
$5 million if the date of the Second Contingent Payment 
      occurs before December 19, 2018 and the gold price averages $1,500 or more 
      per ounce for a consecutive 30 day period within one year following the 
      date of the Second Contingent Payment, and not later than December 19, 
      2018 (“the Fourth Contingent Payment”). 


21 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

The Company has decided not to construct the phase 1 heap leach 
project for Cerro del Gallo in 2015. The timing of construction will depend on 
market conditions and project returns. The estimated capital cost for phase 1 of 
this project is over $165 million and construction would take approximately 18 
months. Once completed, Cerro del Gallo is expected to produce approximately 
95,000 gold equivalent ounces on an annual basis. 


APA Ruling 


On October 4, 2012, the Company received a ruling (the “APA 
Ruling”) from the Mexican tax authorities which confirmed the appropriate price 
for sales of silver under the Amended and Restated Silver Purchase Agreement. 
Under Mexican tax law, an APA Ruling is generally applicable for up to a five 
year period (which in the Company’s case, covered the year in which the ruling 
application was filed, the immediately preceding year and the three subsequent 
years) and the Company’s APA Ruling covered the five years ending December 31, 
2014. In 2015, the Company intends to continue to record its revenue from sales 
of silver under the Amended and Restated Silver Purchase Agreement in a manner 
consistent with prior years, the APA Ruling and applicable Mexican laws. The 
Company has until the end of 2016 to file an application for a renewed APA 
Ruling in respect of 2015 and the subsequent four taxation years. There can be 
no assurance that Mexican tax laws applicable to the APA Ruling will not change 
or that the applicable authorities will issue a renewal or similar ruling or 
that the authorities will continue to assess the Company’s taxes on the basis of 
its realized prices for silver. To the extent the Mexican tax authorities 
determine that the appropriate price of silver sales under the Amended and 
Restated Silver Purchase Agreement is different than the realized price, it 
could have a material adverse effect on our results of operations, financial 
condition and cash flows. 


Dividend Report and Policy 


The Company has not paid any dividends since incorporation and 
currently has no plans to pay dividends. 


Capital management 


Key financial ratios the Company uses to assess new growth 
opportunities and to determine how much debt the Company can take on are shown 
in the net asset table above. The Company’s vision is to manage financial risk 
by maintaining a conservative balance sheet. Liquidity at March 31, 2015 
included cash and cash equivalents of $57.6 million and an undrawn amount on its 
revolving line of credit of $75.0 million. In addition, the Company expects to 
be able to meet all of its commitments including repayment of its 6.5% 
convertible debentures, and fulfill its exploration and capital program for 2015 
and later years from its operating cash flows, cash balances and if needed the 
revolving line of credit. 


The Company manages its common shares, stock options, warrants 
and debt as capital. The Company’s objectives in managing capital are to 
safeguard its ability to continue as a going concern in order to provide returns 
for shareholders and benefits for other stakeholders. To meet this objective, 
the Company will ensure it has sufficient cash resources to pursue the 
exploration and development of its mining properties, to fund future production 
at the San Dimas and Black Fox mines, development of the Grey Fox mine and the 
Cerro del Gallo project, as well as potential acquisitions. 


To support these objectives the Company manages its capital 
structure and makes adjustments to it in light of changes in economic conditions 
and risk characteristics of its underlying assets. To maintain or adjust its 
capital structure, the Company may attempt to issue shares, issue debt, acquire 
or dispose of assets or adjust the amount of cash held.


22 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

The Company’s investment policy is to invest its cash in highly 
liquid short-term interest-bearing investments with maturities of 90 days or 
less from the original date of acquisition, selected with regards to the 
expected timing of expenditures from continuing operations. The Company is 
subject to a number of externally imposed capital requirements relating to its 
debt. The requirements are both financial and operational in nature; the Company 
has complied with all such requirements during the year. 


Pursuant to the terms of the line of credit, the Company is 
required to maintain the following financial covenants: 



  
  

    • 
    Tangible net worth (being equity less goodwill 
      and other intangible assets) of at least $685 million plus 50% of positive 
      net income earned after March 31, 2015. 

  

    • 
    Net debt leverage ratio (being total 
      liabilities, less trade payables incurred in the ordinary course of 
      business less unrestricted cash divided by rolling 4 quarter EBITDA) of 
      less than 3.50:1. 

  

    • 
    Senior net debt leverage ratio (being that 
      portion of net debt that ranks pari passu with or in priority to the line 
      of credit divided by rolling 4 quarter EBITDA) less than 2.00:1 

  

    • 
    Interest coverage ratio (being earnings before 
      interest, depreciation and amortization divided by interest expense) 
      greater than 4.50:1. 


As at March 31, 2015, the Company was fully compliant with 
these covenants. 


SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA 



The following table provides summary unaudited financial data 
for the last eight quarters: 



  
  

    (In thousands of US dollars except for per
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

    share amounts and operating data) 
     
    2015 
     
     
     2014 
     
     
    2013 
   
  

  

     
     
    Q1 
     
     
    Q4 
     
     
    Q3 
     
     
    Q2 
     
     
    Q1 
     
     
    Q4 
     
     
    Q3 
     
     
    Q2 
     
  

  

         Financial 
      Data 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     
     
      
   

  

    Revenue 
     
    73,310 
     
     
    71,171 
     
     
    75,503 
     
     
    79,669 
     
     
    48,269 
     
     
    47,737 
     
     
    53,793 
     
     
    52,475 
   

  

    Total cost of sales 
     
    (61,840
    ) 
     
    (65,837
    ) 
     
    (62,300
    ) 
     
    (55,025
    ) 
     
    (38,788
    ) 
     
    (33,992
    ) 
     
    (30,833
    ) 
     
    (28,882
  ) 

  

    Earnings from mine operations 1
     
    11,470 
     
     
    5,334 
     
     
    13,203 
     
     
    24,644 
     
     
    9,481 
     
     
    13,745 
     
     
    22,960 
     
     
    23,593 
   

  

    Impairment charges 
     
    - 
     
     
    (110,000
    ) 
     
    (98,961
    ) 
     
    - 
     
     
    - 
     
     
    - 
     
     
    - 
     
     
    - 
   

  

    Exploration expenses 
     
    (121
    ) 
     
    (577
    ) 
     
    (1,205
    ) 
     
    - 
     
     
    (17
    ) 
     
    (428
    ) 
     
    - 
     
     
    - 
   

  

    General and administrative expenses 
     
    (8,013
    ) 
     
    (7,107
    ) 
     
    (5,854
    ) 
     
    (10,524
    ) 
     
    (13,335
    ) 
     
    (7,682
    ) 
     
    (7,086
    ) 
     
    (1,907
  ) 

  

    Earnings (loss) from operations 1    
     
    3,336 
     
     
    (112,350
    ) 
     
    (92,817
    ) 
     
    14,120 
     
     
    (3,871
    ) 
     
    5,635 
     
     
    15,874 
     
     
    21,686 
   

  

    Other income (expenses) 
     
    4,730 
     
     
    (102
    ) 
     
    1,257 
     
     
    (4,259
    ) 
     
    (8,633
    ) 
     
    (1,556
    ) 
     
    (834
    ) 
     
    (5,479
  ) 

  

    Inocme tax (expense) recovery 1
     
    (4,482
    ) 
     
    (9,314
    ) 
     
    (7,922
    ) 
     
    (4,743
    ) 
     
    4,251 
     
     
    (39,974
    ) 
     
    (4,960
    ) 
     
    (11,966
  ) 

  

    Net income (loss) 1 
     
    3,584 
     
     
    (121,766
    ) 
     
    (99,482
    ) 
     
    5,118 
     
     
    (8,253
    ) 
     
    (35,895
    ) 
     
    10,080 
     
     
    4,241 
   

  

    Basic income (loss) per share 
     
    0.02 
     
     
    (0.76
    ) 
     
    (0.62
    ) 
     
    0.03 
     
     
    (0.06
    ) 
     
    (0.31
    ) 
     
    0.09 
     
     
    0.04 
   

  

    Diluted income (loss) per share 
     
    0.02 
     
     
    (0.76
    ) 
     
    (0.62
    ) 
     
    0.03 
     
     
    (0.06
    ) 
     
    (0.31
    ) 
     
    0.09 
     
     
    0.04 
 





  
  

    1 
    
      
Adjustment to 2014 figures – as a result of the 
      finalization of the Black Fox purchase price allocation the depletion at 
      Black Fox was adjusted. Earnings from mine operations and earnings from 
      operations increased by $1.2 million in Q1-2014, $5.0 million in Q2 2014, 
      $7.0 million in Q3-2014, and decreased by $13.2 million in Q4-2014. Income 
      tax (expense) recovery decreased by $0.4 million in Q1 2014, $0.4 in Q2 
      2014 and $0.6 in Q3 2015 and increased by $1.1 million in Q4-2014 . Net 
      (loss) income and adjusted net income (loss) decreased by $0.8 million in 
      Q1 2014, $4.5 million in Q2 104, $6.4 million in Q3 2014 and decreased by 
      $11.8 million in Q4- 2014 . (see Note 1(i) to the condensed consolidated 
      interim financial statements).




  
  

    • 
    Financial data by quarter are significantly 
      impacted by the acquisition of Brigus in 2014. Results from the Black Fox 
      mine have been consolidated as of March 5, 2014. 


23 






PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 


  
  

    • 
    
      
When the Company reaches its annual threshold for 
      deliveries under the silver purchase agreement, the Company realizes 
      silver sales at spot prices, increasing both revenue and net income. 
      Revenue in Q3 2014, Q2 2014, Q1 2014, Q3 2013 and Q2 2013 included $5.9 
      million, $14.8 million, $3.9 million, $8.4 million, and $13.2 million, 
      respectively, of silver sales at spot prices. 

  

    • 
    
      
In Q3 2014, an impairment of $99.0 million for goodwill 
      was recorded. 

  

    • 
    
      
In Q4 2014, an impairment of $110.0 million was recorded 
      against mining interests at Black Fox and Cerro del Gallo. 

  

    • 
    
      
General and administrative expenses include share-based 
      compensation which fluctuates based on the share price of the Company. In 
      Q1 and Q2 2014 the share price appreciated resulting in higher share-based 
      compensation, whereas in Q2 2013 a sharp drop in the share price caused 
      share-based compensation to decline significantly. 

  

    • 
    
      
In Q1 2014 the Company incurred $6.7 million of 
      transaction costs related to the acquisition of Brigus. 

  

    • 
    
      
The income tax expense in Q4 2013 was mainly due to the 
      introduction of a mining royalty in Mexico that resulted in the Company 
      recording a $35.9 million deferred tax liability and expense. 

  

    • 
    
      
Income tax expense is impacted by the effects of foreign 
      exchange fluctuations on its Mexico peso denominated deferred income 
      taxes, which were significant in certain periods, such as Q2 2013 and Q4 
      2014. 


NON-GAAP MEASURES 


The Company has included certain non-GAAP performance measures 
throughout this document. These performance measures are employed by management 
to assess the Company’s operating and financial performance and to assist in 
business decision-making. The Company believes that, in addition to conventional 
measures prepared in accordance with GAAP, certain investors and other 
stakeholders use this information to evaluate the Company’s operating and 
financial performance; however, these non-GAAP performance measures do not have 
any standardized meaning. Accordingly, these performance measures are intended 
to provide additional information and should not be considered in isolation or 
as a substitute for measures of performance prepared in accordance with GAAP. 



Non – GAAP measure – Cash costs per gold ounce 


The Company has included the non-GAAP performance measures of 
total cash costs per gold ounce on a gold equivalent ounce and by-product basis, 
throughout this document. The Company reports total cash costs on a production 
basis. In the gold mining industry, this is a common performance measure but 
does not have any standardized meaning. In presenting cash costs on a production 
basis, the Company follows the original recommendations made by the Gold 
Institute Production Cost Standard. The Company believes that, in addition to 
conventional measures prepared in accordance with GAAP, certain investors use 
this information to evaluate the Company’s performance and ability to generate 
cash flow. Accordingly, it is intended to provide additional information and 
should not be considered in isolation or as a substitute for measures of 
performance prepared in accordance with GAAP. The following table provides a 
reconciliation of total cash costs per gold equivalent ounce and total cash 
costs per gold ounce on a by-product basis to operating expenses (the nearest 
GAAP measure) per the condensed consolidated interim financial statements. 


24 






PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 


  
  

      
     
    Three months 
      ended March 31, 
     

  

      
     
    2015 
     
     
    2014 
     

  

    Operating expenses per the 
      consolidated 
     
      
     
     
      
     

  

    financial statements ($000's) 
     
    42,717 
     
     
    27,683 
     

  

    Share-based payment included 
      in operating expenses($000's) 
     
    (364
    ) 
     
    (565
    ) 

  

    Inventory movements and adjustments ($000's) 
    
     
    355 
     
     
    148 
     

  

    Total cash operating costs 
      ($000's) 
     
    42,708 
     
     
    27,266 
     

  

    Ounces of gold produced 
     
    54,365 
     
     
    32,278 
     

  

    Gold equivalent ounces of 
      silver produced 
     
    6,708 
     
     
    7,480 
     

  

    Gold equivalent ounces produced 
     
    61,073 
     
     
    39,758 
     

  

    Total cash costs per gold 
      equivalent ounce ($) 
     
    699 
     
     
    686 
     

  

      
     
      
     
     
      
     

  

    Total cash operating costs 
      ($000's) 
     
    42,708 

     
     
    27,266 
     

  

    By-product silver credits ($000's) 
     
    (7,985
    ) 
     
    (9,730
    ) 

  

    Cash costs, net of by-product 
      credits ($000's) 
     
    34,723 
     
     
    17,536 
     

  

    Ounces of gold produced 
     
    54,365 
     
     
    32,278 
     

  

    Total by-product cash 
      costs per gold ounce produced ($) 
     
    639 
     
     
    543 
     


Gold equivalent ounces of silver produced for the San Dimas 
mine are calculated as silver ounces produced multiplied by the ratio of the 
average realized silver price to the average realized gold price during each 
quarter. These calculations are shown below. 



  
  

      
     
    Three months 
      ended March 31, 
     

  

      
     
    2015 
     
     
    2014 
     

  

    Silver ounces produced 
      (millions) (A) 
     
    1.93 
     
     
    1.51 
     

  

    Average realized silver price (B) 
    $
    4.20 
     
    $
    6.44 
     

  

    Average realized gold price 
      (C) 
    $
    1,207 
     
    $
    1,300 
     

  

    Gold equivalent ounces of silver (A)x (B)/(C) 
    
     
    6,708 
     
     
    7,480 
     


The Company produces one by-product metal, being silver at San 
Dimas. By-product silver credits are computed as silver ounces produced during a 
period multiplied by the average realized silver price during that same period. 
Cash costs without adjusting for by-product credits would be calculated on a 
co-product basis, whereby total cash operating costs would be allocated 
separately to production of gold and silver. The basis for the allocation of 
costs is typically relative realized sales prices, which results in co-product 
cash costs being the same as cash costs on a gold equivalent ounce basis.


The Company sells the majority of its silver production at a 
fixed price of approximately $4.20 per ounce pursuant to a silver purchase 
agreement that the Company assumed when it acquired the San Dimas mine in 2010. 
The fixed price approximated the cost of producing an ounce of silver at the 
time the silver purchase agreement was entered into by the previous mine owner. 
The fixed price is reflected in the calculation of by-product silver credits. 



Management uses total cash costs per gold equivalent ounce and 
by-product cash costs per gold ounce to monitor the operating performance of its 
mines and to assess the attractiveness of potential acquisition targets. 
Management also believes these measures provide investors and analysts with 
useful information about the Company’s underlying cash costs of operations and the 
impact of by-product credits on the Company’s cost structure is a relevant 
metric used to understand the Company’s operating profitability and ability to 
generate cash flow. When deriving the production costs associated with an ounce 
of gold, the Company includes by-product credits as the Company considers that 
the cost to produce the gold is reduced as a result of the by-product sales 
supplementary to the gold production process, thereby allowing management and 
the Company’s other stakeholders to assess the net costs of gold production. 


25 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 



Non – GAAP measure – All-in sustaining costs per gold ounce 



In June 2013, the World Gold Council (“WGC”) published a 
guidance note on non-GAAP metrics available to companies in the gold industry to 
use to report their costs in an effort to encourage improved understanding of 
the total costs associated with mining an ounce of gold. The WGC is a market 
development organization for the gold industry and is an association whose 
membership comprises leading gold mining companies, including Primero. The WGC 
is not a regulatory industry organization. The WGC worked with its member 
companies to develop the definition of “all-in sustaining costs per gold ounce”, 
which it believes to be helpful to investors, governments, local communities and 
other stakeholders in understanding the economics of gold mining. 


The Company has adopted the reporting of “all-in sustaining 
costs per gold ounce”. This metric is a non-GAAP performance measure and has no 
standardized meaning throughout the industry. Accordingly, it is intended to 
provide additional information and should not be considered in isolation or as a 
substitute for measures of performance prepared in accordance with GAAP. The 
Company reports this measure on a gold ounces produced basis. 


The Company presents all-in sustaining costs because it 
believes that it more fully defines the total current cost associated with 
producing gold. The Company also believes that this measure allows investors and 
other stakeholders of the Company to better understand its costs of producing 
gold and better assess the Company’s ability to generate cash flow from current 
operations. Management also uses all-in sustaining costs in evaluating the 
efficiency of its operations because it believes that IFRS measures, such as 
operating expenses, do not capture all of the costs incurred to discover, 
develop, and sustain gold production. As the measure seeks to reflect the full 
cost of gold production from current operations, it does not include capital 
expenditures attributable to development projects or mine expansions, 
exploration and evaluation costs attributable to growth projects, income tax 
payments and financing costs. In addition, the calculation of all-in sustaining 
costs does not include depreciation and depletion expense as it does not reflect 
the impact of expenditures incurred in prior periods. Even though this measure 
is not representative of all of the Company’s cash expenditures, management 
believes that it is a useful measure in allowing it to analyze the efficiency of 
its current gold mining operations.


26 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

The following table provides a reconciliation of all-in 
sustaining costs per gold ounce to the condensed consolidated interim financial 
statements for the three months ended March 31, 2015 and 2014:



  

     
     
    Three months 
      ended March 31,
     
  


  

     
     
    2015 
     
     
    2014 
     
  

  

    Cash costs, net of by-product credits ($000's)
     
    34,723 
     
     
    17,536
     
  

  

    Corporate general and administrative expenses
     
     
     
     
     
     
  

  

         Share-based payments ($000s)
     
    2,627
     
     
    7,473
     
  

  

         Other general and administrative expenses ($000s)
     
    5,386
     
     
    5,862
     
  

  

    Exploration and evaluation costs ($000s)
     
    121
     
     
    -
     
  

  

    Reclamation cost accretion ($000s)
     
    182
     
     
    336
     
  

  

    Sustaining capital expenditures ($000s)
     
    13,729
     
     
    13,361
     
  

  

    All-in sustaining costs ($000s)
     
    56,768
     
     
    44,568
     
  

  

     
     
     
     
     
     
     
  

  

    Ounces of gold produced
     
    54,365
     
     
    32,278
     
  

  

     
     
     
     
     
     
     
  

  

    All-in sustaining costs per gold ounce ($)
     
    1,044
     
     
    1,381
     
  




Adjustments 


All-in sustaining costs adjust “cash costs, net of by-product 
credits”, for corporate general and administrative expenses, reclamation cost 
accretion and sustaining capital expenditures. Corporate general and 
administrative expenses are included as a line item on the Company’s statement 
of operations. Sustaining capital expenditures and reclamation cost accretion 
are not line items on the Company’s financial statements. 


Sustaining capital expenditures are defined as those capital 
expenditures which do not increase annual gold ounce production at a mine site 
and exclude all expenditures at the Company’s projects and certain expenditures 
at the Company’s operating sites which are deemed expansionary in nature.


Reclamation cost accretion represents the growth in the 
Company’s decommissioning liability due to the passage of time. This amount does 
not reflect cash outflows but it is considered to be representative of the 
periodic costs of reclamation and remediation. Reclamation cost accretion is 
included in finance expense in the Company’s condensed consolidated interim 
statements of operations and comprehensive income. 


The Company’s exploration program comprises delineation 
drilling, exploration drilling, exploration drifting and regional exploration. 
The costs related to delineation drilling, exploration drilling and exploration 
drifting are included in all-in sustaining costs. The regional exploration 
program is designed to identify new mineral targets on the Company’s extensive 
land holdings in order to grow production rather than sustain production. 


Non – GAAP measure – Adjusted net income (loss) 


The Company has included the non-GAAP performance measures of 
adjusted net income (loss) and adjusted net income (loss) per share, throughout 
this document. Items are adjusted where considered to be unusual and impacting 
comparability based on the historical and expected future performance of the 
Company. Neither of these non-GAAP performance measures has any 
standardized meaning and is therefore unlikely to be comparable to other 
measures presented by other issuers. The Company believes that, in addition to 
conventional measures prepared in accordance with GAAP, certain investors use 
this information to evaluate the Company’s performance and ability to generate 
cash flow. Accordingly, it is intended to provide additional information and 
should not be considered in isolation or as a substitute for measures of 
performance prepared in accordance with GAAP. The following table provides a 
reconciliation of adjusted net income to net income (the nearest GAAP measure) 
per the condensed consolidated interim financial statements. All adjustments are 
shown net of tax. 


27 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 




  
  

      
     
    Three months 
      ended
     

  

      
     
    March 31,
     

  

    (In thousands of US dollars except per 
      share amounts) 
     
    2015 
     
     
    2014 
     

  

      
     
      
     
     
      
     

  

    Net income (loss) 
     
    3,584 
     
     
    (8,253
    ) 

  

    Impairment charges 
     
    534 
     
     
    - 
     

  

    Impact of foreign exchange on 
      deferred taxes 
     
    2,211 
     
     
    (517
    ) 

  

    Gain on derivative liability 
     
    (1,329
    ) 
     
    - 
     

  

    Mark to Market on Convertible 
      debenture 
     
    (8,205
    ) 
     
    - 
     

  

    Office closure costs 
     
    705 
     
     
    - 
     

  

    Transaction costs 
     
    3,639 
     
     
    6,722 
     

  

    Adjusted net income (loss) 
     
    1,139 
     
     
    (2,048
    ) 

  

      
     
      
     
     
      
     

  

    Adjusted net income per share 
     
    0.01 
     
     
    (0.02
    ) 


Non – GAAP measure - Operating cash flows before working 
capital changes and operating cash flows before working capital changes per 
share


The Company has included the non-GAAP performance measure 
operating cash flows before working capital changes and operating cash flows 
before working capital changes per share in this MD&A. These Non-GAAP 
performance measures do not have any standardized meaning and are therefore 
unlikely to be comparable to other measures presented by other issuers. The 
Company believes that, in addition to conventional measures, prepared in 
accordance with GAAP, certain investors use this information to evaluate the 
Company’s performance and ability to generate cash flow. Accordingly, it is 
intended to provide additional information and should not be considered in 
isolation or as a substitute for measures of performance prepared in accordance 
with GAAP. The following table provides a reconciliation of operating cash flows 
before working capital changes to cash (used in) provided by operating 
activities (the nearest GAAP measure) per the condensed consolidated interim 
financial statements and the calculation of per share amounts. 


28 






PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 


  
  

      
     
    Three 
      months ended 
     

  

    (In thousands of US dollars) 
     
    March 
      31, 
     

  

      
     
    2015 
     
     
    2014 
     

  

    Cash provided by operating 
      activities 
     
    15,264 

     
     
    (7,434
    ) 
  

  

    Change in non-cash operating working capital 
    
     
    3,513 
     
     
    13,943 
     

  

    Operating cash flows before 
      working capital changes 
     
    18,777 
     
     
    6,509 
     

  

      
     
      
     
     
      
     

  

    Operating cash flows per 
      share before working capital change 
     
    0.12 
     
     
    0.05 
     

  

      
     
      
     
     
      
     

  

    Weighted average number of 

     
      
     
     
      
     

  

    common shares outstanding (basic) 
     
    161,783,009 
     
     
    128,112,079 
     


Related party transactions 


As at March 31, 2015, the Company’s related parties include its 
subsidiaries, associates over which it exercises significant influence, and key 
management personnel. During its normal course of operations, the Company enters 
into transactions with its related parties for goods and services.


Other than payments to key management, there were no further 
related party transactions for the three months ended March 31, 2015 that have 
not been disclosed in the Company’s condensed consolidated interim financial statements. 



ADOPTION OF NEW ACCOUNTING POLICIES 


Functional and presentation currency 


On January 1, 2015, Primero Gold Canada Inc. (“PGCI”) and 
Primero Mining Corp. (“PMC”) amalgamated as one company under the name Primero 
Mining Corp. (new PMC). PGCI, which held the Black Fox Complex assets, uses the 
U.S. dollar as its functional currency, while the functional currency of the 
former parent Company, PMC, was the Canadian dollar.


On March 12, 2015 Canada Revenue Agency approved the election 
of U.S. dollar as the functional currency of new PMC. As a result of the change 
in underlying conditions relevant to new PMC, effective March 31, 2015 the 
functional currency of former PMC was changed from the Canadian dollar to the 
U.S. dollar. 


Recent pronouncements issued 


The Company has reviewed new and revised accounting 
pronouncements that have been issued but are not yet effective and determined 
that the following may have an impact in the future on the Company. The Company 
is currently evaluating the impact of adopting these standards on its 
consolidated financial statements. 


In May 2014, the IASB issued IFRS 15 - Revenue from Contracts 
with Customers (“IFRS 15”) which supersedes existing standards and 
interpretations including IAS 18, Revenue. IFRS 15 establishes a single 
five-step model framework for determining the nature, amount, timing and 
uncertainty of revenue and cash flows arising from a contract with a customer. 
The standard is effective for annual periods beginning on or after January 1, 
2017, with early adoption permitted.


29 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

Primero will be required to adopt IFRS 9, “Financial 
Instruments” on January 1, 2018. IFRS 9 is the result of the first phase of the 
IASB’s project to replace IAS 39, “Financial Instruments: Recognition and 
Measurement”. The new standard replaces the current multiple classification and 
measurement models for financial assets and liabilities with a single model that 
has only two classification categories: amortized cost and fair value. 



CRITICAL ACCOUNTING POLICY – 
DEPLETION OF MINING PROPERTIES 


Mining properties are depleted using the units-of-production 
method over the mine’s estimated and economically proven and probable reserves 
and an estimate of the portion of resources expected to be classified as 
reserves. Depletion is calculated on a mine-by-mine basis. If a mine has 
significant components with differing useful lives, depletion is calculated 
based on the useful life of each component. 


Mineralization at the Company’s mine sites is segregated into 
reserves (including proven and probable), resources (including measured, 
indicated and inferred) and exploration potential. The definitions applied by 
the Company are based on those in National Instrument 43-101 – Standards of 
Disclosure for Mineral Projects (“NI 43-101”); in addition, the Company also 
applies the following definition: 


Exploration potential – mineralization quantified by the 
Company’s geologists with a sufficient degree of confidence to include in the 
Company’s acquisition fair value determination, but without the necessary level 
of measurement precision to enable it to be classified as a mineral reserve or 
resource as defined by NI 43-101. 


The Company’s depletion estimation methodology divides the 
total mining property capitalized in respect of a mining asset into a depletable 
component and a non-depletable component. The value assigned to the depletable 
component is equal to the value assigned to the proven and probable reserves and 
a portion of resources of the asset. The value assigned to the non-depletable 
component is the value assigned to the exploration potential of the asset and 
the remaining resources not included in the depletable component. The allocation 
of values to the proven and probable reserves, resources and exploration 
potential of the asset are based on the discounted cash flow analysis of the 
Company’s future expected cash flows to be derived from the mine in question. 
The depletable component of the capitalized total mining property is depleted 
over 100% of reserves and a portion of resources included in the Company’s 
discounted cash flow analysis. The non-depletable component is not depleted but, 
in combination with the depletable component, is evaluated for impairment when 
events and changes in circumstances indicate that the carrying amount may not be 
recoverable.


Each year, coincident with the updated reserve and resource 
estimates, the Company expects that a portion of resources will be transferred 
to reserves and a portion of exploration potential will be transferred to 
resources. As a result, the category of non-depletable mineralization is 
expected to reduce and, in the absence of further additions to exploration 
potential, eventually be fully classified within the depletable component over 
the life of mine. 


When considering the portion of resources to include in the 
depletion base of the depletable component, management considers which of the 
Company’s resources are believed to eventually be classified as proven and 
probable reserves. In assessing which resources to include so as to best reflect 
the useful life of the mine, management considers resources that have been 
included in the discounted cash flow analysis. To be included in the analysis, 
resources need to be above the cut-off grade set by management, which means that 
the resource can be economically mined and is therefore commercially viable. 
This consistent systematic method for inclusion in the analysis takes into 
account management’s view of the gold price and exchange rates. In addition, in 
order to determine the proportion of resources to include in the depletion base, management considers the existence, 
commercial viability and potential economic recovery of such resources based on 
historical experience and available geological and drilling information of the 
area under consideration and other operations/parts of the mine that are 
contiguous to the area under consideration. In instances where management is 
able to demonstrate the economic recovery of such resources with a high level of 
confidence, such additional resources, which may also include certain of the 
inferred resources, are included in the calculation of depletion. 


30 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 



Development costs incurred during a period are added to the 
total mining property capitalized at the commencement of the period in 
calculating the depletion expense. Future development costs necessary to access 
inferred resources, have been taken into account when determining the pattern of 
depletion for the Company’s mining properties; such costs are included in the 
discounted cash flow analysis and are determined by the Company’s geologists and 
engineers based on an in-depth knowledge of the mine and planned development 
work to access resources.


Total depletion expense for the Company during the three months 
ended March 31, 2015 was $13.1 million (2014 - $11.1 million). Had the depletion 
expense been calculated without inclusion of inferred resources and, where 
applicable, exploration potential, and related future development costs, the 
depletion expense would have been $11 million (2014 - $5.6 million). 


Due to the fact that the economic assumptions used to estimate 
the proven and probable reserves and resources change from year to year, and 
because additional geological data is generated during the course of operations, 
estimates of the resources and proven and probable reserves may change from year 
to year. Changes in the proven and probable reserves and inferred resources used 
in the life-of -mine plan may affect the depletion calculation and such changes 
are recognized prospectively. 


San Dimas 


The value assigned to the depletable and non-depletable pools 
of San Dimas were $307.1 million and $342.7 million respectively for December 
31, 2014. The depletable component is depleted over 100% of reserves and 75% of 
resources for the period ended March 31, 2015. The non-depletable component is 
not depleted.


The Company has risk-weighted the resources included in the San 
Dimas depletion calculation considering the following factors: 



  
  

    i. 
    
      
Both historic and recent rates of conversion of resources 
      to reserves at the San Dimas mine;

  

     
     

  

    ii. 
    
      
The nature of the ore deposit and the physical 
      characteristics of the mine site. Exploration from the surface at San 
      Dimas is challenging due to topographical challenges and accordingly the 
      definition drilling required to establish resources is delayed due to the 
      time required to develop access to underground drilling stations. This 
      delay has historically limited the quantity of reserves that can be 
      identified for future mining at San Dimas at any point in time. 
      Accordingly, the San Dimas mine has historically had a short reserve life, 
      however, management is confident that resources and exploration potential 
      will convert to reserves as development progresses;

  

     
     

  

    iii. 
    
      
Management is required under IFRS to assess the useful 
      life of the San Dimas mine and management believes that inclusion of a 
      portion of resources provides a more accurate estimate as the useful life 
      of the San Dimas mine for calculation of depletion expense. Estimating the 
      useful life of the San Dimas mine without inclusion of a portion of 
      resources would, in management’s opinion, result in an inappropriately 
      short estimate of the life of the San Dimas mine;


31 






PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 


  
  

    iv. 
    
      
The change in reserve and resource estimation methodology 
      as at December 31, 2011 from a polygonal approach to a geostatistical 
      approach, which resulted in a transfer of estimated mineral reserves to 
      inferred resources and the reclassification of a substantial portion of 
      inferred resources to exploration potential. Given the high proportion of 
      inferred resources previously classified as proven and probable reserves 
      under the polygonal method, management has a high level of confidence that 
      these inferred resources will be part of future 
  production.


The Company has determined to include 100% of reserves and 75% 
of resources in the depletion calculation for the three months ended March 31, 
2015 as the Company believes this is supported by the long mining history at the 
San Dimas mine with an average historical conversion rate of approximately 90% 
of resources into reserves.


Future capital expenditures necessary to access these resources 
have been taken into account when determining the pattern of depletion charge 
for the San Dimas operations. These costs are included in the life-of-mine cash 
flows and are determined by the Company’s geologists and engineers based on an 
in-depth knowledge of the mine and planned development work. For the the three 
months ended March 31, 2015, $69.1 million of future development costs were 
included in the calculation of depletion expense for San Dimas.


For the three months ended March 31, 2015, the depletable pool 
was depleted on a units-of-production basis based on inclusion of 100% of 
reserves and 75% of resources, which represented 1.4 million ounces.


Black Fox 


The value assigned to the depletable and non-depletable pools 
of Black Fox were $41.8 million and $82.4 million respectively for December 31, 
2014. The depletable component is depleted over 100% of reserves and 0% of 
resources for the period ended March 31, 2015. The non-depletable component is 
not depleted.


When considering the percentage of resources to include in the 
depletion base of the depletable component, management considered the existence, 
commercial viability and potential economic recovery of the Black Fox resources 
based on historical experience and available geological and drilling information 
of the area under consideration and other operations/parts of the mine, that are 
contiguous to the area under consideration. Given the relative lack of history 
of the mine and inability to demonstrate the economic recovery of such resources 
with a high level of confidence, it was determined that none of the resources 
should be included in the calculation of depletion for the Black Fox mine.


CRITICAL ACCOUNTING POLICIES, ESTIMATES AND 
JUDGEMENTS 


The preparation of financial statements in conformity with IFRS 
requires management to make estimates, judgements and assumptions that affect 
the reported amounts of assets and liabilities and disclosure of contingent 
liabilities at the date of the financial statements, and the reported amounts of 
revenues and expenses during the reporting period.


ACCOUNTING POLICIES 


Management has identified the following critical accounting 
policies: 


32 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

Economic recoverability and probability of future 
economic benefits of exploration, evaluation and development costs 


The Company has determined that exploration drilling, 
evaluation, development and related costs incurred which have been capitalized 
are economically recoverable. Management uses several criteria in its 
assessments of economic recoverability and probability of future economic 
benefits including geological and metallurgical information, history of 
conversion of mineral deposits to proven and probable reserves, scoping and 
feasibility studies, accessible facilities, and existing permits for the life of 
mine plan. The estimates contained within these criteria could change over time 
which could affect the economic recoverability of capitalized costs. 


Determination of useful lives of property, plant and 
equipment 


Assets other than mining interests are depreciated using the 
straight-line method. Should the actual useful life of the property, plant or 
equipment vary future depreciation charges may change.


Deferred stripping


The Company defers stripping costs incurred during the 
production stage of its open pit operations when these costs are considered to 
generate a future benefit. The determination of these amounts requires the use 
of judgements and estimates such as estimates of tonnes of waste to be removed 
over the life of the mining area and economically recoverable reserves extracted 
as a result. Changes in a mine’s life and design may result in changes to the 
expected stripping ratio. Any changes in these estimates are accounted for 
prospectively. 


Inventories 


Finished goods, work-in-process and stockpiled ore are valued 
at the lower of average production cost and net realizable value.


The Company records the costs of work-in-process inventories at 
the lower of cost and estimated net realizable value. These costs are charged to 
income and included in operating expenses on the basis of ounces of gold 
recovered. The estimates and assumptions include surveyed quantities of 
stockpiled ore, in-circuit process volumes, gold and silver contents of both, 
costs to recover saleable ounces, recoverable ounces once processed and the 
price per ounce of gold or silver when ounces of gold and silver are expected to 
be recovered and sold. If these estimates or assumptions prove to be inaccurate, 
the Company could be required to write down the carrying amounts of its 
work-in-process inventories, which would reduce the Company’s income and working 
capital.


Mining interests and impairment testing 



The Company records mining interests at cost, less any 
adjustments for impairment. Exploration costs are capitalized where they meet 
the Company’s criteria for capitalization.


Mining properties are depleted using a units-of-production 
basis over a mine’s estimated and economically proven and probable reserves and 
an estimate of the portion of resources expected to be classified as reserves. 
If a mine has significant parts with differing useful lives, depletion is 
calculated based on the useful life of each part. For certain mines, including 
the San Dimas and Black Fox mines, the Company may segregate the recognized 
value of the mine between its “depletable” and “non-depletable” parts. The value assigned to the depletable 
component is that which is recognized in respect of the mine’s reserves and 
resources, while the value assigned to the non-depletable component is that 
which relates to exploration potential and portion of the resources not included 
in depletable pools. If estimates of the value of the “depletable” and 
“non-depletable” parts of a mining property prove to be inaccurate, this could 
increase the amount of future depletion expense which would reduce the Company’s 
net income and net assets. 


33 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 



The Company depletes its operating mines based on estimates of 
the production to be derived over the life of the mine that are attributable to 
proven and probable reserves and inferred resources. The Company has estimated 
that 100% of proven and probable reserves and 75% of inferred resources will be 
recovered from the San Dimas mine and that 100% of proven and probable reserves 
and 0% of inferred resources will be recovered from the Black Fox mine. If these 
estimates of reserves and resources expected to be recovered prove to be 
inaccurate, or if the Company revises its mining plan for a location, due to 
reductions in the metal price forecasts or otherwise, to reduce the amount of 
reserves and resources expected to be recovered, the Company could be required 
to write down the carrying amounts of its mining properties, or to increase the 
amount of future depletion expense, both of which would reduce the Company’s net 
income and net assets.


The Company reviews and evaluates its goodwill and mining 
interests for impairment when events and changes in circumstances indicate that 
the related carrying amounts may not be recoverable, and in the case of 
goodwill, annually. Goodwill is allocated to cash-generating units for the 
purposes of impairment testing. The allocation is made to those CGUs that are 
expected to benefit from the business combination in which the goodwill arose. 
The carrying amounts of the CGUs are compared to their recoverable amount. The 
recoverable amount is the higher of value in use and fair value less costs to 
sell. In assessing value in use, the estimated future cash flows are discounted 
to their present value using a pre-tax discount rate that reflects current 
market assessments of the time value of money and the risks specific to the CGU 
for which the estimates of future cash flows have not been adjusted.


The Company bases its impairment calculation on detailed 
budgets and forecasts which are prepared separately for each of the Company’s 
CGUs to which the individual assets are allocated. The Company currently has 
three CGUs, the San Dimas mine, the Black Fox Complex and, the Cerro del Gallo 
project. These budgets and forecasts generally cover the life of the mine. If 
the recoverable amount of an asset (or CGU) is estimated to be less than its 
carrying amount, an impairment is recognized immediately as an expense and the 
carrying amount is reduced to its recoverable amount. Impairment is assessed at 
the CGU level. 


Plant and equipment are depreciated over their estimated useful 
lives. If estimates of useful lives including the economic lives of mines prove 
to be inaccurate, the Company could be required to write down the carrying 
amounts of its plant and equipment, or increase the amount of future 
depreciation expense, both of which would reduce the Company’s net income and 
net assets. 


Fair value of assets purchased in a business 
combination 


The Company’s business combinations are accounted for using the 
acquisition method of accounting whereby assets acquired and liabilities assumed 
are recorded at their fair values as of the date of acquisition and any excess 
of the purchase price over such fair values is recorded as goodwill.


34 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

Assumptions underlying fair value estimates are subject to 
significant risks and uncertainties, which if incorrect could lead to an 
overstatement of the mineral properties of the Company which would then be 
subject to an impairment test as described above. 


Reclamation and closure cost obligations 



The Company has an obligation to reclaim its mining properties 
after the minerals have been mined from the site, and has estimated the costs 
necessary to comply with existing reclamation standards. IFRS requires the 
Company to recognize the fair value of a decommissioning liability, such as site 
closure and reclamation costs, in the period in which it is incurred if a 
reasonable estimate of fair value can be made. The Company records the estimated 
present value of future cash flows associated with site closure and reclamation 
as liabilities when the liabilities are incurred and increases the carrying 
values of the related assets by the same amount. At the end of each reporting 
period, the liabilities are increased to reflect the passage of time (accretion 
expense). Adjustments to the liabilities are also made for changes in the 
estimated future cash outflows underlying the initial fair value measurements, 
and changes to the discount rate used to present value the cash flows, both of 
which may result in a corresponding change to the carrying values of the related 
assets. Should the estimation of the reclamation and closure cost obligations be 
incorrect, additional amounts may need to be provided for in future which could 
lead to an increase in both the liability and associated asset. Should the 
reported asset and liability increase, the amortization expense in the statement 
of operations of the capitalized asset retirement cost would increase. 



Taxation 


The Company recognizes the future tax benefit related to 
deferred tax assets to the extent that it is probable that future taxable 
profits will be available against which they can be utilized. Assessing the 
recoverability of deferred tax assets requires management to make significant 
estimates related to expectations of future taxable income, applicable tax 
strategies and the expected timing of the reversals of existing temporary 
differences. In making its assessments, management gives additional weight to 
positive and negative evidence that can be objectively verified. Estimates of 
future taxable income are based on forecasted cash flows from operations and the 
application of existing tax laws in each jurisdiction. Forecasted cash flows 
from operations are based on life of mine projections internally developed and 
reviewed by management.


The Company recognizes current income tax benefits when it is 
more likely than not, based on technical merits, that the relevant tax position 
will be sustained upon examination by applicable tax authorities. The more 
likely than not criteria is a matter of judgment based on the individual facts 
and circumstances of the relevant tax position evaluated in light of all 
available evidence.


The recoverability of deferred tax assets and the recognition 
and measurement of uncertain tax positions are subject to various assumptions 
and management judgment. Actual results may differ from these estimates. In 
circumstances where the applicable tax laws and regulations are either unclear 
or subject to ongoing varying interpretations, it is reasonably possible that 
changes in these estimates could occur that materially affect the amounts of 
current and deferred income taxes recognized by the Company, as well as deferred 
tax assets and liabilities recorded at December 31, 2014.


Share-based payments 


For equity-settled awards, the fair value of the award is 
charged to the statement of operations and credited to the share-based payment 
reserve rateably over the vesting period, after adjusting for the number of awards that are expected to vest. The significant 
estimations and assumptions included in the calculation of the fair value of the 
award are expected volatility, expected life, expected dividend rate and 
expected risk-free rate of return. Changes in these assumptions may result in a 
material change to the expense recorded for the issuance of share-based 
compensation. 


35 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 



ESTIMATES AND JUDGEMENTS 


The critical judgements that the Company’s management has made 
in the process of applying the Company’s accounting policies that have the most 
significant effect on the amounts recognized in the Company’s condensed 
consolidated interim financial statements are as follows: 


Tax ruling in Mexico 


The Company has taken the position that if the Mexican tax laws 
relative to the APA Ruling do not change and the Company does not change the 
structure of the silver purchase agreement, the ability of the Company to 
continue to pay taxes in Mexico based on realized prices of silver will continue 
for the life of the San Dimas mine. Should this judgment change, there could be 
a material change in the Company’s results of operations, financial condition 
and cash flows.


Liability to sell silver to Silver Wheaton Caymans and 
gold to Sandstorm Gold Ltd. 


The Company has accounted for and presented the liability to 
sell silver to Silver Wheaton Caymans and gold to Sandstorm Gold Ltd. net within 
the mining interests rather than as a separate liability in the Company’s 
statement of financial position. 


Componentization of property, plant and equipment 



Assets are componentized for the purposes of depreciation. 
Should the componentization of assets change, depreciation charges may vary 
materially in the future.


Asset acquisitions 


The Company has determined that the acquisition of Cerro was an 
asset acquisition rather than a business combination. This is considered a 
significant judgment that could have a material impact on the assets and 
liabilities recognized as well as any future depletion expense. 


Functional currency


The determination of a subsidiary’s functional currency often 
requires significant judgment where the primary economic environment in which 
the subsidiary operates may not be clear. This can have a significant impact on 
the consolidated results of the Company. 


Financial instruments 


The Company’s financial instruments at March 31, 2015 consist 
of cash and cash equivalents, trade and other receivables, restricted cash, an 
equity investment in Fortune Bay, trade and other payables, the convertible 
debentures and the line of credit. 


36 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

At March 31, 2015, the carrying amounts of cash and cash 
equivalents, trade and other receivables, restricted cash and trade and other 
payables are considered to be a reasonable approximation of their fair values 
due to their short-term nature.


The Company’s equity investment in Fortune Bay is designated as 
available for sale and is held at fair value. Any unrealized gains or losses on 
available for sale assets are recognized in other comprehensive income (“OCI”). 
During the first quarter of 2015, the Company recorded an impairment loss of 
$0.5 million in the statement of operations relating to its investment in 
Fortune Bay. Fortune Bay is a publicly-listed company and the fair value is 
based on the trading price of its shares as at the date of the condensed 
consolidated interim statement of financial position. 


The initial fair value of the convertible debentures assumed 
with the Brigus acquisition was based on the present value of the future cash 
flows to be paid under the terms of the debentures. Subsequently, the 
convertible debentures are being carried at amortized cost. The fair value of 
the 5.75% convertible debentures which closed on February 9, 2015 is based on 
the market price of the debenture on the TSX Exchange. Gains and losses from 
fluctuations in the market price are recognized in the statement of operations 
and comprehensive income (loss) as mark-to-market gain or loss on convertible 
debentures. 



  
  

      
     
    Fair value 
     
     
    Carrying value 
     

  

    As at March 31, 2015 
    
    $
     
    
    $
     

  

      
     
      
     
     
      
     

  

    5.75% convertible unsecured 
      debentures (a) 
     
    66,795 

     
     
    66,795 
     

  

    Senior unsecured convertible debentures (b) 
     
    45,497 
     
     
    46,668 
     




  
  

    (a) 
    
      
Fair value is calculated based on the market price of the 
      convertible debenture on the TSX Exchange.

  

     
     

  

    (b) 
    
      
Fair value is calculated using a discounted cash flow 
      analysis.


Derivative instruments - Embedded derivatives


Financial instruments and non-financial contracts may contain 
embedded derivatives, which are required to be accounted for separately at fair 
value as derivatives when the risks and characteristics of the embedded 
derivatives are not closely related to those of their host contract and the host 
contract is not carried at fair value. The Company regularly assesses its 
financial instruments and non-financial contracts to ensure that any embedded 
derivatives are accounted for in accordance with its policy. There were no 
material embedded derivatives requiring separate accounting at March 31, 2015 or 
December 31, 2014, other than those discussed below. 


The convertible debentures assumed with the acquisition of 
Brigus are considered to contain an embedded derivative liability which was 
initially recognized at fair value using an option pricing model, and is 
subsequently measured at fair value each period during the term of the 
debentures. During the three months ended March 31, 2015 an unrealized 
derivative gain of $1.3 million was recognized in relation to this derivative 
liability. 


37 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

RISKS AND UNCERTAINTIES 


Financial instrument risk exposure 


The following describes the types of financial instrument risks 
to which the Company is exposed and its objectives and policies for managing 
those risk exposures: 



  
  

    a) 
    
      
Credit risk


Credit risk is the risk that the counterparty to a financial 
instrument will cause a financial loss for the Company by failing to discharge 
its obligations. Credit risk is primarily associated with trade and other 
receivables; however, it also arises on cash. To mitigate exposure to credit 
risk on financial assets, the Company ensures non-related counterparties 
demonstrate minimum acceptable credit worthiness and ensures liquidity of 
available funds. 


The Company closely monitors its financial assets and does not 
have any significant concentration of credit risk with non-related parties. The 
Company invests its cash in highly rated financial institutions and sells its 
products exclusively to organizations with strong credit ratings. The credit 
risk associated with trade receivables at March 31, 2015 is considered to be 
negligible.


The Company’s maximum exposure to credit risk at March 31, 2015 
and December 31, 2014 is as follows: 



  
  

     
      
     
    March 31 
     
     
    December 31 
     

  

     
      
     
    2015 
     
     
    2014 
     

  

     
      
    
     $
     
    
    $
     

  

     
    Cash 
     
    57,619 

     
     
    27,389 
     

  

     
    Trade and other receivables 
     
    1,472 
     
     
    59 
     

  

     
    Taxes receivable 
     
    32,397 
     
     
    33,272 
     

  

     
      
     
    91,488 
     
     
    60,720 
     


The Company has no concentrations of credit risk, other than 10 
months of VAT outstanding from the Mexican tax authorities (included in taxes 
receivable), which the Company expects to be refunded in due course or offset by 
taxes payable for 2015. 



  
  

    (b) 
    
      
Liquidity risk


Liquidity risk is the risk that the Company will encounter 
difficulty in meeting obligations associated with its financial liabilities that 
are settled by delivering cash or another financial asset. The Company has 
developed a planning, budgeting and forecasting process to help determine the 
funds required to support its normal operating requirements on an ongoing basis 
and its expansionary plans. 


In the normal course of business, the Company enters into 
contracts and performs business activities that give rise to commitments for 
future minimum payments.


The Company expects to discharge its commitments as they come 
due from its existing cash balances, cash flow from operations and collection of 
receivables. 


The Company has entered into commercial leases on certain types 
of equipment and office space which have been classified as operating leases. 
These leases have lives of between 1 and 6 years. There are no restrictions 
placed on the Company as a result of entering into these leases. Some of the 
leases contain renewal or purchase options at the end of the lease. The total 
operating lease expense during the three month ended March 31, 2015 was $0.4 
million (2014 - $Nil).


38 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 




  
  

    (c) 
    
      
Market risk

  

     
     

  

    (i) 
    
      
Currency risk


Currency risk is the risk that the fair values or future cash 
flows of the Company’s financial instruments will fluctuate because of changes 
in foreign currency exchange rates. Exchange rate fluctuations may affect the 
costs incurred in the Company’s operations. Gold is sold in U.S. dollars and 
costs are incurred principally in U.S. dollars, Canadian dollars and Mexican 
pesos. The appreciation of the Mexican peso or the Canadian dollar against the 
U.S. dollar can increase the costs of gold production and capital expenditures 
in U.S. dollar terms. The Company also holds cash that is denominated in 
Canadian dollars and Mexican pesos which are subject to currency risk. The 
Company’s head office general and administrative expenses are mainly denominated 
in Canadian dollars and are translated to US dollars at the average rate during 
the period, as such if the US dollar appreciates as compared to the Canadian 
dollar, the costs of the Company would decrease in US dollar terms. The Company 
is further exposed to currency risk through non-monetary assets and liabilities 
of its Mexican and Canadian entities whose taxable profit or loss is denominated 
in a non-US dollar currency. Changes in exchange rates give rise to temporary 
differences resulting in a deferred tax liability or asset with the resulting 
deferred tax charged or credited to income tax expense. 


During the three months ended March 31, 2015, the Company 
recognized a gain of $2.4 million on foreign exchange (2014 - loss of $0.4 
million). Based on the above net exposures at March 31, 2015, a 10% depreciation 
or appreciation of the Mexican peso against the U.S. dollar would result in a 
$3.3 million increase or decrease in the Company’s after-tax net earnings (loss) 
(2014 - $1.5 million); and a 10% depreciation or appreciation of the Canadian 
dollar against the U.S. dollar would result in a $0.7 million increase or 
decrease in the Company’s after-tax net earnings (loss) (2014 - $1.8 million). 



The Company does not currently use derivative instruments to 
reduce its exposure to currency risk, however, management monitors its differing 
currency needs and tries to reduce its exposure to currency risks through 
exchanging currencies in line with Company strategy. 



  
  

    (ii) 
    
      
Interest rate risk


Interest rate risk is the risk that the fair values and future 
cash flows of the financial instruments will fluctuate because of changes in 
market interest rates. The exposure to interest rates is monitored. The 
Company’s has exposure to interest rate risk on its revolving line of credit 
which is subject to a floating interest rate. As at March 31, 2015, the Company 
does not have an exposure to interest rate risk given that the line of credit 
has been fully paid during the quarter ended March 31, 2015 (2014 - $nil). In 
addition the 5.75% debentures are subject to swings which are recorded at fair 
value and therefore influenced by market interest rates.



  
  

    (iii) 
    
      
Price risk


Price risk is the risk that the fair value or future cash flows 
of the Company’s financial instruments will fluctuate because of changes in 
commodity prices. Profitability depends on sales prices for gold and silver. 
Metal prices are affected by numerous factors such as the sale or purchase of 
gold and silver by various central banks and financial institutions, interest 
rates, exchange rates, inflation or deflation, fluctuations in the value of the 
U.S. dollar and foreign currencies, global and regional supply and demand, and 
the political and economic conditions of major producing countries throughout 
the world. 


39 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 

The table below summarizes the impact on profit after tax for a 
10% change in the average commodity price achieved by the Company during the 
year. The analysis is based on the assumption that the gold and silver prices 
move 10% with all other variables held constant.



  
  

     
      
     
    Three 
      months ended 
     

  

     
      
     
    March 
      31, 
     

  

     
      
     
    2015 
     
     
    2014 
   

  

     
      
    
    $000 
     
    
    $000 
   

  

     
    Gold Prices 
     
      
     
     
      
     

  

     
    10% increase 
     
    6,530 
     
     
    3,960 
     

  

     
    10% decrease 
     
    (6,530
    ) 
     
    (3,960
    ) 
  

  

     
      
     
      
     
     
      
     

  

     
    SIlver Prices 
     
      
     
     
      
     

  

     
    10% increase 
     
    799 
     
     
    862 
     

  

     
    10% decrease 
     
    (799
    ) 
     
    (862
    ) 
  


OTHER RISKS AND UNCERTAINTIES 


The Company’s business contains significant risk due to the 
nature of mining, exploration, and development activities. For additional 
discussion of these and other risk factors, please refer to the Company’s Annual 
Information Form for the year ended December 31, 2014, which is found under the 
Company’s profile at www.sedar.com. 


APA Ruling 


In October 2012 the Company received an APA ruling on the 
appropriate price of silver sales under the silver purchase agreement. Under 
Mexican tax law, an APA ruling is generally applicable for up to a five year 
period. For Primero this applies to the fiscal years 2010 to 2014. Assuming 
Primero continues to sell silver under the silver purchase agreement on the same 
terms and there are no changes in the application of Mexican tax laws relative 
to the APA ruling, the Company expects to record revenues and pay taxes on 
realized prices for the life of the San Dimas mine. There can be no assurance 
that Mexican tax laws applicable to the APA ruling will not change or that the 
Mexican tax authorities will not change their views on the appropriate price for 
the sale of silver under the silver purchase agreement. If the Mexican tax 
authorities determine that the appropriate price of silver sales under the 
silver purchase agreement is different than the realized price, Primero’s cash 
flows and earnings could be significantly adversely impacted. 


Effectiveness of internal control over financial 
reporting 


The Company is required to maintain and evaluate the 
effectiveness of its internal control over financial reporting under National 
Instrument 52-109 in Canada (“NI 52-109”) and under the Securities Exchange Act 
of 1934, as amended, in the United States. There is no assurance that the 
Company will be able to achieve and maintain the adequacy of its internal 
control over financial reporting as such standards are modified, supplemented, 
or amended from time to time, and the Company may not be able to ensure that it 
can conclude on an ongoing basis that its internal control over financial 
reporting is effective. The Company’s failure to establish and maintain 
effective internal control over financial reporting could result in the loss of 
investor confidence in the reliability of its financial statements. In addition, 
any failure to implement required new or improved controls, or difficulties 
encountered in their implementation, could result in the Company’s inability to 
meet its reporting obligations. There can be no assurance that the Company will 
be able to remediate material weaknesses, if any, identified in future periods, 
or maintain all of the controls necessary for continued compliance, and there 
can be no assurance that the Company will be able to retain sufficient skilled 
finance and accounting personnel. No evaluation can provide complete assurance 
that the Company’s internal control over financial reporting will detect or 
uncover all failures of persons within the Company to disclose material 
information otherwise required to be reported.


40 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 



Disclosure controls and procedures


Disclosure controls and procedures form a framework designed to 
provide reasonable assurance that information disclosed publicly fairly presents 
in all material respects the financial condition, results of operations, and 
cash flows of the Company for the periods presented in this MD&A. The 
Company’s disclosure controls and procedures framework includes processes 
designed to ensure that material information relating to the Company, including 
its consolidated subsidiaries, is made known to management by others within 
those entities to allow timely decisions regarding required disclosure. 


The Company’s management, with the participation of its CEO and 
CFO, has evaluated the design, operation and effectiveness of the Company’s 
disclosure controls and procedures. Based on the results of that evaluation, the 
Company’s CEO and CFO have concluded that, as of the end of the period covered 
by this report, the Company’s disclosure controls and procedures were effective 
to provide reasonable assurance that the information required to be disclosed by 
the Company in its annual filings, interim filings or other reports filed or 
submitted by it under securities legislation is recorded, processed, summarized 
and reported, within the time periods specified in the securities legislation, 
and is accumulated and communicated to the Company’s management, including the 
CEO and CFO, as appropriate to allow timely decisions regarding required 
disclosure. 


Internal controls over financial reporting 


The Company’s management, with the participation of its CEO and 
CFO, is responsible for establishing and maintaining adequate internal control 
over financial reporting. The Company’s internal control over financial 
reporting is a process designed to provide reasonable assurance regarding the 
reliability of financial reporting and the preparation of financial statements 
for external purposes in accordance with IFRS. The Company’s internal control 
over financial reporting includes policies and procedures that: 



  
  

    • 
    
      
pertain to the maintenance of records that accurately and 
      fairly reflect, in reasonable detail, the transactions and dispositions of 
      assets of the Company; 

  

    • 
    
      
provide reasonable assurance that transactions are 
      recorded as necessary to permit preparation of financial statements in 
      accordance with IFRS and that the Company’s receipts and expenditures are 
      made only in accordance with authorizations of management and the 
      Company’s Directors; and 

  

    • 
    
      
provide reasonable assurance regarding prevention or 
      timely detection of unauthorized acquisition, use, or disposition of the 
      Company’s assets that could have a material effect on the Company’s 
      condensed consolidated interim financial statements. 



Remediation Plan for Material Weakness in Internal Control 
over Financial Reporting - In connection with the audit of our financial 
statements for the year ended December 31, 2014, Company’s management and 
auditors identified a material weakness solely relating to the valuation of 
business combinations with respect to the acquisition of Brigus, the Company is in the 
process of developing a remediation plan to address the deficiency previously 
noted in the areas of personnel, systems and controls. 


41 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 



Because of the inherent complexities in valuing business 
combinations relating to mergers and acquisitions, the Company will enhance its 
internal control system by consulting with a professional valuation company with 
experience and knowledge in valuing assets in accordance with applicable 
accounting standards for its next material business combination. 


There has been no material change in internal controls of the 
Company during the quarter ended March 31, 2015 that has materially affected, or 
is likely to materially affect, the Company’s internal control over financial 
reporting. 


Readers are cautioned that any controls and procedures, no 
matter how well conceived and operated, can provide only reasonable, not 
absolute, assurance that the objectives of the control system are met. Due to 
the inherent limitations in all controls systems, they cannot provide absolute 
assurance that all control issues and instances of fraud, if any, within the 
Company have been prevented or detected. These inherent limitations include the 
realities that judgments in decision-making can be faulty, and that breakdowns 
can occur because of simple error or mistake. Additionally, controls can be 
circumvented by the individual acts of some persons, by collusion of two or more 
people, or by unauthorized override of the control. The design of any control 
system also is based in part upon certain assumptions about the likelihood of 
future events, and there can be no assurance that any design will succeed in 
achieving its stated goals under all potential future conditions. Accordingly, 
because of the inherent limitations in a cost effective control system, 
misstatements due to error or fraud may occur and not be detected.


Cautionary Statement on Forward-Looking Information 


Certain statements made and information contained in this 
MD&A constitute “forward-looking information” within the meaning of Canadian 
securities laws, for example, references to the possibility of acquiring 
producing or near-term producing precious metals assets and future gold and 
silver production. Forward –looking information and statements in this MD&A 
include those that relate to: 



  
  

    • 
    the ability of the Company to operate and 
      expand production at its existing mines; 

  

    • 
    the effect of mining techniques and methods 
      such as long-hole mining or changing labour shifts; 

  

    • 
    the ability of the Company to grow through 
      acquisition; 

  

    • 
    the payment of taxes based upon the contracted 
      price for silver under the Amended and Restated Silver Purchase Agreement; 
    

  

    • 
    the ability to identify new Mineral Resources 
      and convert Mineral Resources into Mineral Reserves; 

  

    • 
    the impact of estimation methodologies on mine 
      and production planning; 

  

    • 
    the ability to generate cash flows that exceed 
      requirements; 

  

    • 
    intentions to become an intermediate gold 
      producer; 

  

    • 
    the timing and amount of capital expenditures 
      and costs; 

  

    • 
    the development of new mineral deposits; 

  

    • 
    the Company’s ability to complete future 
      financings to raise additional capital as needed; 

  

    • 
    expected ore grades, recovery rates and 
      through-put; 

  

    • 
    the ability of the Company to comply with 
      environmental, safety and other regulatory requirements as well as the 
      Company’s policies in respect thereof; 

  

    • 
    expected or proposed development or 
      construction activities, and the expected costs thereof; 



42 






PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 


  
  

    • 
    expectations regarding currency fluctuations; 
    

  

    • 
    the timing and results of union contract 
      negotiations; 

  

    • 
    the timing and possible outcome of pending 
      litigation; 

  

    • 
    future prices of precious and base metals; 
  

  

    • 
    the ability of the Company to obtain government 
      approvals or permits in connection with the continued operation and 
      development of its operations, development project and exploration 
      properties; 

  

    • 
    the impact of the acquisitions on the business 
      and operations of the Company; and 

  

    • 
    the ability of the Company to maintain 
      effective internal control over financial reporting. 


Such forward-looking information is based upon factors and 
assumptions that, while considered reasonable by the Company as of the date of 
such statements, are inherently subject to uncertainties and contingencies, and, 
if incorrect, could cause actual future results to be materially different than 
expressed in the forward-looking statements. The assumptions and factors which 
may prove to be incorrect, include, but are not limited to: the specific 
assumptions set forth in this MD&A; the expectations and beliefs of 
management; assumptions relating to the availability of suitable mining assets 
for acquisition on reasonable terms; that there are no significant disruptions 
affecting operations, whether due to labour disruptions, supply disruptions, 
damage to or loss of equipment, whether as a result of natural occurrences 
including flooding, political changes, title issues, intervention by local 
landowners, loss of permits, or environmental concerns or otherwise; that 
development and expansion at its operations and project proceeds on a basis 
consistent with current expectations and the Company does not change its 
expansion, development and exploration plans; that the exchange rate between the 
Canadian dollar, the Mexican peso and the United States dollar remain consistent 
with current levels or as set out in this MD&A; that prices for gold and 
silver remain consistent with the Company’s expectations; that prices for key 
mining supplies, including labour costs and consumables, remain consistent with 
the Company’s current expectations; that production meets expectations and is 
consistent with estimates; that plant, equipment and processes will operate as 
anticipated; that there are no material variations in the current tax and 
regulatory environment or the tax positions taken by the Company; that the 
Company will maintain access to surface rights; that the Company will be able to 
obtain and maintain government approvals or permits in connection with the 
continued operation and development of its existing operations, development and 
exploration activities; and that the Company can access adequate financing, 
appropriate equipment and sufficient labour, all at acceptable rates.


No assurance can be given that these assumptions will prove to 
be correct. These assumptions should be considered carefully by investors. 
Investors are cautioned not to place undue reliance on the forward-looking 
information and statements or the assumptions on which the Company’s 
forward-looking information and statements are based. 


Forward-looking information is subject to a variety of risks 
and uncertainties which could cause actual events or results to differ from 
those reflected in the forward-looking statements. Such risks include, but are 
not limited to: the volatility of prices of gold, silver and other metals; 
uncertainty of Mineral Reserves, Mineral Resources, Inferred Mineral Resources, 
inability to realize exploration potential, mineral grades and mineral recovery 
estimates; uncertainty of future production, delays in completion of expansion, 
exploration and development plans for any reason including insufficient capital, 
delays in permitting, and labour issues; inability to maintain or acquire 
attractive mining properties on terms it considers acceptable or at all; other 
risks inherent with acquisitions including integration inefficiencies and 
potential unknown liabilities associated therewith; the ability of the Company 
to comply with its obligations under material agreements including financing 
agreements; changes to Mexican tax laws or a reversal by Mexican tax authorities 
of their favourable ruling supporting the Company’s advance pricing agreement or 
other changes in tax law or administration that increases the taxes payable by 
the Company; the ability of the Company to achieve projected gold and silver production, and 
gold and silver grades; projected cash costs of production, development and 
exploration, and capital expenditures may be greater than anticipated; currency 
fluctuations beyond those that are typical or anticipated; limitations on 
insurance coverage; commercial viability of mineral deposits; inability to 
complete any development projects for any reason; risks associated with the 
adequacy of infrastructure, including interruptions in power supply; mining 
risks, including unexpected formations, cave-ins and voids, which delay 
operations or prevent extraction of material; risks associated with competition 
in the mining industry; risks associated with the ability to retain key 
executives and key operating personnel; risks associated with conflicting legal 
obligations of directors and officers of the Company who are directors and/or 
officers of other companies; risks associated with foreign operations; adverse 
changes in labour laws or in the Company’s labour relations, or labour disputes, 
accidents or other adverse safety incidents; title disputes or claims; changes 
in other regulations that result in increased costs; cost of environmental 
expenditures and potential environmental liabilities; dissatisfaction or 
disputes with local communities or first nations; failure of plant, equipment or 
processes to operate as anticipated. Should one or more of these risks and 
uncertainties materialize, or should underlying assumptions prove incorrect, 
actual results may vary materially from those described in forward-looking 
statements.


43 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 



Investors are advised to carefully review and consider the risk 
factors identified in this MD&A under the heading “Risks and 
uncertainties”, and in the Company’s Annual Information Form for the year 
ended December 31, 2014, for a discussion of the factors that could cause the 
Company’s actual results, performance and achievements to be materially 
different from any anticipated future results, performance or achievements 
expressed or implied by the forward-looking statements. Investors are further 
cautioned that the foregoing list of assumptions and risk factors is not 
exhaustive and it is recommended that prospective investors consult the more 
complete discussion of the Company’s business, financial condition and prospects 
that is included in this MD&A. The forward-looking information and 
statements contained in this MD&A are made as of the date hereof and, 
accordingly, are subject to change after such date. The Company does not 
undertake to update any forward-looking information, except as, and to the 
extent, required by applicable securities laws. The forward-looking statements 
contained herein are expressly qualified by this cautionary statement. 


Cautionary Note for United States Investors 


The disclosure in this MD&A uses terms that comply with 
reporting standards in Canada and certain estimates are made in accordance with 
National Instrument 43-101 “Standards of Disclosure for Mineral Projects” (“NI 
43-101”). NI 43-101 is a rule developed by the Canadian Securities 
Administrators that establishes standards for all public disclosure an issuer 
makes of scientific and technical information concerning mineral projects. 
Unless otherwise indicated, all reserve and resource estimates contained in or 
incorporated by reference in this AIF have been prepared in accordance with NI 
43-101. These standards differ significantly from the requirements of the United 
States Securities and Exchange Commission (the “SEC”), SEC Industry Guide 7 
under the United States Securities and Exchange Act of 1934, as amended (“Guide 
7”) and reserve and resource information contained herein and incorporated by 
reference herein may not be comparable to similar information disclosed by U.S. 
companies.


This MD&A uses the terms “Mineral Reserve”, “Proven Mineral 
Reserve” and “Probable Mineral Reserve” which are terms defined in the Canadian 
Institute of Mining, Metallurgy and Petroleum which were adopted by the Canadian 
Securities Administrators’ NI 43-101. Under SEC standards, mineralization may 
not be classified as a “reserve” unless the determination has been made that the 
mineralization could be economically and legally produced or extracted at the 
time the reserve determination is made. Among other things, all necessary 
permits would be required to be in hand or issuance imminent in order to 
classify mineralized material as reserves under the SEC standards. Accordingly, 
Mineral Reserve estimates contained in this MD&A may not qualify as 
“reserves” under SEC standards. In addition, disclosure of “contained ounces” is 
permitted disclosure under Canadian regulations; however, the SEC only permits 
issuers to report mineralization as in place tonnage and grade without reference 
to unit measures.


44 





PRIMERO MINING CORP. 


MANAGEMENT’S DISCUSSION AND ANALYSIS 


FOR THE THREE MONTHS ENDED MARCH 31, 2015 



This MD&A also uses the terms “Measured Mineral Resources”, 
“Indicated Mineral Resources” and “Inferred Mineral Resources”. We advise 
investors that while such terms are recognized and required by Canadian 
securities regulations, the SEC does not recognize them. Inferred Mineral 
Resources have a great amount of uncertainty as to their existence, and great 
uncertainty as to their economic and legal feasibility. It cannot be assumed 
that all or any part of an Inferred Mineral Resource will ever be upgraded to a 
higher category. Under Canadian regulations, estimates of Inferred Mineral 
Resources may not form the basis of feasibility or other economic studies, 
except in limited circumstances. Mineral Resources that are not Mineral Reserves 
do not have demonstrated economic viability. None of the following 
mineralization has been demonstrated to be ore nor is considered to be a Mineral 
Reserve. Investors are cautioned not to assume that all or any part of Measured 
Mineral Resources or Indicated Mineral Resources will ever be converted into 
Mineral Reserves. Investors are also cautioned not to assume that any part or 
all of an Inferred Mineral Resource exists, or is economically or legally 
mineable. 


NI 43-101 also permits the inclusion of disclosure regarding 
the potential quantity and grade, expressed as ranges, of a target for further 
exploration provided that the disclosure (i) states with equal prominence that 
the potential quantity and grade is conceptual in nature, that there has been 
insufficient exploration to define a Mineral Resource and that it is uncertain 
if further exploration will result in the target being delineated as a Mineral 
Resource, and (ii) states the basis on which the disclosed potential quantity 
and grade has been determined. Disclosure regarding exploration potential has 
been included in this MD&A. United States investors are cautioned that 
disclosure of such exploration potential is conceptual in nature by definition 
and there is no assurance that exploration of the mineral potential identified 
will result in any category of NI 43-101 Mineral Resources being identified.


For the above reasons, information contained in this MD&A 
may not be comparable to similar information disclosed by U.S. companies subject 
to the reporting and disclosure requirements under the United States federal 
securities laws and the rules and regulations thereunder. 


 


On behalf of the Board 





  
  

    “Joseph F. Conway”
  

  

    Joseph F. Conway  

  

    President, CEO and Director 




45 














  
  

    FORM 52-109F2 

  

    CERTIFICATION OF INTERIM FILINGS 

  

    FULL CERTIFICATE 


I, Joseph Conway, Chief Executive 
Officer, Primero Mining Corp., certify the following: 


1. Review: I have reviewed the interim financial 
report and interim MD&A (together, the “interim filings”) of Primero 
Mining Corp. (the “issuer”) for the interim period ended March 31, 
2015. 


2. No misrepresentations: Based on my knowledge, 
having exercised reasonable diligence, the interim filings do not contain any 
untrue statement of a material fact or omit to state a material fact required to 
be stated or that is necessary to make a statement not misleading in light of 
the circumstances under which it was made, with respect to the period covered by 
the interim filings. 


3. Fair presentation: Based on my knowledge, 
having exercised reasonable diligence, the interim financial report together 
with the other financial information included in the interim filings fairly 
present in all material respects the financial condition, financial performance 
and cash flows of the issuer, as of the date of and for the periods presented in 
the interim filings.


4. Responsibility: The issuer’s other certifying 
officer(s) and I are responsible for establishing and maintaining disclosure 
controls and procedures (DC&P) and internal control over financial reporting 
(ICFR), as those terms are defined in National Instrument 52-109 
Certification of Disclosure in Issuers’ Annual and Interim Filings, for 
the issuer. 


5. Design: Subject to the limitations, if any, 
described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) 
and I have, as at the end of the period covered by the interim filings 



  
  

     
    A. 
    
      
designed DC&P, or caused it to be designed under our 
      supervision, to provide reasonable assurance that

  

     
     
     
     

  

     
    
    I. 
    
      
material information relating to the issuer is made known 
      to us by others, particularly during the period in which the interim 
      filings are being prepared; and

  

     
     
     
     

  

     
    
    II. 
    
      
information required to be disclosed by the issuer in its 
      annual filings, interim filings or other reports filed or submitted by it 
      under securities legislation is recorded, processed, summarized and 
      reported within the time periods specified in securities legislation; 
      and

  

     
     
     
     
  

     
    B. 
    
      
designed ICFR, or caused it to be designed under our 
      supervision, to provide reasonable assurance regarding the reliability of 
      financial reporting and the preparation of financial statements for 
      external purposes in accordance with the issuer’s 
GAAP.


5.1 Control framework: The control framework the 
issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is 
Internal Control – Integrated Framework (2013) published by the 
Committee of Sponsoring Organizations of the Treadway Commission. 


5.2 ICFR – material weakness relating to design: 
The issuer has disclosed in its interim MD&A for each material 
weakness relating to design existing at the end of the interim period 



  
  

     
    (a) 
    
      
a description of the material 
weakness;








  
  

     
    (b) 
    
      
the impact of the material weakness on the issuer’s 
      financial reporting and its ICFR; and

  

     
     
     

  

     
    (c) 
    
      
the issuer’s current plans, if any, or any actions 
      already undertaken, for remediating the material 
  weakness.


5.3 N/A 


6. Reporting changes in ICFR: The issuer has 
disclosed in its interim MD&A any change in the issuer’s ICFR that occurred 
during the period beginning on January 1, 2015 and ended on March 31, 
2015 that has materially affected, or is reasonably likely to materially 
affect, the issuer’s ICFR.


Date: May 5, 2015 


“Joseph Conway” 
_______________________
Joseph 
Conway 
Chief Executive Officer 














  
  

    FORM 52-109F2 

  

    CERTIFICATION OF INTERIM FILINGS 

  

    FULL CERTIFICATE 


I, Wendy Kaufman, Chief Financial 
Officer, Primero Mining Corp., certify the following: 


1. Review: I have reviewed the interim financial 
report and interim MD&A (together, the “interim filings”) of Primero 
Mining Corp. (the “issuer”) for the interim period ended March 31, 
2015. 


2. No misrepresentations: Based on my knowledge, 
having exercised reasonable diligence, the interim filings do not contain any 
untrue statement of a material fact or omit to state a material fact required to 
be stated or that is necessary to make a statement not misleading in light of 
the circumstances under which it was made, with respect to the period covered by 
the interim filings. 


3. Fair presentation: Based on my knowledge, 
having exercised reasonable diligence, the interim financial report together 
with the other financial information included in the interim filings fairly 
present in all material respects the financial condition, financial performance 
and cash flows of the issuer, as of the date of and for the periods presented in 
the interim filings.


4. Responsibility: The issuer’s other certifying 
officer(s) and I are responsible for establishing and maintaining disclosure 
controls and procedures (DC&P) and internal control over financial reporting 
(ICFR), as those terms are defined in National Instrument 52-109 
Certification of Disclosure in Issuers’ Annual and Interim Filings, for 
the issuer. 


5. Design: Subject to the limitations, if any, 
described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) 
and I have, as at the end of the period covered by the interim filings 



  
  

     
    A. 
    
      
designed DC&P, or caused it to be designed under our 
      supervision, to provide reasonable assurance that

  

     
     
     
     

  

     
    
    I. 
    
      
material information relating to the issuer is made known 
      to us by others, particularly during the period in which the interim 
      filings are being prepared; and

  

     
     
     
     

  

     
    
    II. 
    
      
information required to be disclosed by the issuer in its 
      annual filings, interim filings or other reports filed or submitted by it 
      under securities legislation is recorded, processed, summarized and 
      reported within the time periods specified in securities legislation; 
      and




  
  

     
    B. 
    
      
designed ICFR, or caused it to be designed under our 
      supervision, to provide reasonable assurance regarding the reliability of 
      financial reporting and the preparation of financial statements for 
      external purposes in accordance with the issuer’s 
GAAP.


5.1 Control framework: The control framework the 
issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is 
Internal Control – Integrated Framework (2013) published by the 
Committee of Sponsoring Organizations of the Treadway Commission. 


5.2 ICFR – material weakness relating to design: 
The issuer has disclosed in its interim MD&A for each material 
weakness relating to design existing at the end of the interim period 



  
  

     
    (a) 
    
      
a description of the material 
weakness;








  
  

     
    (b) 
    
      
the impact of the material weakness on the issuer’s 
      financial reporting and its ICFR; and

  

     
     
     

  

     
    (c) 
    
      
the issuer’s current plans, if any, or any actions 
      already undertaken, for remediating the material 
  weakness.


5.3 N/A 


6. Reporting changes in ICFR: The issuer has 
disclosed in its interim MD&A any change in the issuer’s ICFR that occurred 
during the period beginning on January 1, 2015 and ended on March 31, 
2015 that has materially affected, or is reasonably likely to materially 
affect, the issuer’s ICFR.


Date: May 5, 2015 


“Wendy Kaufman” 
_______________________
Wendy 
Kaufman 
Chief Financial Officer 














PRIMERO REPORTS FIRST QUARTER 2015 RESULTS; 
SAN 
DIMAS ACHIEVES RECORD QUARTERLY PRODUCTION 


(Please note that all 
  dollar amounts in this news release are expressed in U.S. dollars unless 
  otherwise indicated. Refer to the Company’s first quarter 2015 management 
  discussion and analysis (“MD&A”) and financial statements for more 
  information.) 


Toronto, Ontario, May 6, 2015 – Primero Mining Corp. (“Primero” 
or the “Company”) (TSX:P; NYSE: PPP) today reports financial and operational 
results for the first quarter ended March 31, 2015. The Company is pleased to 
report strong production of 61,073 gold equivalent ounces1, a 54% 
increase compared to the first quarter of 2014, at total cash costs2 
of $699 per gold equivalent ounce. Primero also reports first quarter revenues 
of $73.3 million, operating cash flow before changes in working 
capital3 of $18.8 million ($0.12 per share), and net income of $3.6 
million ($0.02 per share).


First Quarter Highlights: 



  
  

    •
    
      
Production Growth: Strong first quarter performance 
      included 61,073 gold equivalent ounces (54,365 ounces of gold and 1.93 
      million ounces of silver) from San Dimas and Black Fox combined, compared 
      to 39,758 gold equivalent ounces produced in the same period of 2014. 
    

  

      
      

  

    •
    
      
Record Quarter at San Dimas: San Dimas achieved record 
      quarterly production totaling 46,569 gold equivalent ounces (39,861 ounces 
      of gold and 1.93 million ounces of silver), compared to 35,662 gold 
      equivalent ounces produced in Q1 2014, representing a 31% increase. The 
      mine achieved industry lowest quartile total cash costs of $582 per gold 
      equivalent ounce or $659 on an all-in sustaining cost basis4. 
      

  

      
      

  

    •
    
      
2015 Guidance Maintained: Primero remains on-track to 
      achieve 2015 production guidance of between 250,000 and 270,000 gold 
      equivalent ounces, at total cash costs in the range of $650 to $700 per 
      gold equivalent ounce, or between $1,000 and $1,100 per ounce on an all-in 
      sustaining cost basis. 


1 








  
  

    •
    
      
Strong Revenue and Operating Cash Flow Generation: 
      Primero generated strong quarterly revenues of $73.3 million and operating 
      cash flow before working capital changes of $18.8 million ($0.12 per 
      share). The Company reported net income of $3.6 million ($0.02 per share) 
      and adjusted net income of $1.1 million ($0.01 per share)5. 
    

  

      
      

  

    •
    
      
Balance Sheet Remains Strong: Total liquidity position of 
      $132.6 million as at March 31, 2015, includes the addition of $75 million 
      of convertible unsecured subordinated debentures ($71 million net 
      proceeds), maturing on February 28, 2020. 

  

      
      

  

    •
    
      
Costs Managed: First quarter total cash costs of $699 per 
      gold equivalent ounce and all-in sustaining costs of $1,044 per ounce, 
      remain within the Company’s 2015 guidance range. 

  

      
      

  

    •
    
      
San Dimas Mill Operating Above Design: The San Dimas mill 
      achieved an average daily throughput rate of 2,863 tonnes per day during 
      the quarter, well above its nameplate capacity of 2,500 tonnes per day, 
      and setting the stage for timely completion of the planned expansion to 
      3,000 tonnes per day by mid-2016. 

  

      
      

  

    •
    
      
Black Fox Focused on Transition to Underground: 
      Underground development at Black Fox continues to progress on-schedule and 
      the underground mine remains on-track to achieve production rates of 1,000 
      tonnes per day during the third quarter of 2015. 

  

      
      

  

    •
    
      
Improved Reserve and Resource Grades: Primero's focus on 
      delivering high quality, high margin underground ounces resulted in a 4% 
      increase, to 5.7 grams per tonne, in the gold mineral reserve grade at its 
      platform San Dimas mine in Mexico, as well as a 19% increase in the 
      underground gold mineral reserve grade to 7.5 grams per tonne at its Black 
      Fox mine, located near Timmins, Ontario. 


“Primero has delivered a strong start to 2015,” stated Joseph 
F. Conway, Chief Executive Officer. “Our platform San Dimas mine achieved record 
production levels and continues to exceed operational expectations, delivering 
significant cash flow for the Company. I am extremely proud of our operating 
team for the success they have achieved at this mine, as it continues to show 
improved grades, higher throughput, lower costs and more operational 
flexibility. We are employing the same optimization approach used at San Dimas 
at the Black Fox mine, which is on-track with underground development and is 
positioned to increase mined grade and improve cash flow from mid-2015 onwards. 
At a corporate level we successfully completed the convertible debenture 
financing early in the first quarter, ensuring that we have the financial 
capacity to invest and expand our assets in a volatile gold price environment. 
Our strong first quarter performance has positioned us to deliver the 20% 
organic growth planned in 2015, creating a period of strong cash flow and value 
creation for our shareholders.” 


Production Growth 


Primero produced 61,073 gold equivalent ounces (54,365 ounces 
of gold and 1.93 million ounces of silver) from San Dimas and Black Fox combined 
during the first quarter of 2015, at total cash costs of $699 per gold 
equivalent ounce and all-in sustaining costs of $1,044 per ounce. This compares 
favourably to Q1 2014 production of 39,758 gold equivalent ounces, at total cash 
costs of $686 per gold equivalent ounce and all-in sustaining costs of $1,381 
per ounce. During the first quarter of 2014, Primero only owned the Black Fox 
mine for 26 days. Quarterly production remains in-line with Q4 2014 levels of 
62,209 gold equivalent ounces at total cash costs of $701 per gold equivalent 
ounce. The Company remains on-track to meet 2015 production and cost guidance 
(see below). 


2 







“We have successfully established operations at the San Dimas 
  mine at 2,900 tonnes per day, well ahead of schedule”, stated Ernest Mast, 
  President and Chief Operating Officer. “The remaining 100 tonnes per day will 
  require optimizations that we will complete during 2015, with the final tailings 
  belt filter currently scheduled for completion in early 2016. At Black Fox we 
  have continued to drill the central high-grade zone at depth, expanding the 
  known mineralization. We now have 50 intercepts with an average of 12 grams per 
  tonne gold over 7 metres. This is materially higher grade than the 
  mineralization above the 550 metre level. For this reason the Company is now 
  determining the best ramp route and planning to start the Black Fox ramp down to 
  the 600 metre level in 2015. We expect to be in a position to access this higher 
grade mineralization in 2016.” 


San Dimas Mine and Mill Outperform – Both Achieve Record 
Quarterly Production 


San Dimas produced 46,569 gold equivalent ounces (39,861 ounces 
of gold and 1.93 million ounces of silver) during the first quarter of 2015, 31% 
more than the same period in 2014, achieving record quarterly production. The 
increase in production was largely attributable to consistent mill operation 
above its nameplate capacity of 2,500 tonnes per day (“TPD”). During the 
quarter, the San Dimas mill achieved average throughput of 2,863 TPD, a 30% 
increase versus Q1 2014. Importantly, the San Dimas mine maintained pace with 
the mill, achieving record quarterly production of 2,931 TPD, 21% higher than in 
Q1 2014. Head grades increased as expected and consistent with recent 
exploration success, averaging 5.01 grams per tonne (“g/t”) of gold during the 
quarter. Metallurgical recoveries also reverted to their historical high levels 
with the completion of a final leach tank, averaging 96% for gold and 93% for 
silver in the quarter.


San Dimas total cash costs declined in the first quarter 2015 
to $582 per gold equivalent ounce, down 8% from $632 in the first quarter 2014. 
All-in sustaining costs at San Dimas declined to the industry’s lowest quartile 
at $659 per ounce in the first quarter 2015, compared with $893 per ounce in the 
same period of 2014, due to lower sustaining capital expenditures and higher 
production. 


The San Dimas mine and mill are on-track to complete the 
planned expansion to 3,000 TPD of throughput in mid-2016. 


Black Fox Focused on Transition to Underground 


Black Fox produced 14,504 ounces of gold during the first 
quarter at total cash costs of $1,077 per ounce and all-in sustaining costs of 
$1,552 per ounce. As previously announced, the mine is in a transitional phase 
as production shifts from primarily open-pit to high grade underground 
production. The underground mine remains on schedule to achieve the targeted 
1,000 TPD production rate during the third quarter of 2015, thereafter all-in 
sustaining costs are expected to decrease materially. The Black Fox mill 
operated at 2,121 TPD in Q1 2015, despite challenging winter conditions. 
Approximately 94% of the ore was mined from the open-pit and the remainder from 
underground development, according to plan, as the Company focuses on building 
its underground stope inventory. The Company will continue producing 
predominantly from the open-pit until mid-2015 when higher grade production from 
the underground is expected to increase. As a result, gold production at Black 
Fox is expected to be weighted towards the second half of the year. 


3 







Strong Financial Results 


Revenue in the first quarter of 2015 was $73.3 million, 52% 
higher than the $48.3 million in the first quarter 2014, as a result of the 
addition of the Black Fox Complex and the expansion of the San Dimas mill (see 
above). The Company sold 55,037 ounces of gold at an average realized price of 
$1,186 per ounce and 1.90 million ounces of silver at an average realized price 
of $4.20 per ounce in the first quarter of 2015, in accordance with the San 
Dimas silver purchase agreement6 and the Black Fox gold stream 
agreement7. 


Gold produced at Black Fox is subject to a gold purchase 
agreement and as a result 1,858 ounces were sold to Sandstorm Gold Ltd. 
(“Sandstorm”) at a fixed price of $518 per ounce in the first quarter of 2015. 
Silver produced at San Dimas is subject to a silver purchase agreement and as a 
result 1.90 million ounces of silver were sold to Silver Wheaton Caymans 
(“Silver Wheaton”) at a fixed price of $4.20 per ounce during the first quarter 
2015. As of March 31, 2015, the Company has delivered 4.3 million ounces of 
silver into the San Dimas silver purchase agreement’s 6.0 million ounce annual 
threshold (August 5 annual threshold renewal date), after which the Company will 
begin selling 50% of the silver produced at San Dimas at spot market prices 
until the next threshold renewal date (August 5). 


The Company realized net income of $3.6 million ($0.02 per 
share) for the first quarter of 2015 compared with a net loss of $8.3 million 
($0.06 per share loss) for the first quarter of 2014, mainly as a result of 
increased gold and silver sales.


The adjusted net income for the first quarter was $1.1 million 
($0.01 per share), compared to an adjusted net loss of $2.0 million ($0.02 per 
share loss) in the first quarter of 2014. Adjusted net loss/income primarily 
excludes the mark to market on the 5.75% convertible debentures, transaction 
costs, the impact of impairment charges, the impact of foreign exchange rate 
changes on deferred tax balances in both periods, and the gain on derivative 
liability.


Operating cash flow before working capital changes in the first 
quarter of 2015 was $18.8 million ($0.12 per share), compared to $6.5 million 
($0.05 per share) in the first quarter of 2014.


Balance Sheet Strengthened 


The Company’s liquidity position at March 31, 2015 was $132.6 
million, comprising of $57.6 million in cash, up from the December 31, 2014 
balance of $27.4 million, plus $75 million of undrawn revolving credit facility. 
The notable increase in liquidity is largely attributable to the receipt of net 
proceeds from the $75 million convertible debenture financing completed during 
the quarter.


On February 9, 2014, Primero closed a $75 million offering of 
5.75% convertible unsecured subordinated debentures, maturing on February 28, 
2020. As previously reported, the Company intends to use the proceeds to fund 
underground development and mill expansion plans at San Dimas, to fund 
development and capital expenditures at the Black Fox complex, and to repay the 
indebtedness outstanding under its $75 million revolving credit facility, with 
the balance to be used for general corporate purposes. In March 2015, the 
outstanding amount on the revolving credit facility of $40 million was repaid. 



Capital expenditures during the first quarter of 2015 totaled 
$19.0 million, in line with the $20.3 million spent during the same period in 
2014. Total capital expenditures during 2015 are expected to be approximately 
$66.7 million excluding capitalized exploration costs of $18.6 million.


4 







2015 Guidance Maintained 


Primero maintains its production guidance of between 250,000 
and 270,000 gold equivalent ounces, up to 20% higher than 2014, due to increased 
production from both San Dimas and Black Fox. Total cash costs for 2015 are 
expected to be in the range of $650 to $700 per gold equivalent ounce, or 
between $1,000 and $1,100 per ounce on an all-in sustaining cost basis.





  
  

    Production Outlook 
    Black Fox 
    San Dimas 
    Estimated 2015 
    Actual 2014 

  

    Attributable gold equivalent 
      production1 (gold equivalent ounces) 
    75,000-85,000 
    175,000-185,000 
    250,000-270,000 
    225,054 

  

    Gold Production (ounces) 
    75,000-85,000 
    145,000-155,000 
    220,000-240,000 
    189,943 

  

    Silver Production6 (million 
      ounces) 
    
    6.5-7.5 
    6.5-7.5 
    6.15 

  

    Total cash costs2 (per gold 
      equivalent ounce) 
    $820-$870 
    $590-$640 
    $650-$700 
    $687 

  

    All-in Sustaining Costs4 (per gold ounce) 
    $1,075-$1,125 
    $840-$890 
    $1,000-$1,100 
$1,222 


Material assumptions used to forecast total cash costs for 2015 
include: an average gold price of $1,200 per ounce; an average silver price of 
$5.21 per ounce (calculated using the silver purchase agreement contract price 
of $4.20 per ounce and assuming excess silver beyond contract requirements is 
sold at an average silver price of $18 per ounce); and conservative foreign 
exchange rates of 1.10 Canadian dollars and 13 Mexican pesos to the US dollar. 



Black Fox Complex Plan 


The Company is currently filling the 2,200 TPD Black Fox mill 
with ore from the Black Fox open-pit and underground operations. During the 
third quarter of 2015 the Company will deplete the current open-pit and 
production from the underground mine will increase to approximately 1,000 TPD. 
The Company will then supplement underground production with the Black Fox 
stockpile, currently estimated to be 1.0 million tonnes of 1.1 g/t gold, which 
is capable of sustaining the mill until late 2017. 


As a result of positive exploration results from the central 
zone at Black Fox, the Company is now planning to accelerate the ramp down to 
the 600 metre level during 2015. The Company expects to complete an updated 
internal resource estimate and announce any associated capital requirements for 
this ramp by the third quarter of 2015. 


The Company has begun an internal scoping study designed to 
assess strategies to optimize its Timmins assets. The Black Fox Complex scoping 
study will assess: 



  
  

    •
    The timing and economic returns of developing 
      an open-pit at Grey Fox; 

  

     
     

  

    •
    The timing and economic returns of developing 
      an underground operation at Grey Fox; 

  

     
     

  

    •
    The cost of installing a shaft to access 
      mineralization below 700 metres below surface at Black Fox. 



Given the exploration success at Black Fox and Grey Fox, the 
Company is confident that alternate economic ore sources to complement the Black 
Fox underground operation will be available before the end of 2017. 


5 







Conference Call and Webcast Details 


The Company's senior management will host a conference call 
today, Wednesday, May 6, 2015 at 9:00 a.m. ET to discuss the first quarter 
financial and operational results.


Participants may join the call by dialing North America toll 
free 1-888-789-9572 or 416-695-7806 for calls outside Canada and 
the U.S., and entering the participant passcode 7803315. 


A live and archived webcast of the conference call will also be 
available at www.primeromining.com under the News and Events section or 
by clicking here: 


http://www.gowebcasting.com/6388


A recorded playback of the Q1 2015 results call will be 
available until August 3, 2015 by dialing 1-800-408-3053 or 905-694-9451 
and entering the call back passcode 7803315. 


This release should be read in conjunction with Primero’s first 
quarter 2015 financial statements and MD&A report on the Company's website, 
www.primeromining.com, or on the SEDAR website at www.sedar.com. 



(1) “Gold equivalent ounces” include silver ounces produced at 
San Dimas, and converted to a gold equivalent based on a ratio of the average 
commodity prices realized for each period. The ratio for the first quarter 2015 
was 282:1 based on the average realized prices of $1,186 per ounce of gold and 
$4.20 per ounce of silver. The ratio used for the 2015 guidance projection is 
230:1 based on estimated average prices of $1,200 per ounce of gold and $5.21 
per ounce of silver. 


(2) Total cash costs per gold equivalent ounce and total cash 
costs per gold ounce on a by-product basis are non-GAAP measures. Total cash 
costs per gold equivalent ounce are defined as costs of production (including 
refining costs) divided by the total number of gold equivalent ounces produced. 
Total cash costs per gold ounce on a by-product basis are calculated by 
deducting the by-product silver credits from operating costs and dividing by the 
total number of gold ounces produced. The Company reports total cash costs on a 
production basis. In the gold mining industry, these are common performance 
measures but do not have any standardized meaning. As such, they are unlikely to 
be comparable to similar measures presented by other issuers. In reporting total 
cash costs per gold equivalent and total cash costs per gold ounce on a 
by-product basis, the Company follows the recommendations of the Gold Institute 
Production Cost Standard. The Company believes that, in addition to conventional 
measures, prepared in accordance with GAAP, certain investors use this 
information to evaluate the Company’s performance and ability to generate cash 
flow. Accordingly, it is intended to provide additional information and should 
not be considered in isolation or as a substitute for measures of performance 
prepared in accordance with GAAP. Refer to the Company’s first quarter 2015 
MD&A for a reconciliation of cash costs per gold ounce on both a by-product 
and gold equivalent basis to reported operating expenses (the most directly 
comparable GAAP measure).


(3) “Operating cash flow” is operating cash flow before working 
capital changes. This and operating cash flows before working capital changes 
per share are non-GAAP measures which the Company believes provides a better 
indicator of the Company’s ability to generate cash flow from its mining 
operations. See the Company’s first quarter 2015 MD&A for a reconciliation 
of operating cash flows to GAAP.


(4) The Company, in conjunction with an initiative undertaken 
within the gold mining industry, has adopted an all-in sustaining cost non-GAAP 
performance measure that the Company believes more fully defines the total cost 
associated with producing gold; however, this performance measure has no 
standardized meaning. Accordingly, it is intended to provide additional 
information and should not be considered in isolation or as a substitute for 
measures of performance prepared in accordance with GAAP. The Company reports 
this measure on a gold ounces produced basis. Refer to the Company’s first 
quarter 2015 MD&A for a reconciliation of all-in sustaining costs per gold 
ounce. 


(5) Adjusted net income/loss and adjusted net income/loss per 
share are non-GAAP measures. Neither of these non-GAAP performance measures has 
any standardized meaning and is therefore unlikely to be comparable to other 
measures presented by other issuers. The Company believes that, in addition to 
conventional measures prepared in accordance with GAAP, the Company and certain 
investors use this information to evaluate the Company’s performance. 
Accordingly, it is intended to provide additional information and should not be 
considered in isolation or as a substitute for measures of performance prepared 
in accordance with GAAP. Refer to the Company’s first quarter 2015 MD&A for 
a reconciliation of adjusted net income/loss to reported net income.


(6) Upon the acquisition of the San Dimas mine, the Company was 
required to assume a silver purchase agreement with Silver Wheaton. According to 
the silver purchase agreement until August 6, 2014 Primero will deliver to 
Silver Wheaton a per annum amount equal to the first 3.5 million ounces of 
silver produced at San Dimas and 50% of any excess at $4.04 per ounce 
(increasing by 1% per year). Thereafter Primero will deliver to Silver Wheaton a 
per annum amount equal to the first 6.0 million ounces of silver produced at San 
Dimas and 50% of any excess at $4.20 per ounce (increasing by 1% per year). The 
Company will receive silver spot prices only after the annual threshold amount 
has been delivered. 


(7) Upon the acquisition of the Black Fox mine the Company was 
required to assume a gold purchase agreement with Sandstorm. According to the 
gold purchase agreement, Sandstorm is entitled to acquire 8% of production at 
the Black Fox mine and 6.3% at the Black Fox Extension for a fixed price of $518 
per ounce in 2015 (subject to an inflationary adjustment, not to exceed 2% per 
year).


6 







About Primero 


Primero Mining Corp. is a Canadian-based precious metals 
producer that owns 100% of the San Dimas gold-silver mine and the Cerro del 
Gallo gold-silver-copper development project in Mexico and 100% of the Black Fox 
mine and adjoining properties in the Township of Black River-Matheson near 
Timmins, Ontario, Canada. Primero offers immediate exposure to un-hedged, below 
average cash cost gold production with a substantial resource base in 
politically stable jurisdictions. The Company is focused on becoming a leading 
intermediate gold producer by building a portfolio of high quality, low cost 
precious metals assets in the Americas.



  
  

    Primero’s website is www.primeromining.com. 

  

      

  

    For further information, please contact: 

  

      

  

    Tamara Brown 

  

    VP, Investor Relations 

  

    Tel: (416) 814 3168 

  

    [email protected] 


CAUTIONARY NOTE ON FORWARD-LOOKING INFORMATION 


This news release contains “forward-looking statements”, within 
the meaning of the United States Private Securities Litigation Reform Act of 
1995 and applicable Canadian securities legislation, concerning the business and 
operations of Primero Mining Corp. and its consolidated subsidiaries 
(collectively, “Primero” or the “Company”). All statements, other than 
statements of historical fact, are forward-looking statements. Generally, 
forward-looking statements can be identified by the use of forward-looking 
terminology such as “plans”, “expects”, “is expected”, “forecasts”, “intends”, 
“anticipates”, “believes” or variations of such words and phrases or statements 
that certain actions, events or results “are anticipated”, “may”, “could”, 
“would”, “might” or “will require”, “occur” or “be achieved” or the negative 
connotation thereof. Forward-looking information is also identifiable in 
statements of currently occurring matters which will continue in future or other 
statements that may be stated in the present tense and are not historical 
facts.


Forward-looking statements in this news release include, but 
are not limited to, statements regarding the level of gold equivalent production 
at San Dimas and Black Fox; the realization of silver sales at spot prices; the 
amount of gold equivalent ounces produced in 2015, the cash costs and all-in 
sustaining costs for 2015; the capital expenditures in 2015; the underground 
development in 2015; the amount of ore from the Company’s operations in 2015; 
the probability of encountering high grade mineralization in, and the 
exploration potential of, the Company’s exploration targets; optimization and 
expansion initiatives; and the Company’s intentions to become an intermediate 
gold producer.


The assumptions made by the Company in preparing the 
forward-looking information contained in this news release, which may prove to 
be incorrect, include, but are not limited to: the expectations and beliefs of 
management; the specific assumptions set forth above in this news release; the 
expectations regarding the ability to decrease costs; that there are no 
significant disruptions affecting operations; that development and expansion 
projects proceed on a basis consistent with current expectations and the Company 
does not change its development and exploration plans; that the exchange rate 
between the Canadian dollar, Mexican peso and the United States dollar remain 
consistent with current levels or as set out in this news release; that prices 
for gold and silver remain consistent with the Company's expectations; that 
production meets expectations; that the Company will sell some of its silver 
production at spot prices in 2015; that the Company identifies higher grade 
veins in sufficient quantities of minable ore at its operations; that there are 
no material variations in the current tax and regulatory environment; that the 
Company will receive required permits and access to surface rights; that the 
Company can access financing, appropriate equipment and sufficient labour; that 
the political environment within Mexico will continue to support the development 
of environmentally safe mining projects.


7 







Forward-looking statements are subject to known and unknown 
risks, uncertainties and other important factors that may cause the actual 
results, performance or achievements of Primero to be materially different from 
those expressed or implied by such forward-looking statements, including: the 
Company may not be able to achieve planned production levels, or generate 
significant free cash flow, or may not realize cost reductions or material cost 
reductions; the Company may not be able to expand production, or realize 
anticipated production levels; the Company may not be able to complete 
development projects or realize anticipated production levels, the Company may 
be required to change its development and exploration plans with a negative 
impact on production; the Company may not discover mineralization in minable 
quantities; the exchange rate between the Canadian dollar, the Mexican peso and 
the United States dollar may change with an adverse impact on the Company’s 
financial results; the optimization and expansion initiatives may not provide 
the benefits anticipated; the Company may not be able to become an 
intermediate gold producer by building a portfolio of high quality, low cost 
precious metals assets in the Americas. Certain of these factors are discussed 
in greater detail in Primero’s registration statement on Form 40-F on file with 
the U.S. Securities and Exchange Commission, and its most recent Annual 
Information Form on file with the Canadian provincial securities regulatory 
authorities and available at www.sedar.com.


Should one or more of these risks and uncertainties 
  materialize, or should underlying assumptions prove incorrect, actual results 
  may vary materially from those described in forward-looking statements. In 
  addition, although Primero has attempted to identify important factors that 
  could cause actual actions, events or results to differ materially from those 
  described in forward-looking statements, there may be other factors that cause 
  actions, events or results not to be as anticipated, estimated or intended. 
  There can be no assurance that such statements will prove to be accurate, as 
  actual results and future events could differ materially from those anticipated 
  in such statements. Accordingly, readers should not place undue reliance on 
forward-looking statements.


Forward-looking statements are made as of the date hereof and 
accordingly are subject to change after such date. Forward-looking statements 
are provided for the purpose of providing information about management’s current 
expectations and plans and allowing investors and others to get a better 
understanding of our operating environment. Primero does not undertake to update 
any forward-looking statements that are included in this document, except in 
accordance with applicable securities laws. 


SUMMARIZED FINANCIAL AND OPERATING RESULTS AND FINANCIAL 
STATEMENTS FOLLOW 


8 







SUMMARIZED FINANCIAL AND OPERATING RESULTS 


(in thousands of United States dollars, except per share and 
per ounce amounts - unaudited) 


SUMMARIZED FINANCIAL DATA 



  
  

      
     
    Three Months 
      Ended March 31, 
     

  

     
     
     
     

  

      
     
    2015 
     
     
    2014¹ 
     

  

         
      Key Performance Data 
     
      
     
     
      
     

  

    Tonnes of ore milled 
     
    448,589 
     
     
    238,566 
     

  

    Produced 
     
      
     
     
      
     

  

     Gold equivalent (ounces) 
     
    61,073 
     
     
    39,758 
     

  

     Gold (ounces) 
     
    54,365 

     
     
    32,278 
     

  

     Silver (million ounces) 
     
    1.93 
     
     
    1.51 
     

  

    Sold 
     
      
     
     
      
     

  

     Gold equivalent (ounces) 
     
    61,651 
     
     
    37,249 
     

  

     Gold (ounces) 
     
    55,037 

     
     
    30,583 
     

  

     Silver (million ounces) 
     
    1.90 
     
     
    1.34 
     

  

    Average realized prices 
     
      
     
     
      
     

  

     Gold ($/ounce)² 
    $
    1,186 
     
    $
    1,295 
     

  

     Silver ($/ounce)² 
    $
    4.20 
     
    $
    6.44 
     

  

    Total cash costs (per gold ounce) 
     
      
     
     
      
     

  

     Gold equivalent basis 
    
    $
    699 
     
    $
    686 
     

  

     By-product basis 
    $
    639 
     
    $
    543 
     

  

    All-in sustaining costs (per 
      gold ounce) 
    $
    1,044 
     
    $
    1,381 
     

  

      
     
      
     
     
      
     

  

         
      Financial Data 
     
      
     
     
      
     

  

    (in thousands of US dollars except per share 
      amounts) 
     
      
     
     
      
     

  

    Revenues 
     
    73,310 

     
     
    48,269 
     

  

    Earnings from mine operations 3 

     
    11,470 
     
     
    9,481 
     

  

    Net income (loss) 
      3 
     
    3,584 
     
     
    (8,253
    ) 
  

  

    Adjusted net income (loss) 3 
     
    1,139 
     
     
    (2,048
    ) 

  

    Basic income (loss) per share 
    
     
    0.02 
     
     
    (0.06
    ) 
  

  

    Diluted income (loss) per share 
     
    0.02 
     
     
    (0.06
    ) 

  

    Adjusted net income (loss) 
      per share 
     
    0.01 
     
     
    (0.02
    ) 
  

  

    Operating cash flows before working capital 
      changes 
     
    18,777 
     
     
    6,509 
     

  

    Assets 
     
      
     
     
      
     

  

     Mining interests 
     
    881,408 
     
     
    1,068,865 
     

  

     Total assets 
     
    1,026,559 
    
     
     
    1,258,647 
     

  

    Liabilities 
     
      
     
     
      
     

  

     Long-term liabilities 
    
     
    169,080 
    
     
     
    134,286 
     

  

     Total liabilities 
     
    272,329 
     
     
    303,539 
     

  

    Equity 
     
    754,230 
    
     
     
    955,108 
     

  

    Weighted average shares outstanding 
      (basic)(000's) 
     
    161,783 
     
     
    128,112 
     

  

    Weighted average shares 
      outstanding (diluted)(000's) 
     
    161,873 
    
     
     
    128,112 
     




  
  

    (1) 
    
      
Includes the results for the period for which the Black 
      Fox Complex assets, acquired on March 5, 2014, were owned by Primero 
      (March 5, 2014 to March 31, 2014).

  

     
     

  

    (2) 
    
      
Average realized gold and silver prices reflect the 
      impact of the gold purchase agreement with Sandstorm at the Black Fox mine 
      and the silver purchase agreement with Silver Wheaton Caymans at the San 
      Dimas mine (see “Other liquidity considerations” in the Company’s first 
      quarter 2015 MD&A”).

  

     
     

  

    (3) 
    
      
Adjustment to 2014 figures – as a result of the 
      finalization of the Black Fox purchase price allocation the depletion at 
      Black Fox was adjusted relating to the period March 5, 2014 to March 31, 
      2014. Earnings from mine operation increased by $1.2 million, net loss and 
      adjusted loss decreased by $834,000. (see Note 1(i) to the condensed 
      consolidated interim financial statements).


9 







SUMMARIZED OPERATING DATA 


SAN DIMAS 





  
  

      
     
      
     
     
    Three 
      months ended 
     

  

      
     
    31-Mar-15 
     
     
    31-Dec-14 
     
     
    30-Sep-14 
     
     
    30-Jun-14 
     
     
    31-Mar-14
     

  

    Key Performance Data 
    
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

    Tonnes of ore mined 
     
    263,747 
     
     
    253,531 
     
     
    229,589 
     
     
    196,025 
     
     
    218,032 
     

  

    Tonnes of ore milled 
     
    257,670 

     
     
    261,859 

     
     
    219,656 
     
     
    218,830 
     
     
    198,570 
     

  

    Average mill head grade (grams/tonne) 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

     Gold 
     
    5.01 
     
     
    4.49 
     
     
    4.34 
     
     
    4.97 
     
     
    4.76 
     

  

     Silver 
     
    250 
     
     
    224 
     
     
    216 
     
     
    230 
     
     
    260 
     

  

    Average recovery rate (%) 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

     Gold 
     
    96% 
     
     
    95% 
     
     
    95% 
     
     
    94% 
     
     
    93% 
     

  

     Silver 
     
    93% 
     
     
    92% 
     
     
    92% 
     
     
    92% 
     
     
    91% 
     

  

    Produced 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

     Gold equivalent 
      (ounces) 
     
    46,569 
     
     
    41,875 
     
     
    37,385 
     
     
    46,248 
     
     
    35,662 
     

  

     Gold (ounces) 
     
    39,861 
     
     
    35,806 
     
     
    29,176 
     
     
    32,895 
     
     
    28,182 
     

  

     Silver (million ounces) 
    
     
    1.93 
     
     
    1.74 
     
     
    1.41 
     
     
    1.49 
     
     
    1.51 
     

  

    Sold 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

     Gold equivalent 
      (ounces) 
     
    45,256 
     
     
    39,178 
     
     
    40,221 
     
     
    45,737 
     
     
    31,926 
     

  

     Gold (ounces) 
     
    38,642 
     
     
    33,767 
     
     
    31,713 
     
     
    31,542 
     
     
    25,260 
     

  

     Silver at fixed price 
      (million ounces) 
     
    1.90 
     
     
    1.56 
     
     
    1.17 
     
     
    0.82 
     
     
    1.15 
     

  

     Silver at spot (million ounces) 
     
    - 
     
     
    - 
     
     
    0.29 
     
     
    0.76 
     
     
    0.19 
     

  

    Average realized price (per 
      ounce) 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

     Gold 
    $
    1,207 
     
    $
    1,207 
     
    $
    1,275 
     
    $
    1,286 
     
    $
    1,300 
     

  

     Silver¹ 
    $
    4.20 
     
    $
    4.20 
     
    $
    7.43 
     
    $
    11.56 
     
    $
    6.44 
     

  

    Total cash costs (per gold ounce) 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

     Gold equivalent basis 
    
    $
    582 
     
    $
    654 
     
    $
    690 
     
    $
    551 
     
    $
    632 
     

  

     By-product basis 
    $
    479 
     
    $
    576 
     
    $
    526 
     
    $
    252 
     
    $
    455 
     

  

    All-in sustaining costs (per 
      ounce) ² 
    $
    659 
     
    $
    897 
     
    $
    919 
     
    $
    626 
     
    $
    893 
     

  

    Revenue ($000's) 
    $
    54,640 
     
    $
    47,289 
     
    $
    51,273 
     
    $
    58,803 
     
    $
    41,499 
     

  

    Earnings from mine operations 
      ($000's) 
    $
    14,615 
     
    $
    6,478 
     
    $
    10,599 
     
    $
    20,350 
     
    $
    11,768 
     




  
  

    (1) 
    
      
Average realized silver prices reflect the impact of the 
      silver purchase agreement with Silver Wheaton Caymans (see “Other 
      liquidity considerations in the Company’s first quarter 2015 
      MD&A”).

  

     
     

  

    (2) 
    
      
Total cash costs per gold ounce on a gold equivalent and 
      by-product basis and all-in sustaining costs are non-GAAP financial 
      measures. Refer to the Company’s first quarter 2015 MD&A for a 
      reconciliation to operating expenses.


10 







BLACK FOX 



  
  

      
     
      
     
     
    Three 
      months ended 
     
     
    For the period 
     

  

      
     
    31-Mar-15 
     
     
    31-Dec-14 
     
     
    30-Sep-14 
     
     
    30-Jun-14
    
     
     
    March 5, 2014 -
     

  

      
     
      
     
     
      
     
     
      
     
     
      
     
     
    March 31, 2014 
     

  

    Key Performance Data 
    
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

    Open pit mining 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

    Tonnes of ore mined 
     
    275,865 

     
     
    228,798 
     
     
    232,985 
     
     
    247,029 
     
     
    55,422 
     

  

    Strip ratio 
     
    5.87 
     
     
    10.00 
     
     
    6.78 
     
     
    8.10 
     
     
    12.66 
     

  

    Average gold grade 
      (grams/tonne) 
     
    1.99 
     
     
    1.91 
     
     
    2.61 
     
     
    1.85 
     
     
    2.17 
     

  

    Underground mining 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

    Tonnes of ore mined 
     
    11,525 
     
     
    51,719 
     
     
    20,880 
     
     
    41,739 
     
     
    8,096 
     

  

    Average gold grade (grams/tonne) 
     
    4.84 
     
     
    5.92 
     
     
    5.78 
     
     
    4.33 
     
     
    5.65 
     

  

    Open pit and 
      underground 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

    Tonnes of ore milled 
     
    190,919 
     
     
    221,063 
     
     
    223,083 
     
     
    209,948 
     
     
    39,996 
     

  

    Average mill head grade 
      (grams/tonne) 
     
    2.49 
     
     
    3.00 
     
     
    3.24 
     
     
    2.69 
     
     
    3.36 
     

  

    Average gold recovery rate (%) 
     
    95% 
     
     
    96% 
     
     
    96% 
     
     
    95% 
     
     
    95% 
     

  

    Produced 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

     Gold (ounces) 
     
    14,504 
     
     
    20,334 
     
     
    22,288 
     
     
    17,166 
     
     
    4,096 
     

  

    Sold 
     
      
     
     
      
     
     
      
     
     
      
     
     
      
     

  

     Gold at spot price (ounces) 
     
    14,537 
     
     
    19,491 
     
     
    18,432 
     
     
    15,720 
     
     
    5,008 
     

  

     Gold at fixed price 
      (ounces) 
     
    1,858 
     
     
    1,148 
     
     
    1,556 
     
     
    1,334 
     
     
    315 
     

  

    Average realized gold price (per 
      ounce)2 
    $
    1,137 
     
    $
    1,157 
     
    $
    1,212 
     
    $
    1,224 
     
    $
    1,272 
     

  

    Total cash costs (per gold 
      ounce)¹ 
    $
    1,077 
     
    $
    799 
     
    $
    688 
     
    $
    998 
     
    $
    1,154 
     

  

    All-in sustaining costs (per ounce) 
    $
    1,552 
     
    $
    1,374 
     
    $
    1,202 
     
    $
    1,771 
     
    $
    1,480 
     

  

    Revenue ($000's) 
    $
    18,670 
     
    $
    23,882 
     
    $
    24,230 
     
    $
    20,866 
     
    $
    6,770 
     

  

    Earnings (loss) from mine operations ($000's) 
      3 
    $
    (3,145
    ) 
    $
    (1,143
    ) 
    $
    2,604 
     
    $
    4,294 
     
    $
    (2,287
    ) 




  
  

    (1) 
    
      
The Company reports total cash costs on a production 
      basis, where the prior owner of Black Fox reported total cash costs on a 
      sales basis, consequently the reported total cash costs, cash costs per 
      gold ounce, and all-in sustaining costs per ounce for Black Fox for 
      historical periods will differ from those reported by the prior 
    owner.

  

    (2) 
    
      
Total cash costs per gold ounce on a gold equivalent and 
      by-product basis and all-in sustaining costs are non-GAAP financial 
      measures. Refer to the Company’s first quarter 2015 MD&A for a 
      reconciliation to operating expenses.

  

    (3) 
    
      
Adjustment to 2014 figures – as a result of the 
      finalization of the Black Fox purchase price allocation the depletion at 
      Black Fox was adjusted. Earnings from mine operations increased by $1.2 
      million in Q1 2014, $5.0 million in Q2 2014, $7.0 million in Q3 2014 and 
      decreased by $13.2 million in Q4 2014. (see Note 1(i) to the condensed 
      consolidated interim financial statements).


11 








  
  

    PRIMERO MINING CORP. 

  

    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE 
      LOSS 

  

    THREE MONTHS ENDED MARCH 31, 2015 AND 2014 

  

    (In thousands of 
      United States dollars, except for share and per share amounts) 
  




  
  

      
     
    Unaudited 
      
     

  

      
     
    Three 
      months ended March 31, 
     

  

      
     
      
     
     
    2014 
     

  

      
     
    2015 
     
     
    (As restated) 
     

  

      
    
    $
     
    
    $
     

  

      
     
      
     
     
      
     

  

    Revenue 
     
    73,310 
     
     
    48,269 
     

  

      
     
      
     
     
      
     

  

    Operating expenses 
     
    (42,767
    ) 
     
    (27,683
    ) 

  

    Depreciation and depletion 
     
    (19,073
    ) 
     
    (11,105
    ) 

  

    Total cost of sales 
     
    (61,840
    ) 
     
    (38,788
    ) 

  

      
     
      
     
     
      
     

  

    Earnings from mine operations 
    
     
    11,470 

     
     
    9,481 
     

  

    Exploration expenses 
     
    (121
    ) 
     
    (17
    ) 

  

    General and administrative expenses 
     
    (8,013
    ) 
     
    (13,335
    ) 

  

      
     
      
     
     
      
     

  

    Earnings (loss) from 
      operations 
     
    3,336 
     
     
    (3,871
    ) 

  

    Transaction costs and other expenses 
     
    (3,906
    ) 
     
    (7,267
    ) 

  

    Foreign exchange gain (loss) 
    
     
    2,418 
     
     
    (358
    ) 

  

    Finance income 
     
    167 
     
     
    118 
     

  

    Finance expense 
     
    (2,870
    ) 
     
    (524
    ) 

  

    Gain on derivative liability 
     
    1,329 
     
     
    - 
     

  

    Mark-to-market gain on 
      convertible debentures 
     
    8,205 
     
     
    - 
     

  

    Impairment in value of investment in Fortune 
      Bay 
     
    (534
    ) 
     
    - 
     

  

    Share in results of Santana Minerals 
     
    (79
    ) 
     
    (602
    ) 

  

      
     
      
     
     
      
     

  

    Earnings (loss) before income 
      taxes 
     
    8,066 
     
     
    (12,504
    ) 

  

      
     
      
     
     
      
     

  

    Income tax (expense) recovery 
     
    (4,482
    ) 
     
    4,251 
     

  

      
     
      
     
     
      
     

  

    Net income (loss) for the period 
     
    3,584 
     
     
    (8,253
    ) 

  

      
     
      
     
     
      
     

  

    Other comprehensive income 
      (loss), net of tax Items that may be subsequently reclassified to 
      profit or loss: 
     
    
     
     
    
     

  

    Exchange differences on 
      translation of foreign operations, net of tax of $nil (2014 - $nil) 
     
    (514
    ) 
     
    204 
     

  

    Reclassification of unrealized loss on investment in 
      Fortune Bay to impairment, net of tax of $nil 
     
    456 
     
     
    - 
     

  

    Total comprehensive income (loss) for the period 
     
    3,526 
     
     
    (8,049
    ) 

  

      
     
      
     
     
      
     

  

    Basic income (loss) per share 
     
    0.02 
     
     
    (0.06
    ) 

  

    Diluted income (loss) per share 
     
    0.02 
     
     
    (0.06
    ) 

  

    Weighted average number of common shares 
      outstanding 
     
    
     
     
    
     

  

     Basic 
     
    161,783,009 
      
     
     
    128,112,079 
     

  

     Diluted 
     
    161,872,810 
     
     
    128,112,079 
     


12 








  
  

    PRIMERO MINING CORP. 

  

    CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 

  

    (In thousands of 
      United States dollars) 




  
  

      
     
    Unaudited 
     
     
      
     

  

      
     
    March 31, 
     
     
    December 31, 
     

  

      
     
    2015 
     
     
    2014 
     

  

      
    
     $
     
    
     $
     

  

    Assets 
     
      
     
     
      
     

  

    Current assets 
     
      
     
     
      
     

  

     Cash and cash 
      equivalents 
     
    57,619 

     
     
    27,389 
     

  

     Trade and other receivables 
     
    1,472 
     
     
    59 
     

  

     Taxes receivable 
     
    32,397 

     
     
    33,272 
     

  

     Prepaid expenses 
     
    7,457 
     
     
    6,633 
     

  

     Inventories 
     
    19,947 
     
     
    20,366 
     

  

    Total current assets 
     
    118,892 
     
     
    87,719 
     

  

      
     
      
     
     
      
     

  

    Non-current assets 
     
      
     
     
      
     

  

       Restricted cash 
    
     
    6,469 
     
     
    17,646 
     

  

     Mining interests 
     
    881,408 
     
     
    881,480 
     

  

     Deferred tax asset 
     
    1,718 
     
     
    611 
     

  

     Long-term stockpile 
     
    16,297 
     
     
    14,309 
     

  

     Long-term prepayments 
    
     
    879 
     
     
    - 
     

  

     Investment in Santana Minerals 
     
    302 
     
     
    384 
     

  

     Investment in Fortune Bay 
     
    594 
     
     
    671 
     

  

    Total assets 
     
    1,026,559 
     
     
    1,002,820 
     

  

      
     
      
     
     
      
     

  

    Liabilities 
     
      
     
     
      
     

  

    Current liabilities 
     
      
     
     
      
     

  

     Trade and other payables 
     
    43,779 
     
     
    50,743 
     

  

     Income tax payable 
     
    4,218 
     
     
    1,670 
     

  

     Other taxes payable 
     
    3,179 
     
     
    6,593 
     

  

     Derivative liability 

     
    154 
     
     
    - 
     

  

     Current portion of long-term debt 
     
    51,919 
     
     
    5,616 
     

  

     Total current 
      liabilities 
     
    103,249 
    
     
     
    64,622 
     

  

      
     
      
     
     
      
     

  

    Non-current liabilities 
     
      
     
     
      
     

  

     Other taxes payable 
     
    11,874 
     
     
    11,295 
     

  

     Deferred tax liability 
    
     
    49,767 

     
     
    50,374 
     

  

     Decommissioning liability 
     
    31,409 
     
     
    32,566 
     

  

     Long-term debt 
     
    71,068 

     
     
    89,771 
     

  

     Derivative liability 
     
    - 
     
     
    1,405 
     

  

     Other long-term liabilities 
     
    4,962 
     
     
    4,802 
     

  

    Total liabilities 
     
    272,329 
     
     
    254,835 
     

  

      
     
      
     
     
      
     

  

    Equity 
     
      
     
     
      
     

  

    Share capital 
     
    861,795 
    
     
     
    858,761 
     

  

    Warrant reserve 
     
    34,782 
     
     
    34,782 
     

  

    Contributed surplus 
     
    21,211 

     
     
    21,526 
     

  

    Accumulated other comprehensive income 
     
    (5,219
    ) 
     
    (5,161
    ) 

  

    Deficit 
     
    (158,339
    ) 
     
    (161,923
    ) 

  

    Total equity 
     
    754,230 
     
     
    747,985 
     

  

    Total liabilities and equity 
     
    1,026,559 
     
     
    1,002,820 
     


13 








  
  

    PRIMERO MINING CORP. 

  

    CONSOLIDATED STATEMENTS OF CASH FLOWS 

  

    THREE MONTHS ENDED MARCH 31, 2015 AND 2014 

  

    (In thousands of 
      United States dollars) 




  
  

      
     
    Unaudited 
     

  

      
     
    Three 
      months ended March 31, 
     

  

      
     
      
     
     
    2014 
     

  

      
     
    2015 
     
     
    (As restated) 
     

  

      
    
    $
     
    
    $
     

  

    Operating activities 
    
     
      
     
     
      
     

  

    Earnings (loss) before income taxes 
     
    8,066 
     
     
    (12,504
    ) 

  

    Adjustments for: 
     
      
     
     
      
     

  

     Depreciation and depletion 
     
    19,073 
     
     
    11,105 
     

  

     Share-based payments - 
      Stock Option plan 
     
    352 
     
     
    153 
     

  

     Share-based payments - Phantom Share 
      Unit plan 
     
    2,275 
     
     
    7,989 
     

  

     Payments made under the 
      Phantom Share Unit Plan 
     
    (1,513
    ) 
     
    (2,626
    ) 
  

  

     Unrealized loss on investment in 
      Santana Minerals 
     
    79 
     
     
    602 
     

  

     Unrealized gain on 
      derivative liabilities 
     
    (1,329
    ) 
     
    - 
     

  

     Mark-to-market gain on convertible 
      debentures 
     
    (8,205
    ) 
     
    - 
     

  

     Loss on write-down of 
      inventory 
     
    - 
     
     
    1,225 
     

  

     Unrealized foreign exchange gain 
     
    (1,169
    ) 
     
    220 
     

  

     Other 
     
    534 
     
     
    372 
     

  

     Taxes paid 
     
    (5,847
    ) 
     
    (433
    ) 

  

     Other adjustments 
     
      
     
     
      
     

  

    Transaction costs (disclosed in financing 
      activities) 
     
    3,639 
     
     
    - 
     

  

    Finance income (disclosed in 
      investing activities) 
     
    (48
    ) 
     
    (118
    ) 
  

  

    Finance expense 
     
    2,870 
     
     
    524 
     

  

    Operating cash flow before 
      working capital changes 
     
    18,777 

     
     
    6,509 
     

  

    Changes in non-cash working capital 
     
    (3,513
    ) 
     
    (13,943
    ) 

  

    Cash provided by (used in) operating activities 
     
    15,264 
     
     
    (7,434
    ) 

  

      
     
      
     
     
      
     

  

    Investing activities 
    
     
      
     
     
      
     

  

    Expenditures on mining interests 
     
    (19,907
    ) 
     
    (20,285
    ) 

  

    Acquisition of Brigus Gold 
      Corp (net) 
     
    - 
     
     
    (7,773
    ) 
  

  

    Interest received 
     
    48 
     
     
    118 
     

  

    Increase in long-term stockpile 
     
    (1,988
    ) 
     
    - 
     

  

    Cash 
      used in investing activities 
     
    (21,847
    ) 
     
    (27,940
    ) 

  

      
     
      
     
     
      
     

  

    Financing activities 
     
      
     
     
      
     

  

    Repayment of debt 
     
    (40,000
    ) 
     
    (2,611
    ) 
  

  

    Proceeds on exercise of options 
     
    826 
     
     
    7,686 
     

  

    Issuance of $75 million 
      convertible debt 
     
    75,000 

     
     
    - 
     

  

    Transaction costs on issuance of convertible 
      debt 
     
    (3,639
    ) 
     
    - 
     

  

    Payments on capital leases 

     
    (1,867
    ) 
     
    - 
     

  

    Change in deferred tax liability 
     
    - 
     
     
    - 
     

  

    Funds released from 
      reclamation bond 
     
    8,544 
     
     
    - 
     

  

    Proceeds on issuance of flow-through shares 
    
     
    - 
     
     
    8,037 
     

  

    Interest paid 
     
    (2,971
    ) 
     
    (1,837
    ) 

  

    Cash 
      provided by financing activites 
     
    35,893 
     
     
    11,275 
     

  

      
     
      
     
     
      
     

  

    Effect of foreign exchange rate changes on cash 
     
    920 
     
     
    (240
    ) 

  

      
     
      
     
     
      
     

  

    Increase (decrease) in cash 
     
    30,230 
     
     
    (24,339
    ) 

  

    Cash, beginning of period 
     
    27,389 
     
     
    110,711 
     

  

    Cash, end of period 
     
    57,619 
     
     
    86,372 
     


14

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