Form 6-K PRIMERO MINING CORP For: Mar 31

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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, 2016

Commission File Number: 001-35278

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

Suite 2100, 79 Wellington Street West,
TD South Tower, P.O Box 139
Toronto, Ontario
M5K 1H1 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-

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SUBMITTED HEREWITH

Exhibits

	99.1	Condensed Consolidated Interim Financial Statements for the period ended March 31, 2016
	99.2	Management's Discussion and Analysis for the period ended March 31, 2016
	99.3	CEO Certification of Interim Filings
	99.4	CFO Certification of Interim Filings
	99.5	News Release dated May 4, 2016

 

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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 4, 2016	By:	/s/ Wendy Kaufman
		Wendy Kaufman
	Title:	Chief Financial Officer

 

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PRIMERO MINING CORP.
MARCH 31, 2016

 

 

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

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PRIMERO MINING CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015
(IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)

	Notes		2016			2015
Revenue	5	$	50,544		$	73,310
Operating expenses			(40,282	)		(42,767	)
Depreciation and depletion			(16,057	)		(19,073	)
Total cost of sales			(56,339	)		(61,840	)
Earnings (loss) from mine operations			(5,795	)		11,470
Exploration expenses			(334	)		(121	)
General and administrative expenses			(5,532	)		(8,013	)
Earnings (loss) from operations			(11,661	)		3,336
Transaction costs and other expenses	9		(386	)		(3,906	)
Finance expense	10		(3,259	)		(2,870	)
Mark-to-market gain (loss) on convertible debentures			(375	)		8,205
Other income (expense)	11		(650	)		3,301
Earnings (loss) before income taxes			(16,331	)		8,066
Income tax (expense) recovery	12		3,159			(4,482	)
Net income (loss) for the year			($13,172	)	$	3,584
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			-			(514	)
Unrealized gain on investment in Fortune Bay, net of tax of $nil			85			-
Reclassification of unrealized loss on investment in Fortune Bay to        impairment, net of tax of $nil			-			456
Total comprehensive net income (loss) for the year			($13,087	)	$	3,526
Basic net income (loss) per share			($0.08	)	$	0.02
Diluted net income (loss) per share			($0.08	)	$	0.02
Weighted average number of common shares outstanding
Basic			164,510,929			161,783,009
Diluted			164,510,929			161,872,810

See accompanying notes to the condensed consolidated interim financial statements.

1

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PRIMERO MINING CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS OF UNITED STATES DOLLARS)
(UNAUDITED)

			March 31			December 31
	Notes		2016			2015
Assets
Current assets
Cash and cash equivalents		$	22,067		$	45,601
Trade and other receivables			1,071			1,793
Taxes receivable			26,857			30,689
Prepaid expenses			8,768			8,524
Inventories	6		24,960			31,964
Total current assets			83,723			118,571
Non-current assets
Restricted cash			6,309			5,920
Mining interests	7		794,601			790,118
Deferred tax asset			4,254			3,781
Long-term stockpile	6		2,707			5,694
Other non-current assets			610			884
Total assets		$	892,204		$	924,968
Liabilities
Current liabilities
Trade and other payables		$	39,957		$	44,972
Income tax payable			-			12,870
Other taxes payable			461			3,406
Current portion of long-term debt	8		4,315			52,417
Totalcurrent liabilities			44,733			113,665
Non-currentl iabilities
Other taxes payable			14,082			13,354
Deferred tax liability			49,447			53,107
Decommissioningl iability			29,825			28,294
Long-term debt	8		111,289			62,727
Other long-term liabilities			5,091			4,945
Total liabilities		$	254,467		$	276,092
Shareholders' equity
Share capital	14 (a)	$	869,525		$	867,375
Contributed surplus	14 (b)		54,782			54,984
Accumulated other comprehensive loss			(4,565	)		(4,650	)
Deficit			(282,005	)		(268,833	)
Totalshareholders' equity		$	637,737		$	648,876
Total liabilitiesand shareholders'equity		$	892,204		$	924,968
Commitments and contingencies (Notes 18 and 12(b))

See accompanying notes to the condensed consolidated interim financial statements.

2

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PRIMERO MINING CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
(IN THOUSANDS OF UNITED STATES DOLLARS , EXCEPT FOR NUMBER OF COMMON SHARES )
(UNAUDITED )

Total comprehensive loss was $13.1 million for the three months ended March 31, 2016 (March 31, 2015 – income of $3.5 million) .

See accompanying notes to the condensed consolidated interim financial statements.

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PRIMERO MINING CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015
(IN THOUSANDS OF UNITED STATES DOLLARS)
(UNAUDITED)

	Notes		2016			2015
Operating activities
Earnings (loss) before income taxes			($16,331	)	$	8,066
Adjustments for:
Depreciation and depletion			16,057			19,073
Share-based compensation expense	14 (b)		1,857			2,627
Payments made under the Phantom Share Unit Plan			(279	)		(1,513	)
Mark-to-market loss (gain) on convertible debentures			375			(8,205	)
Write-off of assets			544			-
Write-down of inventory			505			-
Unrealized foreign exchange loss (gain)			1,355			(1,169	)
Taxes paid			(15,775	)		(5,847	)
Other			(5	)		(716	)
Other adjustments
Transaction costs (disclosed in financing activities)			-			3,639
Finance income (disclosed in investing activities)			(23	)		(48	)
Finance expense	10		3,259			2,870
Operating cashflow before working capital changes			(8,461	)		18,777
Changes in non-cash working capital	13		5,478			(5,501	)
Cash provided by (used in) operating activities			($2,983	)	$	13,276
Investing activities
Expenditures on mining  interests			($17,755	)		($19,907	)
Interest received			23			48
Cash used in investing activities			($17,732	)		($19,859	)
Financing activities
Repayment of debt	8 (a)		($48,116	)		($40,000	)
Drawdown on revolving credit facility	8 (d)		50,000			-
Issuance of convertible debt			-			75,000
Transaction costs on issuance of convertible debt			-			(3,639	)
Payments on capital leases			(1,220	)		(1,867	)
Funds released from reclamation bond			-			8,544
Proceeds on exercise of options			-			826
Payments relating to issuance of flow-through shares			(4	)		-
Interest paid			(3,996	)		(2,971	)
Cash provided by (used in) financing activities			($3,336	)	$	35,893
Effect of foreign exchange rate changes on cash		$	517		$	920
Increase (decrease) in cash			(23,534	)		30,230
Cash, beginning of period			45,601			27,389
Cash, end of period		$	22,067		$	57,619

See accompanying notes to the condensed consolidated interim financial statements.

4

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PRIMERO MINING CORP.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(IN THOUSANDS OF UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

(UNAUDITED)

1. Basis of preparation

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 Primero Mining Corp.’s (the Company) 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, estimates and judgements were presented in Note 3 of the audited annual consolidated financial statements for the year ended December 31, 2015 and have been consistently applied in the preparation of these condensed consolidated interim financial statements.

These condensed consolidated interim financial statements were approved by the Company’s Board of Directors on May 3, 2016.

2. 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, 2018, with early adoption permitted.

Primero will be required to adopt IFRS 9, “Financial Instruments” on January 1, 2018. 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. It also provides a new impairment model and includes a substantially reformed approach to hedge accounting.

In January 2016, the IASB issued IFRS 16, Leases (IFRS 16). IFRS 16 is effective for periods beginning on or after January 1, 2019, with early adoption permitted, provided IFRS 15 has been adopted. IFRS 16 eliminates the current dual model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance lease accounting for lessees.

5

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PRIMERO MINING CORP.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(IN THOUSANDS OF UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

(UNAUDITED)

3. Tax ruling in Mexico

On October 4, 2012, Primero Empresa Minera, S.A. de C.V. (PEM) received a ruling (the “APA Ruling”) from the Mexican tax authority (“SAT”) 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). The Company’s APA Ruling covered the five years ending December 31, 2014.

In February 2016, PEM received a legal claim from the Mexican tax authority seeking to nullify the APA. The legal claim initiated does not identify any different basis for paying taxes, nor have any tax reassessments been received from the SAT. The Company intends to vigorously defend the validity of its APA. The Company has filed procedural and substantive responses to the claim. The procedural response is a challenge against the admission of the SAT’s claim. The substantive response contains the Company’s response to the SAT’s claim. If the SAT is successful in retroactively nullifying the APA, the SAT may seek to audit and reassess PEM in respect of its sales of silver in connection with the Silver Purchase Agreement for 2010 through 2014. While PEM would have rights of appeal in connection with any reassessments the amount of additional taxes that the SAT could reassess PEM for the tax years 2010 through 2014 on the silver sold in connection with the Silver Purchase Agreement would likely have a material adverse effect on the Company’s results of operations, financial condition and cash flows.

For 2015 and the first quarter of 2016, the Company continued to record its revenue from the sale of silver for purposes of Mexican tax accounting in a manner consistent with the APA on the basis that the applicable facts and laws have not changed. The Company’s legal and financial advisors continue to believe that the Company has filed its tax returns compliant with applicable Mexican law. To the extent the SAT determines that the appropriate price of silver sales under the Silver Purchase Agreement is significantly different from the realized price and while PEM would have rights of appeal in connection with any reassessments, it is likely to have a material adverse effect on the Company’s business, financial condition and results of operations.

4. 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:

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PRIMERO MINING CORP.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(IN THOUSANDS OF UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

(UNAUDITED)

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PRIMERO MINING CORP.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(IN THOUSANDS OF UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

(UNAUDITED)

5. Revenue

		Three months ended March 31
		2016			2015
Gold	$	44,823		$	65,295
Silver		5,721			8,015
	$	50,544		$	73,310

a)    Silver Purchase Agreement

The Silver Purchase Agreement provides that for the first four years after the Company’s acquisition of the San Dimas mine up to August 5, 2014, the first 3.5 million ounces of silver produced per annum by the San Dimas mine, plus 50% of the excess silver produced above this amount, were to be sold to Silver Wheaton Caymans (SWC) at the lesser of $4.04 per ounce (adjusted by 1% per year) and market prices. From August 6, 2014, for the life of the mine, the first 6 million ounces of silver produced per annum by the San Dimas mine, plus 50% of the excess silver produced above this amount, must be sold to SWC at the lesser of $4.20 per ounce (adjusted by 1% per year) and market prices. All silver not sold to SWC is available to be sold by the Company at market prices.

The contract year for purposes of the threshold runs from August 6 of a year to August 5 of the following year. The threshold for the year ended ended August 5, 2016 has not been met (4.2 million ounces have been delivered under the contract as at March 31, 2016), while threshold for the year ended August 5, 2015 was met in July 2015. During the three months ended March 31, 2016 and 2015 the Company did not sell any silver at market prices.

b)    Gold Purchase Agreement

As part of the acquisition of Brigus Gold Corp. (“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 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, 2016 the Company recorded revenue of $0.8 million (2015 - $0.9 million) under the contract terms.

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PRIMERO MINING CORP.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(IN THOUSANDS OF UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

(UNAUDITED)

6. Inventories

		March 31			December 31
		2016			2015
Current portion of inventory
Gold and silver	$	4,047		$	10,279
Stockpiled ore		10,004			9,021
Work-in-progress		4,626			6,541
Supplies		6,283			6,123
		24,960			31,964
Long-term stockpile		2,707			5,694
	$	27,667		$	37,658

7. Mining interests

A summary of mining interest by property is as follows:

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 5 (a) and (b)). Substantially all of the Company’s assets are pledged as security under the revolving credit facility (Note 8(d)).

The carrying value of property, plant and equipment under finance leases at March 31, 2016 was $8.6 million (December 31, 2015 - $10.1 million). The lessors hold first security rights over the leased assets.

9

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PRIMERO MINING CORP.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(IN THOUSANDS OF UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

(UNAUDITED)

8. Debt

		M arch 31			December 31
		2016			2015
Current debt
6.50% convertible debentures(a)	$	-		$	47,751
Finance lease liabilities(b)		4,315			4,666
		4,315			52,417
Long-term debt
5.75% convertible debentures (c)		61,875			61,500
Line of credit(d)		48,980			-
Finance lease liabilities(b)		434			1,227
		111,289			62,727
	$	115,604		$	115,144

(a) During 2014 as part of the acquisition of Brigus, the Company assumed $50 million of senior unsecured debentures ($48.1 million after investors holding $1.9 million of the debentures accepted the change of control offer made by the Company). The debentures bore interest at 6.5% per annum payable semi-annually in arrears on March 31 and September 30 of each year. These debentures were repaid in cash upon maturity on March 31, 2016.

(b) The Company is obligated under various finance leases for equipment as well as a milling facility at 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% . There are no restrictions placed on the Company as a result of these leases, however, the lessors hold first security rights over the leased assets.

(c) On February 9, 2015, the Company issued $75 million of 5.75% convertible unsecured subordinated debentures (the 5.75% Debentures) maturing on February 28, 2020. The 5.75% 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. 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 the 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 5.75% Debentures as financial instruments measured at fair value for reporting purposes given that the debentures contain multiple embedded derivatives. Fair value changes are recorded through the statement of operations and comprehensive income (loss).

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PRIMERO MINING CORP.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(IN THOUSANDS OF UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

(UNAUDITED)

(d) The Company has a $75 million revolving credit facility available until May 23, 2017 which 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. The Company drew down $50 million under the revolving credit facility to repay the 6.5% convertible debentures (note 8(a)). Unamortized transaction costs of $1.1 million have been netted against the drawn amount resulting in a carrying balance of $48.9 million at March 31, 2016. The revolving credit facility is secured by substantially all of the Company’s assets and contains customary covenants and default clauses typical to this type of facility. As at March 31, 2016 the Company was in compliance with all debt covenants.

9. Transaction costs and other expenses

		Three months ended March 31
		2016			2015
Transaction costs relating to:
5.75% convertible debenture offering (Note 8(c))	$	-		$	3,639
Other expenses		386			267
	$	386		$	3,906

10. Finance expenses

		Three months ended March 31
		2016			2015
Interest on 6.5% convertible debentures	$	775		$	771
Interest on 5.75% convertible debentures		1,081			591
Interest on revolving credit facility		476			545
Accretion on 6.5% convertible debentures		365			353
Accretion on asset retirement obligation		275			182
Amortization on revolving credit facility transaction costs		217			260
Others		70			168
	$	3,259		$	2,870

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PRIMERO MINING CORP.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(IN THOUSANDS OF UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

(UNAUDITED)

11. Other income (expenses)

		Three months ended March 31
		2016			2015
Foreign exchange gain (loss)	$	(678	)	$	2,418
Gain on derivative liability		5			1,329
Finance income		23			167
Other		-			(613	)
	$	(650	)	$	3,301

12. Income taxes

a)    Tax expense

Tax expense comprise the following:

		Three months ended March 31
		2016			2015
Current income tax expense	$	665		$	6,034
Deferred income tax expense (recovery)		(3,824	)		(1,552	)
Income tax expense (recovery)	$	(3,159	)	$	4,482

Income tax expense differs from the amount that would result from applying the Canadian federal and provincial income tax rates to earnings from continuing operations before taxes. These differences result from the following items:

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PRIMERO MINING CORP.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(IN THOUSANDS OF UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

(UNAUDITED)

		Three months ended March 31
		2016			2015
Earnings (loss) before income taxes	$	(16,331	)	$	8,066
Canadian federal and provincial income taxrate		26.5%			26.0%
Expected income tax expense (recovery)		(4,328	)		2,097
Increase (decrease) to expense attributable to:
Effect of different foreign statutory rates on earnings of subsidiaries		(356	)		404
Share-based payments		422			92
Impact of foreign exchange and inflation		1,562			2,579
Withholding taxes on intercompany interest		852			978
Royalty taxes in Mexico		(267	)		580
Flow through share renunciation		120			(95	)
Non deductible income/expenses		(2,578	)		(2,849	)
Ontario mining taxes		(203	)		(279	)
Impact of tax losses not recognized		1,617			975
Income tax expense (recovery)	$	(3,159	)	$	4,482

b)    Challenge to the 2012 APA

Overview

In February 2016 the Mexican tax authority, Servicio de Administración Tributaria (the “SAT”), initiated a proceeding seeking to nullify the APA which it issued to the Company in 2012. The APA confirmed the Company’s basis for paying taxes on the price it realized for certain silver sales between 2010 to 2014. If the SAT’s challenge is successful it is likely to have a material adverse effect on the Company’s business, financial condition and results of operations.

Background

In 2004, affiliates of Goldcorp Inc. (“Goldcorp”) entered into a Silver Purchase Agreement with Silver Wheaton Corp. (“Silver Wheaton”) in connection with the San Dimas mine and two other mines in Mexico. Under the Silver Purchase Agreement, Goldcorp received cash and securities in exchange for an obligation to sell the amount of silver extracted from the mines at a price set forth in the Silver Purchase Agreement. In order to satisfy its obligations under the Silver Purchase Agreement, sales were made by Goldcorp through a non-Mexican subsidiary to a Silver Wheaton company in the Cayman Islands (“SWC”). Upon Primero’s acquisition of the San Dimas Mine, the Silver Purchase Agreement was amended and restated and Primero assumed all of Goldcorp’s obligations with respect to the San Dimas concession under the Silver Purchase Agreement. Primero did not receive any of the initial consideration that was paid to Goldcorp under the Silver Purchase Agreement.

As amended and restated, the provisions of the Silver Purchase Agreement require that, on a consolidated basis, the Company sell to Silver Wheaton during a contract year (August 6th to the following August 5th), 100% of the amount of silver produced from the San Dimas concessions up to 6 million ounces and 50% of silver produced thereafter, at the lower of (i) the current market price and (ii) $4.04 per ounce plus an annual increase of 1% (the “PEM Realized Price”). In 2015, the contract price was $4.24. The price paid by Silver Wheaton under the Silver Purchase Agreement represents the total value that the Company and its affiliates receive for the sale of silver to Silver Wheaton. The Silver Purchase Agreement continues indefinitely in respect of any silver produced from the San Dimas concessions.

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PRIMERO MINING CORP.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(IN THOUSANDS OF UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

(UNAUDITED)

The specific terms of the Silver Purchase Agreement require that the Company sell the silver through one of its non-Mexican subsidiaries, Silver Trading Barbados (“STB”), to Silver Wheaton’s Cayman subsidiary, Silver Wheaton Caymans. As a result, the Company’s Mexican subsidiary that holds the San Dimas concessions, Primero Empresa Minera (“PEM”), sells the required amount of silver produced from the San Dimas concessions to STB to allow it to fulfill its obligations under the Silver Purchase Agreement.

When the Company initially acquired the San Dimas mine, the sales from PEM to STB were made at the spot market price while the sales by STB to Silver Wheaton Caymans were at the contracted PEM Realized Price, which at that time was $4.04 per ounce. In order to reflect commercial realities and the effects of the Silver Purchase Agreement on the Company on a consolidated basis, PEM amended the terms of sales of silver between itself and STB and commenced to sell the amount of silver due under the Silver Purchase Agreement to STB at the PEM Realized Price. For Mexican income tax purposes PEM then recognized the revenue on these silver sales on the basis of its actual realized revenue, which was the PEM Realized Price.

APA

In order to provide the Company with stability and assurances that the SAT would accept the PEM Realized Price (and not the spot market silver price) as the proper price to use to calculate Mexican income taxes, the Company applied for and received the APA from the SAT. The APA confirmed the PEM Realized Price would be used as the Company’s basis for calculating taxes owed by the Company on the silver sold under the Silver Purchase Agreement. The Company believed that the function of an APA was to provide tax certainty and as a result made significant investments in Mexico based on that certainty. Under Mexican law, an advanced pricing agreement is valid for five years and therefore the APA represented the SAT’s agreement to accept the PEM Realized Price as the basis for calculating taxes for the tax years 2010 through 2014.

Challenge to APA for 2010 – 2014 tax years

In February 2016, the SAT initiated a legal proceeding seeking to nullify the APA, however, the SAT has not identified an alternative basis in the legal claim for calculating taxes on the silver sold by PEM for which it receives the PEM Realized Price. If the SAT is successful in retroactively nullifying the APA, the SAT may seek to audit and reassess PEM in respect of its sales of silver in connection with the Silver Purchase Agreement for 2010 through 2014. The Company is an ‘interested party’ in this proceeding. While PEM would have rights of appeal in connection with any reassessments, if the legal proceeding is finally concluded in favour of the SAT, the amount of additional taxes that the SAT could charge PEM for the tax years 2010 through 2014 on the silver sold in connection with the Silver Purchase Agreement would likely have a material adverse effect on the Company’s results of operations, financial condition and cash flows.

14

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PRIMERO MINING CORP.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(IN THOUSANDS OF UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

(UNAUDITED)

The Company intends to vigorously defend the validity of the APA and has filed procedural and substantive responses to the claim. In addition, the Company intends to explore opportunities to minimize the potential impact on the Company in the event that the SAT is successful in its legal claim to nullify the APA, but there is no assurance that the Company will find or be able to implement a reasonable solution.

Uncertain tax treatment for tax years following 2014

For 2015 and the first quarter of 2016, the Company continued to record its revenue from the sale of silver for purposes of Mexican tax accounting in a manner consistent with the APA on the basis that the applicable facts and laws have not changed. The Company’s legal and financial advisors continue to believe that the Company has filed its tax returns compliant with applicable Mexican law. The Company has until the end of 2016 to file an application for a renewed APA in respect of 2015 and the four subsequent tax years. Given the legal challenge by the SAT against the APA for the 2010-2014 tax years, the Company currently believes it is unlikely the SAT will agree to an Advance Pricing Agreement for the 2015-2019 tax years on terms similar to the challenged APA. To the extent the SAT determines that the appropriate price of silver sales under the Silver Purchase Agreement, for tax purposes, is significantly different from the PEM Realized Price and while PEM would have rights of appeal in connection with any reassessments, it is likely to have a material adverse effect on the Company’s business, financial condition and results of operations.

13. Supplementary cash flow information

Changes in non-cash working capital comprise the following:

		Three months ended March 31
		2016			2015
Trade and other receivables	$	166		$	(317	)
Taxes receivable		4,290			(89	)
Prepaid expenses		(1,124	)		225
Inventories		6,163			(1,569	)
Trade and other payables		(3,163	)		(3,751	)
Taxes payable		(854	)		-
	$	5,478		$	(5,501	)

14. 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.

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PRIMERO MINING CORP.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(IN THOUSANDS OF UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

(UNAUDITED)

b)    Share-based compensation

The movement in contributed surplus and phantom share liability related to share-based compensation during the three month period ended March 31, 2016 and the year ended December 31, 2015 are as follows:

(i) 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-based compensation arrangements).

A summary of the Company’s stock option activities for the three month period ended March 31, 2016 and the year ended December 31, 2015 is presented below.

		Options			W eighted average
		outstanding			exercise price
Outstanding at January 1, 2015		9,254,224			C$6.17
Granted		1,617,870			4.23
Exercised		(300,000	)		3.47
Cancelled		(71,875	)		5.68
Expired		(6,254,021	)		6.17
Outstanding at December 31, 2015		4,246,198			C$5.70
Granted		2,177,969			2.95
Outstanding at March 31, 2016		6,424,167			C$4.76

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, 2016 and the year ended December 31, 2015.

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PRIMERO MINING CORP.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(IN THOUSANDS OF UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

(UNAUDITED)

		2016			2015
Risk free interest rate		0.51%			0.95%
Expected life in years		3.50			3.50
Volatility		62.51%			59.27%
Expected dividends		0.00%			0.00%
Forfeiture rate		5.00%			5.00%
Weighted average fair value of options issued		C$0.83			C$1.73

As at March 31, 2016, the following stock options were outstanding and exercisable:

(ii) Phantom Share Unit Plan (PSUP) and Directors PSU Plan (Directors PSUP)

PSUP is 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.

A person holding Director PSUs is entitled to elect to receive at vesting, either 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 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.

A summary of the unit activity for the three month period ended March 31, 2016 and the year ended December 31, 2015 under the PSUP and the Directors PSUP is presented below.

		PSUP			Directors PSUP
Outstanding at January 1, 2015		1,329,080			186,063
Redeemed		(1,088,066	)		(198,575	)
Granted		-			223,883
Cancelled		(7,437	)		-
Outstanding at December 31, 2015		233,577			211,371
Redeemed		(135,588	)		-
Cancelled		(2,125	)		-
Outstanding at March 31, 2016		95,864			211,371

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PRIMERO MINING CORP.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(IN THOUSANDS OF UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

(UNAUDITED)

Units issued under the PSUP and Directors PSUP are accounted for as cash-settled awards. 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 (loss) during the three months ended March 31, 2016 in relation to the PSUP and Directors PSUP was a recovery of $0.1 million (2015 – expense of $0.6 million) recognized under general and administrative expenses. The total liability recognized at March 31, 2016 in respect of the PSUP and Directors PSUP was $0.3 million (December 31, 2015 - $0.7 million) which is classified as a current liability, reported within trade and other payables.

(iii) 2013 PSU Plan (2013 PSUP)

A person holding PSUs issued under this plan is entitled to receive at vesting either 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, or the number of common shares equal to the number of PSUs, or a combination of cash and equity. The choice of settlement is solely at the Company’s discretion.

A summary of the unit activity for the the three months ended March 31, 2016 and year ended December 31, 2015 under the 2013 PSUP is presented below.

		March 31			December 31
		2016			2015
Opening balance		2,088,902			1,152,464
Redeemed		(508,431	)		(958,515	)
Granted		2,865,949			1,960,463
Cancelled		(10,651	)		(65,510	)
		4,435,769			2,088,902

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 based on 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 (loss) for the three months ended March 31, 2016 in relation to the 2013 PSUP was $1.1 million, (2015 - $2.2 million).

(iv) Deferred share units

A person holding deferred share units (DSUs) under this plan is entitled to receive at vesting, either a cash payment equal to the redemption value of the DSUs, shares issued from treasury equal to the number of DSUs, shares purchased on the stock exchange, or any combination of these, such that the cash payment plus number of shares delivered have a value equal to the redemption value of the DSUs. The choice of settlement is solely at the Company’s discretion.

The redemption value is calculated by the number of DSUs redeemed multiplied by the weighted average price per share traded on the TSX over the last five trading days preceding the redemption date.

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PRIMERO MINING CORP.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(IN THOUSANDS OF UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

(UNAUDITED)

As at March 31, 2016, a total of 315,790 DSUs were issued and outstanding. The DSUP 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 based on the grant date closing price of Primero shares on the TSX. The total amount of expense recognized in the statements of operations and comprehensive income (loss) for the three months ended March 31, 2016 was $0.1 million (2015 - $Nil).

(v) Director PSU Cash Plan

The Company’s Board of Directors approved the “Non-Employee Director Phantom Share Unit Cash-Settled Plan” on February 22, 2016. Under this plan, PSUs may be granted to a Non-Employee Director for services rendered to the Company. A person holding PSUs under this plan is entitled to receive at vesting, a cash payout equivalent to the vesting date value per PSU calculated based on the volume weighted average price per share traded on the TSX over the last five trading days preceding the vesting date. A total of 203,388 units were issued and outstanding under this plan as at March 31, 2016.

15. Financial instruments

The Company’s financial instruments at March 31, 2016 consist of cash and cash equivalents, restricted cash, trade and other receivables, an equity investment in Fortune Bay, trade and other payables, and debt.

At March 31, 2016, the carrying amounts of cash, restricted cash and cash equivalents, 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 fair value of the finance lease liability approximate their carrying value as the interest rate implicit in the leases approximate current market rates.

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, 2016 or December 31, 2015, other than those discussed below.

The 5.75% convertible debentures issued by the Company on February 9, 2015 (Note 8 (c)) 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 ended March 31, 2016 a mark to market loss of $0.4 million (2015 - $8.2 million gain) was recognized in relation to the debentures.

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

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PRIMERO MINING CORP.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(IN THOUSANDS OF UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

(UNAUDITED)

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.

The levels in the fair value hierarchy that the Company’s financial assets and liabilities that are measured and recognized at fair value on a recurring basis are as follows:

		March 31, 2016						December 31, 2015
		Level 1			Level 2			Level 1			Level 2
Investment in Fortune Bay(1)	$	610		$	-		$	525		$	-
5.75% convertible debentures (2)		61,875			-			61,500			-
Derivative liability on 6.5%  convertible debentures (3)		-			-			-			5

(1)	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.
(2)	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.
(3)	Calculated at December 31, 2015 using an option pricing model with the following inputs: share price $3.36, conversion price $14.00, expected life 3 months, volatility 69.77% and a discount rate of 8%.

At March 31, 2016, there were no financial assets or liabilities measured and recognized on the consolidated statements of financial position at fair value that would be categorized as Level 3 in the fair value hierarchy (December 31, 2015 – $nil).

16. Capital management

The Company’s objectives in managing capital are to:

•	ensure the Company has the financial capacity to support its operations in a low gold price environment with sufficient capability to manage unforeseen operational or industry developments
•	ensure the Company has the capital and capacity to support its long-term growth strategy
•	ensure the Company complies with its debt covenants
•	provide returns for shareholders and benefits for other stakeholders.

The Company’s capital items are the following:

		March 31			December 31
		2016			2015
Cash and cash equivalents	$	22,067		$	45,601
Undrawn revolving line of credit (Note 8 (d))		25,000			75,000
Current portion of long-term debt		4,315			52,417
Long-term debt		111,289			62,727
Shareholders' equity		637,737			648,876

To support these objectives the Company manages its capital structure and makes adjustments to it within the context of the Company’s strategy, economic conditions and risk characteristics of its underlying assets. To maintain or adjust its capital structure, the Company may attempt to issue shares, adjust the amount of debt or enter into new debt. The Company does not currently pay out dividends.

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PRIMERO MINING CORP.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(IN THOUSANDS OF UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

(UNAUDITED)

Several key policy guidelines are used to manage the Company’s capital structure:

•	maintain a liquidity cushion to address operational and/or industry disruptions or downturns
•	maintain a conservative level of debt relative to total capital and earnings within the context of financial forecasts for pricing, costs and production.

The revolving credit facility matures on May 23, 2017. While we expect to renew this facility in advance of the maturity date, if full repayment is required we expect the cash generated by our operations to be sufficient to repay the facility in full at maturity. We closely monitor our cash position and operational performance, and will take steps to reduce non-critical capital and discretionary spending if deemed necessary.

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, reduce capital spending, acquire or dispose of assets or adjust the amount of cash held. The Company continues to evaluate a number of financing alternatives to strengthen the balance sheet.

17. Related party transactions

Other than payments to key management, there were no further related party transactions for the three months ended March 31, 2016.

18. 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. These proceedings were initiated by Ejidos against defendants who were 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. None of the initial proceedings named Primero as a party and Primero therefore had no standing to participate in them.

In 2015, two of these proceedings were decided in favor of the Ejidos. Upon becoming aware of the decisions Primero obtained injunctions to suspend any legal effect of the decisions while the Company proceeds with a legal process to nullify the Ejidos’ claim by submitting evidence of Primero’s legal title.

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PRIMERO MINING CORP.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(IN THOUSANDS OF UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

(UNAUDITED)

The third legal proceeding commenced by the Ejidos has not been decided and Primero remains without standing to participate therein because it was not named as a party. In the event a final decision is rendered in favour of the Ejido in that proceeding, Primero will seek to annul such decision by defending its position as the legitimate owner.

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.

(b) The Company is aware of a class action lawsuit having been filed in February 2016 against the Company in the State of California seeking to recover damages for investors in the Company’s common shares under the U.S. federal securities laws, however no class has yet been certified and we have not been served process in respect of the suit. The Company will vigorously defend this class action lawsuit if it proceeds.

(c) As at March 31, 2016, the Company had entered into commitments to purchase plant and equipment totaling $2.2 million (December 31, 2015 - $5.7 million).

(d) 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.

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 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 interim financial statements of the Company as at and for the three months ended March 31, 2016. Additional information on the Company, including its Annual Information Form for the year ended December 31, 2015, 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 U.S. 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 3, 2016.

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 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 two exploration properties the Cerro del Gallo gold-silver-copper project, located in the state of Guanajuato in central Mexico and Ventanas, located in Durango State, Mexico.

The profitability and operating cash flow of the Company are affected by numerous factors, including the amount of gold and silver produced and sold, market prices of gold and silver, operating costs, regulatory and environmental compliance, as well as currency exchange rates, political risks, and varying levels of taxation. The Company seeks to manage these risks, but many of the factors affecting these risks are beyond the Company’s control.

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 a convertible debenture trading on the TSX under the symbol “P.DB.V”.

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

		Three months ended March 31
		2016			2015
Key Performance Data
Tonnes of ore milled		373,635			448,589
Produced
Gold equivalent (ounces)		36,158			61,073
Gold (ounces)		32,835			54,365
Silver (million ounces)		0.92			1.93
Sold
Gold equivalent (ounces)		43,622			61,651
Gold (ounces)		38,781			55,037
Silver (million ounces)		1.35			1.90
Average realized prices
Gold ($/ounce)1	$	1,156		$	1,186
Silver ($/ounce)1	$	4.24		$	4.20
Total cash costs (per gold ounce)2
Gold equivalent basis	$	944		$	699
By-product basis	$	920		$	639
All-in sustaining costs(per gold ounce)2	$	1,555		$	1,044
Financial Data (in thousands of US dollars except per share amounts)
Revenues	$	50,544		$	73,310
Earnings (loss) from mine operations		(5,795	)		11,470
Net income (loss)		(13,172	)		3,584
Adjusted net income (loss)2		(7,777	)		1,139
Basic net income (loss) per share		(0.08	)		0.02
Diluted net income (loss per share)		(0.08	)		0.02
Adjusted net income (loss) per share2		(0.05	)		0.01
Operating cash flows before working capital changes		(8,461	)		18,777
Operating cash flows before working capital changes per share		(0.05	)		0.12
Weighted average shares outstanding (basic) (000’s)		164,511			161,783
Weighted average shares outstanding (diluted) (000’s)		164,511			161,873

		March 31, 2016			December 31, 2015
Assets
Mining interests	$	794,601		$	790,118
Total assets	$	892,204		$	924,968
Liabilities
Long-term liabilities	$	209,734		$	162,427
Total liabilities	$	254,467		$	276,092
Equity	$	637,737		$	648,876

1.	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”).
2.	See “NON-GAAP measurements “

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

Q1 2016 HIGHLIGHTS

•	The Company has filed procedural and substantive responses to the legal claim against its Advance Pricing Agreement (“APA”) with the Mexican tax authorities (“SAT”), received in February 2016. The legal claim initiated does not identify any different basis for paying taxes, nor have any tax reassessments been received from the SAT. The Company continues to pay taxes in a manner consistent with the APA on the basis that the applicable facts and laws have not changed.
•	On March 31, 2016, the 6.5% Convertible Debentures assumed on the acquisition of Brigus Gold Corp. (“Brigus”) were repaid for a total of $48.1 million. To finance this repayment, $50.0 million was drawn on the revolving line of credit.
•	Total production of 36,158 gold equivalent ounces in Q1 2016 compared to 61,073 gold equivalent ounces in the same period of 2015. Gold production was 32,835 ounces in Q1 2016 compared to 54,365 ounces in Q1 2015, and silver production was 0.92 million ounces from San Dimas in Q1 2016 compared to 1.93 million ounces in Q1 2015.
•	At San Dimas, after unacceptable safety performance in 2015, new ground support standards were implemented, in line with the Ontario Mining Regulations. This high priority safety initiative resulted in the deferral of certain high grade stopes and impacted the mining sequence during the quarter. The implementation phase is now complete, and the mine is now operating at nameplate mill capacity of 2,500 tonnes per day (“TPD”) and expects to continue at this rate for the remainder of 2016. The 2016 operating plan does not require the completion of the mill expansion to 3,000 TPD and as a result, the project has been deferred, saving $5 million in capital expenditures in 2016.
•	At Black Fox, production was affected by the limited availability of high grade ore from the upper, remnant areas of the underground mine, leading to the majority of the mill feed being sourced from the low grade stockpile. Underground activity focused on development to provide access to high-quality ore from the Deep Central zone later in 2016. Development reached the 640 metre level, the first level of the Deep Central zone.
•	A loss from mine operations of $5.8 million was incurred for Q1 2016 compared to earnings of $11.5 million in Q1 2015. Lower gold and silver production at San Dimas as well as increased costs related to additional ground support within the mine were the main drivers for the change in mine operation performance.
•	The Company incurred total cash costs per gold equivalent ounce of $944 for Q1 2016 compared to $699 for Q1 2015. All-in sustaining costs were $1,555 per gold ounce for Q1 2016 compared to $1,044 for Q1 2015. The increase in unit costs was largely due to lower production at both mines and implementation of enhanced ground support measures at San Dimas during Q1 2016.
•	The Company recognized a net loss of $13.2 million in Q1 2016 compared to net income of $3.6 million in Q1 2015 due to the lower earnings from mine operations. Adjusted net loss was $7.8 million ($0.05 per share) for Q1 2016, compared to adjusted net income of $1.1 million ($0.01 per share) for the same period in 2015.

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

•	The Company generated negative operating cash flow before working capital changes during the first quarter of $8.5 million ($0.05 per share), which included $15.8 million in cash payments for income taxes in Mexico for the annual payment of mining royalty taxes, a final payment for filing its 2015 tax return and 2016 tax instalments.
•	In February 2015, the Company issued $75.0 million in 5.75% convertible unsecured subordinated debentures (5.75% Convertible Debentures) maturing on February 28, 2020. This debenture is recorded at fair value and is marked to market on a quarterly basis – an $8.2 million gain was recorded in Q1 2015 compared to a small loss in Q1 2016. Transaction costs incurred on the issuance of $3.6 million were also expensed in Q1 2015.
•	Given the production under performance at San Dimas resulting from the implementation of enhanced safety measures, Primero updated its 2016 guidance in a news release issued on April 18, 2016. Primero’s revised 2016 production guidance is between 230,000 and 250,000 gold equivalent ounces compared to the original estimate of 260,000 to 280,000 gold equivalent ounces. The Company has also updated its cost guidance to reflect year to date performance and a modified mine plan at San Dimas for the remainder of 2016. Total cash cost guidance was revised to $650 to $700 per gold equivalent ounce and all-in sustaining costs to $975 to $1,025 per ounce.

REVIEW OF CONSOLIDATED FINANCIAL INFORMATION

Earnings (loss) from mine operations comprises:

		Three months ended March 31
(in thousands of U.S. dollars)		2016			2015
Gold revenue	$	44,823		$	65,295
Silver revenue		5,721			8,015
Operating expenses		(40,282	)		(42,767	)
Depreciation and depletion		(16,057	)		(19,073	)
Earnings (loss) from mine operations	$	(5,795	)	$	11,470

4

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

The table below sets out variances in the key drivers of earnings from mine operations for the three months ended March 31, 2016 compared with the three months ended March 31, 2015:

		Three months ended
(in thousands of U.S. dollars)		March 31
Earnings from mine operations in 2015	$	11,470
Differences:
Revenue
Lower realized gold price		(1,186	)
Lower ounces of gold sold		(19,286	)
Higher realized silver price		26
Lower ounces of silver sold		(2,320	)
Lower operating expenses		2,485
Lower depreciation and depletion		3,016
Loss from mine operations as reported in 2016	$	(5,795	)

•	Gold revenue decreased in Q1 2016 compared to Q1 2015 due mainly to reduced gold and silver production at San Dimas. San Dimas gold sales of 24,300 ounces were 37% below the first quarter of 2015, driven by lower gold production as Canadian standards for ground support were implemented in the mine. This was the major driver in the lower earnings from mine operations in the first quarter of 2016 compared to the first quarter of 2015.
•	The average price realized for gold was $1,156 per ounce, slightly below the $1,186 per ounce realized in the first quarter of 2015. Silver prices realized during Q1 2016 were in-line with the prices realized in Q1 2015, as in both periods all silver was sold to Silver Wheaton Caymans under the terms of the silver purchase agreement.
•	Operating expenses were $40.3 million in Q1 2016; $2.5 million lower than Q1 2015 mainly because of lower costs at Black Fox as the majority of mill feed during Q1 2016 was sourced from the low grade, lower cost stockpile and positive impacts from the U.S. dollar exchange on Canadian dollar denominated costs. At San Dimas, cost savings achieved from lower consumption costs associated with the lower mill feed were offset by additional costs from ground support. Labour costs remained relatively fixed at San Dimas despite the lower production levels.
•	Depreciation and depletion was $16.1 million in Q1 2016, compared to $19.1 million in Q1 2015, a decrease of $3.0 million due to lower sales.

A summary income statement follows:

5

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

		Three months ended March 31
(in thousands of U.S. dollars)		2016			2015
Earnings (loss) from mine operations	$	(5,795	)	$	11,470
Exploration expenses		(334	)		(121	)
General and administrative expenses		(5,532	)		(8,013	)
Transaction costs and other expenses		(386	)		(3,906	)
Finance expense		(3,259	)		(2,870	)
Mark-to-market gain (loss) on convertible debentures		(375	)		8,205
Other income (expense)		(650	)		3,301
Income tax (expense) recovery		3,159			(4,482	)
Net income (loss)	$	(13,172	)	$	3,584

•

General and administrative expenses were $5.5 million in Q1 2016, $2.5 million lower than in Q1 2015. The breakdown of general and administrative expenses is in the table below. Share-based compensation expense was lower in Q1 2016 due to a one time additional grant of Performance Share Units to certain executives which were fully expensed in Q1 2015. Salaries and wages decreased due to a reduction in number of corporate employees. Other general expenses, which include rent and office costs, decreased following the closure of the offices in Vancouver and Mexico City in Q1 2015.

•	Transaction costs in Q1 2015 relate to the costs incurred on the issuance of the 5.75% Convertible Debenture.
•	Finance expense increased by $0.4 million from Q1 2015, primarily due to a full quarter of interest recognized in Q1 2016 relating to the 5.75% Convertible Debentures. These debentures were issued February 9, 2015.
•	The 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 2016, a loss of $0.4 million was recognized compared to a gain of $8.2 million in Q1 2015.
•	In other income (expense) the Company recorded a foreign exchange loss of $0.7 million in Q1 2016 compared to a gain of $2.4 million in Q1 2015. The foreign exchange loss in 2016 was mainly due to unrealized foreign exchange losses on the translation of the Canadian dollar denominated net liabilities, as the Canadian dollar strengthened during the Q1 2016 period relative to the U.S. dollar (its functional currency). In Q1 2015 the Canadian dollar weakened relative to the U.S. dollar.

6

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

•	The Company’s income tax expense (recovery) is detailed as follows:

		Three months ended March 31
(in thousands of U.S. dollars)		2016			2015
Current tax (recovery) expense
Mining royalty at San Dimas	$	-		$	1,364
Other current tax		665			4,670
	$	665		$	6,034
Deferred tax expense (recovery)
Withholding tax on intercompany interest	$	852		$	978
San Dimas change in tax shelter		(3,665	)		(1,223	)
Mining royalty at San Dimas		(160	)		(375	)
Amortization of flow through share premium		(541	)		(816	)
Other deferred tax		(310	)		(116	)
	$	(3,824	)	$	(1,552	)
Total	$	(3,159	)	$	4,482

San Dimas expenses current taxes based on the taxable earnings of the period. During Q1 2016 San Dimas did not generate any taxable earnings and therefore was not subject to current royalty taxes or current income taxes.

The tax recovery from the San Dimas tax shelter was higher in 2016 because San Dimas had an operating loss in the current period which created a tax loss.

San Dimas income taxes are based on its Mexican peso financial statements, which includes foreign exchange and other income items (permanent differences) different than the U.S. dollar reporting financial statements. In addition, foreign exchange losses are recognized in deferred income tax expense when the Mexican peso denominated deferred income tax balance is translated to its U.S. dollar reporting currency. In Q1 2016 this increased deferred tax expense by $1.7 million (Q1 2015-$2.2 million). The reduction in San Dimas tax shelters reflects the impact of this foreign exchange offset by inflation on the San Dimas’ deferred income tax balances and the impact of higher book to tax depreciation. The volatility of the exchange rate between the Mexican peso and the U.S. dollar can result in significant adjustments to deferred tax expense.

7

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

REVIEW OF OPERATIONS

San Dimas Mine

		Three months ended March 31
		2016			2015
Key Performance Data
Tonnes of ore mined		151,193			263,747
Tonnes of ore milled		149,182			257,670
Tonnes of ore milled per day		1,639			2,863
Average mill head grade (grams/tonne)
Gold		4.13			5.01
Silver		198			250
Average gold recovery rate (% )
Gold		99%			96%
Silver		97%			93%
Produced
Gold equivalent (ounces)		22,901			46,569
Gold (ounces)		19,578			39,861
Silver (million ounces)		0.92			1.93
Sold
Gold equivalent (ounces)		29,140			45,256
Gold (ounces)		24,300			38,642
Silver at fixed price (million ounces)		1.35			1.90
Average realized price (per ounce)
Gold	$	1,178		$	1,207
Silver1	$	4.24		$	4.20
Total cash costs (per gold ounce)2
Gold equivalent basis	$	998		$	582
By product basis	$	968		$	479
All in sustaining costs (per ounce)3	$	1,362		$	659
Revenue ($000's)	$	34,333		$	54,640
Earnings (loss) from mine operations ($000's)	$	(6,390	)	$	14,615

1.	Average realized silver prices reflect the impact of the silver purchase agreement with Silver Wheaton Caymans (see “Other liquidity considerations”).
2.	See “NON- GAAP measurements “
3.	For the purposes of calculating all-in sustaining costs at individual mine sites, the Company does not include corporate general and administrative expenses. See “NON- GAAP measurements “.

8

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

The San Dimas mine produced 19,578 ounces of gold and 0.92 million ounces of silver in the first quarter of 2016, 51% and 52% lower for gold and silver respectively, in comparison to the first quarter of 2015.

The decrease in production was mainly due to additional ground support activities, with new policies implemented to improve overall mine safety. During the quarter, the mine retrofitted all active areas with standards for ground support in line with Ontario Mining Regulations. Previously, this practice was deemed unnecessary due to the generally excellent rock conditions, but given unacceptable safety results in 2015, a transformational shift in the mine’s safety culture was required, including the implementation of new practices respecting ground support, among other safety initiatives.

The ground support measures taken resulted in a change in mining sequence leading to a deferral of some high grade stopes as access to certain areas was restricted during this implementation phase. The implementation of the updated ground support procedures is now complete, and the mine and mill are expected to operate at or above nameplate capacity of 2,500 TPD for the remainder of 2016.

The reduction in tonnes mined drove a significant decrease in mill throughput during the quarter, which averaged 1,639 TPD, a decrease of 43% compared to the first quarter of 2015. In addition to the reduction in throughput, head grades were lower in the first quarter of 2016 than in the first quarter of 2015 as a result of the areas being mined due to additional ground support activity which reduced access to higher grade areas.

During the quarter, both gold and silver sales exceeded production as inventory on hand at the end of 2015 was drawn down. All silver sold was delivered to Silver Wheaton Caymans under the silver purchase agreement. The threshold limit under the silver purchase agreement for the 2015 contract year (August 6 of a year to August 5 of the following year) is 6.0 million ounces of silver. As of March 31, 2016 the Company has delivered 4.2 million ounces of silver towards this annual threshold, after which the Company will begin selling 50% of the silver produced at San Dimas at spot market prices.

Total cash costs on a gold-equivalent and by-product basis in the first quarter of 2016 were $998 and $968 per ounce, respectively, compared with $582 and $479 per ounce, respectively, in the first quarter of 2015. Unit costs were higher during the quarter mainly due to lower gold and silver production and higher costs related to the ground support improvements.

Overall costs were lower during the first quarter of 2016 compared to the first quarter of 2015 as the reduced mining and milling activity led to reductions in contractor costs, and consumption of explosives, reagents, and grinding media. An additional $2.5 million of costs were incurred in the quarter relating to the implementation of additional ground support within the mine.

Despite the cost savings on certain variable items noted above, as fixed and other costs are now spread over lower gold production and silver credits were significantly lower than in the first quarter of 2015, unit costs were higher than in the comparative period.

All-in sustaining costs per gold ounce were $1,362 per ounce in the first quarter of 2016, compared to $659 per ounce in the first quarter of 2015. The increase was driven by the lower gold production during the quarter. Capital spending at San Dimas was similar in the first quarter of 2016 to the first quarter of 2015. Capital spending during the quarter focused on underground development and drifting, with $1.2 million spent on new underground mining equipment used for ground support.

9

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

A revised operating plan was developed at San Dimas for the remainder of 2016 given the production shortfall during the first quarter and the impact of the change in the mining sequence. This operating plan does not require the completion of the mill expansion to 3,000 TPD in 2016, as the mine is now targeting higher grade stopes at slightly lower tonnage. The Company has therefore deferred the completion of the San Dimas mill expansion, saving $5 million in capital expenditures in 2016. The San Dimas mill is expected to continue to be capable of operating in excess of its nameplate 2,500 TPD capacity, as shown by the average throughput achieved in the fourth quarter of 2015 of 2,726 TPD.

The Company updated its 2016 guidance for San Dimas due to the impact on production from the implementation of Canadian standards for ground support at the mine. San Dimas production guidance has been revised to between 160,000 and 170,000 gold equivalent ounces from the original estimate of 190,000 to 200,000 gold equivalent ounces. Accordingly, cash cost guidance has also been revised to $600 to $650 per gold equivalent ounce with all-in sustaining costs expected to be between $775 and $825 per ounce.

10

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

Black Fox

		Three months ended March 31
		2016			2015
Key Performance Data
Open pit mining
Tonnes of ore mined		-			275,865
Strip ratio		-			5.87
Average gold grade (grams/tonne)		-			1.99
Underground mining
Tonnes of ore mined		38,501			11,525
Average gold grade (grams/tonne)		4.99			4.84
Drawdown of stockpile (tonnes)		185,952			-
Open pit and underground
Tonnes of ore milled		224,453			190,919
Tonnes of ore milled per day		2,467			2,121
Average mill head grade (grams/tonne)		1.94			2.49
Average gold recovery rate (% )		95%			95%
Produced
Gold (ounces)		13,257			14,504
Sold
Gold at spot price (ounces)		13,146			14,537
Gold at fixed price (ounces)		1,336			1,858
Average realized gold price1
Gold price (per ounce)	$	1,118		$	1,137
Gold at spot price (per ounce)	$	1,179		$	1,254
Gold at fixed price (per ounce)	$	521		$	518
Total cash costs (per gold ounce)2	$	851		$	1,077
All-in sustaining costs (per ounce)3	$	1,404		$	1,552
Revenue ($000's)	$	16,211		$	18,670
Earnings (loss) from mine operations (000's)	$	658			($3,145	)

1.	Average realized gold prices reflect the impact of the gold purchase agreement with Sandstorm (see “Other liquidity considerations”).
2.	See “NON- GAAP measurements “
3.	For the purposes of calculating all-in sustaining costs at individual mine sites, the Company does not include corporate general and administrative expenses. See “NON- GAAP measurements “.

The Black Fox mine produced 13,257 ounces of gold in the first quarter of 2016 compared to 14,504 ounces in the first quarter of 2015. While first quarter production was affected by the limited availability of high-grade ore from the upper, remnant areas of the underground mine, underground development activity progressed during the quarter in order to provide access to high quality ore from the Deep Central zone later in 2016. During the quarter, 185,952 tonnes from the low grade stockpile were processed through the mill. This stockpile drawdown allowed milling at a higher rate than in the first quarter of 2015, with 2,467 TPD being milled, 16% above the 2,121 TPD milled in the first quarter of 2015.

11

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

Daily production rates are expected to increase through the remainder of 2016 as the underground contribution from the Deep Central zone ramps-up. Drifting on the 640 metre level intersected initial ore in the Deep Central zone in April, which was one month ahead of schedule. The Company is now working to complete two crosscuts through the zone and has started development of the 660 metre level ahead of initial stoping activities. Underground mine production is expected to increase to approximately 850 TPD in the fourth quarter of 2016 as the mine is expected to start producing from the Deep Central zone.

Total cash cost per gold ounce were lower in the first quarter of 2016 at $851 compared to $1,077 per ounce in the first quarter of 2015 due to lower operating costs. Underground production was higher in Q1 2016 incurring higher operating costs, however, because the majority of production came from the drawdown of the lower cost stockpile inventory, average operating costs were less. In addition, the weaker Canadian dollar relative to the U.S. dollar impacted costs positively at Black Fox during the quarter. These cost savings more than offset the decreased gold production during the quarter, driving down cash costs.

All-in sustaining costs were lower period over period due to the cost savings noted above, partially offset by increased underground development costs incurred in the first quarter of 2016, in order to access high grade ore from the Deep Central zone later in the year.

The Company continued with an extensive drill program at the Froome zone, approximately 800 metres west of the Black Fox open-pit, inclusive of in-fill drilling to better understand the ore body and step-out drilling to assess whether the ore body continues at depth and laterally. Mineralization continues to demonstrate consistency over long intervals with significant gold mineralization. The Company expects to be in a position to make a production decision on the Froome zone in Q2 2016.

12

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

OUTLOOK FOR 2016 OPERATING RESULTS

The implementation of ground support at the San Dimas mine impacted production rates in the first quarter. This led Primero to reduce 2016 annual production guidance by 30,000 gold equivalent ounces to between 230,000 and 250,000 gold equivalent ounces.

AISC guidance is now expected to be between $975 and $1,025 per gold ounce and total cash costs are expected to be in the range of $650 to $700 per gold equivalent ounce. Revised cash cost guidance at Black Fox reflects the inclusion of the historical costs related to the inventory draw down which were not included in the original guidance.

Capital expenditures at San Dimas were also reduced by $5 million, mainly associated with the deferral of the mill expansion project.

The Company's 2016 production outlook is summarized in the following table, with a comparison to 2015 actual results:

		San Dimas			Black Fox			Estimated 2016			Actual 2015
Attributable gold equivalent production1 (gold equivalent ounces)		160,000-170,000			70,000-80,000			230,000-250,000			259,474
Gold production1 (ounces)		120,000-130,000			70,000-80,000			190,000-210,000			221,060
Silver production1 (million ounces)		7.5-8.5			N/A			7.5-8.5			8.30
Total cash costs2 (per gold equivalent ounce)	$	600-$650		$	750-$800		$	650-$700		$	637
All-in sustaining costs2 (per gold ounce)	$	775-$825		$	1,000-$1,050		$	975-$1,025		$	972
Capital expenditures (millions of U.S. dollars)	$	51.4		$	23.6		$	77.3		$	93.3

1.

San Dimas’ previously disclosed production outlook was 190,000 to 200,000 gold equivalent ounces, 145,000 to 155,000 gold ounces and 8.5 to 9.5 million silver ounces. Black Fox production remains unchanged. The Company’s previously disclosed consolidated production outlook was 260,000 to 280,000 gold equivalent ounces, 215,000 to 235,000 gold ounces and 8.5 to 9.5 million silver ounces.

2.

San Dimas’ previous outlook for cash cost per equivalent ounce was $525 to $575 and all-in sustaining cost per ounce of $660 to $710. Black Fox previous outlook for cash cost per equivalent ounce was $680 to $730 and all-in sustaining cost per ounce of $940 to $990. The Company’s previous outlook for consolidated cash cost per equivalent ounce was $570 to $620 and all- in sustaining cost per ounce of $850 to $900.

Material assumptions used to forecast total cash costs for 2016 were based on the Company’s actual results to March 31, 2016 and include an estimated average gold price of $1,078 per ounce (based on actual gold prices received in Q1 2016 and $1,050 per ounce for the remainder of the year), silver market price of $14 per ounce, and foreign exchange rates of $1.35 Canadian dollars and $16 Mexican pesos to the U.S. dollar for the remainder of 2016. Silver sold under the silver purchase agreement is expected to average $4.26 for the 2016 year.

The Company’s 2016 outlook for revenues and operating expenses are directly correlated to its production outlook and cash cost outlook with the assumption that production will match sales quantities.

13

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

ANALYSIS OF CASH FLOWS FOR THE THREE MONTHS
ENDED MARCH 31, 2016 AND 2015

Sources and uses of cash

		Three months ended March 31
(in thousands of U.S. dollars)		2016			2015
Cash flow:
Provided by (used in) operating activities before working capital changes	$	(8,461	)	$	18,777
Changes in non-cash working capital		5,478			(5,501	)
Provided by (used in) operating activities		(2,983	)		13,276
Used in investing activities		(17,732	)		(19,859	)
Provided by (used in) financing activities and other		(2,819	)		36,813
Increase (decrease) in cash	$	(23,534	)	$	30,230

Operating activities

Primero’s cash flows from operating activities before working capital changes were lower in the first quarter of 2016 when compared to the first quarter of 2015 due to lower gold and silver production and higher taxes paid in Mexico. The reduced production levels, mainly stemming from the ground support measures taken at San Dimas, resulted in negative cash flows associated with operations for the quarter.

Changes in non-cash working capital were a cash inflow of $5.5 million in the first quarter of 2016 compared with an outflow of $5.5 million in the first quarter of 2015. During the quarter, gold and silver inventory was reduced as more product was sold than produced during the quarter at San Dimas, drawing down on opening inventories. Additionally, the low grade stockpile was drawn down at Black Fox to feed the mill to augment the ore obtained from underground mining during the quarter. During the first quarter of 2015, open pit operations drove an increase in the ore stockpile at Black Fox.

14

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

Investing activities

Cash used in investing activities are mostly capital expenditures as shown in the table below.

					Three months ended
					March 31			Estimated
(in millions of U.S. dollars)		2016			2015			2016
Capital Expenditures
San Dimas Underground Development	$	2.3		$	4.3		$	24.5
San Dimas Sustaining Capital		2.9			0.6			13.2
San Dimas Projects		0.4			1.0			4.6
San Dimas Sub Total	$	5.6		$	5.9		$	42.3
Black Fox Underground Development		5.4			4.1			9.3
Black Fox Sustaining Capital		1.0			1.2			5.4
Black Fox Complex Sub Total	$	6.4		$	5.3		$	14.7
Cerro del Gallo Development		0.2			0.5			1.9
Total Capital Expenditures	$	12.2		$	11.7		$	58.9
Capitalized Exploration Expenditures
San Dimas Diamond Drilling	$	1.4		$	1.3		$	4.3
San Dimas Drifting		1.1			0.7			4.4
San Dimas Regional Diamond Drilling		-			0.4			0.4
San Dimas Sub Total	$	2.5		$	2.4		$	9.1
Black Fox Diamond Drilling		1.0			1.7			4.4
Grey Fox & Regional Exploration		1.7			2.9			4.5
Black Fox Complex Sub Total	$	2.7		$	4.6		$	8.9
Cerro del Gallo Geology Mapping		0.3			0.3			0.4
Total Capitalized Exploration Expenditures	$	5.5		$	7.3		$	18.4
TOTAL CAPITAL EXPENDITURES	$	17.7		$	19.0		$	77.3

San Dimas capital spending during the quarter was focused on underground development, drifting, and diamond drilling. Given the increased focus on ground support activities, less underground development work was performed than in the first quarter of 2015. A total of $1.2 million was spent on underground equipment, mainly on two bolters to speed up mine support work.

For the full 2016 year, estimated San Dimas capital expenditures are expected to be $51.4 million. This is lower than the original guidance of $56.4 million due to the deferral of the mill expansion project.

Black Fox underground development costs were above the previous year, as there was a focus on developing down to the Deep Central zone as quickly as possible, to open up high quality ore for later in 2016. Regional exploration work focused mainly on drilling at the Froome zone.

15

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

Financing activities

During the quarter, $50 million was drawn on the revolving line of credit to finance the March 31, 2016 repayment of the $48 million due on the 6.5% Convertible Debentures assumed with the acquisition of Brigus. Interest paid on the 5.75% Convertible Debentures, the 6.5% Convertible Debentures and payments relating to capital leases led to a net cash outflow from financing activities of $4.9 million during the quarter.

In the first quarter of 2015, the Company received $75 million in gross proceeds from the issuance of the 5.75% convertible debentures, and repaid $40 million of debt, associated with the outstanding balance of its revolving line of credit.

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.

16

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

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 below.

		As at			As at
(in thousands of U.S. dollars except ratios and per share amounts)		March 31, 2016			December 31, 2015
Cash and cash equivalents	$	22,067		$	45,601
Other current assets		61,656			72,970
Non-current assets		808,481			806,397
Total assets	$	892,204		$	924,968
Current liabilities (excluding short-term debt)	$	40,418		$	61,248
Non-current liabilities (excluding long-term debt)		98,445			99,700
Short-term debt		4,315			52,417
Long-term debt		111,289			62,727
Total liabilities	$	254,467		$	276,092
Total shareholders' equity	$	637,737		$	648,876
Total equity	$	637,737		$	648,876
Total common shares outstanding		164,648,090			164,185,807
Total options outstanding1		6,424,167			4,246,198
Key financial ratios
Current ratio2		1.87			1.04
Total liabilities-to-equity3		0.40			0.43
Debt-to-total capitalization4		0.15			0.15

1.	As at the date of this MD&A, the Company had 164,694,238 common shares outstanding, the total number of options outstanding was 6,294,960 of which 3,277,186 are exercisable.
2.	Current ratio is calculated as (cash and cash equivalents + other current asset) ÷ (current liabilities + short-term debt).
3.	Total liabilities-to-equity is calculated as total liabilities ÷ total equity.
4.	Debt-to-total capitalization is calculated as (short-term debt + long-term debt) ÷ (short-term debt + long-term debt + total equity).

The Company’s net assets (equity) as at March 31, 2016 were $638 million compared to $649 million as at December 31, 2015, a reduction due to the loss in Q1 2016. The current ratio has increased from December 31, 2015 as a result of the repayment of the 6.5% Convertible Debenture, and the annual payment of mining royalty tax and the final 2015 tax payment in Mexico, both of which occurred in March and reduced current liabilities.

The Company’s objective is to manage financial risk by maintaining a conservative balance sheet. Liquidity at March 31, 2016 included cash and cash equivalents of $22.1 million and an undrawn amount on its revolving line of credit of $25 million.

The revolving line of credit matures on May 23, 2017. While the Company expects to renew this facility in advance of the maturity date, if full repayment is required it is expected the cash generated by operations should be sufficient to repay the facility in full at maturity. The Company closely monitors its cash position and operational performance, and will take steps to reduce non-critical capital and discretionary spending if deemed necessary.

17

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

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, reduce capital spending, acquire or dispose of assets or adjust the amount of cash held. The Company continues to evaluate a number of financing alternatives to strengthen the balance sheet.

Capital structure

Debt

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements, other than the availability of the undrawn portion of the revolving line of credit of $25 million at March 31, 2016. The line of credit is secured by substantially all of the Company’s assets and contains customary covenants and default clauses typical to this type of facility.

Pursuant to the terms of the revolving 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 $584 million plus 50% of positive net income earned after March 31, 2014.
•	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, as defined in the credit agreement) 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, as defined in the credit agreement) 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, 2016, the Company was compliant with these covenants.

Cash requirements

The following table summarizes the contractual maturities of the Company’s financial liabilities and operating and capital commitments:

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

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, if required.

Other liquidity considerations

APA Ruling

On October 4, 2012, the Company’s Mexican subsidiary, Primero Empresa Minera, S.A. de C.V. (“PEM”) received a ruling (the “APA Ruling”) from the Mexican tax authority (“SAT”) 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). The Company’s APA Ruling covered the five years ending December 31, 2014.

In February 2016, PEM received a legal claim from the Mexican tax authority seeking to nullify the APA. The legal claim initiated does not identify any different basis for paying taxes, nor have any tax reassessments been received from the SAT. The Company intends to vigorously defend the validity of its APA. The Company has filed procedural and substantive responses to the claim. The procedural response is a challenge against the admission of the SAT’s claim. The substantive response contains the Company’s response to the SAT’s claim. If the SAT is successful in retroactively nullifying the APA, the SAT may seek to audit and reassess PEM in respect of its sales of silver in connection with the Silver Purchase Agreement for 2010 through 2014. While PEM would have rights of appeal in connection with any reassessments the amount of additional taxes that the SAT could reassess PEM for the tax years 2010 through 2014 on the silver sold in connection with the Silver Purchase Agreement would likely have a material adverse effect on the Company’s results of operations, financial condition and cash flows.

The Company believes that it is entitled to rely on the APA which is legally binding in respect of the Company’s 2010 through 2014 taxation years. The Company obtained the ruling transparently and in good faith. Primero believes the APA should not be the subject of challenge by a government administration installed upon the change of government after the APA was duly issued. Primero has and will continue to invest millions of dollars in the local Mexican economy and intends to continue legal action aimed at ensuring that the Mexican tax authority respects the rule of law.

In connection with the Company’s procedural challenge to the SAT’s legal claim, the Mexican Federal Court recently issued an order mandating that no decision may be issued in connection with the substantive claim until the procedural challenge against the admission of SAT’s claim is decided on. This procedural order is being appealed by the SAT, and the Company does not expect the order to delay the resolution of the substance of the case.

The Company has also taken other measures to defend its interests, including submitting a complaint to Procuraduría de la Defensa del Contribuyente (PRODECON or the Mexican tax Ombudsman) regarding violations of Primero’s rights by the SAT. 

For 2015 and the first quarter of 2016, the Company continued to record its revenue from the sale of silver for purposes of Mexican tax accounting in a manner consistent with the APA on the basis that the applicable facts and laws have not changed. The Company’s legal and financial advisors continue to believe that the Company has filed its tax returns compliant with applicable Mexican law. To the extent the SAT determines that the appropriate price of silver sales under the Silver Purchase Agreement is significantly different from the realized price and while PEM would have rights of appeal in connection with any reassessments, it is likely to have a material adverse effect on the Company’s business, financial condition and results of operations.

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

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 in return for an upfront payment comprising cash and shares of Silver Wheaton Corp. (“Silver Wheaton”) 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 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 Pike River property at the same contract gold price. The Company was required to assume the gold purchase agreement when it acquired Brigus in March 2014.

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

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”);
•	$14 million on announcement of a decision by Primero to construct a carbon-in-leach mill for Phase II (“the Second 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;
•	$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 Company has decided to defer a construction decision for Cerro del Gallo due to current economic conditions. 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 would be expected to produce approximately 95,000 gold equivalent ounces on an annual basis.

Dividend Report and Policy

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

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA

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

•	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 2015, Q3 2014, Q2 2014 included $12.8 million, $5.9 million and $14.8 million, respectively, of silver sales at spot prices.
•	In Q2 2015, silver sales were lower because of the loss of PEM’s export license and higher in Q3 2015 because of the subsequent reinstatement.
•	In Q4 2015 and Q4 2014, impairments of $104 million and $110 million, respectively, were recorded against mining interests at Black Fox and Cerro del Gallo.
•	In Q3 2014, an impairment of $99 million for goodwill was recorded related to the value on the acquisition of Brigus.
•	General and administrative expenses include share-based compensation which historically has fluctuated based on the share price of the Company. In Q2 2014 the share price appreciated resulting in higher share-based compensation.
•	In Q1 2015 the Company incurred $3.6 million of transaction costs on the issuance of the 5.75% Convertible Debentures. These debentures are marked-to-market each quarter.
•	Finance expense varies depending on the amount of debt held by the Company.

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

•	Other income (expenses) largely includes foreign exchange gains or losses from the revaluation of certain local denominated assets and liabilities at San Dimas and Black Fox to U.S. dollars.
•	Income tax expense is impacted by the effects of foreign exchange fluctuations on its Mexico peso denominated non-cash deferred income taxes, which were significant in certain periods, such as Q4 2014 and Q3 2015.

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.

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

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.

(1)

In 2016 includes additional costs incurred due to the abnormal production level resulting from the ground support initiatives and a significant draw down of finished goods inventory at San Dimas.

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.

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

		Three months ended March 31
		2016			2015
Silver ounces produced (millions) (A)		0.92			1.93
Average realized silver price (B)	$	4.24		$	4.20
Average realized gold price (C )	$	1,178		$	1,207
Gold equivalent ounces of silver (A) x (B) / (C )		3,323			6,708

By-product silver credits are calculated as silver ounces produced multiplied by the average realized silver price ( (A) X (B) ) in the table above.

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 byproduct 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.

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. 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.

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 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, 2016 and 2015:

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 (loss).

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.

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

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. Adjusted net income (loss) excludes the following from net earnings:

•	Impairment charges (reversals) related to mining interests and other non-current assets;
•	Foreign exchange impacts on its Mexican peso denominated deferred tax liabilities;
•	Unrealized gains (losses) on non-hedge derivative instruments;
•	Mark-to-market gains (losses) on convertible debenture;
•	Gains/losses and other one-time costs relating to acquisitions/dispositions;
•	Costs related to restructuring/severance arrangements, care and maintenance and demobilization costs, and other expenses not related to current operations;
•	Costs incurred to bring production to its normal capacity.

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 consolidated financial statements. All adjustments are shown net of tax.

		Three months ended March 31
(in thousands of U.S. dollars except for per share amounts)		2016			2015
Net income (loss)	$	(13,172	)	$	3,584
Impairment charges		-			534
Adjustment to normalize inventory costs at San Dimas		1,590			-
Underground support initiative at San Dimas		1,749			-
Impact of foreign exchange on deferred taxes		1,686			2,211
(Gain) loss on derivative liability		(5	)		(1,329	)
Mark-to-market (gain) loss on convertible debenture		375			(8,205	)
Office closure costs and severance payments		-			705
Transaction costs		-			3,639
Adjusted net income (loss)	$	(7,777	)	$	1,139
Weighted average shares outstanding (000's)		164,511			161,783
Adjusted net income (loss) per share	$	(0.05	)	$	0.01

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

RELATED PARTY TRANSACTIONS

As at March 31, 2016, 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, 2016 that have not been disclosed in the Company’s condensed consolidated interim financial statements.

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, 2018, with early adoption permitted.

Primero will be required to adopt IFRS 9, “Financial Instruments” on January 1, 2018. 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. It also provides a new impairment model and includes a substantially reformed approach to hedge accounting.

In January 2016, the IASB issued IFRS 16, Leases (IFRS 16). IFRS 16 is effective for periods beginning on or after January 1, 2019, with early adoption permitted. IFRS 16 eliminates the current dual model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance lease accounting for lessees.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGEMENTS

The Company’s management makes judgements in its process of applying the Company’s accounting policies in the preparation of its unaudited condensed interim consolidated financial statements. In addition, the preparation of the financial data requires that the Company’s management make assumptions and estimates of the impacts from uncertain future events on the carrying amounts of the Company’s assets and liabilities at the end of the reporting period, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates as the estimation process is inherently uncertain. Estimates are reviewed on an ongoing basis based on historical experience and other factors that are considered to be relevant under the circumstances. Revisions to estimates and the resulting impacts on the carrying amounts of the Company’s assets and liabilities are accounted for prospectively. The critical accounting policies, estimates and judgements applied in the preparation of the Company’s unaudited condensed interim consolidated financial statements for the three months ended March 31, 2016 are consistent with those applied and disclosed in notes 2 and 3 to the Company’s audited consolidated financial statements for the year ended December 31, 2015.

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

FINANCIAL INSTRUMENTS

The Company’s financial instruments at March 31, 2016 consist of cash and cash equivalents, trade and other receivables, restricted cash, an equity investment in Fortune Bay Corp. (“Fortune Bay”), trade and other payables, financial lease liabilities, the convertible debentures and the revolving credit factility.

At March 31, 2016, 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 fair value of the financial lease liability approximate their carrying value as the interest rate implicit in the leases approximate current market rates.

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.

The levels in the fair value hierarchy that the Company’s financial assets and liabilities that are measured and recognized at a fair value on a recurring basis are as follows:

		March 31, 2016						December 31, 2015
		Level 1			Level 2			Level 1			Level 2
Investment in Fortune Bay(1)	$	610		$	-		$	525		$	-
5.75% convertible debentures(2)		61,875			-			61,500			-
Derivative liability on 6.5% convertible debentures		-			-			-			5

1.	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.
2.	Fair value is calculated based on the market price of the convertible debenture on the TSX Exchange as at the date of the statement of financial position.

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, 2016 or December 31, 2015.

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

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, 2015, which can be found under the Company’s profile at www.sedar.com.

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 CONTROL 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.

There has been no change in internal controls over financial reporting during the three months ended March 31, 2016 that has materially affected, or is likely to materially affect, the Company’s internal control over financial reporting.

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

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:

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

Such forward-looking information is necessarily based upon a number of factors and assumptions that, while considered reasonable by the Company as of the date of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The assumptions made by the Company in preparing the forward looking information contained in this MD&A, 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 MD&A; assumptions relating to the existence of companies that may wish to dispose of producing or near-term producing precious metals assets; 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 there are no disruptions in the supply of power from the Las Truchas power generation facility, whether as a result of damage to the facility or unusually limited amounts of precipitation; that development and expansion at San Dimas and Black Fox proceeds on a basis consistent with current expectations and the Company does not change its development and exploration plans; that the Cerro del Gallo and Grey Fox projects will be developed in accordance with the Company’s plans; that the exchange rate between the Canadian dollar, Mexican peso and the United States dollar remains consistent with current levels; 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; that the Company’s current estimates of mineral reserves, mineral resources, exploration potential, mineral grades and mineral recovery are accurate; that the Company identifies higher grade veins in sufficient quantities of minable ore in the Central Block and Sinaloa Graben; that the geology and vein structures in the Sinaloa Graben are as expected; that the Company completes the proposed tunnels and access routes; that the ratio of gold to silver price is maintained in accordance with the Company’s expectations; that there are no material variations in the current tax and regulatory environment; that the APA is not nullified and that the Company pays taxes on a similar basis for future periods; that Mexican tax laws relative to the APA ruling remain unchanged; that the Company will continue to pay taxes in Mexico based on realized prices of silver; that the Company will receive required permits and access to surface rights; that the Company can access financing, appropriate equipment and sufficient labour and that the political environment within Mexico will continue to support the development of environmentally safe mining projects.

No assurance can be given as to whether 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 and other metals; uncertainty of mineral reserves, mineral resources, exploration potential, mineral grades and mineral recovery estimates; uncertainty of future production, delays in completion of the mill expansion at San Dimas, exploration and development plans; insufficient capital to complete development and exploration plans; risks associated with developing the Cerro del Gallo and Grey Fox projects; currency fluctuations; financing of additional capital requirements; cost of exploration and development programs; inability to complete proposed tunnels and access routes or other development; mining risks, including unexpected formations and cave-ins, which delay operations or prevent extraction of material; risks associated with foreign operations; governmental and environmental regulation; tax law changes; the ability of the Company to continue to pay taxes based on the realized price of silver; the volatility of the Company's stock price; landowner dissatisfaction and disputes; delays in permitting; damage to equipment; labour disruptions; interruptions. 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.

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

Investors are advised to carefully review and consider the risk factors identified in this MD&A under the heading “Risk and uncertainties”, and in the Company’s Annual Information Form for the year ended December 31, 2015 as filed on SEDAR, 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 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.

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PRIMERO MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 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. 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

“Ernest Mast”

_____________________
Ernest Mast
President, CEO and Director

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FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE

I, Ernest Mast, President and 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, 2016.

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 N/A

5.3 N/A

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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, 2016 and ended on March 31, 2016 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: May 4, 2016

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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, 2016.

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 N/A

5.3 N/A

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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, 2016 and ended on March 31, 2016 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: May 4, 2016

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PRIMERO REPORTS FIRST QUARTER 2016 FINANCIAL RESULTS
SAN DIMAS PRODUCTION RATES RETURNED TO PLAN IN APRIL (Please note that all dollar amounts in this news release are expressed in U.S. dollars unless otherwise indicated.)

Toronto, Ontario, May 4, 2016 – Primero Mining Corp. (“Primero” or the “Company”) (TSX:P) (NYSE: PPP) today reported financial results for the first quarter ended March 31, 2016.

Highlights:

	•	Creating and Sustaining a Safety-First Culture: As reported on April 18, 2016, Primero’s principal focus during the first quarter of 2016 was to create and sustain a safety-first culture at its operations. As a result of the significant efforts made by employees and management at all levels, Primero is pleased to report that the San Dimas mine achieved no reportable safety incidents during the first quarter while also returning the mine to production levels of 2,500 TPD.
	•	Earnings Impacted by Temporary Production Delay: First quarter earnings were directly impacted by changes to the mining sequence at San Dimas to include the implementation of enhanced ground support standards. The Company realized a net loss of $13.2 million ($0.08 per share) and adjusted net loss1 of $7.8 million ($0.05 per share) in Q1 2016. The Company generated negative operating cash flow before working capital changes during the first quarter of $8.5 million ($0.05 per share) , which included $15.8 million in cash tax payments.

1

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•

Convertible Debentures Repaid in Cash: Primero repaid in full the $48 million due on its 6.5% convertible debentures on their maturity date of March 31, 2016. As at March 31, 2016 the Company had total liquidity position of $47.1 million, including $22.1 million in cash.

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	•	Mexican Tax Update: The Company has filed procedural and substantive responses to the legal claim against its Advance Pricing Agreement (“APA”) with the Mexican tax authorities (“SAT”) , received in February 2016. The legal claim initiated does not identify any different basis for paying taxes, nor have any tax reassessments been received from the SAT. The Company continues to pay taxes in a manner consistent with the APA on the basis that the applicable facts and laws have not changed.
	•	Mine Production On-Track to Achieve Revised Guidance: The Company is pleased to report that in April both the San Dimas and Black Fox mines achieved their targeted production rates in line with the updated 2016 production guidance of between 230,000 and 250,000 gold equivalent ounces2 at all-in sustaining costs3 of between $975 and $1,025 per gold ounce.
	•	Mineral Resources Increased Beyond Depletion: Primero announced on March 16, 2016 that it had successfully increased total Mineral Resources across its assets in 2015, with total Measured and Indicated Mineral Resources as of December 31, 2015 of 3.1 million ounces of gold plus 88.3 million ounces of silver in addition to total Inferred Mineral Resources of 1.2 million ounces of gold and 77.1 million ounces of silver.
	•	Froome Zone Demonstrates Consistency of Mineralization: Recent drilling continues to delineate the highly prospective Froome Zone, located approximately 800 metres west of the Black Fox mine. Mineralization continues to demonstrate consistency over long intervals with significant gold mineralization, and Primero expects to be in a position to make a production decision on the Froome Zone in Q2 2016 Highlights from recent drilling include 6.1 g/t gold over 43.7 metres true width (16PR-G103) , 6.2 g/t gold over 37.9 metres true width (16PR-G109) , 5.0 g/t gold over 43.7 metres true width (16PR-G102) .

“During our first quarter, we successfully implemented improved ground control procedures across our vast San Dimas mine,” stated Ernest Mast, President and Chief Executive Officer. “I feel a renewed sense of optimism as we enter the second quarter. On all-levels, we are pulling together as a stronger Primero team to achieve our corporate objectives, and through April we have made significant advances towards attaining these goals. The San Dimas mine successfully achieved average production rates in-line with the mill’s 2,500 tonnes per day nameplate capacity. Black Fox made significant advances in developing the Deep Central zone ahead of schedule, began mining the recently identified 520 metre level in the Central Zone and completed infill drilling at the Froome deposit. I have utmost confidence in the Primero team to achieve its objectives, and I see us at an inflection point for the Company - now aligned for improved production and strong returns through the remainder of 2016 and beyond.”

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Creating and Sustaining a Safety-First Culture

Primero’s principal focus during the first quarter of 2016 was to create and sustain a safety-first culture at its operations. As a result of the significant efforts made by employees and management at all levels, Primero is pleased to report that the San Dimas mine achieved no reportable safety incidents during the first quarter.

As a testament to Primero’s continued commitment to sustainable economic, social and environmental operations in all areas of corporate life, including business ethics, employee health and safety, involvement with the community, and preservation of the environment, in March 2016, for the fifth consecutive year, Primero was awarded the “Empresa Socialmente Responsable” or “Socially Responsible Company” designation. This prestigious award, from El Centro Mexicano para la Filantropía (“CEMEFI”) , the Mexican Centre for Philanthropy, is the result of a thorough independent assessment of Primero’s corporate and social responsibility framework.

Production and Earnings Impacted by Temporary Production Delay

As reported on April 18, 2016, Primero’s production in Q1 2016 was impacted by the deliberate focus on increased worker safety and the introduction of enhanced ground support standards at the San Dimas mine, leading to combined production of 36,158 gold equivalent ounces during the first quarter of 2016, 41% lower than in Q1 2015. All-in sustaining costs (“AISC”) averaged $1,555 per gold ounce during the quarter and total cash costs⁴ averaged $944 per gold equivalent ounce.

Given the reduced production levels, Primero generated $50.5 million of revenue in Q1 2016, 31% lower than in Q1 2015 as a result selling 29% less gold equivalent ounces at a 3% lower average realized gold price. In Q1 2016, the Company sold 38,781 ounces of gold at an average realized price of $1,156 per ounce and 1.35 million ounces of silver at an average realized price of $4.24 per ounce. Revenue in Q1 2015 totaled $73.3 million from selling 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.

Silver produced at San Dimas is subject to a silver purchase agreement⁵ and as a result 1.35 million ounces of silver were sold to Silver Wheaton (Caymans) Ltd. (“Silver Wheaton”) at a fixed price of $4.24 per ounce during the quarter. As of March 31, 2016 the Company has delivered 4.2 million ounces of silver under the San Dimas silver purchase agreement’s 6.0 million ounce annual contract year threshold (which runs from August 6^th to the following August 5^th) , after which the Company will begin selling 50% of the silver produced at San Dimas at spot market prices until August 5, 2016 when the annual threshold is reset. Silver ounces sold in Q1 2016 were higher than silver produced due to timing of shipments. Gold produced at Black Fox is subject to a gold purchase agreement⁶ and as a result 1,336 ounces were sold to Sandstorm Gold Ltd. (“Sandstorm”) at a fixed price of $521 per ounce in Q1 2016.

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The Company incurred a net loss of $13.2 million ($0.08 per share) in Q1 2016 compared with net income of $3.6 million ($0.02 per share) for the first quarter of 2015. Adjusted loss for Q1 2016 was $7.8 million ($0.05 per share) compared with adjusted income of $1.1 million ($0.01 per share) in Q1 2015. Adjusted loss in 2016 primarily excludes the impact of foreign exchange rate changes on deferred tax balances and an adjustment to remove the normalization of inventory costs at San Dimas, net of taxes.

Primero generated negative operating cash flow before working capital changes during in Q1 2016 of $8.5 million ($0.05 per share) , compared to positive operating cash flow of $18.8 million ($0.12 per share) in Q1 2015. Q1 2016 operating cash flow was affected by $15.8 million in cash payments for income taxes in Mexico, the annual payment of mining royalty taxes, a final payment for filing its 2015 tax return, and 2016 initial tax instalments.

Liquidity Expected to Improve By End of 2016

The Company’s total liquidity position at March 31, 2016 totalled $47.1 million, comprised of $22.1 million in cash and $25.0 million available under its line of credit. During the quarter, a number of events significantly affected total liquidity which included the drawdown of $50.0 million from the line of credit to repay the 6.5% convertible debentures that matured on March 31, 2016 and $15.8 million in cash payments for income taxes in Mexico, the annual payment of mining royalty taxes, a final payment for filing its 2015 tax return, and 2016 initial tax instalments.

Primero expects to improve its liquidity through positive cash flows from operations and will explore other financing opportunities along with initiating the renewal of its revolving credit facility, which matures in May 2017.

Mexican Tax Update

The Company has filed procedural and substantive responses to the legal claim against its Advance Pricing Agreement (“APA”) with the Mexican tax authorities (“SAT”). The procedural response is a challenge against the admission of the SAT’s claim. The substantive response contains the Company’s response to the SAT’s claim. The APA was obtained to confirm that the Company should calculate taxes on silver produced at the San Dimas mine based on the price realized by the Company. The legal claim initiated does not identify any different basis for paying taxes, nor have any tax reassessments been received from the SAT. The Company continues to pay taxes in a manner consistent with the APA on the basis that the applicable facts and laws have not changed.

The Company believes that it is entitled to rely on the APA which is legally binding in respect of the Company’s 2010 through 2014 taxation years. The Company obtained the ruling transparently and in good faith. Primero believes the APA should not be the subject of challenge by a government administration installed upon the change of government after the APA was duly issued. Primero has and will continue to invest millions of dollars in the local Mexican economy and intends to continue legal action aimed at ensuring that the Mexican tax authority respects the rule of law.

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In connection with the Company’s procedural challenge to the SAT’s legal claim, the Mexican Federal Court recently issued an order mandating that no decision may be issued in connection with the substantive claim until the procedural challenge against the admission of SAT’s claim is decided on. This procedural order is being appealed by the SAT, and the Company does not expect the order to delay the resolution of the substance of the case.

The Company has also taken other measures to defend its interests, including submitting a complaint to Procuraduría de la Defensa del Contribuyente (PRODECON or the Mexican tax Ombudsman) regarding violations of Primero’s rights by the SAT.

Primero also recently obtained a ruling nullifying the Mexican customs authority’s acts that suspended the Company from the import and export registries in 2015.  While this order is subject to appeal, Primero believes this order recognizes Primero’s compliance with Mexican laws in these matters.

The Company will continue to vigorously defend the validity of the APA and the correctness of its tax filing position.

Production On-Track to Achieve Revised Guidance

The Company is pleased to report that in April both the San Dimas and Black Fox mines achieved their targeted production rates in-line with the revised 2016 production guidance of between 230,000 and 250,000 gold equivalent ounces at all-in sustaining costs between $975 and $1,025 per gold ounce.

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Table 1: 2016 Production Guidance

					2016 Revised Guidance						Actual
		San Dimas			Black Fox			Consolidated			2015
Attributable gold equivalent production (gold equivalent ounces)		160,000- 170,000			70,000-80,000			230,000-250,000			259,474
Gold Production (ounces)		120,000- 130,000			70,000-80,000			190,000-210,000			221,060
Silver Production (million ounces)		7.5-8.5			N/A			7.5-8.5			8.30
Total cash costs (per gold equivalent ounce)		$600-$650			$750-$800			$650-$700			$637
AISC (per gold ounce)		$775-$825			$1,000-$1,050			$975-$1,025			$972
Capital Expenditures ($ millions)		$51.4			$23.6			$77.3			$93.3

Material assumptions used to forecast total cash costs for 2016 include: an average gold price of $1,078 per ounce (bases on actual gold prices received for Q1 2016 and $1,050 per ounce for the remainder of the year) ; an average silver price of $5.00 per ounce (calculated using the silver purchase agreement contract price of $4.26 per ounce and assuming excess silver beyond contract requirements is sold at an average silver price of $14 per ounce) ; and foreign exchange rates of 1.35 Canadian dollars and 16 Mexican pesos to the US dollar.

San Dimas Production Rates Returned to Plan

As previously disclosed, first quarter production at San Dimas was impacted by changes to the mining sequence to include the implementation of enhanced ground support procedures, and the condition that all employees will never work under unsupported ground. The implementation process was a monumental task given the significant size of the San Dimas mine, and resulted in weaker than expected performance in Q1 2016. However, as of April, the Company has been successful in re-establishing mining operations in-line with the mill’s current 2,500 tonnes per day (“TPD”) nameplate capacity, with ground support implementations completed.

Primero also completed a revised 2016 operating plan for the San Dimas mine which includes the recent changes to the mining sequence and the addition of rock bolting and screening. Based on an assessment of the new cycle times and the productivity of mining crews, Primero has determined not to advance the 3,000 TPD mill expansion in 2016, resulting in a $5 million reduction from this year’s planned capital expenditures. However, construction will continue to complete the expanded crushing circuit which will help alleviate backlogs experienced during the rainy season.

Based on the updated plan, the mine will focus on achieving increased head grades through the removal of low-grade, incremental cut-and-fill tonnes and the reduction of mining dilution. Following a detailed evaluation of the mine’s performance under the new production regime, Primero will assess the specific benefits of increasing milling capacity in 2017.

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Black Fox Positioned for Breakthrough with Transition to Deep Central Zone

At Black Fox, first quarter production was affected by the limited availability and deferrals of high-grade ore from the upper, remnant areas of the underground mine. Significant development progress was made to access the mine’s Deep Central zone, an area of high quality ore that has no remnant mining. Drifting on the 640 metre level intersected initial ore in the Deep Central zone in April, approximately one month ahead of schedule, and Primero is now working to complete two crosscuts. Development has also started on the 660 metre level ahead of initial stoping activities.

Daily underground production rates are expected to increase through the remainder of 2016, principally from a ramp-up in contribution of ore from the Deep Central zone but also from a large mineralized zone accessed in April on the 520 metre level in the mine’s Central zone. Newly discovered areas on the 540 and 560 metre levels were successfully delineated and will be included in the 2016 mine plan. As a result, Black Fox’s production is expected to increase to approximately 850 TPD in the fourth quarter of 2016.

Primero’s efforts also remain focused on growing the mine’s Mineral Resources, with the mine currently working to complete a 200 metre extension of the 520 metre level exploration drift which will allow for better drill angles to test mineralization located to the west of the Deep Central zone and to depths of 1,000 metres and below. Initial drill results from this program are expected in Q3 2016.

The Company has also commenced an internal economic evaluation of the Black Fox Froome zone. As reported on March 16, 2016, Primero has outlined an initial Mineral Resource estimate for this highly prospective zone located approximately 800 metres west of the Black Fox mine. The initial estimate only included drilling up to February 17, 2016 and contained an Indicated Mineral Resources of 43,000 ounces of gold and an Inferred Mineral Resources of 129,000 ounces of gold, with all currently defined resources at less than 250 metres depth. Primero continues to expand the Froome zone by drilling for mineralized extensions both laterally and at depth. The Company completed approximately 21,000 metres of drilling in the first quarter, drilling the ore body to 12.5 metre centres giving the Company a block model suitable to develop a mine plan for the internal economic evaluation. A production decision is expected during Q2 2016.

An additional 23,000 metres of drilling is planned at the Froome zone in 2016 focused on expanding the ore body and drilling other targets on the company’s concessions. Highlights from recent drilling include 6.1 g/t gold over 43.7 metres true width (16PR-G103) , 6.2 g/t gold over 37.9 metres true width (16PR-G109) , 5.0 g/t gold over 43.7 metres true width (16PR-G102) , 6.5 g/t gold over 24.8 metres true width (16PR-G083) , 6.5 g/t gold over 21.8 metres true width (16PR-G073) , 6.6 g/t gold over 21.1 metres true width (16PR-G104) , and 6.1 g/t gold over 20.4 metres true width (16PR-G115) .

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Highlighted exploration drilling results from the Froome zone are included in Table 2 with locations identified in Figure 1.

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Table 2: Froome Zone – Recent Highlighted Drilling Results

Hole	From	To	Core	True Width	Gold Grade
	(m)	(m)	Length	(m)	(g/t)
			(m)
16PR-G073	139.0	169.1	30.1	21.8	6.5
including	144.0	152.0	8.0	5.8	10.6
16PR-G083	155.4	191.5	36.1	24.8	6.5
including	168.0	176.0	8.0	5.5	11.6
and	194.3	237.0	42.7	29.3	4.1
16PR-G084	147.8	171.6	23.8	17.2	7.5
including	152.0	158.0	6.0	4.3	11.9
16PR-G091	161.2	180.5	19.3	13.4	8.7
and	183.3	190.0	6.7	4.7	10.4
and	197.0	221.2	24.2	16.8	4.8
16PR-G092	150.4	168.0	17.7	13.3	8.1
and	172.0	196.0	24.0	18.1	5.4
16PR-G102	210.2	272.8	62.5	43.7	5.0
16PR-G103	182.5	241.3	58.8	43.7	6.1
including	205.9	212.3	6.4	4.8	13.9
and	247.5	255.7	8.2	6.1	5.5
16PR-G104	168.2	199.0	30.8	21.1	6.6
and	201.1	236.8	35.7	24.4	4.7
16PR-G108	191.4	220.0	28.7	20.8	6.3
and	224.0	239.7	15.7	11.4	5.7
and	243.8	257.0	13.3	9.6	5.3
16PR-G109	180.2	231.0	50.8	37.9	6.2
including	201.0	211.3	10.3	7.7	10.6
16PR-G115	184.4	213.0	28.6	20.4	6.1
including	193.0	198.0	5.0	3.6	14.8
16PR-G117	161.0	211.0	50.0	34.5	4.7
16PR-G119	147.0	175.2	28.2	20.9	4.6
and	178.7	198.0	19.3	14.3	6.0
16PR-G1221	125.9	177.7	51.9	36.1	4.1

1. 6 assays pending.

Black Fox Complex drilling was conducted by Norex Drilling supervised by Primero's exploration team. Mr. David Laudrum, P.Geo., Senior Resource Manager for Primero has reviewed the technical exploration information in this news release as the QP for the Company for the purposes of NI 43-101. All samples are 1/2 core and analyses reported herein were performed by the independent laboratories Polymet Labs which is ISO 9001:2000 certified, Accurassay Laboratories, which is ISO/IEC 17025 certified, ALS Laboratories, which is ISO 9001/IEC17025 certified, SGS Canada Laboratories, which is ISO9001/IEC17025 certified, Swastika Laboratories, which is ISO 17025 certified. Primero's quality control program includes systematic insertion of blanks, standard reference material and duplicates to ensure laboratory accuracy.

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Conference Call and Webcast Details

The Company's senior management will host a conference call today, Wednesday, May 4, 2016 at 9:00 am ET to discuss first quarter 2016 financial results.

Participants may join the call by dialing North America toll free 1-888-789-9572 or 416-340-2217 for calls outside Canada and the U.S., and entering the participant passcode 3894515.

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/7416.

A recorded playback of the first quarter 2016 results call will be available until August 1, 2016 by dialing 1-800-408-3053 or 905-694-9451 and entering the call back passcode 2246322.

This release should be read in conjunction with Primero’s first quarter 2016 financial statements and MD&A report on the Company's website, www.primeromining.com, in the “Financial Reports” section under “Investors”, or on the SEDAR website at www.sedar.com, or on the Edgar website  www.sec.gov.

(1) 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 first quarter 2016 MD&A for a reconciliation of adjusted net income (loss) to reported net income (loss) .

(2) “Gold equivalent ounces” include silver ounces produced, 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 2016 was 278:1 based on the average realized prices of $1,178 per ounce of gold and $4.24 per ounce of silver.

(3) 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. For the purposes of calculating all-in sustaining costs at individual mine sites, the Company does not include corporate general and administrative expenses. Corporate general and administrative expenses are included in the computation of all-in sustaining costs per consolidated gold ounce. Refer to the Company’s first quarter 2016 MD&A for a reconciliation of all-in sustaining costs per gold ounce.

(4) 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, and are non-GAAP measures. 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 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 2016 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) .

11

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(5) According to the silver purchase agreement between the Company and Silver Wheaton Corp., until August 6, 2014 Primero delivered 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 $4.12 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.

(6) Black Fox was subject to a gold purchase agreement which continues and was assumed by the Company upon its acquisition of the mine. According to the gold purchase agreement, Sandstorm is entitled to 8% of production at the Black Fox mine and 6.3% at the Pike River property.

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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:

Evan Young
Manager, Investor Relations
Tel: (416) 814-2694
[email protected]

CAUTIONARY STATEMENT 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”, “if approved”, “forecasts”, “intends”, “anticipates”, “believes”, “in order to” or variations of such words and phrases or statements that certain actions, events or results “are anticipated”, “may”, “could”, “would”, “might” or “will require”, “will allow”, “will enhance” or “will include” or similar statements or the negative connotation thereof. Forward-looking information is also identifiable in statements of currently occurring matters which will continue in future, such as “is updating”, “is working” or “is also assessing” or other statements that may be stated in the present tense and are not historical facts or words with future implication such as “opportunity”, “promising”.

Forward-looking statements in this news release include, but are not limited to, the implementation of enhanced ground support standards at the San Dimas mine; the level and timing of gold equivalent production at San Dimas and Black Fox; the Company’s annual production guidance; the realization of silver sales at spot prices; the amount of gold equivalent ounces produced in 2016, the cash costs and all-in sustaining costs for 2016; the capital expenditures in 2016; the Company’s intentions and expectations respecting the expansion of San Dimas’ production to 3,000 TPD; the Black Fox underground development and ability to open new mining areas in 2016; the ability to develop the Black Fox Froome zone; the amount of ore from the Company’s operations in 2016; the probability of encountering high grade mineralization in, and the exploration potential of, the Company’s exploration targets and plans; the ability to generate significant free cash flow while repaying debt and also internally funding future growth; optimization and expansion initiatives; statements regarding the APA and the Company's ability to defend its validity, the Company's ability to pay taxes in Mexico on realized silver prices; the Company’s ability to defend itself from appeals from the SAT in respect to orders identified as being in the Company’s favour; 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; that there are no significant disruptions affecting operations; that development and expansion at San Dimas proceeds 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; the amount of silver that the Company will sell at spot prices in 2016; the success in the exploration and  development of areas in the Deep Central Zone and the adjacent Froome zone at Black Fox; that the Company identifies higher grade veins in sufficient quantities of minable ore in the Central Block and in Sinaloa Graben; that there are no material variations in the current tax and regulatory environment or the basis for the calculation of the Company’s income tax (including as a result of the current challenge to the advance pricing agreement); 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 and Canada will continue to support the development of environmentally safe mining projects.

13

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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; the Company may not be able to expand production at San Dimas as anticipated or generate significant free cash flow; the Company may not be successful in returning the Black Fox mine to higher 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.

14

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Figure 1: Black Fox – Froome Zone Drill Hole Locations Map

SUMMARIZED FINANCIAL AND OPERATING RESULTS AND FINANCIAL STATEMENTS FOLLOW

15

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SUMMARIZED FINANCIAL AND OPERATING RESULTS

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

SUMMARIZED FINANCIAL DATA

		Three months ended March 31
		2016			2015
Key Performance Data
Tonnes of ore milled		373,635			448,589
Produced
Gold equivalent (ounces)		36,158			61,073
Gold (ounces)		32,835			54,365
Silver (million ounces)		0.92			1.93
Sold
Gold equivalent (ounces)		43,622			61,651
Gold (ounces)		38,781			55,037
Silver (million ounces)		1.35			1.90
Average realized prices
Gold ($/ounce)1	$	1,156		$	1,186
Silver($/ounce)1	$	4.24		$	4.20
Total cash costs (per gold ounce)2
Gold equivalent basis	$	944		$	699
By-product basis	$	920		$	639
All-in sustaining costs (per gold ounce)2	$	1,555		$	1,044
Financial Data (in thousands of US dollars except per share amounts)
Revenues	$	50,544		$	73,310
Earnings (loss) from mine operations		(5,795	)		11,470
Net income (loss)		(13,172	)		3,584
Adjusted net income (loss)2		(7,777	)		1,139
Basic net income (loss) per share		(0.08	)		0.02
Diluted net income (loss per share)		(0.08	)		0.02
Adjusted net income (loss) per share2		(0.05	)		0.01
Operating cash flows before working capital changes		(8,461	)		18,777
Operating cash flows before working capital changes per share		(0.05	)		0.12
Weighted average shares outstanding (basic)(000’s)		164,511			161,783
Weighted average shares outstanding(diluted) (000’s)		164,511			161,873

		March 31, 2016			December 31, 2015
Assets
Mining interests	$	794,601		$	790,118
Total assets	$	892,204		$	924,968
Liabilities
Long-term liabilities	$	209,734		$	162,427
Total liabilities	$	254,467		$	276,092
Equity	$	637,737		$	648,876

1.	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 2016 MD&A) .
2.	See “NON-GAAP measurements” in the Company’s first quarter 2016 MD&A

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SUMMARIZED OPERATING DATA

San Dimas

		Three months ended
		31-Mar-16			31-Dec-15			30-Sep-15			30-Jun-15			31-Mar-15
Key Performance Data
Tonnes of ore mined		151,193			228,539			232,014			263,868			263,747
Tonnes of ore milled		149,182			250,796			228,392			256,235			257,670
Tonnes of ore milled per day		1,639			2,726			2,483			2,816			2,863
Average mill head grade (grams/tonne)
Gold		4.13			5.23			4.75			4.60			5.01
Silver		198			300			272			275			250
Average gold recovery rate (%)
Gold		99%			98%			96%			96%			96%
Silver		97%			96%			95%			95%			93%
Produced
Gold equivalent (ounces)		22,901			50,370			49,566			44,128			46,569
Gold (ounces)		19,578			41,371			33,623			36,500			39,861
Silver (million ounces)		0.92			2.32			1.90			2.15			1.93
Sold
Gold equivalent (ounces)		29,140			48,466			53,475			38,747			45,256
Gold (ounces)		24,300			40,320			34,471			34,273			38,642
Silver at fixed price (million ounces)		1.35			2.10			2.01			1.26			1.90
Silver at spot (million ounces)		-			-			0.85			-			-
Average realized price (per ounce)
Gold	$	1,178		$	1,092		$	1,115		$	1,187		$	1,207
Silver1	$	4.24		$	4.24		$	7.42		$	4.20		$	4.20
Total cash costs (per gold ounce)3
Gold equivalent basis	$	998		$	535		$	507		$	608		$	582
By product basis	$	968		$	414		$	219		$	487		$	479
All in sustaining costs (per ounce)2	$	1,362		$	753		$	454		$	822		$	659
Revenue ($000's)	$	34,333		$	52,960		$	59,660		$	45,979		$	54,640
Earnings (loss) from mine operations ($000's)		($6,390	)	$	11,408		$	18,179		$	9,515		$	14,615

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 2016 MD&A) .
2.	For the purposes of calculating all-in sustaining costs at individual mine sites, the Company does not include corporate general and administrative expenses. See “NON- GAAP measurements“ in the Company’s first quarter 2016 MD&A.
3.	See “NON- GAAP measurements“ in the Company’s first quarter 2016 MD&A

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Black Fox

		Three months ended
		31-Mar-16			31-Dec-15			30-Sep-15			30-Jun-15			31-Mar-15
Key Performance Data
Open pit mining
Tonnes of ore mined		-			-			201,484			372,319			275,865
Strip ratio		-			-			4.40			4.02			5.87
Average gold grade (grams/tonne)		-			-			2.01			2.02			1.99
Underground mining
Tonnes of ore mined		38,501			57,041			36,005			36,265			11,525
Average gold grade (grams/tonne)		4.99			5.80			3.99			4.00			4.84
Tonnes increase (decrease) in stockpile		(185,952	)		(172,188	)		3,979			186,409			96,471
Tonnes processed
Tonnes of ore milled		224,453			229,229			233,510			222,175			190,919
Tonnes of ore milled per day		2,467			2,492			2,538			2,441			2,121
Average mill head grade (grams/tonne)		1.94			2.51			2.66			2.65			2.49
Average gold recovery rate (%)		95%			96%			96%			97%			95%
Produced
Gold (ounces)		13,257			17,785			19,054			18,362			14,504
Sold
Gold at spot price (ounces)		13,146			16,434			16,302			17,324			14,537
Gold at fixed price (ounces)		1,336			1,015			1,640			1,378			1,858
Average realized gold price (per ounce)1	$	1,118		$	1,059		$	1,089		$	1,143		$	1,137
Total cash costs (per gold ounce)2	$	851		$	834		$	780		$	762		$	1,077
All-in sustaining costs (per ounce)3	$	1,404		$	1,104		$	1,000		$	1,071		$	1,552
Revenue ($000's)	$	16,211		$	18,444		$	19,559		$	21,392		$	18,670
Earnings (loss) from mine operations (000's)	$	658			($1,075	)		($354	)	$	1,563			($3,145	)

1.	1. Average realized gold prices reflect the impact of the gold purchase agreement with Sandstorm (see “Other liquidity considerations” in the Company’s first quarter 2016 MD&A) .
2.	See “NON- GAAP measurements” in the Company’s first quarter 2016 MD&A
3.	For the purposes of calculating all-in sustaining costs at individual mine sites, the Company does not include corporate general and administrative expenses. See “NON- GAAP measurements” in the Company’s first quarter 2016 MD&A

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PRIMERO MINING CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND
COMPREHENSIVE (LOSS) INCOME
THREE MONTHS ENDED MARCH 31, 2016 AND 2015
(IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

		2016			2015
Revenue	$	50,544		$	73,310
Operating expenses		(40,282	)		(42,767	)
Depreciation and depletion		(16,057	)		(19,073	)
Total cost of sales		(56,339	)		(61,840	)
Earnings (loss) from mine operations		(5,795	)		11,470
Exploration expenses		(334	)		(121	)
General and administrative expenses		(5,532	)		(8,013	)
Earnings (loss) from operations		(11,661	)		3,336
Transaction costs and other expenses		(386	)		(3,906	)
Finance expense		(3,259	)		(2,870	)
Mark-to-market gain (loss) on convertible debentures		(375	)		8,205
Other income (expense)		(650	)		3,301
Earnings (loss) before income taxes		(16,331	)		8,066
Income tax (expense) recovery		3,159			(4,482	)
Net income (loss) for the year		($13,172	)	$	3,584
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		-			(514	)
Unrealized gain on investment in Fortune Bay, net of tax of $nil		85			-
Reclassification of unrealized loss on investment in Fortune Bay to impairment, net of tax of $nil		-			456
Total comprehensive net income (loss) for the year		($13,087	)	$	3,526
Basic net income (loss) per share		($0.08	)	$	0.02
Diluted net income (loss) per share		($0.08	)	$	0.02
Weighted average number of common shares outstanding
Basic		164,510,929			161,783,009
Diluted		164,510,929			161,872,810

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PRIMERO MINING CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS OF UNITED STATES DOLLARS)
(UNAUDITED)

		March 31			December 31
		2016			2015
Assets
Current assets
Cash and cash equivalents	$	22,067		$	45,601
Trade and other receivables		1,071			1,793
Taxes receivable		26,857			30,689
Prepaid expenses		8,768			8,524
Inventories		24,960			31,964
Total current assets		83,723			118,571
Non-current assets
Restricted cash		6,309			5,920
Mining interests		794,601			790,118
Deferred tax asset		4,254			3,781
Long-term stockpile		2,707			5,694
Other non-current assets		610			884
Total assets	$	892,204		$	924,968
Liabilities
Current liabilities
Trade and other payables	$	39,957		$	44,972
Income tax payable		-			12,870
Other taxes payable		461			3,406
Current portion of long-term debt		4,315			52,417
Total current liabilities		44,733			113,665
Non-current liabilities
Other taxes payable		14,082			13,354
Deferred tax liability		49,447			53,107
Decommissioning liability		29,825			28,294
Long-term debt		111,289			62,727
Other long-term liabilities		5,091			4,945
Total liabilities	$	254,467		$	276,092
Shareholders' equity
Share capital	$	869,525		$	867,375
Contributed surplus		54,782			54,984
Accumulated other comprehensive loss		(4,565	)		(4,650	)
Deficit		(282,005	)		(268,833	)
Total shareholders' equity	$	637,737		$	648,876
Total liabilities and shareholders' equity	$	892,204		$	924,968

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PRIMERO MINING CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2016 AND 2015
(IN THOUSANDS OF UNITED STATES DOLLARS)

		2016			2015
Operating activities
Earnings (loss) before income taxes		($16,331	)	$	8,066
Adjustments for:
Depreciation and depletion		16,057			19,073
Mining interest impairment charge		-			-
Goodwill impairment charge		-			-
Share-based compensation expense		1,857			2,627
Payments made under the Phantom Share Unit Plan		(279	)		(1,513	)
Mark-to-market loss (gain) on convertible debentures		375			(8,205	)
Write-off of assets		544			-
Write-down of inventory		505			-
Unrealized foreign exchange loss (gain)		1,355			(1,169	)
Taxes paid		(15,775	)		(5,847	)
Other		(5	)		(716	)
Other adjustments
Transaction costs (disclosed in financing activities)		-			3,639
Finance income (disclosed in investing activities)		(23	)		(48	)
Finance expense		3,259			2,870
Operating cash flow before working capital changes		(8,461	)		18,777
Changes in non-cash working capital		5,478			(5,501	)
Cash provided by (used in) operating activities		($2,983	)	$	13,276
Investing activities
Expenditures on mining interests		($17,755	)		($19,907	)
Equity investment in Santana Minerals		-		$	0
Acquisition of Brigus Gold Corp (net)		-		$	0
Interest received		23			48
Cash used in investing activities		($17,732	)		($19,859	)
Financing activities
Repayment of debt		($48,116	)		($40,000	)
Drawdown on revolving credit facility		50,000			-
Issuance of convertible debt		-			75,000
Transaction costs on issuance of convertible debt		-			(3,639	)
Payments on capital leases		(1,220	)		(1,867	)
Funds released from reclamation bond		-			8,544
Proceeds on exercise of options		-			826
Payments relating to issuance of flow-through shares		(4	)		-
Interest paid		(3,996	)		(2,971	)
Cash provided by (used in) financing activities		($3,336	)	$	35,893
Effect of foreign exchange rate changes on cash	$	517		$	920
Increase (decrease) in cash		(23,534	)		30,230
Cash, beginning of period		45,601			27,389
Cash, end of period	$	22,067		$	57,619

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