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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

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 consolidated financial
statements of the Company as at and for the year ended December 31, 2012.
Additional information on the Company, including its Annual Information Form for
the year ended December 31, 2012, which is expected to be filed by March 31,
2013, can be found under Primeros profile at www.sedar.com.

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

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

This MD&A has been prepared as of February 20, 2013.

2012HIGHLIGHTS

2012 was a very successful year for Primero. There were
significant improvements in the operating metrics at San Dimas and the Company
met its revised upward guidance. The Company received a favourable tax ruling
regarding the tax treatment of its silver revenue. In the fourth quarter, the
Company also announced that it had entered into a definitive agreement to
acquire the Cerro Del Gallo development project with the acquisition of Cerro
Resources NL (Cerro) which, upon closing in 2013, will diversify Primeros
asset base and marks an important step in becoming a mid-tier producer. These
events had a very positive impact on Primeros stock price, which increased 97%
in 2012, far out-performing the industry and general market indices. The
specific highlights for 2012 are:

- Produced 26,310 gold equivalent ounces1 in the fourth quarter and 111,132
  gold equivalent ounces in 2012, compared to 23,115 and 102,224 gold equivalent
  ounces, respectively, in 2011;
- Produced 23,143 ounces of gold in the fourth quarter and 87,900 ounces of
  gold in 2012, compared to 20,191 ounces and 79,564 ounces, respectively, in
  2011;
- Produced 1.32 million ounces of silver in the fourth quarter and 5.13
  million ounces in 2012, compared to 1.20 million ounces and 4.6 million
  ounces, respectively, in 2011. In total the Company sold 716,229 ounces of
  silver at spot prices in 2012, compared to 511,752 ounces in 2011.
- Lowered total cash costs per gold equivalent ounce2 to $677 for the fourth
  quarter and $636 for 2012 from $719 and $640, respectively, in 2011. On a
  by-product basis, total cash costs per gold ounce were $535 for the fourth
  quarter and $366 for 2012, compared to $580 and $384 per gold ounce for,
  respectively, 2011;
- Earned net income of $1.2 million ($0.01 per share) for the fourth quarter
  and $49.6 million ($0.54 per share) for 2012, compared to $31.2 million ($0.35
  per share) and $49.6 million ($0.56 per share), respectively, in 2011.
  Adjusted net income3 was $4.5 million ($0.05 per share) for the fourth quarter
  and $41.3 million ($0.45 per share) for 2012, compared to $4.7 million ($0.05
  per share) and $28.3 million ($0.32 per share), respectively, in 2011.

1

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

- Generated operating cash flows before working capital changes of $17.8
  million in the fourth quarter, and $88.8 million in 2012, compared to $14.6
  million and $77.6 million, respectively, in 2011;
- Received a ruling from the Mexican tax authorities in October 2012
  confirming that the Companys Mexican subsidiary appropriately records revenue
  and taxes from sales of silver under the silver purchase agreement at realized
  rather than spot prices;
- Entered into a definitive agreement to acquire Cerro in December 2012,
  which after spinning out various exploration assets, will result in the
  Company owning 69% of the feasibility stage Cerro Del Gallo project, a
  gold-silver deposit with approximately 1.0 million ounces of gold equivalent
  proven and probable reserves and 2.3 million ounces of gold equivalent
  measured and indicated resources (inclusive of reserves), located in the
  province of Guanajuato, Mexico;
- Repaid the remaining $30 million convertible note on its maturity date of
  August 6, 2012 by issuing 8,422,460 common shares to Goldcorp. On October 10,
  2012, Goldcorp sold these shares by way of a secondary offering.

|1 | Gold equivalent ounces includes silver ounces produced,
      and converted to a gold equivalent based on a ratio of the average
      commodity prices received for each period. The ratio for 2012 was based on
      realized prices of $1,662 per ounce of gold and $7.52 per ounce of
      silver.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|2 | Total cash costs per gold equivalent ounce and total cash
      costs per gold ounce on a by-product basis are non-GAAP measures. Total
      cash costs per gold equivalent ounce are defined as costs of production
      (including refining costs) divided by the total number of gold equivalent
      ounces produced. Total cash costs per gold ounce on a by-product basis are
      calculated by deducting the by-product silver credits from operating costs
      and dividing by the total number of gold ounces produced. The Company
      reports total cash costs on a production basis. In the gold mining
      industry, these are common performance measures but do not have any
      standardized meaning, 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
      Non-GAAP measure  Total cash costs per gold ounce below for a
      reconciliation of cash costs per gold ounce on both a by-product and gold
      equivalent basis to reported operating expenses (the most directly
      comparable GAAP measure).
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3 | Adjusted net income and adjusted net income per share are
      non-GAAP measures. Adjusted net income is net income adjusted for unusual
      items. 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. Accordingly,
      it is intended to provide additional information and should not be
      considered in isolation or as a substitute for measures of performance
      prepared in accordance with GAAP. Refer to Non-GAAP measure  Adjusted
      net incomebelow for a reconciliation of adjusted net income to
      reported net income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

2

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

OVERVIEW

Primero is a Canadian-based precious metals producer with
operations in Mexico. 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. Primero
currently has one producing property  the San Dimas mine, which it acquired on
August 6, 2010.

The Companys shares are listed on the Toronto Stock Exchange
(TSX) under the symbol P and on the New York Stock Exchange (NYSE) under
the symbol PPP. In addition, Primero has common share purchase warrants which
trade on the TSX under the symbol P.WT.

The Company is transitioning from a single-asset gold producer
to an intermediate gold producer. The Company believes that the San Dimas mine
provides a solid production base with short-term opportunities to optimize mine
capacity, increase mill throughput and expand production. Furthermore, cash flow
generated by the San Dimas mine provides funding for acquisition
opportunities.

RECENT CORPORATE DEVELOPMENTS

Agreement to acquire Cerro del
Gallo1

On December 13, 2012, the Company announced that it has entered
into a definitive agreement with Cerro whereby Primero will acquire all of the
issued and outstanding common shares of Cerro by way of a scheme of arrangement
(the "Arrangement") under the Australian Corporations Act 2001. Cerro is an
exploration and development company whose principal asset is 69% of the
feasibility stage Cerro Del Gallo project, a gold-silver deposit with
approximately 1.0 million ounces of gold equivalent proven and probable reserves
and 2.3 million ounces of gold equivalent measured and indicated resources
(inclusive of reserves), located in the province of Guanajuato, Mexico.

Cerro del Gallo is an attractive long-life project that will
diversify Primeros near-term production with an anticipated additional 95,000
gold equivalent ounces per year (expected to begin in mid-2015), a 58% increase
in currently estimated near-term production. The project will double Primeros
current reserves and triple its measured and indicated resources. Furthermore it
will leverage on Primero's regional expertise and solidify its presence in
Mexico, one of the world's most supportive mining districts, with further
consolidation opportunities.

Under the terms of the Arrangement, each Cerro shareholder will
receive 0.023 of a Primero common share (the "Exchange Ratio") for each Cerro
common share held (the "Share Consideration"). Additionally Cerro shareholders
will receive 80.01% of the common shares of a newly incorporated company
("Spinco"). Spinco will assume Cerro's interests in the Namiquipa, Espiritu
Santo, Mt Philp and

_______________________________________________1
The information on the Cerro del Gallo project in this and other sections of
this MD&A assumes Goldcorp Inc. converts its 30.8% position in Cerro del
Gallo to a Net Profit Interest and that resources include reserves. Cerro
Resources NL has filed a technical report under National Instrument 43-101 -
Standards of Disclosure for Mineral Projects (NI 43-101)
entitled Technical Report, First Stage Heap Leach Feasibility Study, Cerro del
Gallo Gold Silver Project, Guanajuato, Mexico (the Technical Report)
with an effective date of May 11, 2012. Mr. Gabriel Voicu, Vice President,
Geology and Exploration, who is a qualified person for the purposes of NI
43-101, hasreviewed the Technical Report on behalf of Primero. To the
best of Primeros knowledge, information and belief, there is no new material
scientific or technical information that would make the Technical Report
inaccurate or misleading. Primero plans to file a technical report on the Cerro
del Gallo project within 180 days of December 13, 2012 in accordance with the
requirements of NI 43-101.

3

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Kalman projects, shares in Syndicated Metals Limited and
approximately $4.0 million in cash. Primero will purchase a 19.99% interest in
Spinco with anti-dilution rights for two years. Primero will also be entitled to
appoint a director to the Spinco board of directors.

Cerro's outstanding options and its option plan will be
substantially assumed by Primero, subject to adjustment to reflect the Exchange
Ratio and a corresponding upward adjustment in the exercise price. The
transaction will be carried out by way of a court-approved scheme of arrangement
and will require approval by at least 75% of the votes cast by at least 50% of
the shareholders of Cerro at a special meeting of Cerro shareholders. Approval
of Cerro's option holders will also be required. The transaction is also subject
to applicable regulatory approvals and the satisfaction of certain other closing
conditions customary in transactions of this nature. It is anticipated that the
Cerro shareholder meeting will be held in April 2013. Primero does not require a
shareholder vote to complete the transaction.

The definitive agreement in respect of the Arrangement includes
customary provisions, including no solicitation of alternative transactions by
Cerro, a right in favour of Primero to match any potential superior proposals
and a reimbursement fee payable to Primero by Cerro in certain events.

The transaction is expected to close in May 2013.

Advance pricing agreement ruling

On October 17, 2011 the Companys Mexican subsidiary, Primero
Empresa Minera, S.A. de C.V. (PEM), filed a formal application to the Mexican
tax authorities for an advance pricing agreement (APA) on the appropriate
price for sales of silver under the silver purchase agreement. In its 2010 and
2011 financial statements and income tax returns, PEM had recorded revenue at
the fixed price realized from Silver Wheaton Caymans and computed income taxes
on the same basis.

On October 4, 2012, the Company received a ruling from the
Mexican tax authorities that confirmed the silver pricing in PEMs 2010 and 2011
income tax returns. Under Mexican tax law, an APA ruling is generally applicable
for up to a five year period. For Primero this applies to the fiscal years 2010
to 2014. Assuming PEM continues to sell silver under the silver purchase
agreement on the same terms and there are no changes in the application of
Mexican tax laws relative to the APA ruling, PEM expects to record revenues and
pay taxes on realized prices for the life of the San Dimas mine.

San Dimas mine and mill expansion

On October 15, 2012, the Company announced a mine and mill
expansion of the San Dimas mine to increase throughput to 912,500 tonnes per
year ("TPY") or 2,500 tonnes per day ("TPD") at a capital cost of $14.4 million.
Construction of the mine and mill expansion began in October 2012, with
completion expected during the first quarter of 2014. Based on current Mineral
Reserves, the project has a payback period of less than 24 months.

As a prerequisite to the mine and mill expansion, the Company
initiated an optimization program in the third quarter of 2012. The Companys
aim is to expand throughput to the current milling capacity of 2,150 TPD
exclusively through productivity improvements by the end of first quarter of
2013. Since its initiation the optimization program has successfully increased
average throughput rates from 1,920 TPD in the third quarter 2012 to 2,066 TPD
in the fourth quarter 2012. The optimization program has been successful at
reducing process variation, increasing throughput and improving mining dilution.

4

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

As part of the Company's optimization program it began testing
long-hole mining during the third quarter of 2012. By the end of 2012 Primero
was operating two long-hole drills to test the mining method in several of the
San Dimas veins with varying widths and dip. Results were very encouraging and
as a result the Company has included long-hole mining as part of the 2013 mine
plan.

The Company's underground development plan details increasing
mine throughput from the current 1,967 TPD achieved in 2012 to 2,150 TPD at
completion of the optimization program to 2,500 TPD (or 2,650 TPD based on 94%
availability), by the end of the first quarter of 2014. This expansion will
allow for an average production target of 160,000 gold equivalent ounces per
year over the next five years. Cash costs during the next five years are
expected to reduce by approximately $110 per ounce from current levels.

Convertible debt and secondary offering

On August 7, 2012, the Company repaid the $30 million balance
  of the convertible note in common shares. The conversion price was Cdn$3.74,
  being the greater of 90% of the volume weighted average trading price of the
  Companys common shares for the five trading days ended August 6, 2011
  (the initial maturity date) or August 6, 2012. In accordance with the terms
  of the note, the note was translated into Canadian dollars at Cdn$1.05 to US
  $1.00. Accordingly, 8,422,460 common shares were issued to Goldcorp, which increased
  its holding to 39,573,660 common shares, representing in the aggregate 40.9%
  of the issued and outstanding common shares of the Company. On September 24,
  2012, Primero entered into an engagement letter together with Goldcorp and certain
  underwriters pursuant to which the underwriters agreed to purchase the 8,422,460
  common shares held by Goldcorp on a bought deal basis at an offering price of
  C$5.25 per share. The offering closed on October 11, 2012, after which Goldcorp
  held 31,151,200 common shares of Primero, representing approximately 32.2% of
  the outstanding common shares of the Company. Primero did not receive any proceeds
  from this offering, and all of the expenses of the offering were paid by Goldcorp.
  These 31,151,200 common shares are subject to the original three year lock-up
  period that commenced on August 6, 2010.

Mid-year 2012 reserve and resource update

On September 4, 2012, Primero provided a mid-year update of
estimated Mineral Reserves and Mineral Resources for the San Dimas mine as at
June 30, 2012. Contained gold in Probable Mineral Reserves amounted to 584,000
ounces, an increase over year-end 2011 of 79,000 ounces (126,000 ounces before
depletion). The increase in contained gold in Indicated Mineral Resources (which
include Probable Mineral Reserves) was 17% to 678,000 ounces, and in Inferred
Mineral Resources was 23% to 866,000 ounces. Contained silver in Indicated
Mineral Resources and Inferred Mineral Resources each increased by 11% from
year-end 2011 estimates to 40.6 million ounces and 67.5 million ounces,
respectively.

San Dimas Mine Mineral Resources and Mineral Reserves as at
June30, 2012

Tonnage
    
    
    
    
    
    
    
    
    
    
    
    ContainedClassification
    
    (million
    
    
    Gold
    
    
    Silver Grade
    
    
    Contained Gold
    
    
    Silvertonnes)
    
    
    Grade (g/t)
    
    
    (g/t)
    
    
    (000 ounces)
      
    
    (000 ounces)Mineral ReservesProbable
    
    3.785
    
    
    4.8
    
    
    290
    
    
    584
    
    
    34,700Mineral ResourcesIndicated
    
    3.193
    
    
    6.6
    
    
    400
    
    
    678
    
    
    40,630Inferred
    
    6.865
    
    
    4.0
    
    
    300
    
    
    866
    
    
    67,500


5

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Notes to Mineral Reserve Statement:

|1. | Cutoff grade of 2.52 grams per tonne ("g/t") gold
      equivalent ("AuEq") based on total operating cost of US$98.50/t. Metal
      prices assumed are gold US$1,250 per troy ounce and silver US$20 per troy
      ounce. Silver supply contract obligations have been referenced in
      determining overall vein reserve estimate viability.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                  
|2. | Processing recovery factors for gold and silver of 97%
      and 94% assumed.                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                  
|3. | Exchange rate assumed is 13 pesos/US$1.00.                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                  
|4. | The Mineral Reserve estimates were prepared by Mr.
      Herbert A. Smith P.Eng. of AMC Mining Consultants (Canada) Ltd. and a QP
      for the purposes of National Instrument 43-101 ("NI
  43-101").                                                                                                                                          

Notes to Mineral Resource Statement:

|1. | Mineral Resources are total and include those resources
      converted to Mineral Reserves.                                                                                                                             
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                          
|2. | A 2g/t Au Eq cutoff grade is applied and the AuEq is
      calculated at a gold price of US$1,400 per troy ounce and a silver price
      of US$25 per troy ounce.                                                       
|   |                                                                                                                                                                                                                          
|3. | A constant bulk density of 2.7 tonnes/m3has
      been used.                                                                                                                                                             
|   |                                                                                                                                                                                                                          
|4. | The Mineral Resource estimates were prepared by Mr.
      Rodney Webster MAusIMM, MAIG and Mr. J. Morton Shannon P.Geo., both of AMC
      Mining Consultants (Canada) Ltd. and a QP for the purposes of NI
      43-101.

There is significant exploration potential at San Dimas beyond
the stated Mineral Resources and Mineral Reserves. The scale of the identified
targets is in the order of 6-10 million tonnes at grade ranges of 3-5 grams per
tonne of gold and 200-400 grams per tonne of silver. This potential
mineralization has been estimated by Primero from geological and grade
modelling. It should be noted that these targets are conceptual in nature. There
has been insufficient exploration to define an associated Mineral Resource and
it is uncertain if further exploration will result in the targets being
delineated as a Mineral Resource.

The Company retained AMC Mining Consultants (Canada) Ltd.
("AMC") for its year-end 2011, mid-year 2012 and year-end 2012 Mineral Resource
and Mineral Reserve updates. The Companys updated Mineral Reserves and
associated Mineral Resources were estimated using a block modeling approach with
kriging interpolation. These Mineral Resources were constrained in 18 individual
geological models based on wireframes of the various veins. These wireframes
were modeled along the vein contacts, and were defined by gold and silver
grades, structural geology, quartz veining and mineral alteration. Block
dimensions were based on grade estimation blocks of 10 metres by 10 metres by
vein width.

The Company expects to release its San Dimas year-end 2012
Mineral Resource and Mineral Reserve estimate in early March 2013.

6

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

SELECTED ANNUAL INFORMATION

|                                                      |   | Year ended December 31, | 
|----------------------------------------------------- | - | ----------------------- | 
|                                                      |   | 2012                    | 
|Operating Data                                        |   |                         | 
|Tonnes of ore milled                                  |   | 721,264                 | 
|Produced                                              |   |                         | 
|Gold equivalent (ounces)                              |   | 111,132                 | 
|Gold (ounces)                                         |   | 87,900                  | 
|Silver (million ounces)                               |   | 5.13                    | 
|Sold                                                  |   |                         | 
|Gold equivalent (ounces)                              |   | 110,078                 | 
|Gold (ounces)                                         |   | 87,384                  | 
|Silver (million ounces)                               |   | 5.02                    | 
|Average realized prices                               |   |                         | 
|Gold ($/ounce)                                        | $ | 1,662                   | 
|Silver ($/ounce)1                                     | $ | 7.52                    | 
|Total cash costs (per gold ounce)                     |   |                         | 
|Gold equivalent basis                                 | $ | 636                     | 
|By-product basis                                      | $ | 366                     | 
|                                                      |   |                         | 
|Financial Data                                        |   |                         | 
|(in thousands of US dollars except per share amounts) |   |                         | 
|Revenues                                              |   | 182,939                 | 
|Earnings from mine operations                         |   | 79,389                  | 
|Net income/(loss)                                     |   | 49,553                  | 
|Basic income/(loss) per share                         |   | 0.54                    | 
|Diluted income/(loss) per share                       |   | 0.54                    | 
|Operating cash flows before working capital changes   |   | 88,808                  | 
|Assets                                                |   |                         | 
|Mining interests                                      |   | 496,132                 | 
|Total assets                                          |   | 670,506                 | 
|Liabilities                                           |   |                         | 
|Long-term liabilities                                 |   | 45,071                  | 
|Total liabilities                                     |   | 98,768                  | 
|Equity                                                |   | 571,738                 | 
|Weighted average shares outstanding (basic)(000's)    |   | 91,469                  | 
|Weighted average shares outstanding (diluted)(000's)  |   | 91,635                  | 

| | 1 | Due to a silver purchase agreement originally entered
      into in 2004, Primero sells the majority of silver produced at the San
      Dimas mine at a fixed price (see RESULTS OF OPERATIONS -Silver
      purchase agreement below).
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                           
| | 2 | Primero acquired the San Dimas mine in August 2010 and
      hence had approximately five months of operations in
  2010.                                                                                                                 

7

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Restated results

In the third quarter 2012, it was identified that during its
transition to IFRS, the Company had not taken into account a methodology
difference between Canadian GAAP and IFRS with respect to translation of
deferred tax assets and liabilities denominated in a currency other than the
Companys functional currency (the US dollar). Under IFRS, the non-monetary
assets and liabilities of an entity are measured in its functional currency. If
the entitys taxable profit or tax loss (and, hence, the tax base of its
non-monetary assets and liabilities) is determined in a different currency,
changes in the exchange rate give rise to temporary differences that result in a
recognized deferred tax liability or asset. The resulting deferred tax is
charged or credited to profit or loss.

The adjustments resulting from application of this provision of
IFRS are to deferred tax assets / liabilities and deferred income tax expense /
recovery. The adjustments do not impact cash taxes or the Companys cash flows
and, consistent with disclosure by other mining companies, they are eliminated
in the computation of adjusted net income.

Accordingly, the Company restated the consolidated financial
statements for the years ended December 31, 2011 and 2010, the three months
ended March 31, 2012 and 2011, the three and six months ended June 30, 2012 and
2011 and the three and nine months ended September 30, 2011 and 2010 to give
effect to the IFRS guidance. The adjustments to the Companys financial
statements as a result of these restatements are shown in Note 2 to the
Companys condensed consolidated financial statements for the three and nine
months ended September 30, 2012 and 2011 as filed on SEDAR. The 2011 and first
and second quarter 2012 disclosures in this MD&A have been amended to take
into account the adjustments discussed above.

8

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

SELECTED QUARTERLY INFORMATION

|                                                      |   | Three Months Ended | 
|----------------------------------------------------- | - | ------------------ | 
|                                                      |   | December 31,       | 
|                                                      |   | 2012               | 
|Operating Data                                        |   |                    | 
|Tonnes of ore milled                                  |   | 190,073            | 
|Produced                                              |   |                    | 
|Gold equivalent (ounces)                              |   | 26,310             | 
|Gold (ounces)                                         |   | 23,143             | 
|Silver (million ounces)                               |   | 1.32               | 
|Sold:                                                 |   |                    | 
|Gold equivalent (ounces)                              |   | 25,416             | 
|Gold (ounces)                                         |   | 22,404             | 
|Silver (million ounces)                               |   | 1.25               | 
|Average realized prices                               |   |                    | 
|Gold ($/ounce)                                        | $ | 1,715              | 
|Silver ($/ounce)                                      | $ | 4.12               | 
|Total cash costs (per gold ounce)                     |   |                    | 
|Gold equivalent basis                                 | $ | 677                | 
|By-product basis                                      | $ | 535                | 
|                                                      |   |                    | 
|Financial Data1                                       |   |                    | 
|(in thousands of US dollars except per share amounts) |   |                    | 
|Revenues                                              |   | 43,597             | 
|Earnings from mine operations                         |   | 17,471             | 
|Net income/(loss)                                     |   | 1,245              | 
|Basic income/(loss) per share                         |   | 0.01               | 
|Diluted income/(loss) per share                       |   | 0.01               | 
|Operating cash flows before working capital changes   |   | 17,775             | 
|Assets                                                |   |                    | 
|Mining interests                                      |   | 496,132            | 
|Total assets                                          |   | 670,506            | 
|Liabilities                                           |   |                    | 
|Long-term liabilities                                 |   | 45,071             | 
|Total liabilities                                     |   | 98,768             | 
|Equity                                                |   | 571,738            | 
|Weighted average shares outstanding (basic)(000's)    |   | 91,469             | 
|Weighted average shares outstanding (diluted)(000's)  |   | 91,635             | 

|1 | Financial information has been prepared in accordance
      with IFRS.
|- | ----------------------------------------------------------------------

9

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

OUTLOOK FOR2013

In 2013 Primero expects to increase production to between
120,000 and 130,000 gold equivalent ounces, up to 17% higher than 2012, based on
higher throughput at slightly higher grades. Production is expected to ramp-up
at the end of the first quarter when the current maximum milling capacity of
2,150 TPD is achieved.

Cash costs for 2013 are expected to be in the range of $620 to
$640 per gold equivalent ounce or between $280 and $300 per gold ounce on a
by-product basis, similar to or below 2012 cash costs. Primero's 2013 outlook is
summarized in the following table:

|                                                                       | Outlook 2013       
|---------------------------------------------------------------------- | -------------------
|                                                                       |                    
|Attributable gold equivalent production
      (gold equivalent ounces) | 120,000-130,000    
|                                                                       |                    
|Gold production (ounces)                                               | 90,000-100,000     
|                                                                       |                    
|Silver production (ounces)                                             | 6,000,000-6,500,000
|                                                                       |                    
|Total cash costs (per gold equivalent
      ounce)                     | $620 - $640        
|                                                                       |                    
|Total cash costs - by-product (per gold ounce)                         | $280 - $300        

Material assumptions used to forecast total cash costs for 2013
include: an average gold price of $1,700 per ounce; an average silver price of
$8.52 per ounce (calculated using the silver agreement contract price of $4.12
per ounce and assuming excess silver beyond contract requirements is sold at an
average silver price of $30 per ounce); and foreign exchange rates of 1.00
Canadian dollars and 13 Mexican pesos to the US dollar.

Capital expenditures at San Dimas during 2013 are expected to
be approximately $42.0 million excluding capitalized exploration costs.
Underground development capital and sustaining capital remain at similar levels
to 2012, with approximately 49% of 2013 capital expenditures allocated to
projects and 51% to operations. The 2013 project capital includes the mill
expansion to 2,500 TPD ($10.7 million) and the first phase of a two-year waste
rock pad project ($6.8 million) designed to support the long-term waste disposal
at San Dimas.

Underground development in 2013 will again be focused in the
main mining (Central Block and Sinaloa Graben) blocks. In 2013 the majority of
the ore is anticipated to come from the Central Block with approximately 30%
from the higher-grade Sinaloa Graben block.

Under the promissory note held by an affiliate of Goldcorp
Inc., the Company is required to pay 50% of annual excess free cash flow (as
defined in the promissory note) against the principal balance in addition to
annual $5 million principal installments. The Company generated excess free cash
flow of $15.6 million during the year ended December 31, 2012 and accordingly
will pay $7.8 million to the note holder by April 30, 2013.

See LIQUIDITY AND CAPITAL RESOURCES  Liquidity Outlook below
for discussion of impact of Cerro in 2013.

10

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

REVIEW OF OPERATIONS

San Dimas mine

The following table discloses operating data for the years
ended December 31, 2012 and 2011, as well as the fourth quarter 2012 and the
preceding four quarters.

|                                       |   | Year ended December |  |   |         |  |   |                    |  |   |           |  |   |           |  |   |           | 
|-------------------------------------- | - | ------------------- |  | - | ------- |  | - | ------------------ |  | - | --------- |  | - | --------- |  | - | --------- | 
|                                       |   | 31,                 |  |   |         |  |   | Three months ended |  |   |           | 
|                                       |   | 2012                |  |   | 2011    |  |   | 31-Dec-12          |  |   | 30-Sep-12 |  |   | 30-Jun-12 |  |   | 31-Mar-12 | 
|Operating Data                         |   |                     |  |   |         |  |   |                    |  |   |           |  |   |           |  |   |           | 
|Tonnes of ore milled                   |   | 721,264             |  |   | 662,612 |  |   | 190,073            |  |   | 177,926   |  |   | 174,742   |  |   | 178,523   | 
|Average mill head grade (grams/tonne)  |   |                     |  |   |         |  |   |                    |  |   |           |  |   |           |  |   |           | 
|Gold                                   |   | 3.90                |  |   | 3.86    |  |   | 3.90               |  |   | 3.40      |  |   | 4.25      |  |   | 4.05      | 
|Silver                                 |   | 234                 |  |   | 226     |  |   | 228                |  |   | 210       |  |   | 256       |  |   | 242       | 
|Average recovery rate (%)              |   |                     |  |   |         |  |   |                    |  |   |           |  |   |           |  |   |           | 
|Gold                                   |   | 97%                 |  |   | 97%     |  |   | 97%                |  |   | 97%       |  |   | 97%       |  |   | 97%       | 
|Silver                                 |   | 95%                 |  |   | 94%     |  |   | 95%                |  |   | 95%       |  |   | 95%       |  |   | 95%       | 
|Produced                               |   |                     |  |   |         |  |   |                    |  |   |           |  |   |           |  |   |           | 
|Gold equivalent (ounces)               |   | 111,132             |  |   | 102,224 |  |   | 26,310             |  |   | 25,582    |  |   | 33,598    |  |   | 25,793    | 
|Gold (ounces)                          |   | 87,900              |  |   | 79,564  |  |   | 23,143             |  |   | 18,892    |  |   | 23,277    |  |   | 22,588    | 
|Silver (million ounces)                |   | 5.13                |  |   | 4.60    |  |   | 1.32               |  |   | 1.14      |  |   | 1.36      |  |   | 1.32      | 
|Sold                                   |   |                     |  |   |         |  |   |                    |  |   |           |  |   |           |  |   |           | 
|Gold equivalent (ounces)               |   | 110,078             |  |   | 100,138 |  |   | 25,416             |  |   | 23,251    |  |   | 35,442    |  |   | 26,229    | 
|Gold (ounces)                          |   | 87,384              |  |   | 77,490  |  |   | 22,404             |  |   | 17,100    |  |   | 24,876    |  |   | 23,004    | 
|Silver at fixed price (million ounces) |   | 4.30                |  |   | 4.12    |  |   | 1.25               |  |   | 0.80      |  |   | 0.92      |  |   | 1.33      | 
|Silver at spot (million ounces)        |   | 0.72                |  |   | 0.51    |  |   | -                  |  |   | 0.25      |  |   | 0.47      |  |   | -         | 
|Average realized price (per ounce)     |   |                     |  |   |         |  |   |                    |  |   |           |  |   |           |  |   |           | 
|Gold                                   | $ | 1,662               |  | $ | 1,561   |  | $ | 1,715              |  | $ | 1,646     |  | $ | 1,610     |  | $ | 1,678     | 
|Silver                                 | $ | 7.52                |  | $ | 7.69    |  | $ | 4.12               |  | $ | 9.66      |  | $ | 12.24     |  | $ | 4.08      | 
|Total cash operating costs ($000s)     | $ | 70,716              |  | $ | 65,410  |  | $ | 17,818             |  | $ | 17,872    |  | $ | 17,645    |  | $ | 17,381    | 
|Total cash costs (per gold ounce)      |   |                     |  |   |         |  |   |                    |  |   |           |  |   |           |  |   |           | 
|Gold equivalent basis                  | $ | 636                 |  | $ | 640     |  | $ | 677                |  | $ | 699       |  | $ | 525       |  | $ | 674       | 
|By-product basis                       | $ | 366                 |  | $ | 384     |  | $ | 535                |  | $ | 363       |  | $ | 44        |  | $ | 532       | 

San Dimas produced 87,900 ounces of gold and 5.13 million
ounces of silver in 2012, 10% more and 12% more, respectively, than the same
period in 2011. The increase in gold production was due mainly to 9% higher
throughput from 662,612 tonnes in 2011 to 721,264 tonnes in 2012. Grade was
slightly higher in 2012 than 2011 - with gold up 1% and silver up 4%.

Total cash costs on a gold equivalent and by-product basis in
2012 were $636 and $366 per ounce, respectively, compared with $640 and $384 per
ounce respectively in 2011. Operating costs were 8% higher in 2012 as compared
to 2011, however, this was offset by a 9% increase in gold equivalent ounces
produced. Increases in input costs included higher reagent costs, particularly
sodium cyanide, higher labour costs, and higher power costs as a result of dry
weather conditions leading to low power production from the Companys hydro-electric facility that
caused the Company to consume more diesel fuel and purchase more electricity
from the grid.

11

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Average realized silver prices were 2% lower in 2012 than 2011,
which was offset by higher silver production and more ounces available for the
Company to sell at spot prices during 2012 as compared to 2011. In 2012, the
Company sold 716,229 ounces of silver at spot prices for revenue of $20.1
million, compared to 511,752 ounces in 2011 for revenue of $18.8 million.

Between August 6, 2012 and December 31, 2012, the San Dimas
mine produced 2,037,123 ounces of silver, which was sold to Silver Wheaton
Caymans under the silver purchase agreement.

Transition Matters

Since August 6, 2010, the transition matters relating to the
acquisition of the San Dimas mine have largely been resolved. As at the date of
this MD&A, the only significant outstanding matter is securing a permit to
operate the aircraft used to access the mine. In Mexico, aircraft can only be
operated through a licensed carrier and the Company is currently operating its
aircraft through the carrier of the previous mine owner, Desarrolos Mineros San
Luis, S.A. de C.V. (DMSL). The Company had expected to complete the
acquisition of its own carrier licence by the end of 2012, however, changes in
personnel at the ministry responsible for issuing the permit, as a result of
change of government, have delayed completion until early-2013.

12

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

ANNUAL RESULTS OF OPERATIONS

In thousands of US dollars except per share amounts
      
      December 312012
      
      
      2011(Restated)$
      
      
      $Revenue
      
      182,939
      
      
      156,542Operating expenses
      
      (75,495
      )
      
      (64,845
      )Depreciation and depletion
      
      (28,055
      )
      
      (26,607
      )Total cost of sales
      
      (103,550
      )
      
      (91,452
      )Earnings from mine operations
      
      79,389
      
      
      65,090General and administrative
      
      (30,003
      )
      
      (18,872
      )Other income (expense)
      
      (1,842
      )
      
      17,407Foreign exchange gain (loss)
      
      (948
      )
      
      912Finance income
      
      1,192
      
      
      2,795Finance expense
      
      (2,887
      )
      
      (7,810
      )Loss on derivative contracts
      
      (226
      )
      
      (1,284
      )Earnings before income taxes
      
      44,675
      
      
      58,238Income tax (expense) recovery
      
      4,878
      
      
      (8,594
      )Net income for the period
      
      49,553
      
      
      49,644Basic income per share
      
      0.54
      
      
      0.56Diluted income per share
      
      0.54
      
      
      0.54Weighted average number of common shares
        outstanding - basic
      
      91,469,356
      
      
      88,049,171Weighted average number of common shares outstanding - diluted
      
      91,635,428
      
      
      96,562,288


The figures above (and in the table of results for the fourth
quarter below) are presented in US dollars, the Companys presentation currency.
The functional currency of the Companys operations in Mexico is the U.S.
dollar. The functional currency of the parent company, incorporated in Canada,
is the Canadian dollar. During the year ended December 31, 2011, the functional
currency of Primero Mining Luxembourg S.a.r.l. changed to the Mexican peso as a
result of the change in the denomination of its significant assets and
liabilities. This change was accounted for prospectively.

The Company earned net income of $49.6 million ($0.54 per
share) in the year ended December 31, 2012 compared with net income of $49.6
million ($0.56 per share) in the year ended December 31, 2011. Earnings before
income taxes were $44.7 million in 2012 compared with $58.2 million in 2011. The
decrease is due mainly to the receipt in 2011 of an $18.7 million break fee, net
of transaction costs, on termination of the arrangement agreement to merge with
Northgate, as well as increased general and administrative expenses in 2012
mainly related to share-based payment charges, partially offset by higher
earnings from mine operations and reduced finance expense. Earnings from mine
operations were $79.4 million in 2012, 22% more than 2011 on higher sales
volumes and higher realized gold prices. Income tax was a recovery of $4.9
million in 2012 compared with an expense of $8.6 million in 2011 due mainly to the impact of foreign exchange on deferred income tax assets
and liabilities which reduced deferred tax expense by $9.8 million in 2012 and
increased deferred tax expense by $18.2 million in 2011. The peso depreciated
against the US dollar in 2011 and appreciated in 2012 creating these movements
in deferred taxes. Similar movements can be expected in the future due to the
volatility of exchange rates.

13

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Adjusted net income for 2012 was $41.3 million ($0.45 per
share) compared with $28.3 million ($0.32 per share) for 2011. Adjusted net
income for both years excludes the impact of foreign exchange on deferred income
tax assets and liabilities. The 2011 adjusted net income also excludes the
benefit of the APA filing pertaining to 2010 (in the fourth quarter 2011, after
filing the APA application, the Company recorded the benefit of the APA
retroactive to August 2010, the date of the purchase of the San Dimas mine) as
well as the reversal of the tax savings from foreign exchange losses on an
intercompany loan, the break-fee (net of transaction costs) from Northgate and
realized foreign exchange gains and finance income on the VAT refund collected
from the Mexican government related to VAT paid on the acquisition of the San
Dimas mine.

Revenue

Revenue was $182.9 million for the year ended December 31, 2012
as a result of selling 87,384 ounces of gold at an average realized price of
$1,662 per ounce, and 5.02 million ounces of silver at an average realized price
of $7.52 per ounce. Revenue was $156.5 million in 2011 from selling 77,490
ounces of gold at an average realized price of $1,561 per ounce and 4.63 million
ounces of silver at an average realized price of $7.69 per ounce. Upon
acquisition of the San Dimas mine, the Company assumed the obligation to sell
silver under contract (see Silver purchase agreementbelow). The
Company reached the 3.5 million ounce threshold under the silver purchase
agreement with Silver Wheaton Caymans at the end of April in 2012 and
subsequently sold 716,229 ounces of silver at an average price of $28.03,
compared with meeting the threshold at the end of May in 2011, after which it
sold 511,752 ounces of silver at an average price of $36.77.

Silver purchase agreement

In 2004, the 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. and a per ounce payment of the lesser of
$3.90 (adjusted for annual inflation), or the market price. This transaction was
documented in two silver purchase agreements, the first one between Silver
Trading and Silver Wheaton Caymans (the External SPA), and the second one
between the owner of the San Dimas mine and Silver Trading (the Internal SPA).
The Company was required to assume these two agreements, with amendments, when
it acquired the San Dimas mine. The amended agreements provided that for each of
the first four years after the acquisition date, 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. After four
years, for the life of the mine, the first 6 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.

The expected cash flows associated with the sale of the silver
to Silver Wheaton Caymans at a price lower than the market price have been
reflected in the fair value of the mining interests recorded upon acquisition of
the San Dimas mine. The Company has presented the obligation to sell any silver
production to Silver Wheaton Caymans as part of the mining interests, as the
Company did not receive any of the original upfront payment which was made by Silver
Wheaton to acquire its interest in the silver production of the San Dimas mine.
Further, the Company does not believe that the obligation meets the definition
of a liability as the obligation to sell silver to Silver Wheaton Caymans only
arises upon production of the silver.

14

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Until October, 2011, the Company computed income taxes in
Mexico based on selling all silver produced at the San Dimas mine at market
prices (the price in the Internal SPA that it was required to assume on the
acquisition of the San Dimas mine). From a consolidated perspective, therefore,
the silver sales to Silver Wheaton Caymans realized approximately $4 per ounce,
however, the Company recorded income taxes based on sales at market prices. On
October 11, 2011, as part of its restructuring initiatives and based on
recognized transfer pricing methodology, the Company amended the Internal SPA to
provide that the price payable by Silver Trading to purchase silver is the same
price as the fixed price charged by Silver Trading under the External SPA. On
October 17, 2011, the Companys Mexican subsidiary filed an application to the
Mexican tax authorities for an advance pricing agreement (APA) on the
appropriate price for the intercompany sale of silver under the Internal
SPA.

On October 4, 2012, the Mexican tax authorities ruled on the
APA. The ruling confirmed that the Company's Mexican subsidiary appropriately
recorded revenue and taxes from sales under the silver purchase agreement at
realized prices rather than spot prices effective from August 6, 2010.

Operating expenses

Operating expenses of the San Dimas mine were $75.5 million in
2012 compared to $64.8 million in the same period 2011. Operating expenses
include $1.2 million and $1.8 million of share-based payment expense related to
personnel at the mine for 2012 and 2011, respectively. In addition, operating
expenses in 2012 include $4.2 million for the Companys optimization project
(see RECENT CORPORATE DEVELOPMENTS - San Dimas mine and mill expansion
above). The Company retained the services of a global consulting firm with
extensive experience in mine optimization to assist it in a productivity
improvement project that is expected to be completed in the first quarter of
2013. The benefits of this project were seen in the fourth quarter 2012 and are
expected to be further realized in early-2013. The balance of the increase in
operating expenses in 2012 is due to the increase in production, higher pay
rates for labour, the global shortage of sodium cyanide and higher power costs
due to lower water levels at the Companys hydro-electric facility that required
the Company to purchase more diesel fuel and more power off the grid.

Depreciation and depletion expense

Depreciation and depletion expense was $28.1 million for 2012,
compared to $26.6 million in 2011 due mainly to higher gold production in 2012
than 2011. Depletion cost is initially charged to inventory during the
production process and then transferred to cost of sales when the inventory is
sold. Mining properties are depleted using a units-of-production basis over the
mines estimated and economically proven and probable gold reserves and an
estimate of the portion of mineralization expected to be classified as reserves.
Historically, over the past 30 years, the San Dimas mine has converted
approximately 90% of resources into reserves.

General and administrative expenses

General and administrative expenses were $30.0 million for 2012,
  compared to $18.9 million in 2011, broken down as follows:

15

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Year endedDecember 31,(In thousands of
        U.S. dollars)
      
      2012
      
      
      2011Share-based payment
      
      15,049
      
      
      6,258Salaries and wages
      
      5,761
      
      
      5,364Rent and office costs
      
      1,402
      
      
      1,218Legal, accounting, consulting, and other professional fees
      
      4,628
      
      
      3,031Other general and administrative expenses
      
      3,163
      
      
      3,001Total
      
      30,003
      
      
      18,872


The significantly higher share-based payment charge in 2012 was
primarily due to an increase in the value of units in the Companys phantom
share unit plan as a result of a 97% increase in the price of the Companys
common shares. The increase in salaries and wages was due to the hiring of
additional management and operations personnel in 2012. The increase in legal,
accounting, consulting, and other professional fees was due in part to costs
incurred related to the APA filing and the reserves and resources review.

Finance income

The Company earned finance income of $1.2 million in 2012
compared with $2.8 million in 2011. The amount in 2011 included $2.4 million of
interest income on the refund of $80.6 million of VAT paid on the acquisition of
the San Dimas mine.

Finance expense

Finance expense was $2.9 million in 2012, compared to $7.8
million in 2011. The expense in 2011 included $4.2 million of accretion expense
on the convertible note which was not incurred in 2012 as the convertible note
was fully accreted by August 6, 2011. Accrued interest on the promissory note
and the convertible note was higher in 2011 than 2012 due to a principal
repayment of $30 million on the convertible note in October 2011, followed by
conversion of the remaining $30 million in August 2012, as well as a $5 million
instalment payment on the promissory note made on January 3, 2012 (see
LIQUIDITY AND CAPITAL RESOURCES below).

Foreign exchange

The Company recorded a foreign exchange loss of $0.9 million in
2012 compared with a $0.9 million foreign exchange gain in 2011. The loss in
2012 was mainly due to realized foreign exchange losses on peso-denominated
liabilities as a result of the appreciation of the Mexican peso relative to the
US dollar during the year. The gain in 2011 was due primarily to the revaluation
of the peso-denominated VAT receivable as the peso appreciated against the US
dollar between the beginning of the period and the refund of the VAT by the
Mexican tax authorities in July 2011.

Loss on derivative contracts

The Company purchased two tranches of silver call option
contracts in 2011 and one in 2012. These call options were designed to mitigate
the adverse tax consequences of the silver purchase agreement prior to receiving
the APA ruling. See FINANCIAL INSTRUMENTS  Derivative contracts on
silver below for details of these purchases.

16

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

In the year ended December 31, 2012 the Company reported a loss
of $0.2 million, mainly comprised of realized losses on expired contracts
purchased in September 2011. The Company recorded a loss on derivative contracts
of $1.3 million in the year ended December 31, 2011, comprised of realized
losses of $0.7 million on the sale or expiry of silver call option contracts,
unrealized losses on unexpired call option contracts of $3.2 million, and an
unrealized gain of $2.6 million from mark-to-market adjustments to the fair
value of an embedded derivative included in the convertible note. The Company
does not plan to purchase more silver call options in the future as a result of
receiving the favourable APA ruling.

Income taxes

The Company recorded an income tax recovery of $4.9 million in
the year ended December 31, 2012, compared with an income tax expense of $8.6
million in 2011. The impact of foreign exchange on deferred income tax assets
and liabilities produced a deferred tax recovery of $9.8 million in 2012 and a
deferred tax expense of $18.2 million in 2011. Under IFRS, an entitys
non-monetary assets and liabilities are measured in its functional currency,
however, if the entitys taxable profit or tax loss (and, hence, the tax base of
its non-monetary assets and liabilities) is determined in a different currency,
changes in the exchange rate give rise to temporary differences that result in a
recognized deferred tax liability or asset with an offsetting charge or credit
to deferred tax expense in the statement of operations. The volatility of the
peso against the US dollar means that large fluctuations in deferred taxes are
expected to occur in the future. A breakdown of income taxes for 2012 and 2011
and a reconciliation of actual income taxes to income taxes calculated at the
statutory rate are disclosed in Note 9 of the consolidated financial statements
for the year ended December 31, 2012.

17

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

THREE MONTHS ENDEDDECEMBER31,2012COMPARED WITH THREE MONTHS ENDEDDECEMBER31,2011

For the three months endedIn thousands of US dollars except per share amounts
      
      Three months ended December 31,2012
      
      
      2011(Restated)$
      
      
      $Revenue
      
      43,597
      
      
      35,645Operating expenses
      
      (19,328
      )
      
      (15,825
      )Depreciation and depletion
      
      (6,798
      )
      
      (6,534
      )Total cost of sales
      
      (26,126
      )
      
      (22,359
      )Earnings from mine operations
      
      17,471
      
      
      13,286General and administrative
      
      (11,064
      )
      
      (5,066
      )Other income (expense)
      
      (1,129
      )
      
      (1,129
      )Foreign exchange loss
      
      (1,250
      )
      
      (3,723
      )Finance income
      
      172
      
      
      139Finance expense
      
      (769
      )
      
      (181
      )Loss on derivative contracts
      
      (750
      )
      
      (899
      )Earnings before income taxes
      
      2,681
      
      
      2,427Income tax (expense) recovery
      
      (1,436
      )
      
      28,789Net income for the period
      
      1,245
      
      
      31,216Basic income per share
      
      0.01
      
      
      0.35Diluted income per share
      
      0.01
      
      
      0.32Weighted average number of
        common shares outstanding - basic
      
      93,406,583
      
      
      88,253,347Weighted average number of
        common shares outstanding - diluted
      
      94,784,589
      
      
      96,719,907


The Company earned net income of $1.2 million ($0.01 per share)
for the three months ended December 31, 2012 compared with net income of $31.2
million ($0.35 per share) for the three months ended December 31, 2011, mainly
due to the income tax recovery of $28.8 million in the fourth quarter 2011.
Earnings before income taxes were $0.3 million higher in 2012 than 2011 as
higher earnings from mine operations were offset by higher general and
administrative expenses due primarily to increased share-based payment charges.
The income tax recovery in 2011 was mainly due to the timing of filing the APA
application in October 2011, after which the Company recorded taxes on silver
sales under the silver purchase agreement at realized prices retroactive to
August 2010, the date of acquisition of the San Dimas mine.

Adjusted net income for 2012 was $4.5 million ($0.05 per share)
compared with $4.7 million ($0.05 per share) for 2011. The decline was due
mainly to the increase in the value of the Companys common shares which
increased the value of share based payments, and accordingly increased general
and administrative expenses. Both 2012 and 2011 adjusted net income includes the
reversal of the impact of foreign exchange on deferred income tax assets and
liabilities. The 2011 adjusted net income also excludes the benefit of the APA ruling that relates to the
period from August 6, 2010 to September 30, 2011.

18

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Revenue

Revenue was $43.6 million for the three months ended December
31, 2012 as a result of selling 22,404 ounces of gold at an average realized
price of $1,715 per ounce, and 1.25 million ounces of silver at an average
realized price of $4.12 per ounce. Revenue was $35.6 million for the same period
in 2011 from selling 18,487 ounces of gold at an average realized price of
$1,679 per ounce and 1.11 million ounces of silver at an average realized price
of $4.08 per ounce.

Operating expenses

Operating expenses of the San Dimas mine were $19.3 million in
the fourth quarter 2012 compared to $15.8 million in the same period 2011, due
mainly to the increased sales and the cost of the Companys optimization
project, which added $2.7 million to operating expenses in the three months
ended December 31 2012 (see RECENT CORPORATE DEVELOPMENTS - San Dimas mine
and mill expansion above). Cash production costs per gold ounce were $677
and $535, respectively, on a gold equivalent and by-product basis for 2012,
compared with $719 and $580, respectively, for 2011. Cash operating costs were
7% higher in 2012 than 2011, however, these increased cash costs were offset by
a 14% increase in gold equivalent ounces produced and an 11% increase in
by-product silver credits.

Depreciation and depletion expense

The depreciation and depletion expense was $6.8 million for the
three months ended December 31, 2012 compared to $6.5 million in the same period
2011 due mainly to the increase in production.

General and administrative expenses

General and administrative expenses were $11.1 million for the
  fourth quarter 2012, compared to $5.1 million for 2011, broken down as follows:

Three months endedDecember 31(In thousands of
        U.S. dollars)
      
      2012
      
      
      2011Share-based payment
      
      6,145
      
      
      1,269Salaries and wages
      
      1,895
      
      
      1,743Rent and office costs
      
      546
      
      
      304Legal, accounting, consulting, and other professional fees
      
      1,078
      
      
      653Other general and administrative expenses
      
      1,400
      
      
      1,097Total
      
      11,064
      
      
      5,066


The significantly higher share-based payment charge in 2012 was
primarily due to the impact of the Companys appreciating share price on the
valuation of units in the Companys phantom share unit plan.

Finance income

19

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

The Company earned finance income of $0.2 million in the fourth
quarter 2012 compared with $0.1 million during the same period 2011.

Finance expense

Finance expense was $0.8 million for the three months ended
December 31, 2012, compared to $0.2 million for the same period in 2011. Accrued
interest on the promissory note and convertible note was $0.4 million higher in
2011 than 2012 due to principal repayments of $30 million on the convertible
note in October 2011, followed by a conversion of the remaining $30 million in
August 2012, as well as a $5 million instalment payment on the promissory note
made on January 3, 2012, however, $1.0 million more interest was capitalized to
assets under construction in the fourth quarter 2011. (see LIQUIDITY AND
CAPITAL RESOURCES below).

Foreign exchange

The Company recorded a foreign exchange loss of $1.3 million in
the fourth quarter 2012 compared with a foreign exchange loss of $3.7 million in
the fourth quarter 2011. The loss in 2012 was mainly due to unrealized foreign
exchange losses on peso-denominated assets net of liabilities, as a result of
the depreciation of the Mexican peso relative to the US dollar during the three
month period ended December 31, 2012. The loss in 2011 related mainly to the
impact of recognizing the benefit of the APA for the period August 6, 2010 to
September 30, 2011 in the fourth quarter 2011.

Gain (loss) on derivative contracts

The Company purchased silver call option contracts to mitigate
the adverse tax consequences of the silver purchase agreement prior to receiving
the APA ruling. See FINANCIAL INSTRUMENTS  Derivative contracts on
silver below for details of these purchases.

The Company recorded a loss of 0.8 million on silver call
option contracts in the fourth quarter 2012, comprising a realized loss on sales
of options of $0.1 million, and unrealized losses of $0.7 million on unexpired
contracts. The Company recorded a loss of $0.9 million on these contracts in the
fourth quarter 2011, which comprised a realized loss of $0.4 million on the
expiry of out-of-the-money contracts and an unrealized loss of $0.5 million on
unexpired contracts. At December 31, 2012 the Company no longer had any
derivative contracts.

Income taxes

The Company recorded an income tax expense of $1.4 million in
the three months ended December 31, 2012, compared with a recovery of income
taxes of $28.8 million in the same period in 2011. The tax expense in 2012 was
primarily due to a $1.8 million charge to deferred taxes relating to the foreign
exchange impact of the translation of deferred income tax assets and liabilities
and the 2011 tax recovery included a similar foreign exchange based deferred tax
expense of $5.5 million. As described under ANNUAL RESULTS OF OPERATIONS 
Income taxes above, during the fourth quarter of 2011, the Company
filed an APA application in Mexico in order to recognize revenues on sales of
silver under the silver purchase agreement at realized, rather than spot prices
and record taxes on the same basis. The total impact of this filing retroactive
to August 6, 2010, the date the Company became a party to the silver purchase
agreement, was recognized in the fourth quarter 2011 (a recovery of $33.0
million).

20

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Dividend Report and Policy

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

SELECTED QUARTERLY FINANCIAL DATA

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

|(In thousands of US$ except for per share           |   |         |  |   |         |  |   |            |  |   |            |  |      |         |  |   |            |  |   |         |  |   |         |  
|--------------------------------------------------- | - | ------- |  | - | ------- |  | - | ---------- |  | - | ---------- |  | ---- | ------- |  | - | ---------- |  | - | ------- |  | - | ------- | -
|amounts and operating
      data)                   |   |         |  |   | 2012    |  |   |            |  |   |            |  | 2011 |         |  |   |           
|                                                    |   | Q4      |  |   | Q3      |  |   | Q2         |  |   | Q1         |  |      | Q4      |  |   | Q3         |  |   | Q2      |  |   | Q1      |  
|                                                    |   |         |  |   |         |  |   | (Restated) |  |   | (Restated) |  |      |         |  |   | (Restated) |  |   |         |  |   |         |  
|Revenue                                             |   | 43,597  |  |   | 38,277  |  |   | 57,061     |  |   | 44,004     |  |      | 35,645  |  |   | 46,079     |  |   | 40,830  |  |   | 33,988  |  
|Net income (loss)                                   |   | 1,245   |  |   | 11,586  |  |   | 6,579      |  |   | 30,143     |  |      | 31,216  |  |   | 16,491     |  |   | 4,867   |  |   | (2,933  | )
|Basic income (loss) per share                       |   | 0.01    |  |   | 0.12    |  |   | 0.07       |  |   | 0.34       |  |      | 0.35    |  |   | 0.19       |  |   | 0.06    |  |   | (0.03   | )
|Diluted income (loss) per share                     |   | 0.01    |  |   | 0.12    |  |   | 0.07       |  |   | 0.31       |  |      | 0.32    |  |   | 0.19       |  |   | 0.06    |  |   | (0.03   | )
|Adjusted net income (loss)                          |   | 4,528   |  |   | 2,634   |  |   | 15,369     |  |   | 18,780     |  |      | 4,685   |  |   | 11,567     |  |   | 5,634   |  |   | 1,621   |  
|                                                    |   |         |  |   |         |  |   |            |  |   |            |  |      |         |  |   |            |  |   |         |  |   |         |  
|Adjusted net income (loss) per share                |   | 0.05    |  |   | 0.03    |  |   | 0.17       |  |   | 0.21       |  |      | 0.05    |  |   | 0.13       |  |   | 0.06    |  |   | 0.02    |  
|Operating cash flow before working capital changes  |   | 17,775  |  |   | 16,172  |  |   | 35,813     |  |   | 21,257     |  |      | 14,602  |  |   | 40,770     |  |   | 17,877  |  |   | (1,182  | )
|Cash                                                |   | 139,244 |  |   | 133,130 |  |   | 125,733    |  |   | 86,268     |  |      | 80,761  |  |   | 107,227    |  |   | 63,629  |  |   | 65,380  |  
|Total assets                                        |   | 670,506 |  |   | 662,069 |  |   | 640,919    |  |   | 636,210    |  |      | 609,259 |  |   | 614,029    |  |   | 672,898 |  |   | 665,754 |  
|Long-term liabilities                               |   | 45,071  |  |   | 60,676  |  |   | 53,745     |  |   | 52,196     |  |      | 52,299  |  |   | 122,699    |  |   | 131,591 |  |   | 114,850 |  
|Equity                                              |   | 571,738 |  |   | 567,683 |  |   | 525,848    |  |   | 518,867    |  |      | 487,840 |  |   | 455,761    |  |   | 438,750 |  |   | 432,479 |  
|Gold produced (ounces)                              |   | 23,143  |  |   | 18,892  |  |   | 23,277     |  |   | 22,588     |  |      | 20,191  |  |   | 19,500     |  |   | 19,374  |  |   | 20,498  |  
|Gold equivalent ounces produced                     |   | 26,310  |  |   | 25,582  |  |   | 33,598     |  |   | 25,793     |  |      | 23,115  |  |   | 27,450     |  |   | 27,576  |  |   | 24,083  |  
|Gold sold (ounces)                                  |   | 22,404  |  |   | 17,100  |  |   | 24,876     |  |   | 23,004     |  |      | 18,487  |  |   | 19,659     |  |   | 18,837  |  |   | 20,506  |  
|Average price realized per gold ounce               | $ | 1,715   |  | $ | 1,646   |  | $ | 1,610      |  | $ | 1,678      |  | $    | 1,679   |  | $ | 1,668      |  | $ | 1,523   |  | $ | 1,387   |  
|Cash cost per gold equivalent ounce                 | $ | 677     |  | $ | 699     |  | $ | 525        |  | $ | 674        |  | $    | 719     |  | $ | 641        |  | $ | 586     |  | $ | 624     |  
|Cash cost per gold ounce, net of silver by-products | $ | 535     |  | $ | 363     |  | $ | 44         |  | $ | 532        |  | $    | 580     |  | $ | 222        |  | $ | 190     |  | $ | 491     |  
|Silver produced (million ounces)                    |   | 1.32    |  |   | 1.14    |  |   | 1.36       |  |   | 1.32       |  |      | 1.20    |  |   | 1.10       |  |   | 1.06    |  |   | 1.23    |  
|Silver sold at fixed price (million ounces)         |   | 1.25    |  |   | 0.80    |  |   | 0.92       |  |   | 1.33       |  |      | 1.11    |  |   | 0.86       |  |   | 0.77    |  |   | 1.37    |  

NOTE:ALL FINANCIAL
STATEMENT AMOUNTS IN THE TABLE ARE PRESENTED IN ACCORDANCE WITHIFRS.

21

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Gold production, and accordingly sales, were lower in Q3 2012
than Q1, Q2 and Q4 2012 partly as expected given the sequencing of the mine plan
and also because of power interruptions which impacted the Companys ability to
complete the planned underground development for the quarter and, resultantly,
production tonnage for the same period. Gold production and sales remained
relatively consistent each quarter during 2011, despite a month-long strike by
the union of millworkers in Q2 2011. Somewhat higher grades in Q2 2011 as
compared to other quarters in 2011, and an increase in throughput after the
strike ended offset the impact of the strike. Revenue in Q3 2012, Q2 2012, Q3
2011 and Q2 2011 included $6.8 million, $13.3 million, $9.8 million and $9.0
million, respectively, of silver sales at spot prices, after the Company reached
the annual threshold for deliveries under the silver purchase agreement. These
silver spot sales also reduced cash costs and particularly by-product cash
costs, in the second and third quarters of each year.

Quarterly net income fluctuates in part as a result of items
which are adjusted out in the calculation of adjusted net income. The reduction
in adjusted net income in Q4 and Q3 2012 compared with Q2 and Q1 2012 was due
mainly to lower sales volumes as described above and higher stock-based
compensation, resulting from the increase in the value of issued phantom share
units as a result of the increase in the price of the Companys common shares.
Higher adjusted net income in Q3 2011 compared with the other quarters in 2011
was due mainly to silver sales at high spot prices.

The cash balance of $125.7 million at the end of Q2 2012
reflects the receipt of a refund of $20.1 million in taxes (see Liquidity
Outlook under LIQUIDITY AND CAPITAL RESOURCESbelow). Cash in Q1
2012 includes the repayment at the beginning of January 2012 of the first $5
million instalment of the promissory note plus $4.4 million in accrued interest
thereon (see Debtbelow under LIQUIDITY AND CAPITAL RESOURCES) and
cash in Q4 2012 also includes the second $5 million repayment installment of the
promissory note and interest paid of $2.8 million. The significant increase in
the cash balance during Q3 2011 was due mainly to strong sales proceeds
(including spot silver sales), the receipt of the $18.7 million Northgate
termination fee, net of transaction costs, and the $17.1 million VAT refund, net
of the VAT loan repayment. Cash in Q4 2011 was reduced by the $30 million
convertible note repayment.

The approximate $60 million reduction in long-term liabilities
during 2011 was due to the $30 million convertible note repayment in Q4 2011 and
the reclassification of the $30 million balance of the convertible note to a
current liability based on its contractual maturity. This remaining $30 million
convertible note was repaid in common shares of the Company upon maturity in
August 2012 (see RECENT CORPORATE DEVELOPMENTS above). The reduction of $15.6
million in long-term liabilities in Q4 2012 is due to the payment of the second
$5 million installment on the promissory note (plus interest of $2.8 million)
and the reclassification of $7.8 million of the promissory note to current
liabilities pursuant to the excess free cash flow provision in the promissory
note (see Debt below).

22

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

NON-GAAP MEASURES

Non  GAAP measure  Cash costs per gold ounce

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

|                                                                            |   | Three months ended |   |   | Year ended   |  
|--------------------------------------------------------------------------- | - | ------------------ | - | - | ------------ | -
|                                                                            |   | December 31,       |   |   | December 31, |  
|                                                                            |   | 2012               |   |   | 2011         |  
|Operating expenses per the consolidated financial
      statements ($000's) |   | 19,328             |   |   | 15,825       |  
|Share-based payment included in operating expenses($000's)                  |   | (360               | ) |   | (227         | )
|Inventory movements and adjustments ($000's)                                |   | (1,150             | ) |   | 1,024        |  
|Total cash operating costs ($000's)                                         |   | 17,818             |   |   | 16,622       |  
|Ounces of gold produced                                                     |   | 23,143             |   |   | 20,191       |  
|Gold equivalent ounces of silver produced                                   |   | 3,167              |   |   | 2,924        |  
|Gold equivalent ounces produced                                             |   | 26,310             |   |   | 23,115       |  
|Total cash costs per gold equivalent ounce                                  | $ | 677                |   | $ | 719          |  
|Total cash operating costs ($000's)                                         |   | 17,818             |   |   | 16,622       |  
|By-product silver credits ($000's)                                          |   | (5,434             | ) |   | (4,909       | )
|Cash costs, net of by-product credits ($000's)                              |   | 12,384             |   |   | 11,713       |  
|Ounces of gold produced                                                     |   | 23,143             |   |   | 20,191       |  
|Total by-product cash costs per gold ounce
      produced                   | $ | 535                |   | $ | 580          |  

23

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Non  GAAP measure  Adjusted net income

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

|                                                             |  | Three months ended |  |  | Year ended   |  
|------------------------------------------------------------ |  | ------------------ |  |  | ------------ | -
|(In thousands of US dollars except per share amounts)        |  | December 31,       |  |  | December 31, |  
|                                                             |  | 2012               |  |  | 2011         |  
|                                                             |  |                    |  |  | (Restated)   |  
|Net income                                                   |  | 1,245              |  |  | 31,216       |  
|Loss on derivative contracts                                 |  | 750                |  |  | 899          |  
|Accretion charged on convertible debt                        |  | -                  |  |  | -            |  
|Foreign exchange gain and finance income on                  |  |                    |  |  |              |  
|VAT loan, net of tax                                         |  | -                  |  |  | -            |  
|Reduction in taxes due to loss on                            |  |                    |  |  |              |  
|intercompany loan                                            |  | -                  |  |  | -            |  
|Impact of foreign exchange on deferred income                |  |                    |  |  |              |  
|tax assets and liabilities                                   |  | 1,844              |  |  | 5,542        |  
|Transaction costs and break fees                             |  | 689                |  |  | -            |  
|Prior period benefit of APA filing                           |  | -                  |  |  | (32,972      | )
|Adjusted net income                                          |  | 4,528              |  |  | 4,685        |  
|                                                             |  |                    |  |  |              |  
|Adjusted net income per share                                |  | 0.05               |  |  | 0.05         |  
|                                                             |  |                    |  |  |              |  
|Weighted average number of common shares outstanding (basic) |  | 93,406,583         |  |  | 88,253,347   |  

24

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Non  GAAP measure - Operating cash flows before working
capital changes

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

|                                                          |  | Three months ended |   |  | Year ended   | 
|--------------------------------------------------------- |  | ------------------ | - |  | ------------ | 
|(In thousands of US dollars)                              |  | December 31,       |   |  | December 31, | 
|                                                          |  | 2012               |   |  | 2011         | 
|Cash provided by operating activities                     |  | 28,509             |   |  | 13,037       | 
|Change in non-cash operating working capital              |  | (10,734            | ) |  | 1,565        | 
|Operating cash flows before working capital
      changes |  | 17,775             |   |  | 14,602       | 

25

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

LIQUIDITY AND CAPITAL RESOURCES

YEAR ENDEDDECEMBER31,2012COMPARED WITH YEAR ENDEDDECEMBER31,2011As at December 31, 2012, the Company had
cash of $139.2 million (December 31, 2011 - $80.8 million), and working capital
of $110.9 million (December 31, 2011  $53.4 million).

Net cash flows for the year ended December 31, 2012 and 2011
were as follows:

(In thousands of US dollars)
      
      Year ended December 31,2012
      
      
      2011Cash Flow:
      
      $
      
      
      $Provided by operating activities
      
      114,210
      
      
      152,565Used in investing activities
      
      (38,548
      )
      
      (28,298
      )Used in financing activities
      
      (16,542
      )
      
      (101,107
      )Effect of exchange rate changes on cash
      
      (637
      )
      
      (697
      )Increase in cash
      
      58,483
      
      
      22,463Cash, beginning of period
      
      80,761
      
      
      58,298Cash, end of period
      
      139,244
      
      
      80,761


Operating activities

During the year ended December 31, 2012, the Companys net cash
flows provided by operating activities were $114.2 million, being cash flows
before changes in working capital of $88.8 million and changes in non-cash
working capital of $25.4 million. The cash flows before changes in working
capital primarily comprised cash earnings from mine operations of $108.6
million, offset by cash general and administrative costs of $14.9 million,
income taxes paid of $2.0 million and realized foreign exchange losses of $0.9
million. The change in non-cash working capital of $25.4 million resulted
primarily from a decrease in taxes receivable of $14.6 million as a result of
the collection of taxes after filing the APA application in October 2011, as
well as an increase of $7.6 million in payables.

During the year ended December 31, 2011, the Companys net cash
flows provided by operating activities were $152.6 million, comprising cash
flows before changes in working capital of $77.6 million and changes in non-cash
working capital of $75.0 million. Cash flows before changes in working capital
primarily comprised cash earnings from mine operations of $93.5 million and the
break-fee from the termination of the Northgate arrangement agreement, net of
transaction costs, of $18.3 million, offset by cash general and administrative
costs of $12.6 million, income taxes paid of $17.4 million, and cash (net of
sales proceeds) to purchase silver call option contracts of $4.1 million. The
change in non-cash working capital was an inflow of $75.0 million mainly due to
the collection of VAT receivable from the Mexican government of $87.2 million,
offset by a decrease in payables of $9.2 million and a decrease in inventory of
$4.4 million.

26

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Investing activities

Cash flows used in investing activities were $38.5 million in
2012, compared with $28.3 million in 2011. Substantially all of the outflows in
both 2012 and 2011 were for capital expenditures at the San Dimas mine, mainly
being exploration and delineation drilling and drifting and mine development.
Interest received in the year ended December 31, 2012 was $1.2 million and $2.8
million for the same period in 2011; both amounts primarily related to interest
earned on tax refunds in Mexico.

Financing activities

The Company used $16.5 million of cash for financing activities
in 2012, being the repayment of the first and second $5 million instalments
under the promissory note and $7.2 million of interest thereon, as well as $1.9
million of interest paid on the convertible note prior to conversion (see
Debt below). These payments were offset by cash inflows of $2.5 million
upon the exercise of stock options. The Company used $101.1 million of cash for
financing activities in 2011, being the repayment of the $70.0 million VAT loan,
$30 million of the convertible note and $2.2 million of interest thereon, offset
by $1.0 million of proceeds on the exercise of options and warrants.

THREE MONTHS ENDEDDECEMBER31,2012COMPARED WITH THREE MONTHS ENDEDDECEMBER31,2011

Net cash flows for the three months ended December 31, 2012 and
2011 were as follows:

Three months ended(In thousands of US dollars)
      
      December 312012
      
      
      2011Cash Flow:
      
      $
      
      
      $Provided by operating activities
      
      28,509
      
      
      13,037Used in investing activities
      
      (16,915
      )
      
      (8,691
      )Used in financing activities
      
      (5,228
      )
      
      (31,077
      )Effect of exchange rate changes on cash
      
      (252
      )
      
      265Increase in cash
      
      6,114
      
      
      (26,466
      )Cash, beginning of period
      
      133,130
      
      
      107,227Cash, end of period
      
      139,244
      
      
      80,761


Operating activities

During the three months ended December 31, 2012, the Companys
net cash flows provided by operating activities were $28.5 million, being cash
flows before changes in working capital of $17.8 million and changes in non-cash
working capital of $10.7 million. The cash flows before working capital changes
primarily comprised cash earnings from mine operations of $24.7 million, offset
by cash general and administrative costs of $4.9 million and income taxes paid
of $0.5 million. Non-cash working capital changes of $10.7 million mainly relate
to an increase in payables.

During the three months ended December 31, 2011, the Companys
net cash inflows from operating activities were $13.0 million, being cash flows
before changes in working capital of $14.6 million offset by changes in non-cash working capital of $1.6 million. The
cash flows before working capital changes of $14.6 million mainly comprised cash
earnings from mine operations of $20.0 million, offset by cash general and
administrative costs of $3.8 million and income taxes paid of $0.5 million. The
outflow from non-cash working capital changes of $1.6 million mainly relates to
an increase in inventories of $3.5 million, partially offset by a decrease in
prepaid expenses of $1.9 million.

27

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Investing activities

Cash flows used in investing activities were $16.9 million for
the three months ended December 31, 2012, compared with $8.7 million for the
same period in 2011. Substantially all of the outflows in both 2012 and 2011
were for capital expenditures at the San Dimas mine, mainly being exploration
and delineation drilling and drifting and mine development.

Financing activities

In the three months ended December 31, 2012, the Company used
$5.2 million of cash for financing activities, comprising the repayment of the
second $5 million installment of the promissory note and $2.8 million of
interest thereon (see Debt below), offset by $2.5 million of cash
inflows from the exercise of stock options during the quarter.

The Company used $31.1 million of cash for financing activities
in the fourth quarter of 2011, being the $30 million repayment of principal on
the convertible note and $1.1 million of interest thereon.

Debt

On August 6, 2010, in connection with
the acquisition of the San Dimas Mine, the Company issued the following debt
instruments:

| | (i) | A convertible promissory note (the Note) in the
      principal amount of $60 million with an annual interest rate of 3%, to
      DMSL, which DMSL immediately assigned to Goldcorp. The Note was repayable
      in cash by the Company at any time or convertible, at any time up to the
      maturity date (being the Initial Maturity Date or the Second Maturity
      Date), by Goldcorp at a conversion price of Cdn$6.00 per share. In
      determining the number of common shares to be issued on conversion, per
      the Note, the principal amount would be translated into Canadian dollars
      by multiplying that amount by 1.05.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | On the first anniversary of the Note (Initial Maturity
      Date), the Note was repayable in cash or, at the option of Primero, in
      common shares at 90% of the volume weighted average trading price of the
      common shares for the five trading days ending immediately prior to the
      Initial Maturity Date (the Maturity Conversion Price). If on the Initial
      Maturity Date, Primero served notice to convert (Debtor Conversion
      Notice), Goldcorp had the right to extend the maturity Date until the
      second anniversary of the Note (the Second Maturity Date). On July 20,
      2011, Primero served notice to Goldcorp to convert the Note into common
      shares of the Company and on August 4, 2011, Goldcorp elected to extend
      the maturity date of the Note until the Second Maturity Date, which gave
      the Company the right to (1) pay the principal amount in cash immediately
      or (2) convert the debt to shares on the Second Maturity Date at
      a price equal to the greater of a) the Maturity Conversion Price (which
      was Cdn$3.74) and b) 90% of the volume weighted average trading price of
      the common shares for the five trading days ending immediately prior to
  the Second Maturity Date.

28

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

| |       | On October 19, 2011, the Company used its cash resources
      to repay $30 million of the Note plus $1.1 million of accrued
    interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |       | On July 24, 2012, the Companys board of directors
      resolved to repay the remaining $30 million Note on its maturity date of
      August 6, 2012, in common shares. The conversion price was Cdn$3.74, being
      the greater of the Maturity Conversion Price and 90% of the volume
      weighted average trading price of the Companys common shares for the five
      trading days ended August 6, 2012 (Cdn$3.13). Accordingly, 8,422,460
      common shares were issued to Goldcorp on August 7, 2012 and the Company
      paid accrued interest of $1.9 million in cash on the same date.                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (ii)  | A promissory note in the principal amount of $50 million
      with an annual interest rate of 6% to DMSL, which DMSL subsequently
      assigned to a wholly-owned Luxembourg subsidiary of Goldcorp. The
      promissory note is repayable in four annual installments of $5 million,
      starting on December 31, 2011, with the balance of principal due on
      December 31, 2015. On January 3, 2012, the Company repaid the first $5
      million annual installment plus accrued interest of $4.4 million. The
      second annual installment of $5 million plus accrued interest of $2.8
      million was paid on December 31, 2012. In addition to the annual
      installments, the Company is required to pay 50% of annual excess free
      cash flow (as defined in the promissory note) against the principal
      balance. The Company generated excess free cash flow of $15.6 million
      during the year ended December 31, 2012 and accordingly will pay $7.8
      million to the note holder by April 30, 2013.
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (iii) | A non-revolving term credit facility of $70 million from
      the Bank of Nova Scotia to partly pay $80.6 million of VAT due to the
      Mexican government on the acquisition of the San Dimas Mine. On July 4,
      2011, the Company received a refund of $87.2 million, being the VAT of
      $80.6 million plus interest and foreign exchange gains due to the
      strengthening of the Mexican peso against the US dollar since the August
      2010 acquisition date. Concurrently with the receipt of the VAT from the
      Mexican government, the Company repaid all outstanding principal and
      interest on the $70 million non-revolving term credit facility with the
      Bank of Nova Scotia.                                                                                                                                                                                                                                                                                                                        

The Company is subject to a number of externally imposed
capital requirements relating to its debt. The requirements are both financial
and operational in nature; the Company has complied with all such requirements
during the period.

Pursuant to the terms of the promissory note the Company is
required to maintain the following financial covenants:

| |  | Tangible net worth as at the end of each fiscal quarter
      of at least $400 million, and                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Commencing the quarter ended September 30, 2011, free
      cash flow of at least $10 million, calculated on a rolling four fiscal
      quarter basis.

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Tangible net worth means equity less intangible assets. Free
cash flow means cash flow from operating activities as reported in the
consolidated statement of cash flows, less the aggregate of capital expenditures
at the San Dimas mine, principal and interest on the promissory note and
convertible debt and up to $5 million per year on account of acquisition
opportunities.

Liquidity Outlook

As at December 31, 2012, the Company had cash of $139.2 million
and working capital of $110.9 million. Management estimates that San Dimas will
generate average annual after-tax operating cash flows over the next five years
of approximately $120 million. The Company expects its current cash resources,
as well as ongoing cash flow from the San Dimas mine, will be sufficient to fund
its operations and certain potential acquisition opportunities for the
foreseeable future.

When the Company purchased the San Dimas mine it assumed a
silver purchase agreement under which the majority of silver produced at the
mine was sold at a fixed price of approximately $4 per ounce. Initially the
Company paid income taxes in Mexico based on sales under the silver purchase
agreement at the spot price. This meant that the Company lost approximately $5
after tax on every ounce of silver sold under the silver purchase agreement. In
October 2011, the Company filed an advance pricing agreement (APA) with the
Mexican tax authorities for a ruling on the appropriate price of silver for the
purposes of computing taxes on sales under the silver purchase agreement. Since
filing the APA, the Company recorded revenue under the silver purchase agreement
and paid taxes based on realized prices.

On October 4, 2012, the Company received a positive ruling from
the Mexican tax authorities on the APA filing. The ruling confirmed that the
Company's Mexican subsidiary appropriately records revenue and taxes from sales
under the silver purchase agreement at realized prices rather than spot prices
effective from August 6, 2010. This ruling significantly improves the Companys
cash flow over the duration of the ruling (under Mexican tax law, an APA ruling
is generally applicable for up to a five year period; for Primero this applies
to the fiscal years 2010 to 2014). Assuming the Company continues to sell silver
from its San Dimas mine on the same terms and there are no changes in the
application of Mexican tax laws relative to the APA ruling, the Company expects
to pay taxes on realized prices for the life of the San Dimas mine.

During the year ended December 31, 2012, the Company received
$22.2 million as a full refund of previously overpaid taxes.

On December 13, 2012, the Company announced that it has entered
into a definitive agreement with Cerro Resources NL ("Cerro") whereby Primero
will acquire all of the issued and outstanding common shares of Cerro by way of
a scheme of arrangement (the Arrangement) under the Australian Corporations
Act 2001. Cerro is an exploration and development company whose principal asset
is 69%1of the feasibility stage Cerro Del Gallo project, a
gold-silver deposit located in the province of Guanajuato, Mexico. Under the
terms of the Arrangement, each Cerro shareholder will receive 0.023 of a Primero
common share (the "Exchange Ratio") for each Cerro common share held.
Additionally Cerro shareholders will receive 80.01% of the common shares of a
newly incorporated company ("Spinco"). Spinco will assume Cerro's interests in
the Namiquipa, Espiritu Santo, Mt Philp and Kalman projects, shares in
Syndicated Metals Limited and approximately $4 million in cash. Primero will
purchase a 19.99% interest in Spinco with anti-dilution rights for two years.
The total transaction value is approximately $119 million. Cerro's outstanding
options and its option plan will be substantially assumed by Primero, subject to
adjustment to reflect the Exchange Ratio and a corresponding upward adjustment
in the exercise price. The transaction is expected to close in May 2013.

30

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

The Cerro del Gallo project is planned to be constructed in two
phases. The information in this paragraph on the first phase project was derived
from the June 2012 Definitive Feasibility Study and the information on the
second phase from the May 2011 Preliminary Economic Assessment, both prepared by
Cerro. Primero plans to complete its own optimization studies. The first stage
project is based on the treatment of 4.5 million tonnes per year of mixed,
weathered and partially oxidized ore from a prominent dome shaped hill. The mine
is envisaged to consist of an owner operated open pit operation and heap
leaching to produce a gold dore product and a metal sulphide (predominantly
copper and silver) by-product from a sulphidisation, acidification, recycle and
thickening (SART) process. The first stage project has an estimated capital cost
of $154 million, a mine life of 7.2 years and average annual production,
starting in mid-2015 of 94,600 gold equivalent ounces. The second stage
carbon-in-leach (CIL)/Heap Leach project encompasses the addition of a 3.0
million tonnes per annum CIL processing facility to run in parallel with heap
leach processing fresh rock as mining proceeds to depth. The second stage has an
estimated incremental capital cost of $83 million and is contemplated to
commence in the fifth year, thereby extending mine life to approximately 14
years.

Management is currently working with Cerro employees to
transition the Cerro del Gallo project. Over the next year it is anticipated
that the land for the project will be acquired, engineering will be completed,
environmental permitting and risk assessment will be completed and construction
of the facilities will commence. Costs of $50 million to $60 million are
expected to be incurred during 2013 and a further $80 million in 2014. Given the
location of the project and in particular its proximity to excellent
infrastructure and its relative lack of complexity, the Company believes that
the risk of significant capital cost overruns are limited. Assuming the Company
completes the Cerro acquisition as planned, it expects to fund these costs from
its existing cash balances and from operating cash flow generated by San
Dimas.

In order to enhance its financial flexibility, the Company is
in negotiations with a major financial institution to secure a revolving line of
credit of $50 million. Under the terms of the silver purchase agreement, the
Company can arrange financing for up to $50 million without Silver Wheatons
consent. After the third anniversary of the acquisition of San Dimas and after
the Goldcorp promissory is fully repaid, the limitation on the amount of
financing disappears, provided the Company meets certain standard coverage
ratios. The Company expects to close the line of credit during 2013.

Related party transactions

The Company has a promissory note outstanding to a wholly-owned
subsidiary of Goldcorp. At December 31, 2012, Goldcorp owned approximately 32.0%
of the Companys common shares. Interest accrues on the promissory and is
recorded within trade and other payables. A payment of $5 million plus accrued
interest of $4.4 million was paid under the terms of the promissory note on
January 3, 2012, and a second payment of $5 million plus accrued interest of
$2.8 million was paid on December 31, 2012. In addition to the annual
installments, the Company is required to pay 50% of annual excess free cash flow
(as defined in the promissory note) against the principal balance. The Company
generated excess free cash flow of $15.6 million during the year ended December
31, 2012 and accordingly will pay $7.8 million to the note holder by April 30,
2013.

On August 7, 2012, the Company repaid the $30 million
convertible note due to Goldcorp by issuing 8,422,460 common shares and paying
accrued interest of $1.9 million in cash. Principal of $30 million and interest
of $1.1 million were paid in relation to the convertible note during 2011.

During the year ended December 31, 2012, $2.5 million (2011 -
$3.8 million) was paid to DMSL (a subsidiary of Goldcorp) for the purchase of
equipment, equipment leasing fees and services received under a transition
services agreement between the Company and DMSL. These amounts are considered
to be at fair value. As at December 31, 2012, the Company had
an amount payable of $2.3 million outstanding to DMSL (2011 - $2.9 million). As
at December 31, 2012, the Company had an amount owing from Goldcorp Inc. of $0.3
million (2011 - $nil).

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Shares issued

The Company issued 8,422,460 shares to Goldcorp during the year
ended December 31, 2012, upon the conversion of the $30 million convertible note
(see RECENT CORPORATE DEVELOPMENTS above). In addition, 523,331 shares were
issued upon the exercise of stock options

Outstanding Share Data

Shareholders equity as at December 31, 2012 was $571.7 million
compared to $487.8 million as at December 31, 2011.

Share Capital

As at December 31, 2012 and the date of this MD&A, the
Company had 97,205,622 common shares outstanding (88,259,831 as at December 31,
2011).

Options

As at December 31, 2012, the Company had 7,804,490 options
outstanding with a weighted average exercise price of Cdn$5.57; of these
7,469,490 were exercisable with a weighted average exercise price of $5.65. As
at the date of this MD&A, the total number of options outstanding was
7,804,490, of which 7,469,490 are exercisable.

Common Share Purchase Warrants

As at December 31, 2012, the Company had a total of 20,800,000
common share purchase warrants outstanding with a weighted average exercise
price of Cdn$8.00 per share. As at the date of this MD&A, the total number
of common share purchase warrants outstanding was 20,800,000, all of which are
exercisable. On February 6, 2012, 476,980 brokers warrants with an exercise
price of Cdn$6.00 expired.Directors PSUs

As at December 31, 2012, the Company had 76,924 Directors PSUs
outstanding, of which 38,462 PSUs vest on December 1, 2013 and expire on
December 31, 2013 and 38,462 PSUs vest on December 1, 2014 and expire on
December 31, 2014. A person holding Director PSUs is entitled to elect to
receive, at vesting either (1) a cash amount equal to the volume weighted
average trading price per common share over the five preceding trading days, or
(2) the number of common shares equal to the number of Directors PSUs (subject
to the total number of common shares issuable at any time under the Directors
PSU Plan, combined with all other common shares issuable under any other equity
compensation arrangements then in place, not exceeding 10% of the total number
of issued and outstanding common shares of the Company). If no election is made,
the Company will pay out such Directors PSUs in cash.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

32

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

ADOPTION OF NEW ACCOUNTING POLICIES

Changes in accounting policies

During the third quarter 2012, it was identified that during
its transition to IFRS, the Company had not taken into account a methodology
difference between Canadian GAAP and IFRS with respect to translation of
deferred tax assets and liabilities denominated in a currency other than the
Companys functional currency (the US dollar) (see Restated results above). As
a result of the identification of this methodology difference, the Company
changed its accounting policy with respect to deferred tax assets and
liabilities in order that it records foreign exchange gains and losses
representing the impacts of movements in foreign exchange rates on the tax bases
of non-monetary assets and liabilities which are denominated in foreign
currencies. Foreign exchange gains and losses relating to deferred income taxes
are included in deferred income tax expense or recovery in the Consolidated
Statements of Operations and Comprehensive Income.

Other than this change, the Company has made no changes to its
accounting policies during the year ended December 31, 2012.

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: IFRS 13
Fair Value Measurement(IFRS 13) was issued by the IASB in May 2011,
and is effective for annual periods beginning on or after January 1, 2013, with
early application permitted. IFRS 13 was issued to remedy the inconsistencies in
the requirements for measuring fair value and for disclosing information about
fair value measurement in various current IFRSs. IFRS 13 defines fair value as
the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date.

IFRS 13 relates to how to measure fair value, not what should
be measured at fair value. As at December 31, 2012, the Company recognizes no
assets or liabilities to which IFRS 13 would apply.

In October 2011, the IASB issued IFRIC 20 - Stripping Costs
in the Production Phase of a Mine (IFRIC 20). IFRIC 20 clarifies the
requirements for accounting for the costs of stripping activities in the
production phase of an open-pit mine when two benefits accrue: (i) usable ore
that can be used to produce inventory and (ii) improved access to further
quantities of material that will be mined in future periods. The IFRIC allows a
company to determine a measure to allocate costs between inventory produced and
the stripping activity asset; the IFRIC provides examples of measures.

IFRIC 20 is effective for annual periods beginning on or after
January 1, 2013 with earlier adoption permitted and includes guidance on
transition for pre-existing stripping assets. At present the Company has no open
pit mining operations and as such is not impacted by this new standard. Cerro
del Gallo will be an open pit mine and assuming the acquisition of Cerro
completes as planned, the Company will apply the provisions of IFRIC 20 from
initial recognition, and will develop a policy for allocation of costs.

In June 2011, the IASB issued amendments to IAS 1 
Presentation of Financial Statements (IAS 1). The amendments are
effective for annual periods beginning on or after July 1, 2012, with early
adoption permitted. The amendments to IAS 1 require companies preparing
financial statements in accordance with IFRS to group together items within
other comprehensive income (OCI) that may be reclassified to the profit or
loss section of the Consolidated Statement of Operations. The amendments also
reaffirm existing requirements that items in OCI and profit or loss should be
presented as either a single statement or two consecutive statements.

33

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

The only implication the amendments to IAS 1 has on the Company
is with respect to the balances shown in OCI. At December 31, 2012, the Company
only presented one amount in OCI; this related to the foreign exchange gains or
losses recognized upon translation of the parent company results from its
functional currency (CDN$) to the presentational currency (US$). This amount
would be unlikely to be recycled through the Statement of Operations in future,
as it relates to the parent company (and not a subsidiary which may be disposed
of in future). The fact that this amount will not be recycled through the
Statement of Operations will need to be disclosed in the notes to the financial
statements as a result of this change to IAS 1.

As of January 1, 2015, Primero will be required to adopt IFRS
9, Financial Instruments, which is the result of the first phase of the
IASBs project to replace IAS 39, Financial Instruments: Recognition and
Measurement. The new standard replaces the current multiple classification
and measurement models for financial assets and liabilities with a single model
that has only two classification categories: amortized cost and fair value.

As at December 31, 2012, the Company recognized and
classified/measured the following financial instruments in accordance with IAS
39:

Financial instrument
    Classification under IAS 39
    Measurement basis under IAS
      39Cash
    Loans and receivables
    Amortized costTrade and other receivables
    Loans and receivables
    Amortized costTrade and other payables
    Other financial liabilities
    Amortized costPromissory note
    Other financial liabilities
    Amortized cost


Under the current version of IFRS 9, each of these financial
instruments will have to be classified as either, amortized cost or fair value.
The Company would retain the same classifications as above, and based on an
analysis of the current version of IFRS 9, there would be no change to the
recognition of these financial instruments as a result of the adoption of IFRS
9.

There will likely be some disclosure differences for the
Company as a result of the transition from IAS 39 to IFRS 9.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

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

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Inventories

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

The Company records the costs of mining ore in process as
work-in-process inventories measured at the lower of cost and estimated net
realizable value. These costs are charged to income and included in operating
expenses on the basis of ounces of gold recovered. The estimates and assumptions
used in the measurement of work-in-process inventories include quantities of
recoverable ounces of gold and silver in the mill processing circuits and the
price per gold ounce expected to be realized when the ounces of gold are
recovered. If these estimates or assumptions prove to be inaccurate, the Company
could be required to write down the carrying amounts of its work-in-process
inventories, which would reduce the Companys income and working capital. At
December 31, 2012, the average costs of inventories are significantly below
their net realizable values.

Mining interests and impairment testing

The Company records mining interests at cost. Exploration costs
are capitalized where they meet the Companys criteria for capitalization.

A significant portion of the Companys mining properties are
depleted using the units-of-production method. Under the units-of-production
method, depletion of mining properties is based on the amount of reserves and
the portion of mineralization expected to be recovered from the mines. If
estimates of reserves and mineralization expected to be recovered prove to be
inaccurate, or if the Company revises its mining plan for a location, due to
reductions in the metal price forecasts or otherwise, to reduce the amount of
reserves and mineralization expected to be recovered, the Company could be
required to write down the carrying amounts of its mining properties, or to
increase the amount of future depletion expense, both of which would reduce the
Companys income and net assets.

The Company reviews and evaluates its mining properties for
impairment when events or changes in circumstances indicate that the related
carrying amounts may not be recoverable. For the year ended December 31, 2012,
no events or changes in circumstances were identified which would indicate an
impairment and as such no impairment review was performed. If the Company
determines there has been an impairment because its prior estimates of future
net cash flows have proven to be inaccurate, due to the Mexican tax authorities
changing their position with respect to their views on the appropriate price for
the sale of silver under the silver purchase agreement, reductions in the metal
price forecasts, increases in the costs of production, reductions in the amount
of reserves or mineralization expected to be recovered or otherwise, or because
the Company has determined that the deferred costs may not be recovered based on
current economics or permitting considerations, the Company would be required to
write down the carrying amounts of its mining properties, which would reduce the
Companys income and net assets.

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

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Fair value of assets purchased in a business
combination

The Companys business combinations are accounted for using the
acquisition method of accounting whereby assets acquired and liabilities assumed
are recorded at their fair values as of the date of acquisition and any excess
of the purchase price over such fair values is recorded as goodwill. No goodwill
has been recorded to date.

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

Reclamation and closure cost obligations

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

Taxation

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

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

The recoverability of deferred income tax assets and the
recognition and measurement of uncertain tax positions are subject to various
assumptions and management judgment. Actual results may differ from these
estimates. In circumstances where the applicable tax laws and regulations are
either unclear or subject to ongoing varying interpretations, it is reasonably
possible that changes in these estimates could occur that materially affect the
amounts of current and deferred income taxes recognized by the Company, as well
as deferred income tax assets and liabilities recorded at December 31, 2012.

36

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Share-based payments

For equity-settled awards, the fair value of the award is
charged to the statement of operations and credited to the share-based payment
reserve rateably over the vesting period, after adjusting for the number of
awards that are expected to vest. The fair value of the awards is determined at
the date of grant using the Black-Scholes option pricing model. To the extent
that the inputs into the Black-Scholes pricing model are inaccurate, there could
be an increase or decrease to the share-based payment charge to the statement of
operations.

Capital management

There have been no significant changes in the Companys
objectives, policies and processes for managing its capital, including items the
Company regards as capital, during the year ended December 31, 2012. At December
31, 2012, the Company expects its capital resources and projected cash flows
from continuing operations to support its normal operating requirements on an
ongoing basis, planned development and exploration of its mineral properties,
and other expansionary plans. At December 31, 2012, there were no externally
imposed capital requirements to which the Company is subject and with which the
Company had not complied.

Financial instruments

The Companys financial instruments at December 31, 2012
consist of cash, trade and other receivables, trade and other payables, and the
promissory note. At December 31, 2011, the Companys financial instruments also
included the convertible note and the derivative asset.

At December 31, 2012, the carrying amounts of cash, trade and
other receivables, and trade and other payables are considered to be reasonable
approximation of their fair values due to their short-term nature. The fair
value of the convertible note liability was determined on the date of issue
using a discounted future cash-flow analysis (the note was fully repaid in
August 2012 and so at December 31, 2012 had zero value). The fair value of the
promissory note upon initial recognition was considered to be its face value. At
December 31, 2012 the fair value of the promissory note was $39.3 million. The
Company had no derivative assets at December 31, 2012, however, previously these
assets were marked-to-market each period.

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 December 31, 2012
or December 31, 2011, other than those discussed below.

37

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

(i)         Derivative
contracts on silver

On March 18, 2011, the Company entered into a series of monthly
call option contracts to purchase 1,204,000 ounces of silver at $39 per ounce
for a total cost of $2.2 million. These contracts were designed to mitigate the
adverse tax consequences of the silver purchase agreement while at the same time
exposing the Company to gains from a potential rise in silver prices. The
contracts covered approximately two-thirds of the monthly silver production sold
to Silver Wheaton Caymans over the period April 1, 2011 to September 30, 2011.
All contracts under the March 18, 2011 purchase had expired by December 31,
2011, realizing a net loss of $0.4 million.

On September 15, 2011, the Company entered into a second series
of monthly call option contracts to purchase 1,489,400 ounces of silver at $49
per ounce for a total cost of $3.7 million. These contracts were designed to
cover approximately 30% of the monthly silver production sold to Silver Wheaton
Caymans over the period September 27, 2011 to September 26, 2012. These options
were intended to offset the incremental income tax that would be payable by the
Company if spot prices exceed the strike price. The fair value of these
contracts (which were accounted for as a derivative asset) was $0.2 million at
December 31, 2011, based on current and available market information. A realized
loss on expired contracts of $0.4 million and an unrealized marked-to-market
loss on unexpired contracts of $3.2 million were recognized by the Company in
the year ended December 31, 2011. In the year ended December 31, 2012, the
Company recognized a further loss on these contracts of $0.2 million.

On August 30, 2012, the Company entered into a third series of
monthly call option contracts to purchase 548,000 ounces of silver at $33 per
ounce for a total cost of $0.5 million. These contracts were designed to cover
approximately 30% of the monthly silver production sold to Silver Wheaton
Caymans over the period August 30, 2012 to December 31, 2012. and were intended
to offset the incremental income tax that would be payable by the Company if
spot prices exceed the strike price. In the year ended December 31, 2012, the
Company realized a loss on the sale of contracts of $23.

All silver call option contracts had expired by December 31,
2012. As a result of the APA ruling, the Company does not expect to purchase
silver call option contracts in the future.

(ii)        Convertible note
and promissory note

At both December 31, 2011 and 2012, the fair value of the
conversion feature of the convertible note was $nil. This resulted in a $nil
gain or loss on this non-hedge derivative during 2012, and an unrealized gain of
$2.6 million during 2011.

The fair value of the convertible note liability was determined
  using a statistical model, which contained quoted prices and market-corroborated
  inputs. The fair value of the promissory note upon initial recognition was considered
  to be its face value.

38

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

RISKS AND UNCERTAINTIES

Financial instrument risk exposure

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

(a)        Credit risk

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

The Company closely monitors its financial assets, invests its
cash in highly rated financial institutions and sells its products exclusively
to organizations with strong credit ratings. The credit risk associated with
trade receivables at December 31, 2012 is considered to be negligible.

The Companys maximum exposure to credit risk at December 31,
2012 and 2011 was as follows:

|                            |  | 2012    |  |  | 2011   | 
|--------------------------- |  | ------- |  |  | ------ | 
|                            |  | $       |  |  | $      | 
|                            |  |         |  |  |        | 
|Cash                        |  | 139,244 |  |  | 80,761 | 
|Trade and other receivables |  | 3,792   |  |  | 5,526  | 
|Taxes receivable            |  | 5,914   |  |  | 20,969 | 

(b)        Liquidity risk

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

In the normal course of business, the Company enters into
contracts and performs business activities that give rise to commitments for
future minimum payments. The following table summarizes the contractual
maturities of the Companys financial liabilities and operating and capital
commitments at December 31, 2012:

39

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

December31December 31, 2012
      
      
      2011Within
      
      
      
      
      
      Over1 year
      
      
      2-5
        years
      
      
      5 years
      
      
      Total
      
      
      Total$
      
      
      $
      
      
      $
      
      
      $
      
      
      $Trade and other payables
      
      23,645
      
      
      -
      
      
      -
      
      
      23,645
      
      
      20,553Share-based compensation payable (PSUP)
      
      12,874
      
      
      3,990
      
      
      
      
      
      16,864
      
      
      2,926Taxes payable
      
      2,209
      
      
      -
      
      
      6,055
      
      
      8,264
      
      
      4,213Convertible debt and interest
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      31,846Promissory note and interest
      
      14,933
      
      
      30,263
      
      
      -
      
      
      45,196
      
      
      63,900Minimum rental and operating lease payments
      
      941
      
      
      1,895
      
      
      -
      
      
      2,836
      
      
      1,115Reclamation and closure cost obligations
      
      2,352
      
      
      2,283
      
      
      24,234
      
      
      28,869
      
      
      19,362Commitment to purchase
        plant and equipment
      
      3,694
      
      
      -
      
      
      -
      
      
      3,694
      
      
      69460,648
      
      
      38,431
      
      
      30,289
      
      
      129,368
      
      
      144,609


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

The total operating lease expense during the year ended
December 31, 2012 was $0.6 million (2011 - $1.5 million).

|(c) | Market risk
|--- | -----------
|    |            
|    | (i)        
|    |            
|    |            
|    |            
|    |            

40

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

| |       | The Company does not currently use derivative instruments
      to reduce its exposure to currency risk, however, management monitors its
      differing currency needs and tries to reduce its exposure to currency
      risks through exchanging currencies at what are considered to be optimal
      times.                                                                                                                                                                                                                                                                                                                                                                           
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (ii)  | Interest rate risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |       | Interest rate risk is the risk that the fair values and
      future cash flows of the financial instruments will fluctuate because of
      changes in market interest rates. The exposure to interest rates is
      monitored. The Company has very limited interest rate risk as the net
      exposure of financial instruments subject to floating interest rates is
      not material.                                                                                                                                                                                                                                                                                              
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (iii) | Price risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |       | Price risk is the risk that the fair value or future cash
      flows of the Companys financial instruments will fluctuate because of
      changes in commodity prices. Profitability depends on sales prices for
      gold and silver. Metal prices are affected by numerous factors such as the
      sale or purchase of gold and silver by various central banks and financial
      institutions, interest rates, exchange rates, inflation or deflation,
      fluctuations in the value of the U.S. dollar and foreign currencies,
      global and regional supply and demand, and the political and economic
      conditions of major producing countries throughout the world.
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |       | The table below summarizes the impact on after-tax
      earnings of a 10% change in the average commodity price achieved by the
      Company during the year. The analysis is based on the assumption that the
      gold and silver prices move 10% with all other variables held
    constant.                                                                                                                                                                                                                                                                                                                                                                                          

December 31, 2012
    
    
    December 31, 2011$000s
    
    
    $000sGold prices10% increase
    
    10,166
    
    
    8,46710% decrease
    
    (10,166
    )
    
    (8,467
    )Silver prices10% increase
    
    1,405
    
    
    1,31710% decrease
    
    (1,405
    )
    
    (1,317
    )


Other risks and uncertainties

The Companys business contains significant risk due to the
nature of mining, exploration, and development activities. For additional
discussion of these and other risk factors, please refer to the Companys Annual
Information Form for the year ended December 31, 2011, which is available on the
Companys website at www.primeromining.com or on SEDAR at www.sedar.com, or to
the Companys Annual Information Form for the year ended December 31, 2012,
which is expected to be filed by March 31, 2013 and will be found under the
Companys profile at www.sedar.com.

41

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

APA ruling

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

Risks related to Cerro

On December 13, 2012, The Company announced that it has entered
into a definitive agreement with Cerro whereby Primero will acquire all of the
issued and outstanding common shares of Cerro by way of a scheme of arrangement
under the Australian Corporations Act 2001. The transaction will be carried out
by way of a court-approved scheme of arrangement and will require approval by at
least 75% of the votes cast by at least 50% of the shareholders of Cerro at a
special meeting of Cerro shareholders. Approval of Cerro's option holders will
also be required. The transaction is also subject to applicable regulatory
approvals and the satisfaction of certain other closing conditions customary in
transactions of this nature. There can be no assurance Cerro shareholders will
approve the transaction or that the applicable regulatory approvals will be
attained or that the necessary closing conditions will be satisfied.

Assuming the Cerro acquisition is completed as planned, there
  can be no assurance that the assumptions underlying the acquisition will not
  be impacted by unanticipated changes in the business, industry or general economic
  conditions. Furthermore, permitting for and construction of the Cerro del Gallo
  mine might be delayed, which could reduce or delay cash flows from the project.
  In addition, Goldcorp, which owns a 31% interest in the Cerro del Gallo project
  might not convert its interest into a 10% net profit interest, which could affect
  Primeros future returns from the project.

Effectiveness of internal control over financial
reporting

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

42

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Restatement of consolidated financial statements

The Company restated its consolidated financial statements and
other financial information for the years ended December 31, 2011 and 2010, the
three months ended March 31, 2012 and 2011, the three and six months ended June
30, 2012 and 2011 and the three and nine months ended September 30, 2011 and
2010 with respect to accounting for deferred income taxes in accordance with
IFRS. The restatement of prior financial statements may expose the Company to
risks associated with litigation, regulatory proceedings and government
enforcement actions, including the risk that securities regulators may disagree
with the manner in which the Company has accounted for and reported the
financial impact.

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 as at December 31, 2012. Based on the results
of that evaluation, the Companys CEO and CFO have concluded that, as of the end
of the period covered by this report, the Companys disclosure controls and
procedures were effective to provide reasonable assurance that the information
required to be disclosed by the Company in its annual filings, interim filings
or other reports filed or submitted by it under securities legislation is
recorded, processed, summarized and reported, within the time periods specified
in the securities legislation, and is accumulated and communicated to the
Companys management, including the CEO and CFO, as appropriate to allow timely
decisions regarding required disclosure.

INTERNAL CONTROLS OVER FINANCIAL REPORTING

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

 pertain to the maintenance of records that accurately and
fairly reflect, in reasonable detail, the transactions and dispositions of
assets of the Company;  provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with IFRS and that the Companys receipts and expenditures are made
only in accordance with authorizations of management and the Companys
Directors; and  provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the Companys
assets that could have a material effect on the Companys consolidated financial
statements.

During the third quarter ended September 30, 2012, the Company
engaged an external tax consultant to perform a review of its third quarter 2012
taxation working papers to ensure compliance with IFRS. Management also amended
its period close procedures to include procedures to more closely monitor accounting for deferred income taxes in accordance with IFRS.
On an ongoing basis, these amended close procedures will include the review of
the Companys taxation working papers at the end of every quarter by the
external tax consultant or by an in-house tax expert if one is hired. This was
the only material change in internal control over financial reporting of the
Company during the year ended December 31, 2012.

43

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

As a result of the engagement, the Company identified a
deficiency in internal control over financial reporting that led to the Company
restating its audited financial statements for the years ended December 31, 2011
and 2010 and its unaudited financial statements for the three months ended March
31, 2012 and 2011, the three and six months ended June 30, 2012 and 2011 and the
three and nine months ended September 30, 2011 and 2010. The Companys restated
consolidated financial statements for the years ended December 31, 2011 and 2010
and its amended and restated MD&A for the year ended December 31, 2011 have
been filed on SEDAR. The restatements related to the financial statements for
the three months ended March 31, 2012 and 2011, the three and six months ended
June 30, 2012 and2011 and the three and nine months ended September 30, 2011 and
2010 were disclosed in the notes to the financial statements for the three and
none months ended September 30, 2012. Additional disclosure as to the
effectiveness of the Companys internal control over financial reporting as at
December 31, 2011 and remedial measures undertaken by the Company with respect
to internal control over financial reporting are provided in the amended and
restated MD&A for the year ended December 31, 2011 under Internal control
over financial reporting, as restated.

As of December 31, 2012, an evaluation was carried out, under
the supervision of the CEO and CFO, of the design and operating effectiveness of
the Companys internal controls over financial reporting. Based on this
evaluation, the CEO and CFO concluded that the internal controls over financial
reporting are designed and were operating effectively as at December 31, 2012 to
provide reasonable assurance that the Companys financial reporting is reliable
and that the preparation of the Companys financial statements for external
purposes were prepared in accordance with IFRS.

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 Statement
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, future gold and silver
production and the requirement for future financings. Forward looking
information and statements in this MD&A include those that relate to:

- the ability of the Company to expand production at the San Dimas mine,
- the ability of the Company to complete the acquisition of Cerro,

44

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

- the ability of the Company to identify appropriate future acquisition
  opportunities, or if an opportunity is identified, to conclude a transaction
  on satisfactory terms,
- the actual results of exploration activities, including the ability of the
  Company to continue the historical conversion of resources to reserves at the
  San Dimas mine,
- actual results of reclamation activities at the San Dimas mine,
- the estimation or realization of Mineral Reserves and Resources,
- the timing and amount of estimated future production (including from Cerro
  del Gallo), capital expenditures and costs (including in relation to Cerro del
  Gallo), including forecasted cash costs,
- the timing of the development of new mineral deposits,
- the Companys requirements for additional capital and ability to complete
  future financings,
- future prices of precious and base metals,
- expected ore grades, recovery rates, and throughput
- that plant, equipment or processes will operate as anticipated,
- the occurrence of accidents, labour disputes, road blocks and other risks
  of the mining industry,
- the ability of the Company to obtain governmental approvals or permits in
  connection with the continued operation and development of the San Dimas mine
  and the Cerro del Gallo mine, after completion of the acquisition of Cerro,
- the continuation of Mexican tax laws relative to the APA ruling,
- the ability of the Company to continue to pay taxes in Mexico based on
  realized prices of silver,
- the ability of the Company to comply with environmental, safety and other
  regulatory requirements,
- the completion of development or construction activities, including the
  construction of the Cerro del Gallo mine, after completion of the acquisition
  of Cerro,
- expectations regarding currency fluctuations,
- title disputes relating to the Companys properties,
- the timing and possible outcome of pending litigation,
- the ability of the Company to maintain effective control over financial
  reporting.

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 proceeds
on a basis consistent with current expectations and the Company does not change
its development and exploration plans; that the Company will close the Cerro
acquisition and that the Cerro del Gallo mine 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 Sinaloa Graben/Central Block
tunnel; 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, including the imposition of mining royalties;
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.

45

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

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, exploration and development plans;
insufficient capital to complete mill expansion, development and exploration
plans; risks associated with completing the Cerro acquisition and developing the
Cerro del Gallo mine; currency fluctuations; financing of additional capital
requirements; cost of exploration and development programs; inability to
complete the Sinaloa Graben/Central Block tunnel 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.

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, 2011 as filed on SEDAR, as well as the Companys Annual
Information Form for the year ended December 31, 2012, which is expected to be
filed by March 31, 2013, under the heading Risk Factors 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.

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PRIMERO MINING CORP.MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Cautionary Note for United States Investors

As a British Columbia corporation and a reporting issuer
under Canadian securities laws, the Company is subject to certain rules and
regulations issued by Canadian Securities Administrators. The Company is
required to provide detailed information regarding its properties including
mineralization, drilling, sampling and analysis, on security of samples and
mineral reserve estimates under Canadian National Instrument 43-101 (NI
43-101). The United States Securities and Exchange Commission applies different
standards than the standards under NI 43-101 in order to classify mineralization
as a reserve. Accordingly, mineral reserve estimates contained in this MD&A
may not qualify as reserves under SEC standards. Further, the Company
describes any mineral resources associated with its properties utilizing
terminology such as measured resources. indicated resources or inferred
resources which are terms recognized by Canadian regulators under NI 43-101 but
not recognized by the United States Securities and Exchange Commission. United
States investors are cautioned not to assume that any part or all of the mineral
deposits in these categories will ever be converted into mineral reserves. These
terms have a greater amount of uncertainty as to their existence and feasibility
than reserves recognized by the United States Securities and Exchange
Commission. Further, inferred resources have a great amount of uncertainty as
to their existence and as to whether they can be mined legally or economically.
Therefore, United States investors are also cautioned not to assume that all or
any part of the inferred resources exist. United States investors are also
cautioned that disclosure of 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.

On behalf of the Board

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