---

|PRIMERO MINING CORP.
|--------------------
|DECEMBER 31, 2012   
|                    

Table of contents

|Managements
      Responsibility for Financial Reporting            | 1   
|-------------------------------------------------------------------- | ----
|                                                                     |     
|Independent
      Auditors Report                                   | 2   
|                                                                     |     
|Consolidated
      statements of operations and comprehensive income | 3   
|                                                                     |     
|Consolidated
      balance sheets                                    | 4   
|                                                                     |     
|Consolidated
      statements of changes in equity                   | 5   
|                                                                     |     
|Consolidated
      statements of cash flows                          | 6   
|                                                                     |     
|Notes
      to the consolidated financial statements                 | 7-43

---

MANAGEMENTS RESPONSIBILITY FOR FINANCIAL REPORTING

The consolidated financial statements of Primero Mining Corp.
(the Company) are the responsibility of the Companys management. The
consolidated financial statements are prepared in accordance with International
Financial Reporting Standards as issued by the International Accounting
Standards Board, and reflect managements best estimates and judgment based on
information currently available.

Management has developed and maintains a system of internal
controls to ensure that the Companys assets are safeguarded, transactions are
authorized and properly recorded, and financial information is reliable.

The Board of Directors is responsible for ensuring management
fulfills its responsibilities. The Audit Committee reviews the results of the
audit and the annual consolidated financial statements prior to their submission
to the Board of Directors for approval. The financial statements of the Company
were authorized for issue in accordance with a directors resolution on February
20, 2013.

The consolidated financial statements have been audited by
Deloitte LLP and their report outlines the scope of their examination and gives
their opinion on the financial statements.

|                                          |                        
|----------------------------------------- | -----------------------
|Joseph F. Conway                          | David C. Blaiklock     
|                                          |                        
|President & Chief Executive
      Officer | Chief Financial Officer
|                                          |                        
|February 20, 2013                         | February 20, 2013      

1

---

Independent Auditors Report

To the Shareholders of Primero Mining Corp.

We have audited the accompanying consolidated financial
statements of Primero Mining Corp., which comprise the consolidated balance
sheets as at December 31, 2012 and 2011 and the consolidated statements of
operations and comprehensive income, changes in equity, and cash flows for the
years then ended and a summary of significant accounting policies and other
explanatory information.

Managements Responsibility for the Consolidated Financial
Statements

Management is responsible for the preparation and fair
presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards as issued by the International
Accounting Standards Board, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or
error.

Auditors Responsibility

Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted our audits
in accordance with Canadian generally accepted auditing standards and the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditors judgment, including
the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entitys
preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
entitys internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the
consolidated financial statements.

We believe that the audit evidence we have obtained in our
audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of Primero Mining Corp.
as at December 31, 2012 and 2011 and its financial performance and its cash
flows for the years then ended in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board.

/s/ Deloitte LLP Independent Registered Chartered
Accountants February 20, 2013 Vancouver, Canada

2

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|PRIMERO MINING CORP.                                                                 
|-------------------------------------------------------------------------------------
|                                                                                     
|CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
      INCOME                 
|                                                                                     
|YEARS ENDED DECEMBER 31, 2012 AND 2011                                               
|(In thousands of
      United States dollars, except for share and per share amounts)

|                                                                |              |  | 2012       |   |  | 2011       |  
|--------------------------------------------------------------- | ------------ |  | ---------- | - |  | ---------- | -
|                                                                | Notes        |  |            |   |  | (Restated) |  
|                                                                |              |  | $          |   |  | $          |  
|                                                                |              |  |            |   |  | (Note 2    | )
|                                                                |              |  |            |   |  |            |  
|Revenue                                                         | 6            |  | 182,939    |   |  | 156,542    |  
|                                                                |              |  |            |   |  |            |  
|Operating expenses                                              |              |  | (75,495    | ) |  | (64,845    | )
|Depreciation and
      depletion                                | 12           |  | (28,055    | ) |  | (26,607    | )
|Total cost of sales                                             |              |  | (103,550   | ) |  | (91,452    | )
|                                                                |              |  |            |   |  |            |  
|Earnings from mine operations                                   |              |  | 79,389     |   |  | 65,090     |  
|General and
      administrative expenses                       | 7            |  | (30,003    | ) |  | (18,872    | )
|                                                                |              |  |            |   |  |            |  
|Earnings from operations                                        |              |  | 49,386     |   |  | 46,218     |  
|Other (expense) income                                          | 8            |  | (1,842     | ) |  | 17,407     |  
|Foreign exchange (loss) gain                                    |              |  | (948       | ) |  | 912        |  
|Finance income                                                  |              |  | 1,192      |   |  | 2,795      |  
|Finance expense                                                 | 13 (b)       |  | (2,887     | ) |  | (7,810     | )
|Loss on derivative contracts                                    | 18 (i), (ii) |  | (226       | ) |  | (1,284     | )
|                                                                |              |  |            |   |  |            |  
|Earnings before income taxes                                    |              |  | 44,675     |   |  | 58,238     |  
|                                                                |              |  |            |   |  |            |  
|Income tax recovery (expense)                                   | 9            |  | 4,878      |   |  | (8,594     | )
|                                                                |              |  |            |   |  |            |  
|Net income for the year                                         |              |  | 49,553     |   |  | 49,644     |  
|                                                                |              |  |            |   |  |            |  
|Other comprehensive income                                      |              |  |            |   |  |            |  
|Exchange
      differences on translation of foreign operations |              |  | 386        |   |  | (1,588     | )
|Total comprehensive income for the year                         |              |  | 49,939     |   |  | 48,056     |  
|                                                                |              |  |            |   |  |            |  
|Basic income per share                                          | 10           |  | 0.54       |   |  | 0.56       |  
|Diluted income per
      share                                  | 10           |  | 0.54       |   |  | 0.54       |  
|                                                                |              |  |            |   |  |            |  
|Weighted average number of common shares outstanding            |              |  |            |   |  |            |  
|Basic                                                           |              |  | 91,469,356 |   |  | 88,049,171 |  
|Diluted                                                         |              |  | 91,635,428 |   |  | 96,562,288 |  

|See accompanying notes to the consolidated financial
      statements. | 3
|---------------------------------------------------------------------- | -

---

|PRIMERO MINING CORP.                         
|---------------------------------------------
|CONSOLIDATED BALANCE SHEETS                  
|(In thousands of
      United States dollars)

|                                             |         |  | December 31, |   |  | December 31, |  
|-------------------------------------------- | ------- |  | ------------ | - |  | ------------ | -
|                                             |         |  | 2012         |   |  | 2011         |  
|                                             | Notes   |  |              |   |  | (Restated)   |  
|                                             |         |  | $            |   |  | $            |  
|                                             |         |  |              |   |  | (Note 2      | )
|Assets                                       |         |  |              |   |  |              |  
|Current assets                               |         |  |              |   |  |              |  
|Cash                                         |         |  | 139,244      |   |  | 80,761       |  
|Trade and other receivables                  |         |  | 3,792        |   |  | 5,526        |  
|Taxes receivable                             | 9       |  | 5,914        |   |  | 20,969       |  
|Prepaid expenses                             |         |  | 4,607        |   |  | 5,570        |  
|Inventories                                  | 11      |  | 11,044       |   |  | 9,463        |  
|Derivative asset                             | 18 (i)  |  | -            |   |  | 203          |  
|Total current assets                         |         |  | 164,601      |   |  | 122,492      |  
|                                             |         |  |              |   |  |              |  
|Non-current assets                           |         |  |              |   |  |              |  
|Mining interests                             | 12      |  | 496,132      |   |  | 486,424      |  
|Deferred tax asset                           | 9       |  | 9,773        |   |  | 343          |  
|Total assets                                 |         |  | 670,506      |   |  | 609,259      |  
|                                             |         |  |              |   |  |              |  
|Liabilities                                  |         |  |              |   |  |              |  
|Current liabilities                          |         |  |              |   |  |              |  
|Trade and other payables                     | 15 (e)  |  | 36,520       |   |  | 24,907       |  
|Taxes payable                                | 9       |  | 2,209        |   |  | 4,213        |  
|Current portion of decommissioning liability | 14      |  | 2,182        |   |  | -            |  
|Current portion of long-term debt            | 13      |  | 12,786       |   |  | 40,000       |  
|Total current liabilities                    |         |  | 53,697       |   |  | 69,120       |  
|                                             |         |  |              |   |  |              |  
|Non-current liabilities                      |         |  |              |   |  |              |  
|Taxes payable                                |         |  | 6,055        |   |  | -            |  
|Decommissioning liability                    | 14      |  | 6,101        |   |  | 9,373        |  
|Long-term debt                               | 13      |  | 27,214       |   |  | 40,000       |  
|Other
      long-term liabilities            | 15 (e)  |  | 5,701        |   |  | 2,926        |  
|Total liabilities                            |         |  | 98,768       |   |  | 121,419      |  
|                                             |         |  |              |   |  |              |  
|Equity                                       |         |  |              |   |  |              |  
|Share capital                                | 15 ( b) |  | 456,734      |   |  | 423,250      |  
|Warrant reserve                              | 15 ( d) |  | 34,237       |   |  | 34,237       |  
|Share-based payment reserve                  | 15 ( c) |  | 15,120       |   |  | 14,645       |  
|Foreign currency translation reserve         |         |  | (1,064       | ) |  | (1,450       | )
|Retained earnings                            |         |  | 66,711       |   |  | 17,158       |  
|Total equity                                 |         |  | 571,738      |   |  | 487,840      |  
|Total liabilities
      and equity           |         |  | 670,506      |   |  | 609,259      |  

Commitments and contingencies (Note 20)

Approved on behalf of the Board of Directors

|                           |                           
|-------------------------- | --------------------------
|Joseph F. Conway, Director | Michael E. Riley, Director
|February 20, 2013          | February 20, 2013         

---

|PRIMERO MINING CORP.                                                             
|---------------------------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY                                     
|(In thousands of
      United States dollars, except for number of common shares)

|                                                           |         |  |                     |  |  |          |  |  |         |   |  |             |   |  | Foreign   |   |  |           |   |  |                    |  
|---------------------------------------------------------- | ------- |  | ------------------- |  |  | -------- |  |  | ------- | - |  | ----------- | - |  | --------- | - |  | --------- | - |  | ------------------ | -
|                                                           |         |  |                     |  |  |          |  |  |         |   |  | Share-based |   |  | currency  |   |  | Retained  |   |  |                    |  
|                                                           |         |  | Share
      capital |  |  | Warrants |  |  | payment |   |  | translation |   |  | Earnings/ |   |  |           |  
|                                                           | Notes   |  | Shares              |  |  | Amount   |  |  | reserve |   |  | reserve     |   |  | reserve   |   |  | (Deficit) |   |  | Total
      Equity |  
|                                                           |         |  |                     |  |  | $        |  |  | $       |   |  | $           |   |  | $         |   |  | $         |   |  | $                  |  
|                                                           |         |  |                     |  |  |          |  |  |         |   |  |             |   |  |           |   |  |           |   |  |                    |  
|Balance, January 1, 2011                                   |         |  | 87,739,005          |  |  | 420,994  |  |  | 35,396  |   |  | 8,751       |   |  | 138       |   |  | (35,233   | ) |  | 430,046            |  
|Shares issued for                                          |         |  |                     |  |  |          |  |  |         |   |  |             |   |  |           |   |  |           |   |  |                    |  
|Exercise of warrants                                       | 15 (d ) |  | 492,076             |  |  | 2,127    |  |  | (1,159  | ) |  | -           |   |  | -         |   |  | -         |   |  | 968                |  
|Exercise of stock options                                  | 15 (c)  |  | 28,750              |  |  | 129      |  |  |         |   |  | (50         | ) |  |           |   |  |           |   |  | 79                 |  
|Foreign currency translation                               |         |  | -                   |  |  | -        |  |  | -       |   |  | -           |   |  | (1,588    | ) |  | -         |   |  | (1,588             | )
|Share-based payment                                        | 15 (c)  |  | -                   |  |  | -        |  |  | -       |   |  | 5,944       |   |  | -         |   |  | -         |   |  | 5,944              |  
|Net income                                                 |         |  | -                   |  |  | -        |  |  | -       |   |  | -           |   |  | -         |   |  | 67,829    |   |  | 67,829             |  
|Balance, December 31, 2011 
      (as previously reported) | 2       |  | 88,259,831          |  |  | 423,250  |  |  | 34,237  |   |  | 14,645      |   |  | (1,450    | ) |  | 32,596    |   |  | 503,278            |  
|Impact of restatement                                      | 2       |  | -                   |  |  | -        |  |  | -       |   |  | -           |   |  | -         |   |  | (15,438   | ) |  | (15,438            | )
|Balance, December 31, 2011 (as restated)                   | 2       |  | 88,259,831          |  |  | 423,250  |  |  | 34,237  |   |  | 14,645      |   |  | (1,450    | ) |  | 17,158    |   |  | 487,840            |  
|Shares issued for                                          |         |  |                     |  |  |          |  |  |         |   |  |             |   |  |           |   |  |           |   |  |                    |  
|Conversion of Debt                                         | 13 (i)  |  | 8,422,460           |  |  | 30,000   |  |  | -       |   |  | -           |   |  | -         |   |  | -         |   |  | 30,000             |  
|Exercise of stock options                                  | 15 (c)  |  | 523,331             |  |  | 3,484    |  |  |         |   |  | (952        | ) |  |           |   |  |           |   |  | 2,532              |  
|Foreign currency translation                               |         |  | -                   |  |  | -        |  |  | -       |   |  | -           |   |  | 386       |   |  | -         |   |  | 386                |  
|Share-based payment                                        | 15 (c)  |  | -                   |  |  | -        |  |  | -       |   |  | 1,427       |   |  | -         |   |  | -         |   |  | 1,427              |  
|Net income                                                 |         |  | -                   |  |  | -        |  |  | -       |   |  | -           |   |  | -         |   |  | 49,553    |   |  | 49,553             |  
|Balance, December 31, 2012                                 |         |  | 97,205,622          |  |  | 456,734  |  |  | 34,237  |   |  | 15,120      |   |  | (1,064    | ) |  | 66,711    |   |  | 571,738            |  

Total comprehensive income was $49,939 for the year ended
December 31, 2012 (December 31, 2011 - income of $48,056)

---

|PRIMERO MINING CORP.                         
|---------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS        
|YEARS ENDED DECEMBER 31, 2012 AND 2011       
|(In thousands Of
      United States dollars)

|                                                                                               | Notes         |  | 2012    |       |  | 2011     |  
|---------------------------------------------------------------------------------------------- | ------------- |  | ------- | ----- |  | -------- | -
|                                                                                               |               |  | $       |       |  | $        |  
|                                                                                               |               |  |         |       |  |          |  
|Operating activities                                                                           |               |  |         |       |  |          |  
|Earnings before income taxes                                                                   |               |  | 44,675  |       |  | 58,238   |  
|Adjustments for:                                                                               |               |  |         |       |  |          |  
|Depreciation and depletion                                                                     | 12            |  | 28,055  |       |  | 26,607   |  
|Changes to
      decomissioning liability                                                      |               |  | (161    | )     |  | (851     | )
|Share-based payments                                                                           | 15 (c ), (e ) |  | 16,233  |       |  | 8,073    |  
|Payments made
      under the phantom share unit plan                                          | 15 (e )       |  | (877    | )     |  | -        |  
|Cash paid for
      unrealized derivative
      contracts        (net of sales
      proceeds) |               |  | **(23** | **)** |  | (4,118   | )
|Loss on
      derivative asset                                                                 | 18 (i), (ii)  |  | 226     |       |  | 1,284    |  
|Assets written off                                                                             |               |  | 811     |       |  | 931      |  
|Unrealized
      foreign exchange loss (gain)                                                  |               |  | 175     |       |  | (153     | )
|Taxes paid                                                                                     |               |  | (2,001  | )     |  | (17,435  | )
|Other adjustments                                                                              |               |  |         |       |  |          |  
|Finance income (disclosed in investing activities)                                             |               |  | (1,192  | )     |  | (2,795   | )
|Finance expense                                                                                |               |  | 2,887   |       |  | 7,810    |  
|                                                                                               |               |  | 88,808  |       |  | 77,591   |  
|                                                                                               |               |  |         |       |  |          |  
|Changes in non-cash working capital                                                            | 16            |  | 25,402  |       |  | 74,974   |  
|Cash provided by operating activities                                                          |               |  | 114,210 |       |  | 152,565  |  
|                                                                                               |               |  |         |       |  |          |  
|Investing activities                                                                           |               |  |         |       |  |          |  
|Acquisition of San Dimas                                                                       | 5             |  | -       |       |  | (3,928   | )
|Expenditures on exploration
      and evaluation assets                                        | 12            |  | (35,267 | )     |  | (8,171   | )
|Expenditures on mining interests                                                               | 12            |  | (4,473  | )     |  | (18,994  | )
|Interest received                                                                              |               |  | 1,192   |       |  | 2,795    |  
|Cash used in
      investing activities                                                        |               |  | (38,548 | )     |  | (28,298  | )
|                                                                                               |               |  |         |       |  |          |  
|Financing activities                                                                           |               |  |         |       |  |          |  
|Repayment of VAT loan                                                                          | 13 (iii)      |  | -       |       |  | (70,000  | )
|Repayment of debt                                                                              | 13 (i), (ii)  |  | (10,050 | )     |  | (30,000  | )
|Proceeds on exercise of
      options and warrants                                             | 15 (c), (d)   |  | 2,532   |       |  | 1,047    |  
|Interest paid                                                                                  |               |  | (9,024  | )     |  | (2,154   | )
|Cash used in financing activites                                                               |               |  | (16,542 | )     |  | (101,107 | )
|                                                                                               |               |  |         |       |  |          |  
|Effect of foreign exchange rate changes on cash                                                |               |  | (637    | )     |  | (697     | )
|                                                                                               |               |  |         |       |  |          |  
|Increase in cash                                                                               |               |  | 58,483  |       |  | 22,463   |  
|Cash, beginning of
      year                                                                  |               |  | 80,761  |       |  | 58,298   |  
|Cash, end of year                                                                              |               |  | 139,244 |       |  | 80,761   |  

Supplemental cash flow information (Note 16)

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in
      thousands of United States dollars unless otherwise stated)

|1. | Nature of operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Primero Mining Corp. (Primero or the Company) was
      incorporated in Canada on November 26, 2007 under the Business
      Corporations Act (British Columbia). The Companys registered office is
      Suite 1500, 1055 West Georgia Street, Vancouver, British Columbia. Primero
      is a publicly traded company, listed on both the Toronto and New York
      Stock Exchanges; Primero has no parent company.                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Primero is a Canadian-based precious metals producer with
      mining 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 reportable operating
  segment.                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | On August 6, 2010, the Company completed the acquisition
      of the San Dimas gold-silver mine, mill and related assets (the San Dimas
      Mine), located in Mexicos San Dimas district, on the border of Durango
      and Sinaloa states. In addition to the San Dimas Mine, the Company
      acquired all of the shares of Silver Trading (Barbados) Ltd., which is
      party to a silver purchase agreement with Silver Wheaton Corp. (Silver
      Wheaton) and Silver Wheaton Caymans, as well as all of the rights to the
      Ventanas exploration property, located in Durango state, Mexico.                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|2. | Restatement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | In the third quarter 2012, it was identified that during
      the transition to International Financial Reporting Standards (IFRS) as
      issued by the International Accounting Standards Board (IASB), 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). The comparative information in these financial
      statements was restated and refiled in the third quarter, 2012 in order to
      give effect to the IFRS guidance with the following impacts:
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | As at and for the year-ended December 31,
      2011                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

As previously reported
    Adjustment
    As restatedDeferred tax asset
    15,781
    (15,438)
    343Total assets
    624,697
    (15,438)
    609,259Deferred tax recovery (expense)
    7,918
    (18,185)
    (10,267)Retained earnings (including
      net income impact for same period)
    32,596
    (15,438)
    17,158Total equity
    503,278
    (15,438)
    487,840Total equity and liabilities
    624,697
    (15,438)
    609,259Net income
    67,829
    (18,185)
    49,644Earnings per share - basic
    $0.77
    ($0.21)
    $0.56Earnings per share - diluted
    $0.73
    ($0.19)
    $0.54


None of the adjustments related to the
restatement affect cash taxes payable/receivable or the Companys consolidated
statement of cash flows.

7

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

|3. | Significant accounting policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Statement of Compliance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | The consolidated financial statements of the Company have
      been prepared in accordance and full compliance with IFRS as issued by the
      IASB.                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Basis of measurement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | These consolidated financial statements have been
      prepared on a historical cost basis other than the derivative assets and
      liabilities and the phantom share units (the units) which are accounted
      for at fair value through profit or loss.                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The preparation of these financial statements requires
      management to make estimates and assumptions that affect the reported
      amounts of revenues, expenses, assets, and liabilities at the date of the
      financial statements. If in future such estimates and assumptions, which
      are based on managements best judgment at the date of the financial
      statements, deviate materially from actual circumstances, the original
      estimates and assumptions will be modified as appropriate in the period in
      which the circumstances change.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | In the opinion of management, all adjustments necessary
      to present fairly the financial position of the Company as at December 31,
      2012 and 2011 and the results of its operations and cash flows for the
      years then ended have been made.                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

8

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

| |     | Statement of operations items denominated in currencies
      other than the presentation currency are translated at the period average
      exchange rates. With the exception of foreign exchange differences on an
      intercompany loan between Primero Mining Luxembourg S.a.r.l. and Primero
      Empresa, S.A. de C.V., for which exchange differences are recorded in
      other comprehensive income (OCI), the resulting foreign exchange gains
      and losses are included in the determination of earnings.                                                                                                                                                                                                                                                                                                                                                                               
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | The presentation currency of the Company is the U.S.
      dollar. The results of the Canadian parent company and Primero Mining
      Luxembourg S.a.r.l are translated into the U.S. dollar presentation
      currency as follows: all assets and liabilities are translated at the
      exchange rate prevailing at the balance sheet date; equity balances are
      translated at the rates of exchange at the transaction dates, and all
      items included in the statement of operations are translated using the
      period average exchange rates unless there are significant fluctuations in
      the exchange rate, in which case the rate at the date of transaction is
      used. All differences arising upon the translation to the presentation
      currency are recorded in the foreign currency translation reserve within
      OCI; there is no tax impact of this translation.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (c) | Measurement uncertainties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | Significant estimates used in the preparation of these
      financial statements include:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | (iv)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | (v)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | (vi)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | (vii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | (viii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

9

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

| | (ix) | the provision for income and mining taxes including
      expected recovery and periods of reversals of timing differences and
      composition of deferred income and mining tax assets and liabilities;
      and
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                     
| | (x)  | the fair values of assets and liabilities acquired in
      business combinations.                                                                                                                                  

Significant judgments used in the
preparation of these financial statements include:

| | (i)   | accounting and presentation relating to the agreement to
      sell silver to Silver Wheaton Caymans (Note 5) assumed upon the Companys
      acquisition of the San Dimas Mine;
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                  
| | (ii)  | the componentization of buildings, plant and equipment,
      and the useful lives and related depreciation of these assets;                                                     
| |       |                                                                                                                                                                                  
| | (iii) | the grouping of the San Dimas assets into a Cash
      Generating Unit (CGU) and the determination that the Company has just
      one CGU;                                    
| |       |                                                                                                                                                                                  
| | (iv)  | the classification and fair value hierarchy of financial
      instruments (Note 18); and                                                                                        
| |       |                                                                                                                                                                                  
| | (v)   | the functional currency of the entities within the
      consolidated group.                                                                                                     

| |     | Actual results may differ from these estimates and
      judgments as the estimation process is inherently uncertain. Actual future
      outcomes could differ from present estimates and assumptions, and could
      potentially have material effects on the Companys consolidated financial
      statements. Revisions to estimates and judgments and the resulting effects
      on the carrying amounts of the Companys assets and liabilities are
      accounted for prospectively.                                                                                                                                                                                      
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (d) | Business combinations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | Business combinations are accounted for using the
      acquisition method. At the acquisition date, the Company recognizes at
      fair value: (i) all of the identifiable assets acquired, the liabilities
      assumed and any non-controlling interest in the acquiree; and (ii) the
      consideration transferred to the vendor. Those mineral reserves, resources
      and other assets that are able to be reliably valued are recognized in the
      assessment of fair values on acquisition. Other potential reserves,
      resources, mineral rights and other assets, which in managements opinion
      values cannot be reliably determined, are not recognized.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | When the fair value of the consideration transferred
      exceeds the net of the acquisition date amounts of the identifiable assets
      acquired and the liabilities assumed measured at fair value, the
      difference is treated as goodwill. This goodwill is not amortized, and is
      reviewed for impairment annually or when there is an indication of
      impairment. If the fair value attributable to the Companys share of the
      identifiable net assets exceeds the cost of acquisition, the difference is
      immediately recognized in the statement of operations and comprehensive
      income.                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | Costs, such as advisory, legal, accounting, valuation and
      other professional or consulting fees related to a business combination
      are expensed as incurred. Costs associated with
the issuance of equity and debt instruments are charged to
    the relevant account on the balance sheet.                                                                                                                                                                                                                                                                                                                                                                               

10

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

| | (e) | Revenue recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | Revenue is derived from the sale of gold and silver.
      Revenue is recognized on individual contracts when there is persuasive
      evidence that all of the following criteria are met:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | (iv)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | (v)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | Revenue is recorded at the time of transfer of title.
      Sales prices are fixed based on the terms of the contract or at spot
      prices.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (f) | Cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | Cash and cash equivalents consist of cash on hand,
      deposits in banks and highly liquid investments with an original maturity
      of 90 days or less.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (g) | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | Finished goods (gold and silver in doré),
      work-in-progress, and stockpiled ore are valued at the lower of average
      production cost and net realizable value. Net realizable value is
      calculated as the estimated price at the time of sale less estimated
      future production costs to convert the inventories into saleable
    form.                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | Ore extracted from the mine is stockpiled and
      subsequently processed into finished goods. Production costs are
      capitalized and included in the work-in-process inventory based on the
      current mining cost incurred up to the refining process, including
      applicable overhead, depreciation and depletion relating to mining
      interest, and expensed at the average production cost per recoverable
      ounce of gold or silver. The average production cost of finished goods
      represents the average cost of work-in-process inventories incurred prior
      to the refining process, plus applicable refining cost. Supplies are
      valued at the lower of average cost or replacement
cost.

11

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|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

| | (h) | Mining interests                                                                                 
| | --- | -------------------------------------------------------------------------------------------------
| |     |                                                                                                  
| |     | Mining interests include mining and exploration
      properties and related plant and equipment.
| |     |                                                                                                  
| |     | (i)                                                                                              
| |     |                                                                                                  
| |     |                                                                                                  
| |     |                                                                                                  
| |     |                                                                                                  
| |     |                                                                                                  
| |     | (ii)                                                                                             
| |     |                                                                                                  
| |     |                                                                                                  

| |  | it is expected that the expenditure will be recouped by
      future exploitation or sale; and                                                                                                                              
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | substantial exploration and evaluation activities have
      identified a mineral resource with sufficient certainty that permits a
      reasonable assessment of the existence of commercially recoverable
      reserves.

General and administrative
expenditures relating to exploration and evaluation activities are capitalized
where they can be directly attributed to the site undergoing exploration and
evaluation. Exploration and evaluation assets are classified as tangible or
intangible according to the nature of the assets acquired. At December 31, 2012,
all capitalized exploration and evaluation costs of the Company were classified
as tangible assets.

Capitalization of costs incurred
ceases when the related mining property has reached operating levels intended by
management. Once the property is brought into production, the deferred costs are
transferred to mining properties and are amortized on a units-of-production
basis.

Purchased exploration and evaluation
assets are recognized as assets at their cost of acquisition or at fair value if
purchased as part of a business combination.

The Company reviews and evaluates its
exploration properties for impairment prior to reclassification, and when events
and changes in circumstances indicate that the related carrying amounts may not
be recoverable. The recoverable amount is the higher of value in use and fair
value less costs to sell. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows have not been
adjusted.

12

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|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

| |       | If the recoverable amount of an asset or a CGU is
      estimated to be less than its carrying amount, the carrying amount is
      reduced to its recoverable amount. An impairment is recognized immediately
      as an expense. The Company considers the San Dimas Mine to be a
  CGU.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |       | Where an impairment subsequently reverses, the carrying
      amount of the asset (or CGU) is increased to the revised estimate of its
      recoverable amount, subject to the amount not exceeding the carrying
      amount that would have been determined had no impairment been recognized
      for the asset (or CGU) in prior years. A reversal of impairment is
      recognized immediately in the statement of operations and comprehensive
      income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (iii) | Mining properties and mine development
  expenditure                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |       | The cost of acquiring mineral reserves and mineral
      resources is capitalized on the balance sheet as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |       | Mine development costs incurred to maintain current
      production are included in the statement of operations and comprehensive
      income. These costs include the development and access costs (tunneling)
      of production drifts to develop the ore body in the current production
      cycle. The distinction between mining expenditures incurred to develop new
      ore bodies and to develop mine areas in advance of current production is
      mainly the production timeframe of the mining areas. For those areas being
      developed which will be mined in future periods, the costs incurred are
      capitalized and depleted when the related mining area is mined as compared
      to current production areas, where development costs are considered as
      costs of sales and included in operating expenses given that the
      short-term nature of these expenditures matches the economic benefit of
      the ore being mined.
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |       | The Company reviews and evaluates its mining properties
      for impairment when events and changes in circumstances indicate that the
      related carrying amounts may not be recoverable. The carrying amounts of
      the assets are compared to the recoverable amount of the assets whenever
      events or changes in circumstances indicate that the net book value may
      not be recoverable. The recoverable amount is the higher of value in use
      and fair value less costs to sell. In assessing value in use, the
      estimated future cash flows are discounted to their present value using a
      pre-tax discount rate that reflects current market assessments of the time
      value of money and the risks specific to the asset for which the estimates
      of future cash flows have not been adjusted.                                                                                                                            
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |       | The Company bases its impairment calculation on detailed
      budgets and forecasts which are prepared separately for each of the
      Companys CGUs to which the individual assets are allocated (the Company
      currently has one CGU, the San Dimas Mine). These budgets and forecasts
      generally cover the life of the mine.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |       | If the recoverable amount of an asset (or CGU) is
      estimated to be less than its carrying amount, the carrying amount is
      reduced to its recoverable amount. An impairment is recognized immediately
      as an expense.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

13

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

| |      | Where an impairment subsequently reverses, the carrying
      amount of the asset (or CGU) is increased to the revised estimate of its
      recoverable amount, subject to the amount not exceeding the carrying
      amount that would have been determined had no impairment been recognized
      for the asset (or CGU) in prior years. A reversal of impairment is
      recognized immediately in the statement of operations and comprehensive
      income.                                                                                                                                                                                                                                                                    
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (iv) | Borrowing costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |      | Borrowing costs directly relating to the financing of
      qualifying assets are added to the capitalized cost of those projects
      until such time as the assets are substantially ready for their intended
      use or sale which, in the case of mining properties, is when they are
      capable of commercial production. Where funds have been borrowed
      specifically to finance a project, the amount capitalized represents the
      actual borrowing costs incurred. Where the funds used to finance a project
      form part of general borrowings, the amount capitalized is calculated
      using a weighted average of rates applicable to relevant general
      borrowings of the Company during the period.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |      | All other borrowing costs are recognized in the statement
      of operations and comprehensive income in the period in which they are
      incurred. Borrowing costs are included as part of interest paid in the
      statement of cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (v)  | Major maintenance and repairs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |      | Expenditure on major maintenance and repairs includes the
      cost of replacement parts of assets and overhaul costs. Where an asset or
      part of an asset is replaced and it is probable that future economic
      benefits associated with the item will be available to the Company, that
      expenditure is capitalized and the carrying amount of the item replaced
      derecognized. Similarly, overhaul costs associated with major maintenance
      are capitalized where it is probable that future economic benefits will be
      available and any remaining carrying amounts of the cost of previous
      overhauls are derecognized. All other costs are expensed as
    incurred.                            
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (vi) | Depreciation and depletion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |      | Depreciation and depletion is provided so as to write off
      the cost less estimated residual values of mining properties, buildings,
      plant and equipment on the following bases:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |      | Mining properties are depleted using a
      units-of-production basis over the mines estimated and economically
      proven and probable reserves and an estimate of the portion of
      mineralization expected to be classified as reserves. Construction in
      progress is not depreciated until construction is complete. Buildings,
      plant and equipment unrelated to production are depreciated using the
      straight-line method based on estimated useful lives.                                                                                                                                                                                                                                                  
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |      | Where significant parts of an asset have differing useful
      lives, depreciation is calculated on each separate component. The
      estimated useful life of each item or part has due regard to both its own
      physical life limitations and the present assessment of economically
      recoverable reserves of the mine property at which the item is located, and to possible
future variations in those assessments. Estimates of remaining useful lives and
residual values are reviewed annually. Changes in estimates which affect
depreciation are accounted for prospectively.                                                                                                                                        

14

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

The expected useful lives are as
follows:

Mining properties and leases are based
on estimated life of reserves and a portion of mineralization expected to be
classified as reserves on a units-of-production basis.

Plant and buildings
    8 years to life of mineConstruction equipment and vehicles
    4 yearsComputer equipment
    3 years


| | (vii) | Disposal                                                                                                                                                                                                                                                       
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                
| |       | Upon disposition, an item within mining interests is
      derecognized, and the difference between its carrying value and net sales
      proceeds is disclosed as a profit or loss on disposal in the statement of
      operations and comprehensive income.

| | (i) | Provisions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | General                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | Provisions are recognised when the Company has a present
      obligation (legal or constructive) as a result of a past event, it is
      probable that an outflow of resources embodying economic benefits will be
      required to settle the obligation and a reliable estimate can be made of
      the amount of the obligation. Where the Company expects some or all of a
      provision to be reimbursed, for example under an insurance contract, the
      reimbursement is recognised as a separate asset, but only when the
      reimbursement is virtually certain. The expense relating to any provision
      is presented in the statement of operations and comprehensive income net
      of any reimbursement. If the effect of the time value of money is
      material, provisions are discounted using a current pre-tax rate that
      reflects where appropriate, the risks specific to the liability. Where
      discounting is used, the increase in the provision due to the passage of
      time is recognised as finance expense in the statement of operations and
      comprehensive income.     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | Decommissioning liability                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | The Company records a liability for the estimated
      reclamation and closure of a mine, including site rehabilitation and
      long-term treatment and monitoring costs, discounted to net present value.
      The net present value is determined using the liability-specific risk-free
      interest rate. The estimated net present value of reclamation and closure
      cost obligations is re-measured on an annual basis or when changes in
      circumstances occur and/or new material information becomes available.
      Increases or decreases to the obligations arise due to changes in legal or
      regulatory requirements, the extent of environmental remediation required,
      cost estimates and the discount rate applied to the obligation. The net
      present value of the estimated cost of these changes is recorded in the
      period in which the change is identified and quantifiable. Reclamation
      and closure cost obligations relating to operating mine and development
      projects are recorded with a corresponding increase to the carrying
    amounts of related assets.

15

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|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

| | (j) | Leases                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | The Company holds leases for office space and equipment.
      Leases are classified as either finance or operating leases.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Assets held under finance leases, where substantially all
      of the risks and rewards of ownership have passed to the Company, are
      capitalized on the balance sheet at the lower of the fair value of the
      leased property and the present value of the minimum lease payments during
      the lease term calculated using the interest rate implicit in the lease
      agreement. The corresponding liability to the lessor is included in the
      balance sheet as a finance lease obligation. Capitalized amounts are
      determined at the inception of the lease and are depreciated over the
      shorter of their useful economic lives or the lease term. Lease payments
      are apportioned between finance charges and reduction of the lease
      obligation so as to achieve a constant rate of interest on the remaining
      balance of the liability. Finance charges are recognized in the statement
      of operations and comprehensive income unless they are directly
      attributable to qualifying assets, in which case they are capitalized in
      accordance with the Companys accounting policy on borrowing
  costs.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Leases where substantially all of the risks and rewards
      of ownership have not passed to the Company are classified as operating
      leases. Rentals payable under operating leases are charged to the
      statement of operations and comprehensive income on a straight-line basis
      over the lease term.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (k) | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Income tax expense comprises current and deferred tax.
      Current tax and deferred tax are recognized in the statement of operations
      and comprehensive income except to the extent they relate to items
      recognized directly in equity or in other comprehensive income (OCI), in
      which case the related taxes are recognized in equity or OCI.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Current income tax is the expected cash tax payable or
      receivable on the taxable income or loss for the year, which may differ
      from earnings reported in the statement of operations and comprehensive
      income due to items of income or expenses that are not currently taxable
      or deductible for tax purposes, using tax rates substantively enacted at
      the reporting date, and any adjustment to tax payable in respect of
      previous years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Deferred income tax is recognized in respect of unused
      tax losses, tax credits and temporary differences between the carrying
      amounts of assets and liabilities for financial reporting purposes and the
      amounts used for taxation purposes. Deferred tax is measured at the tax
      rates that are expected to be applied to temporary differences when they
      reverse, based on the tax rates that have been substantively enacted at
      the reporting date. Deferred tax assets and liabilities are offset if
      there is a legally enforceable right to offset current tax liabilities and
      assets, and they relate to income taxes levied by the same tax authority
      on the same taxable entity, or on different tax entities, but they intend
      to settle current tax liabilities and assets on a net basis or their tax
      assets and liabilities will be realized
simultaneously.                                                                                                                                                                                                                                      

16

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|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

| |     | A deferred tax asset is recognized for unused tax losses,
      tax credits and deductible temporary differences, to the extent that it is
      probable that future taxable profits will be available against which they
      can be utilized. Deferred tax assets are reviewed at each reporting date
      and are reduced to the extent that it is no longer probable that the
      related tax benefit will be realized.                                                                                                                                                                                                
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | The Company 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 statements of operations and comprehensive income.                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | The Company recognizes uncertain tax positions in its
      financial statements when it is considered more likely than not that the
      tax position shall be sustained.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (l) | Income per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | Basic income per share is computed by dividing net income
      by the weighted average number of common shares outstanding during the
      period. The computation of diluted income per share assumes the
      conversion, exercise or contingent issuance of securities only when such
      conversion, exercise or issuance would have a dilutive effect on income
      per share. For this purpose, the treasury stock method is used for the
      assumed proceeds upon the exercise of stock options and warrants that are
      used to purchase common shares at the average market price during the
      period.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (m) | Sharebased payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

17

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|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

| | (ii) | Cash-settled awards to employees and others providing
      similar services (Phantom Share Unit Plan)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |      | For cash-settled awards, the fair value is re-calculated
      at each balance sheet date until the awards are settled, using the
      Black-Scholes option pricing model (with any changes in fair value
      recognized in the statement of operations and comprehensive income).
      During the vesting period, a liability is recognized representing the
      portion of the vesting period which has expired at the balance sheet date
      multiplied by the fair value of the awards at that date. After vesting,
      the full fair value of the unsettled awards at each balance sheet date is
      recognized as a liability. Movements in value are recognized in the
      statement of operations and comprehensive
income.

| | (n) | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | All financial instruments are required to be measured at
      fair value on initial recognition. Measurement in subsequent periods
      depends upon whether the financial instrument is classified as fair value
      through profit or loss (FVTPL), available-for-sale, held-to- maturity,
      loans and receivables, or other liabilities. Financial instruments
      classified as FVTPL are measured at fair value with unrealized gains and
      losses recognized in the statement of operations and comprehensive income.
      Available-for-sale financial assets are measured at fair value with
      unrealized gains and losses recognized in other comprehensive income.
      Financial assets classified as held-to-maturity, loans and receivables,
      and financial liabilities classified as other financial liabilities, are
      measured at amortized cost. Transaction costs in respect of financial
      assets and liabilities which are measured as FVTPL are recognized in the
      statement of operations and comprehensive income immediately. Transaction
      costs in respect of other financial instruments are included in the
      initial fair value measurement of the financial instrument.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The Company may enter into derivative contracts or
      financial instruments and non- financial contracts containing embedded
      derivatives. Embedded derivatives 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 designated as fair value through
      profit or loss. These embedded derivatives are measured at fair value with
      changes in fair value recognized in other comprehensive income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The Company has designated its derivative instruments and
      the phantom share units as FVTPL, which are measured at fair value. Trade
      and other receivables and cash are classified as loans and receivables,
      which are measured at amortized cost. Trade and other payables, the
      convertible note, and the promissory note are classified as other
      financial liabilities, which are measured at amortized
  cost.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

18

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

Derecognition

A financial asset (or, where
applicable, a part of a financial asset or part of a group of similar financial
assets) is derecognised when:

| |  | The rights to receive cash flows from the asset have
      expired, or                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company has transferred its rights to receive cash
      flows from the asset or has assumed an obligation to pay the received cash
      flows in full without material delay to a third party under a
      pass-through arrangement; and either (a) the Company has transferred
      substantially all the risks and rewards of the asset, or (b) the Company
      has neither transferred nor retained substantially all the risks and
      rewards of the asset, but has transferred control of the asset.

When the Company has transferred its
rights to receive cash flows from an asset or has entered into a pass-through
arrangement, and has neither transferred nor retained substantially all of the
risks and rewards of the asset, nor transferred control of it, the asset is
recognised to the extent of the Companys continuing involvement in it. In that
case, the Company also recognises an associated liability. The transferred asset
and the associated liability are measured on a basis that reflects the rights
and obligations that the Company has retained.

Continuing involvement that takes the
form of a guarantee over the transferred asset is measured at the lower of the
original carrying amount of the asset and the maximum amount of consideration
that the Company could be required to pay under the guarantee.

|4. | Changes in accounting policies and recent
      pronouncements issued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | 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). 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:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

19

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

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 (Note 21).

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.

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$) to the presentation currency
(US$). 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:

20

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|5. | Silver purchase agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | On August 6, 2010, the Company obtained control of the
      San Dimas Mine, located in Mexicos San Dimas district, on the border of
      Durango and Sinaloa states. This was achieved by acquiring 100% of the
      assets and liabilities of the operations from Desarrolos Mineros San Luis,
      S.A. de C.V. (DMSL), a subsidiary of Goldcorp Inc. (Goldcorp). The
      purchase was part of the Companys strategy of building a portfolio of
      high-quality, low-cost precious metal assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | In addition to the San Dimas Mine, the Company acquired
      all of the shares of Silver Trading (Barbados) Limited. (Silver
      Trading), which is party to a silver purchase agreement with Silver
      Wheaton Corp. and Silver Wheaton Caymans (the 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 amendments 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 market price have
      been reflected in the fair value of the mining interest recorded upon
      acquisition of the San Dimas Mine. The Company has presented the value of
      any expected future cash flows from the sale of any future silver
      production to Silver Wheaton Caymans as part of the mining interest, 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 agreement to sell to Silver Wheaton Caymans meets the
      definition of an onerous contract or other liability as the obligation to
      sell silver to Silver Wheaton Caymans only arises upon production of the
    silver (Note 3 (c)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

21

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

|6. | Revenue                                       
|-- | ----------------------------------------------
|   |                                               
|   | Revenue is comprised of the following
  sales:

2012
    
    
    2011$
    
    
    $Gold
    
    145,224
    
    
    120,957Silver (Note 5)
    
    37,715
    
    
    35,585182,939
    
    
    156,542


|   | As described in Note 5, for the first four years
      post-acquisition of the San Dimas Mine, the Company is entitled to sell
      50% of silver production above a 3.5 million ounce annual threshold at
      market prices. The contract year for the purposes of the threshold runs
      from August 6 of a year to August 5 of the next year. The Company sold
      716,229 ounces of silver at market prices during the year ended December
      31, 2012 (2011 - 511,752).
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|7. | General and administrative expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | General and administrative expenses are comprised of the
      following:                                                                                                                                                                                                                                                                                                                                                                                                             

(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


An additional $1.2 million of
share-based compensation is included in operating expenses for the year ended
December 31, 2012 (2011 - $1.8 million).

22

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

|8. | Other (expense) income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | On July 13, 2011, the Company announced that it had
      entered into a definitive arrangement agreement (the Arrangement
      Agreement) to combine its business with Northgate Minerals Corporation
      (Northgate). On August 29, 2011, the Company announced that the
      Arrangement Agreement had been terminated as Northgate had received a
      Superior Proposal (as defined in the Arrangement Agreement) from another
      company. As provided for in the Arrangement Agreement, a termination fee
      of Cdn$25 million was paid by Northgate to Primero. Transaction costs of
      $7.0 million were incurred by the Company with respect to the Arrangement
      Agreement during 2011. The net amount $18.3 million has been included in
      other (expense) income in the year ended December 31, 2011.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|9. | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

2012
    
    
    2011(Restated)$
    
    
    $Earnings before income taxes
    
    44,675
    
    
    58,238Canadian federal and provincial income tax rate
    
    25.00%
    
    
    26.50%Expected income tax expense
    
    (11,169
    )
    
    (15,433
    )(Increase) decrease attributable to:Effect of
      different foreign statutory rates on earnings of subsidiaries
    
    (2,062
    )
    
    (1,357
    )Share-based payments
    
    (407
    )
    
    (1,930
    )Additional
      deductible expenses
    
    13,778
    
    
    7,299Impact of foreign exchange
    
    2,554
    
    
    14,034Impact of
      foreign exchange on deferred income tax assets and liabilities
    
    9,822
    
    
    (18,185
    )Recovery of 2010 taxes based on
      silver revenue at realized prices
    
    -
    
    
    11,040Impact of
      Mexican inflation on tax values
    
    1,531
    
    
    -Withholding taxes on
      intercompany interest
    
    (4,947
    )
    
    (4,008
    )Recovery of
      Luxembourg taxes
    
    1,473
    
    
    -Benefit of tax losses (not recognized)
    
    (5,695
    )
    
    (54
    )Income tax recovery (expense)
    
    4,878
    
    
    (8,594
    )Income tax expense is
      represented by:Current income tax recovery
    
    660
    
    
    1,673Deferred income tax recovery (expense)
    
    4,218
    
    
    (10,267
    )Net
      income tax recovery (expense)
    
    4,878
    
    
    (8,594
    )


23

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

Effective January 1, 2012, the Canadian
Federal Corporate tax rate decreased from 16.5% to 15% which decreased the
Companys overall statutory rate from 26.5% to 25%.

There is no taxation related to the
other comprehensive income balance recorded by the Company

| | (b) | The significant components of the Companys deferred tax
      assets are as follows:
| | --- | -------------------------------------------------------------------------------------

| |                                                      |  | December 31, |   |  | December 31, |  
| | ---------------------------------------------------- |  | ------------ | - |  | ------------ | -
| |                                                      |  | 2012         |   |  | 2011         |  
| |                                                      |  |              |   |  | (Restated)   |  
| |                                                      |  | $            |   |  | $            |  
| |                                                      |  |              |   |  |              |  
| |                                                      |  |              |   |  |              |  
| | Non-capital losses and other future
      deductions |  | 13,847       |   |  | 14,508       |  
| | Decommissioning liability to be recovered            |  | 904          |   |  | 734          |  
| | Other                                                |  | 4,464        |   |  | 2,751        |  
| | Deferred tax assets                                  |  | 19,215       |   |  | 17,993       |  
| |                                                      |  |              |   |  |              |  
| | Mineral property,
      plant and equipment          |  | (9,442       | ) |  | (17,650      | )
| | Deferred tax liabilities                             |  | (9,442       | ) |  | (17,650      | )
| |                                                      |  |              |   |  |              |  
| | Net deferred tax asset                               |  | 9,773        |   |  | 343          |  

The Company believes that it is
probable that the results of future operations will generate sufficient taxable
income to realize the above noted deferred income tax assets. Of the Companys
total deferred tax assets of $18.3 million, $17.0 million is expected to be
recovered within twelve months of the balance sheet date and the remainder after
twelve months of the balance sheet date. The Company has total unused tax losses
of $63.4 million that are available without restriction of use to carry forward
against future taxable income of the entities in which the losses arose.
However, $17.3 million of these losses (of which $4.4 million expire in 2020 and
2021 and $12.9 million expire in 2030 and 2032) relate to entities that have a
history of losses, and may not be used to offset taxes in other entities. The
majority of the remainder of the losses expire in 2021.

Deductible temporary differences and
unused tax losses for which no deferred tax assets have been recognized are
attributable to the following:

December 31,
    
    
    December 31,2012
    
    
    2011$
    
    
    $Non-capital losses
    
    17,323
    
    
    2,264Capital losses
    
    3,064
    
    
    3,219Share issuance costs
    
    6,511
    
    
    9,642Accrued liabilities and other
    
    14,945
    
    
    2,49241,843
    
    
    17,617


24

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

|    | On October 17, 2011 the Companys Mexican subsidiary
      filed an application for an advance pricing agreement (APA) with the
      Mexican tax authorities on the appropriate price for the intercompany sale
      of silver under the Internal SPA. As described in Note 5, upon the
      acquisition of the San Dimas Mine, the Company assumed the obligation to
      sell silver at below market prices according to a silver purchase
      agreement. Silver sales under the silver purchase agreement realize
      approximately $4 per ounce; however, the Companys provision for income
      taxes until filing the APA was based on sales at market prices.                                                                         
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | For the duration of the APA process, under Mexican tax
      law, the taxpayer can record its revenues and intercompany pricing under
      the terms that the taxpayer considers reasonable (given that they are
      compliant with applicable transfer pricing requirements). As such, the
      Companys Mexican subsidiary recorded revenues from sales of silver under
      the silver purchase agreement (and taxes thereon) at the contracted price
      of approximately $4 since the acquisition of the San Dimas Mine and in
      addition claimed a refund for the previous overpayment of taxes. During
      the year ended December 31, 2012 the Company received $22.2 million as a
      full refund for this overpayment of taxes.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | 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 Internal SPA
      at realized prices rather than spot prices effective from August 6,
      2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Under Mexican tax law, an APA ruling is generally
      applicable for up to a five year period. For Primero this applies to the
      fiscal years 2010 to 2014. Assuming the Company continues to sell silver
      from its San Dimas Mine on the same terms and there are no changes in the
      application of Mexican tax laws relative to the APA ruling, the Company
      expects to pay taxes on realized prices for the life of the San Dimas
      Mine.                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10. | Income per share (EPS)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Basic income per share amounts are calculated by dividing
      the net income for the year by the weighted average number of common
      shares outstanding during the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| |                                                       |  | 2012       |  |  | 2011       | 
| | ----------------------------------------------------- |  | ---------- |  |  | ---------- | 
| |                                                       |  |            |  |  | (Restated) | 
| |                                                       |  |            |  |  |            | 
| | Net income attributable to shareholders
      (basic) |  | 49,553     |  |  | 49,644     | 
| | Net income attributable to shareholders (diluted)     |  | 49,553     |  |  | 52,368     | 
| | Weighted average number of shares (basic)             |  | 91,469,356 |  |  | 88,049,171 | 
| | Weighted average
      number of shares (diluted)     |  | 91,635,428 |  |  | 96,562,288 | 
| | Basic income per share ($s)                           |  | 0.54       |  |  | 0.56       | 
| | Diluted income per share ($s)                         |  | 0.54       |  |  | 0.54       | 

25

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

The following is a reconciliation of
the basic and diluted net income attributable to shareholders:

| |                                                         |  |        |  |  | (Restated) | 
| | ------------------------------------------------------- |  | ------ |  |  | ---------- | 
| |                                                         |  |        |  |  |            | 
| | Net income attributable to shareholders-
      basic    |  | 49,553 |  |  | 49,644     | 
| | Accretion on convertible debt                           |  | -      |  |  | 2,116      | 
| | Interest on convertible debt                            |  | -      |  |  | 608        | 
| | Net income
      attributable to shareholders - diluted |  | 49,553 |  |  | 52,368     | 

The following is a reconciliation of
the basic and diluted weighted average number of common shares:

| |                                                            |  | 2012       |  |  | 2011       | 
| | ---------------------------------------------------------- |  | ---------- |  |  | ---------- | 
| |                                                            |  |            |  |  |            | 
| |                                                            |  |            |  |  |            | 
| | Weighted average number of ordinary shares
      - basic   |  | 91,469,356 |  |  | 88,049,171 | 
| | Potentially dilutive options                               |  | 166,072    |  |  | 90,657     | 
| | Potentially dilutive convertible debt                      |  | -          |  |  | 8,422,460  | 
| | Weighted average
      number of ordinary shares - diluted |  | 91,635,428 |  |  | 96,562,288 | 

|    | For the year ended December 31, 2012, certain of the
      outstanding stock options had a dilutive effect, which had a minor impact
      on basic income per share. For the year ended December 31, 2011, certain
      of the outstanding stock options and warrants, as well as the conversion
      feature attached to the convertible note did have a dilutive effect, which
      had a minor impact on basic income per share.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | There have been no transactions involving shares or
      potential shares between the reporting date and the date of completion of
      these financial statements.                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|11. | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                            

2012
    
    
    2011$
    
    
    $Supplies
    
    4,929
    
    
    4,408Finished goods
    
    3,759
    
    
    4,215Work-in-progress
    
    2,356
    
    
    84011,044
    
    
    9,463


The total amount of inventory expensed
during the year was $97.1 million (2011 - $86.5 million). No inventory is
carried at fair value less costs to sell.

All inventory is expected to be
recovered within 12 months of the balance sheet date.

26

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

|12. | Mining interests                                                                                 
|--- | -------------------------------------------------------------------------------------------------
|    |                                                                                                  
|    | Mining interests include mining and exploration
      properties and related plant and equipment:

| |                                                       |  | Mining           |   |  | Exploration and |   |  | Plant,    |   |  | Construction       |   |  | Construction |   |  |           |   |  |         |  
| | ----------------------------------------------------- |  | ---------------- | - |  | --------------- | - |  | --------- | - |  | ------------------ | - |  | ------------ | - |  | --------- | - |  | ------- | -
| |                                                       |  | properties       |   |  | evaluation      |   |  | Land and  |   |  | equipment          |   |  | in           |   |  | Computer  |   |  |         |  
| |                                                       |  | and
      leases |   |  | assets          |   |  | buildings |   |  | and
      vehicles |   |  | progress     |   |  | equipment |   |  | Total   |  
| |                                                       |  |                  |   |  |                 |   |  |           |   |  |                    |   |  |              |   |  |           |   |  |         |  
| | Cost                                                  |  |                  |   |  |                 |   |  |           |   |  |                    |   |  |              |   |  |           |   |  |         |  
| |                                                       |  |                  |   |  |                 |   |  |           |   |  |                    |   |  |              |   |  |           |   |  |         |  
| | At January 1, 2011                                    |  | 383,718          |   |  | 4,744           |   |  | 46,599    |   |  | 49,977             |   |  | 9,884        |   |  | 792       |   |  | 495,714 |  
| | Additions                                             |  | 2,995            |   |  | 10,766          |   |  | 765       |   |  | 4,517              |   |  | 14,131       |   |  | 291       |   |  | 33,465  |  
| | Reclassifications and
      Adjustments               |  | 31,470           |   |  | (15,510         | ) |  | 3,198     |   |  | 94                 |   |  | (21,607      | ) |  | 555       |   |  | (1,800  | )
| | Assets written off                                    |  | (1,718           | ) |  | -               |   |  | -         |   |  | (1,172             | ) |  | -            |   |  | (1        | ) |  | (2,891  | )
| | At December 31, 2011                                  |  | 416,465          |   |  | -               |   |  | 50,562    |   |  | 53,416             |   |  | 2,408        |   |  | 1,637     |   |  | 524,488 |  
| | Additions                                             |  | -                |   |  | 13,537          |   |  | 167       |   |  | 4,028              |   |  | 23,022       |   |  | 278       |   |  | 41,032  |  
| | Reclassifications and
      Adjustments               |  | 26,569           |   |  | (13,537         | ) |  | 577       |   |  | 1,868              |   |  | (17,131      | ) |  | -         |   |  | (1,654  | )
| | Assets written off                                    |  | -                |   |  | -               |   |  | (100      | ) |  | (909               | ) |  | -            |   |  | (6        | ) |  | (1,015  | )
| | At December 31, 2012                                  |  | 443,034          |   |  | -               |   |  | 51,206    |   |  | 58,403             |   |  | 8,299        |   |  | 1,909     |   |  | 562,851 |  
| |                                                       |  |                  |   |  |                 |   |  |           |   |  |                    |   |  |              |   |  |           |   |  |         |  
| | Depreciation and
      depletion                      |  |                  |   |  |                 |   |  |           |   |  |                    |   |  |              |   |  |           |   |  |         |  
| |                                                       |  |                  |   |  |                 |   |  |           |   |  |                    |   |  |              |   |  |           |   |  |         |  
| | At January 1, 2011                                    |  | 8,629            |   |  | -               |   |  | 710       |   |  | 1,947              |   |  | -            |   |  | 68        |   |  | 11,354  |  
| | Depreciation and depletion charged for the
      year |  | 17,735           |   |  | -               |   |  | 2,161     |   |  | 6,656              |   |  | -            |   |  | 354       |   |  | 26,906  |  
| | Accumulated depreciation on assets written off        |  | -                |   |  | -               |   |  | -         |   |  | (195               | ) |  | -            |   |  | (1        | ) |  | (196    | )
| | At December 31, 2011                                  |  | 26,364           |   |  | -               |   |  | 2,871     |   |  | 8,408              |   |  | -            |   |  | 421       |   |  | 38,064  |  
| | Depreciation and depletion
      charged for the year |  | 18,865           |   |  | -               |   |  | 2,283     |   |  | 7,303              |   |  | -            |   |  | 408       |   |  | 28,859  |  
| | Accumulated depreciation on assets written
      off  |  | -                |   |  | -               |   |  | (10       | ) |  | (191               | ) |  | -            |   |  | (3        | ) |  | (204    | )
| | At December 31, 2012                                  |  | 45,229           |   |  | -               |   |  | 5,144     |   |  | 15,520             |   |  | -            |   |  | 826       |   |  | 66,719  |  
| |                                                       |  |                  |   |  |                 |   |  |           |   |  |                    |   |  |              |   |  |           |   |  |         |  
| | Carrying amount                                       |  |                  |   |  |                 |   |  |           |   |  |                    |   |  |              |   |  |           |   |  |         |  
| |                                                       |  |                  |   |  |                 |   |  |           |   |  |                    |   |  |              |   |  |           |   |  |         |  
| | At December 31, 2011                                  |  | 390,101          |   |  | -               |   |  | 47,691    |   |  | 45,008             |   |  | 2,408        |   |  | 1,216     |   |  | 486,424 |  
| | At
      December 31, 2012                            |  | 397,805          |   |  | -               |   |  | 46,062    |   |  | 42,883             |   |  | 8,299        |   |  | 1,083     |   |  | 496,132 |  

27

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

|    | All property of the Company acquired as part of the San
      Dimas Mine or since that point in time is pledged as security for the
      Companys obligations under the silver purchase agreement and the
      promissory note entered into upon the acquisition of the San Dimas Mine
      (Notes 5 and 13).                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Depreciation and depletion expense for the year ended
      December 31, 2012 was $28.1 million (2011 - $26.6 million) and in addition
      $0.8 million of depletion cost was included in the inventories balance at
      December 31, 2012 (2011 - $0.3 million). Borrowing costs of $1.3 million
      were capitalized during 2012 (2011 - $2.6 million) at a weighted average
      borrowing rate of 4.7% (2011  4.37%). Included within mining properties
      for the year ended December 31, 2012 is a $1.7 million reduction of the
      decommissioning liability (2011 - $1.7 million addition).
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|13. | Current and long-term
debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

a)
    
    December 31,
    
    
    December 31,2012
    
    
    2011$
    
    
    $Convertible debt (i)
    
    -
    
    
    30,000Promissory note (ii)
    
    40,000
    
    
    50,000Total
    
    40,000
    
    
    80,000Less: Current portion of debt
    
    (12,786
    )
    
    (40,000
    )Long-term debt
    
    27,214
    
    
    40,000


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

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

| |      | On October 19, 2011, the Company used its cash resources
      to repay $30 million (or 50%) 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |      | In accordance with IAS 39, Financial Instruments:
      Recognition and Measurement, the Note was considered to contain
      an embedded derivative relating to the conversion option which was set at
      a fixed exchange rate from US dollars to the Canadian-dollar denominated
      shares. The carrying amount of the debt, on initial recognition, was
      calculated as the difference between the proceeds of the convertible debt
      as a whole and the fair value of the embedded derivative. Subsequent to
      initial recognition, the derivative component was re-measured at fair
      value at each reporting date while the debt component was accreted to the
      face value of the Note using the effective interest rate through periodic
      charges to finance expense over the initial one-year term of the debt. As
      the initial one-year term was reached on August 6, 2011, the derivative
      component had $nil value at December 31, 2011. Accretion relating to the
      Note for the year ended December 31, 2012 was $nil (2011 - $4.2 million).
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (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. VAT is a
      refundable tax. On July 4, 2011, the Company received a refund of the
      $80.6 million of VAT. Interest on the refund and the strengthening of the
      Mexican peso against the US dollar since the August 2010 acquisition date
      increased the refund to $87.2 million. 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.                                                                                                                                                                                                                                                                                                                                                                     

29

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|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

(b) Finance expense

Finance expense comprised the
following:

| |                                            |  | 2012   |   |  | 2011   |  
| | ------------------------------------------ |  | ------ | - |  | ------ | -
| |                                            |  | $      |   |  | $      |  
| |                                            |  |        |   |  |        |  
| | Interest and accretion on convertible note |  | 572    |   |  | 5,887  |  
| | Interest on promissory note                |  | 2,787  |   |  | 3,159  |  
| | Interest and fees on VAT loan              |  | -      |   |  | 876    |  
| | Capitalization of borrowing
      costs    |  | (1,287 | ) |  | (2,595 | )
| | Accretion on decommissioning liability     |  | 726    |   |  | 449    |  
| | Other                                      |  | 89     |   |  | 34     |  
| |                                            |  | 2,887  |   |  | 7,810  |  

|14. | Decommissioning liability                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | The decommissioning liability consists of reclamation and
      closure costs for the San Dimas Mine. The undiscounted cash flow amount of
      the obligation was $28.9 million at the reporting date (2011 - $19.4
      million) and the present value of the obligation was estimated at $8.3
      million (2011 - $9.4 million), calculated using a discount rate of 7.75%
      and reflecting payments made during and at the end of the mine life, which
      for the purpose of this calculation, management has assumed is in 23 years
      (2011  17 years). The discount rate of 7.75% used by the Company in 2012
      and 2011 is based on prevailing risk-free pre-tax rates in Mexico for
      periods of time which coincide with the period over which the
      decommissioning costs are discounted.

| |                                                                              |  | $      |  
| | ---------------------------------------------------------------------------- |  | ------ | -
| |                                                                              |  |        |  
| | Decomissioning liability - January 1, 2011                                   |  | 9,775  |  
| | Reduction in decomissioning liability due to discount rate
      change      |  | (2,565 | )
| | Accretion expense                                                            |  | 449    |  
| | Additions to
      decomissioning liability, net of reclamation expenditures |  | 1,714  |  
| | Decomissioning liability - December 31,
      2011                           |  | 9,373  |  
| |                                                                              |  |        |  
| | Change in estimate of mine life                                              |  | (1,654 | )
| | Accretion expense                                                            |  | 726    |  
| | Reclamation expenditures                                                     |  | (162   | )
| | Decomissioning liability - December 31, 2012                                 |  | 8,283  |  
| | Less: Current portion of decomissioning liability                            |  | (2,182 | )
| | Long-term
      portion of decomissioning liability                          |  | 6,101  |  

The change in the estimate of the mine
life will have minimal impact on the net income of the Company in future
periods.

30

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

|15. | Share capital
|--- | -------------
|    |              
|    | (a)          

| |                                     |  | 2012       |  |  | 2011       | 
| | ----------------------------------- |  | ---------- |  |  | ---------- | 
| | Common shares issued and fully paid |  |            |  |  |            | 
| |                                     |  |            |  |  |            | 
| | At January 1                        |  | 88,259,831 |  |  | 87,739,005 | 
| | Issued during period (Note 15 (b))  |  | 8,945,791  |  |  | 520,826    | 
| | At December 31                      |  | 97,205,622 |  |  | 88,259,831 | 

| | (b) | Common shares issuance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | Share capital is recorded in the share capital reserve
      within Equity in the consolidated balance sheet.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (c) | Stock options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | Under the Companys stock option plan (the Rolling
      Plan), the number of common shares that may be issued on the exercise of
      options granted under the plan is equal to 10% of the issued and
      outstanding shares of the Company at the time an option is granted (less
      any common shares reserved for issuance under other share compensation
      arrangements). The majority of options issued typically vest over two
      years; one third upon the date of grant, one third a year from the grant
      date, and one third two years from the grant date, however, this is at the
      discretion of the Board of Directors upon grant. All options are
      equity-settled and have a maximum term of ten years when granted. Vested
      options granted under the Rolling Plan will generally expire 90 days after
      the date that the optionee ceases to be employed by, provide services to,
      or be a director or officer of, the Company, and any unvested options will
      terminate immediately. Each employee share option converts into one
      ordinary share of the Company on exercise. No amounts are paid or payable
      by the recipient upon receipt of the option. The options carry neither
      rights to dividends nor voting rights. Options may be exercised at any
      time from the date of vesting to the date of their
  expiry.

31

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

As at December 31, 2012, the following
stock options were outstanding and exercisable:

Outstanding
      
      
      ExercisableNumber
      
      
      
      
      
      Remaining
      
      
      Number
      
      
      
      
      
      Remainingof options
      
      
      Exercise
      
      
      contractual
      
      
      of options
      
      
      Exercise
      
      
      contractualExpiry date
      
      outstanding
      
      
      price
      
      
      life
        (years)
      
      
      exercisable
      
      
      price
      
      
      life
        (years)Cdn$
      
      
      
      
      
      
      
      
      Cdn$July 29, 2013
      
      125,000
      
      
      4.20
      
      
      0.6
      
      
      125,000
      
      
      4.20
      
      
      0.6July 9, 2014
      
      10,000
      
      
      2.70
      
      
      1.5
      
      
      10,000
      
      
      2.70
      
      
      1.5July 9, 2019
      
      275,000
      
      
      2.70
      
      
      6.5
      
      
      275,000
      
      
      2.70
      
      
      6.5August 6, 2015
      
      4,609,490
      
      
      6.00
      
      
      2.6
      
      
      4,609,490
      
      
      6.00
      
      
      2.6August 25, 2015
      
      1,890,000
      
      
      5.26
      
      
      2.7
      
      
      1,890,000
      
      
      5.26
      
      
      2.7November 12, 2015
      
      460,000
      
      
      6.43
      
      
      2.9
      
      
      460,000
      
      
      6.43
      
      
      2.9November 8, 2016
      
      300,000
      
      
      3.47
      
      
      3.9
      
      
      100,000
      
      
      3.47
      
      
      3.9March 31, 2017
      
      75,000
      
      
      2.60
      
      
      4.2
      
      
      -
      
      
      -
      
      
      -November 7, 2017
      
      60,000
      
      
      6.74
      
      
      4.9
      
      
      -
      
      
      -
      
      
      -7,804,490
      
      
      5.57
      
      
      2.8
      
      
      7,469,490
      
      
      5.65
      
      
      2.8


The following is a continuity schedule
of the options outstanding for the year:

| |                                        |  |           |   |  | Weighted | 
| | -------------------------------------- |  | --------- | - |  | -------- | 
| |                                        |  |           |   |  | average  | 
| |                                        |  | Number of |   |  | exercise | 
| |                                        |  | options   |   |  | price    | 
| |                                        |  |           |   |  | Cdn$     | 
| |                                        |  |           |   |  |          | 
| | Outstanding at January 1, 2011         |  | 8,158,240 |   |  | 5.64     | 
| | Exercised                              |  | (28,750   | ) |  | 2.74     | 
| | Granted                                |  | 475,000   |   |  | 3.66     | 
| | Cancelled                              |  | (30,000   | ) |  | 5.26     | 
| | Outstanding at December 31, 2011       |  | 8,574,490 |   |  | 5.54     | 
| | Exercised                              |  | (523,331  | ) |  | 5.12     | 
| | Granted                                |  | 135,000   |   |  | 4.44     | 
| | Cancelled                              |  | (35,000   | ) |  | 4.20     | 
| | Forfeited                              |  | (346,669  | ) |  | 5.21     | 
| | Outstanding at
      December 31, 2012 |  | 7,804,490 |   |  | 5.57     | 

The weighted average share price on
the date options were exercised during 2012 was Cdn$6.31 (2011  Cdn $3.23)
..

The fair value of the options granted
in 2012 and 2011 was calculated using the Black-Scholes option pricing model.
For all grants, the assumed dividend yield and forfeiture rate were nil and 5%
respectively. Other conditions and assumptions were as follows:

32

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

Average
    
    
    
    
    
    
    
    
    
    
    
    Weightedexpected
    
    
    
    
    
    
    
    
    
    
    
    averageNumber of
    
    
    life of options
    
    
    Exercise
    
    
    Risk free
    
    
    Volatility
    
    
    Black-ScholesIssue date
    
    options
    
    
    (years)
    
    
    price
    
    
    interest rate
    
    
    (i)
    
    
    value
      assignedCdn$
    
    
    %
    
    
    %
    
    
    Cdn$November 7, 2012
    
    60,000
    
    
    3.5
    
    
    6.74
    
    
    1.19
    
    
    51
    
    
    2.56March 31, 2012
    
    75,000
    
    
    3.5
    
    
    2.60
    
    
    1.39
    
    
    47
    
    
    0.92November 8, 2011
    
    300,000
    
    
    3.5
    
    
    3.47
    
    
    1.19
    
    
    47
    
    
    1.22March 7, 2011
    
    175,000
    
    
    3.5
    
    
    3.99
    
    
    2.34
    
    
    48
    
    
    1.39


| | (i) | Volatility was determined based upon the average historic
      volatility of a number of comparable companies, where sufficient history
      of the Company was not available, calculated over the same period as the
      expected life of the option. Where sufficient history was available, the
      volatility was determined based upon the historic volatility of the
      Companys share price over the same period of time as the expected life of
      the option.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | d) | Warrants                                                                                                                                                                                         
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                  
| |    | As at December 31, 2012, the Company had 20.8 million
      warrants outstanding which were exercisable to purchase 20.8 million
      common shares at a price of Cdn $8.00 until July 20, 2015.
| |    |                                                                                                                                                                                                  
| |    | The following is a continuity schedule of the warrants
      outstanding for the period:                                                                                                         

| |                                                        |  |            |   |  | Weighted | 
| | ------------------------------------------------------ |  | ---------- | - |  | -------- | 
| |                                                        |  |            |   |  | average  | 
| |                                                        |  | Number of  |   |  | exercise | 
| |                                                        |  | warrants   |   |  | price    | 
| |                                                        |  |            |   |  | Cdn$     | 
| |                                                        |  |            |   |  |          | 
| | Outstanding and exercisable at January 1,
      2011   |  | 21,775,692 |   |  | 7.82     | 
| | Exercised                                              |  | (492,076   | ) |  | 1.92     | 
| | Expired                                                |  | (6,636     | ) |  | 2.00     | 
| | Outstanding and exercisable at December 31, 2011       |  | 21,276,980 |   |  | 7.96     | 
| | Expired                                                |  | (476,980   | ) |  | 6.00     | 
| | Outstanding and
      exercisable at December 31, 2012 |  | 20,800,000 |   |  | 8.00     | 

Where warrants were issued as part of
a unit or subscription receipt comprised of common shares and warrants, the
value assigned to the warrants was based on their relative fair value (as
compared to the shares issued), determined using the Black-Scholes pricing
model. This value is assigned to the warrant reserve within equity in the
consolidated balance sheet.

33

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

| | (e) | Phantom Share Unit Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | On May 29, 2010, the Board of Directors approved the
      establishment of the Companys Phantom Share Unit Plan (PSUP); this is a
      cash-settled plan and the exercise price of all units is $nil. The amount
      to be paid out in respect of units which vest under the plan is the volume
      weighted average price per share of the Company traded on the Toronto
      Stock Exchange over the last twenty trading days preceding the vesting
      date.                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | On May 28, 2012 the Companys shareholders approved the
      establishment of the Directors PSU plan. 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. The following
      units were issued and outstanding as at December 31,
  2012:

| |                     |  | Number of   |  |  |                   |  |  |                   | 
| | ------------------- |  | ----------- |  |  | ----------------- |  |  | ----------------- | 
| |                     |  | units       |  |  |                   |  |  |                   | 
| | Date
      of issue |  | outstanding |  |  | Vesting date      |  |  | Expiry date       | 
| | August 6, 2010      |  | 1,528,076   |  |  | August 6, 2013    |  |  | December 31, 2013 | 
| | February 27, 2011   |  | 95,666      |  |  | February 27, 2013 |  |  | December 31, 2013 | 
| | February 27, 2011   |  | 95,667      |  |  | February 27, 2014 |  |  | December 31, 2014 | 
| | May 19, 2011        |  | 36,748      |  |  | May 19, 2013      |  |  | December 31, 2013 | 
| | May 19, 2011        |  | 36,749      |  |  | May 19, 2014      |  |  | December 31, 2014 | 
| | November 8, 2011    |  | 33,333      |  |  | November 8, 2013  |  |  | December 31, 2013 | 
| | November 8, 2011    |  | 33,334      |  |  | November 8, 2014  |  |  | December 31, 2014 | 
| | March 31, 2012      |  | 792,610     |  |  | March 31, 2013    |  |  | December 31, 2013 | 
| | March 31, 2012      |  | 792,610     |  |  | March 31, 2014    |  |  | December 31, 2014 | 
| | March 31, 2012      |  | 792,610     |  |  | March 31, 2015    |  |  | December 31, 2015 | 
| | March 31, 2012      |  | 38,462      |  |  | December 1, 2013  |  |  | December 31, 2013 | 
| | March 31, 2012      |  | 38,462      |  |  | December 1, 2014  |  |  | December 31, 2014 | 
| | May 25, 2012        |  | 31,410      |  |  | May 25, 2013      |  |  | December 31, 2013 | 
| | May 25, 2012        |  | 31,410      |  |  | May 25, 2014      |  |  | December 31, 2014 | 
| | May 25, 2012        |  | 31,411      |  |  | May 25, 2015      |  |  | December 31, 2015 | 
| | August 3, 2012      |  | 3,008       |  |  | August 3, 2013    |  |  | December 31, 2013 | 
| | August 3, 2012      |  | 3,009       |  |  | August 3, 2014    |  |  | December 31, 2014 | 
| | August 3, 2012      |  | 3,009       |  |  | August 3, 2015    |  |  | December 31, 2015 | 
| | November 7, 2012    |  | 28,902      |  |  | November 7, 2013  |  |  | December 31, 2013 | 
| | November 7, 2012    |  | 28,902      |  |  | November 7, 2014  |  |  | December 31, 2014 | 
| | November 7, 2012    |  | 28,902      |  |  | November 7, 2015  |  |  | December 31, 2015 | 
| | Total               |  | 4,504,290   |  |  |                   |  |  |                   | 

All of these units have been measured
at the reporting date using their fair values. The total amount of expense
recognized in the statement of operations and comprehensive income during 2012
in relation to the PSUP was $14.7 million ( 2011 - $1.8 million). The total
liability recognized at December 31, 2012 in respect of the PSUP was $16.9 34
million, of which $12.9 million is
classified as a current liability, reported within trade and other payables,
with the remaining $4.0 million classified as a long-term liability, reported
within other long-term liabilities. None of these cash-settled units was vested
at December 31, 2012, but all remain outstanding.

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

The fair value of the units as at
December 31, 2012 was calculated using the Black-Scholes option pricing model
with an assumed dividend yield and forfeiture rate of nil and 0% respectively.
Other conditions and assumptions were as follows:

Number of
    
    
    Remaining
    
    
    Exercise
    
    
    Risk free
    
    
    Volatility
    
    
    Black-ScholesIssue date
    
    units
    
    
    Term
      (years)
    
    
    price
    
    
    interest rate
    
    
    (i)
    
    
    value
      assignedCdn$
    
    
    %
    
    
    %
    
    
    Cdn$August 6, 2010
    
    1,528,076
    
    
    0.7
    
    
    0.00
    
    
    1.14
    
    
    62
    
    
    6.40February 27, 2011
    
    191,333
    
    
    0.2
    
    
    0.00
    
    
    1.14
    
    
    41
    
    
    6.40May 19, 2011
    
    73,497
    
    
    0.4
    
    
    0.00
    
    
    1.14
    
    
    64
    
    
    6.40November 8, 2011
    
    66,667
    
    
    0.9
    
    
    0.00
    
    
    1.14
    
    
    59
    
    
    6.40March 31, 2012
    
    2,377,830
    
    
    1.2
    
    
    0.00
    
    
    1.14
    
    
    56
    
    
    6.40March 31, 2012
    
    76,924
    
    
    0.9
    
    
    0.00
    
    
    1.14
    
    
    57
    
    
    6.40May 25th, 2012
    
    94,231
    
    
    1.4
    
    
    0.00
    
    
    1.14
    
    
    59
    
    
    6.40August 3, 2012
    
    9,026
    
    
    1.6
    
    
    0.00
    
    
    1.14
    
    
    59
    
    
    6.40November 7, 2012
    
    86,706
    
    
    1.9
    
    
    0.00
    
    
    1.14
    
    
    58
    
    
    6.40


| | (i) | Volatility was determined based upon the average historic
      volatility of a number of comparable companies, where sufficient history
      of the Company was not available, calculated over the same period as the
      expected life of the unit. Where sufficient history was available, the
      volatility was determined based upon the historic volatility of the
      Companys share price over the same period of time as the expected life of
      the unit.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|16. | Supplementary cash flow information                              
|--- | -----------------------------------------------------------------
|    |                                                                  
|    | Changes in non-cash working capital comprise the
      following:

2012
    
    
    2011$
    
    
    $Trade and other receivables
    
    2,985
    
    
    24,227Taxes receivable
    
    14,636
    
    
    64,774Prepaid expenses
    
    974
    
    
    (405
    )Inventories
    
    (782
    )
    
    (4,431
    )Trade and other payables
    
    5,823
    
    
    (1,390
    )Taxes payable
    
    1,766
    
    
    (7,801
    )25,402
    
    
    74,974


35

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

|17. | 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. The Company manages its common shares, stock options, warrants and
      debt as capital. The Companys objectives in managing capital are to
      safeguard its ability to continue as a going concern in order to provide
      returns for shareholders and benefits for other stakeholders. To meet this
      objective, the Company will ensure it has sufficient cash resources to
      pursue the exploration and development of its mining properties, to fund
      potential acquisitions and future production in the San Dimas
  mine.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | To support these objectives the Company manages its
      capital structure and makes adjustments to it in light of changes in
      economic conditions and risk characteristics of its underlying assets. To
      maintain or adjust its capital structure, the Company may attempt to issue
      shares, issue debt, acquire or dispose of assets or adjust the amount of
      cash held. The Company does not currently pay out dividends.                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Companys investment policy is to invest its cash in
      highly liquid short-term interest-bearing investments with maturities of
      90 days or less from the original date of acquisition, selected with
      regards to the expected timing of expenditures from continuing operations.
      The Company is subject to a number of externally imposed capital
      requirements relating to its debt (Note 13).The requirements are both
      financial and operational in nature; the Company has complied with all
      such requirements during the year.                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Pursuant to the terms of the promissory note (Note 13),
      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 on the quarter ended September 30, 2011, free
      cash flow of at least $10 million, calculated on a rolling four fiscal
      quarter basis.

|    | 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.                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|18. | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Companys financial instruments at December 31, 2012
      consist of cash, trade and other receivables, trade and other payables,
      and debt.                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | 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 (Note
      13) was determined on the date of issue using a discounted future
      cash-flow analysis. 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.

36

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

Fair value measurements of financial
assets and liabilities recognized in the balance sheet

IFRS requires that financial
instruments are assigned to a fair value hierarchy that reflects the
significance of inputs used in making fair value measurements as follows:

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

At December 31, 2012, the Company does
not have any financial assets or liabilities measured at fair value.

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 2011, other than those discussed below.

| | (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 (Note 9). 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 are 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.

37

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

| |      | 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
      (Note 9). In the year ended December 31, 2012, the Company recognized a
      realized loss on the sale of contracts of $23.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      | All silver call option contracts had expired by December
      31, 2012.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (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.                                                                                                                                                                                                                                                                                                                                                                                               

Financial instrument risk exposure

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

| | (a) | Credit risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | Credit risk is the risk that the counterparty to a
      financial instrument will cause a financial loss for the Company by
      failing to discharge its obligations. Credit risk is primarily associated
      with trade and other receivables; however, it also arises on cash. To
      mitigate exposure to credit risk on financial assets, the Company ensures
      non-related counterparties demonstrate minimum acceptable credit
      worthiness and ensures liquidity of available funds.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | The Company closely monitors its financial assets and
      does not have any significant concentration of credit risk with
      non-related parties. The Company invests its cash in highly rated
      financial institutions and sells its products exclusively to organizations
      with strong credit ratings. The credit risk associated with trade
      receivables at December 31, 2012 is considered to be
  negligible.                                                                     

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

38

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

| |                             |  | 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:                                                                                              

December 31December 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                                                                                                                                                            

39

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

| | (i)   | Currency risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |       | Currency risk is the risk that the fair values or future
      cash flows of the Companys financial instruments will fluctuate because
      of changes in foreign currency exchange rates. Exchange rate fluctuations
      may affect the costs incurred in the operations. Gold is sold in U.S.
      dollars and costs are incurred principally in U.S. dollars and Mexican
      pesos. The appreciation of the Mexican peso against the U.S. dollar can
      increase the costs of gold production and capital expenditures in U.S.
      dollar terms. The Company also holds cash that is denominated in Canadian
      dollars and Mexican pesos which are subject to currency risk. The
      Companys head office general and administrative expenses are mainly
      denominated in Canadian dollars and are translated to US dollars at the
      average rate during the period, as such if the US dollar appreciates as
      compared to the Canadian dollar, the costs of the Company would decrease
      in US dollar terms. The Companys equity is denominated in Canadian
      dollars and as such the Company is subject to currency risk if the
      Canadian dollar depreciates against the U.S. dollar. The Company is
      further exposed to currency risk through non-monetary assets and
      liabilities of its Mexican entity whose taxable profit or loss is
      denominated in a non-US dollar currency. Changes in exchange rates give
      rise to temporary differences resulting in a deferred tax liability or
      asset with the resulting deferred tax charged or credited to income tax
      expense.
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |       | During the year ended December 31, 2012, the Company
      recognized a loss of $0.9 million on foreign exchange (2011 - gain of $0.9
      million). Based on the above net exposures at December 31, 2012, a 10%
      depreciation or appreciation of the Mexican peso against the U.S. dollar
      would result in a $4.5 million increase or decrease in the Companys
      after-tax net earnings (loss) (2011 - $4.1 million); and a 10%
      depreciation or appreciation of the Canadian dollar against the U.S.
      dollar would result in a $2.7 million increase or decrease in the
      Companys after-tax net earnings (loss) (2011: $0.3 million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |       | The Company does not currently use derivative instruments
      to reduce its exposure to currency risk, however, management monitors its
      differing currency needs and tries to reduce its exposure to currency
      risks through exchanging currencies 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

40

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

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

| |               |  | December 31, 2012 |   |  | December 31, 2011 |  
| | ------------- |  | ----------------- | - |  | ----------------- | -
| |               |  | $000s             |   |  | $000s             |  
| | Gold prices   |  |                   |   |  |                   |  
| | 10% increase  |  | 10,166            |   |  | 8,467             |  
| | 10% decrease  |  | (10,166           | ) |  | (8,467            | )
| |               |  |                   |   |  |                   |  
| | Silver prices |  |                   |   |  |                   |  
| | 10% increase  |  | 1,405             |   |  | 1,317             |  
| | 10% decrease  |  | (1,405            | ) |  | (1,317            | )

|19. | Related party transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Transactions with Goldcorp Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The Company has a promissory note outstanding to a
      wholly-owned subsidiary of Goldcorp. At December 31, 2012, Goldcorp owned
      approximately 32% of the Companys common shares. Interest accrues on the
      promissory note 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 (Notes 13 and 18), and a
      second payment of $5 million plus accrued interest of $2.8 million was
      paid on December 31, 2012.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | 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 (Note 13). 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 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).    

41

---

|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

Compensation of key management
personnel of the Company

Aggregate compensation recognized in
respect of key management personnel of the Company including directors is as
follows:

| |                              |  | 2012   |  |  | 2011  | 
| | ---------------------------- |  | ------ |  |  | ----- | 
| |                              |  | $      |  |  | $     | 
| |                              |  |        |  |  |       | 
| | Short-term employee benefits |  | 2,868  |  |  | 2,906 | 
| | Share-based
      payment    |  | 9,730  |  |  | 5,338 | 
| | Total                        |  | 12,598 |  |  | 8,244 | 

|    | The Company does not offer any post-employment benefits
      with respect to key management personnel.
|--- | -------------------------------------------------------------------------------------------------------
|    |                                                                                                        
|20. | Commitments and contingencies                                                                          
|    |                                                                                                        
|    | (a)                                                                                                    
|    |                                                                                                        
|    |                                                                                                        
|    |                                                                                                        
|    | (b)                                                                                                    

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|PRIMERO MINING CORP.                                                         
|-----------------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                               
|DECEMBER 31, 2012                                                            
|(Amounts in thousands
      of United States dollars unless otherwise stated)

| | (c) | Due to the size, complexity and nature of the Companys
      operations, various legal and tax matters arise in the ordinary course of
      business. The Company accrues for such items when a liability is both
      probable and the amount can be reasonably estimated. In the opinion of
      management, any potential charges not yet accrued will not have a material
      effect on the consolidated financial statements of the
  Company.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|21. | Announcement of acquisition of Cerro Resources
      NL                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | On December 13, 2012, the Company announced that it has
      entered into a definitive agreement with Cerro Resources NL ("Cerro") to
      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 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 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. The Company will purchase a 19.99% interest in
    Spinco.                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | 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. 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
      and that the transaction will close in May 2013.

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