---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

This managements discussion and analysis (MD&A) of the
financial condition and results of operations of Primero Mining Corp. (Primero
or the Company) should be read in conjunction with the consolidated financial
statements of the Company as at and for the year ended December 31, 2016.
Additional information on the Company, including its Annual Information Form for
the year ended December 31, 2016, which is expected to be filed by March 31,
2017, can be found under Primeros profile at www.sedar.com.

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

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

This MD&A has been prepared as of March 14, 2017.

OVERVIEW OF THE BUSINESS

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

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

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

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

1

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015
|                                              
|SELECTED CONSOLIDATED ANNUAL INFORMATION      

|Years ended December 31                                                   |   | 2016      |   |   | 2015      |   |   | 20141     |  
|------------------------------------------------------------------------- | - | --------- | - | - | --------- | - | - | --------- | -
|Key Performance Data                                                      |   |           |   |   |           |   |   |           |  
|Tonnes of ore milled                                                      |   | 1,672,322 |   |   | 1,868,926 |   |   | 1,593,005 |  
|Produced                                                                  |   |           |   |   |           |   |   |           |  
|Gold equivalent (ounces)                                                  |   | 176,139   |   |   | 259,474   |   |   | 225,054   |  
|Gold (ounces)                                                             |   | 156,052   |   |   | 221,060   |   |   | 189,943   |  
|Silver (million ounces)                                                   |   | 5.32      |   |   | 8.30      |   |   | 6.15      |  
|Sold                                                                      |   |           |   |   |           |   |   |           |  
|Gold equivalent (ounces)                                                  |   | 178,918   |   |   | 255,951   |   |   | 220,067   |  
|Gold (ounces)                                                             |   | 158,028   |   |   | 218,194   |   |   | 185,286   |  
|Silver (million ounces)                                                   |   | 5.56      |   |   | 8.12      |   |   | 5.94      |  
|Average realized prices                                                   |   |           |   |   |           |   |   |           |  
|Gold ($/ounce)3                                                           | $ | 1,221     |   | $ | 1,136     |   | $ | 1,243     |  
|Silver($/ounce)3                                                          | $ | 4.68      |   | $ | 5.34      |   | $ | 7.46      |  
|Total cash costs (per gold ounce)2                                        |   |           |   |   |           |   |   |           |  
|Gold equivalent basis                                                     | $ | 865       |   | $ | 637       |   | $ | 687       |  
|By-product basis                                                          | $ | 817       |   | $ | 548       |   | $ | 579       |  
|All-in sustaining costs (per
      gold ounce)2                           | $ | 1,333     |   | $ | 960       |   | $ | 1,222     |  
|                                                                          |   |           |   |   |           |   |   |           |  
|Financial Data(in
      thousands of US dollars except per share amounts) |   |           |   |   |           |   |   |           |  
|Revenues                                                                  | $ | 219,176   |   | $ | 291,304   |   | $ | 274,612   |  
|Earnings from mine operations                                             |   | 580       |   |   | 50,473    |   |   | 52,663    |  
|Net loss                                                                  |   | (234,420  | ) |   | (106,910  | ) |   | (224,384  | )
|Adjusted net income
      (loss)2                                         |   | (22,139   | ) |   | 6,556     |   |   | 5,365     |  
|Adjusted EBITDA2                                                          |   | 41,385    |   |   | 100,882   |   |   | 78,673    |  
|Basic loss per share                                                      |   | (1.32     | ) |   | (0.66     | ) |   | (1.48     | )
|Diluted loss per share                                                    |   | (1.32     | ) |   | (0.66     | ) |   | (1.48     | )
|Adjusted net income (loss)
      per share2                               |   | (0.12     | ) |   | 0.04      |   |   | 0.04      |  
|Operating cash flows before working capital
      changes                 |   | 15,267    |   |   | 83,166    |   |   | 73,658    |  
|Weighted average shares
      outstanding (basic)(000s)                  |   | 177,569   |   |   | 162,341   |   |   | 152,064   |  
|Weighted average shares outstanding (diluted)
      (000s)               |   | 177,569   |   |   | 162,341   |   |   | 152,064   |  

|As At December 31     |   | 2016    |  |   | 2015    |  |   | 20141     | 
|--------------------- | - | ------- |  | - | ------- |  | - | --------- | 
|Assets                |   |         |  |   |         |  |   |           | 
|Mining interests      | $ | 577,920 |  | $ | 790,118 |  | $ | 881,480   | 
|Total assets          | $ | 677,817 |  | $ | 924,968 |  | $ | 1,002,820 | 
|Liabilities           |   |         |  |   |         |  |   |           | 
|Long-term liabilities | $ | 130,472 |  | $ | 162,427 |  | $ | 190,213   | 
|Total liabilities     | $ | 216,687 |  | $ | 276,092 |  | $ | 254,835   | 
|Equity                | $ | 461,130 |  | $ | 648,876 |  | $ | 747,985   | 

|1 | Includes the results for the period for which the Black
      Fox Complex assets, acquired March 5, 2014, were owned by Primero (March
  5, 2014 to December 31, 2014).                                                                                                     
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2 | See NON-GAAP measurements                                                                                                                                                                                                                                                 
|3 | Average realized gold and silver prices reflect the
      impact of the gold purchase agreement with Sandstorm at the Black Fox mine
      and the silver purchase agreement with Silver Wheaton Caymans at the San
      Dimas mine (see Other liquidity
considerations).

2

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

HIGHLIGHTS

Operational Performance

| | Primeros consolidated production was 176,139 gold
      equivalent ounces in 2016 compared to 259,474 gold equivalent ounces in
      2015. Gold production was 156,052 ounces in 2016 compared to 221,060
      ounces in 2015, and silver production was 5.32 million ounces from San
      Dimas in 2016 compared to 8.30 million ounces in 2015.                                                                                                                                                                                                                                                                                                                                                                            
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | The San Dimas mine produced 93,881 ounces of gold and
      5.32 million ounces of silver in 2016 38% and 36% lower for gold and
      silver, respectively, in comparison to 2015. Production was adversely
      impacted by the implementation of enhanced ground support in the first
      half of the year, high unplanned worker absences and lack of compliance to
      mine plans during the second half. The Company has started an action plan
      to reset the mining operations and ensure the long-term profitability and
      sustainability of the mine and is committed to work with the union to turn
      San Dimas into a more focused and efficient operation.                                         
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | The Black Fox mine produced 62,171 ounces of gold in
      2016, a decrease of 11% compared to 2015. Production from the Deep Central
      Zone ramped up in September, and mining is now progressing on three levels
      (660, 680, and 700 metre levels). During Q4, 2016 the Black Fox mine plan
      delivered improved grades, which it is expected to continue on in 2017.
      Management will closely monitor the short-term operating results and cash
      flow to ensure the Black Fox mine delivers as planned, and will take
      necessary corrective actions if required.                                                                                                                                  
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | The Companys total cash costs per gold equivalent ounce
      was $865 for 2016 compared to $637 for 2015. On a by-product basis, total
      cash costs per gold ounce were $817 for 2016 compared to $548 for 2015.
      Unit costs were higher in 2016 due mainly to lower production at both
      mines. All-in sustaining costs per ounce were $1,333 for 2016 compared to
      $960 in 2015.                                                                                                                                                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Given the Companys 2016 results, Primero has undertaken
      several actions to streamline its organization and improve shareholder
      value. These actions include resetting the San Dimas operations to reduce
      complexity, decrease workforce and other overhead costs. and restore
      profitability of the mine. The Company will also closely monitor
      short-term operating results and cash flow at Black Fox to ensure it
      delivers as planned. The Company is also reducing general and
      administrative costs through the reduction of corporate office head- count
      by 30%, downsizing the corporate office space and reducing directors
      expenses.                              
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | On February 22, 2017, the Company reported its year-end
      2016 mineral reserves and resources. Total Proven and Probable Mineral
      Reserves as at December 31, 2016 were 1.3 million ounces of contained gold
      and 56.6 million ounces of contained silver. These represent a decrease of
      24% for gold and 20% for silver from year-end 2015, primarily attributable
      to mining depletion (155,000 gold ounces and 5.3 million silver ounces)
      and modified modeling parameters. In its modeling approach, the Company
      has applied a two- pass cut-off grade methodology and increased geological
      constraints which will improve mine planning and future reserve
      reconciliations.

3

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

| | On February 15, 2017, the Company announced that
      unionized employees at San Dimas had initiated a strike action, resulting
      in complete stoppage of mining and milling activities at site. This strike
      is a result of the failure to reach an agreement before the strike
      deadline during the negotiation of the Collective Bargaining Agreement.
      Discussions with the union remain ongoing as the strike continues.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Corporate Finance Developments

| | On March 31, 2016, the 6.5% Convertible Debentures
      assumed on the acquisition of Brigus Gold Corp. (Brigus) were repaid for
      a total of $48.1 million. To finance this repayment, $50.0 million was
      drawn on the revolving credit facility (RCF).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | In June 2016, the Company completed an equity offering
      pursuant to which the Company issued 22,022,500 units (the Units) of the
      Company at a price of C$2.35 per Unit for aggregate gross proceeds of
      C$51,752,875 (the equity offering). Each Unit consists of one common
      share of Primero and one-half of one common share purchase warrant (each
      whole common share purchase warrant is a warrant) of the Company. Each
      whole warrant entitles the holder to acquire one common share of the
      Corporation at a price of C$3.35 per common share until June 25, 2018.                                                                                                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | On February 27, 2017, the Company announced that it has
      entered into a term sheet with Sprott Resource Lending Partnership
      (Sprott) for a $75 million three year term loan (Debt Facility). The
      Debt Facility is intended to refinance the Companys existing $75 million
      RCF, of which $50 million is currently drawn, and will be used partly for
      general corporate purposes. Sprott has concluded technical due diligence
      and the term sheet is subject to execution of definitive transaction
      documents, all regulatory and other third party approvals and satisfaction
      of other customary conditions precedent. Although the Company believes
      that definitive agreements with Sprott will be finalized, there can be no
      assurance that the Company's efforts to obtain financing from Sprott or
      others will be successful.

Corporate Developments

| | In 2016, the Company filed procedural and substantive
      responses to the legal claim against its Advance Pricing Agreement (APA)
      with the Mexican tax authorities (SAT), received in February 2016. The
      claim initiated does not identify any different basis for paying taxes,
      nor have any tax reassessments been received from the SAT. The Company
      continues to pay taxes in a manner consistent with the APA on the basis
      that the applicable facts and laws have not changed. In Q2 2016, the
      Company issued a Notice of Intent to submit a claim to international
      arbitration against the Government of Mexico, under the North American
      Free Trade Agreement (NAFTA), highlighting the improper actions taken by
      the SAT, with the intent of revoking legal rights previously granted to
      the Company and upon which the Company relied to expand its investment in
      Mexico. In late 2016, Primero engaged in dialogue with the Mexican
      government regarding the legal claim of the SAT, and as a result, the
      Company has not yet initiated international arbitration proceedings
      pursuant to NAFTA in order to continue such dialogue.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | As discussed in Note 2(b) to the December 31, 2016
      consolidated financial statements, there is material uncertainty related
      to the Companys ability to continue as a going concern. The Company has
      undertaken a number of actions to reduce cash outflows, and
  the Companys Board of Directors has commenced a strategic
review process to explore alternatives to improve shareholder value. The
alternatives include such things as securing additional financing, strategic
investments, joint ventures or asset sales. On February 23, 2017, the Company
announced the appointment of Mr. Joseph F. Conway as Interim President and Chief
Executive Officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

4

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Financial Performance

| | Earnings from mine operations for 2016 were $0.6 million
      compared to $50.5 million in 2015. The reduction in earnings was a result
      of lower production at both mines partly offset by higher realized prices
      for gold during 2016.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The Company incurred a net loss of $234.4 million ($1.32
      per share) including $228.0 million ($188.9 million net of tax) in
      non-cash impairment charges in 2016, compared to a net loss of $106.9
      million ($0.66 per share) in 2015 which included $104.0 million ($97.3
      million net of tax) in non-cash impairment charges.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Adjusted net loss was $22.1 million ($0.12 per share) for
      2016, compared to adjusted net income of $6.6 million ($0.04 per share)
      for 2015, largely due to lower earnings from mine operations in 2016.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Operating cash flows before changes in working capital
      decreased to $15.3 million ($0.09 per share) in 2016 compared to $83.2
      million ($0.51 per share) in 2015 mainly due to lower earnings from mine
      operations and unrecovered VAT refunds in Mexico totaling $29.0 million.
      Working capital outflows were higher in 2016 at $2.2 million compared to
      $1.5 million in 2015. The increase relates mainly to payments of trade and
      other payables during 2016.                                                                                                                                                                                                                                                                                                            
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Impairment charges of $228.0 million include $111.0
      million at the San Dimas mine and $117.0 million at Black Fox complex. The
      San Dimas impairment was driven primarily by a decrease in mineral
      reserves. The Black Fox complex impairment charges resulted from decreases
      in mineral reserves and the resultant shortened mine life. In 2015,
      impairment charges included $82.0 million at the Black Fox complex
      resulting from declining metal prices, the decision to temporarily defer
      the Grey Fox project development and changes in the Black Fox mine plan to
      focus primarily on higher grade underground ore, plus $22.0 million at
      Cerro del Gallo resulting from declining metal prices and the decision to
      further defer development.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | General and administrative expenses were $14.8 million in
      2016 compared to $20.0 million in 2015. The decreased expenses were due
      primarily to lower bonuses and reduced executive personnel in 2016 as
      compared to 2015.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The $75 million 5.75% Convertible Debentures issued in
      February 2015 and the common share purchase warrants issued in conjunction
      with the equity offering in June 2016 are recorded at fair value and
      marked to market on a quarterly basis. A $12.6 million combined gain was
      recognized from these instruments in 2016 as compared to a $13.5 million
      gain recorded in 2015 on account of the 5.75% Convertible Debentures.                                                                                                                                                                                                                                                                                                                                                   

5

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

| | Income tax recovery in 2016 of $21.5 million (2015 -
      $20.4 million tax expense) includes a tax recovery of $19.9 million (2015
      -$32.5 million tax expense) at San Dimas including $39.1 million (2015 -
      $6.7 million) tax recovery from the impairments and a $nil (2015 - $4.7
      million) tax recovery recorded from the expiry of warrants. During 2016
      and 2015, the Mexican peso devalued approximately 13% and 17% relative to
      the U.S. dollar, respectively. As a result, the tax basis for the
      Companys assets in Mexico devalued relative to its U.S. dollar functional
      reporting currency. The lower tax base from a U.S. dollar perspective
      results in lower deductions for tax purposes in future years if the peso
      remains devalued. As a result, included in the $21.5 million income tax
      recovery for 2016 is a $26.6 million (2015 - $25.4 million) non-cash
      deferred tax expense relating to foreign exchange on its deferred income
      tax liability.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

REVIEW OF ANNUAL CONSOLIDATED FINANCIAL INFORMATION

Earnings from mine operations

|                               |   | Year ended
      December 31 |  
|------------------------------ | - | ---------------------------- | -
|(in thousands of U.S. dollars) |   | 2016                         |  
|Gold revenue                   | $ | 193,077                      |  
|Silver revenue                 |   | 26,099                       |  
|Operating expenses             |   | (155,267                     | )
|Depreciation and depletion     |   | (63,329                      | )
|Earnings from mine operations  | $ | 580                          |  

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

|                                                  |   | Year ended  |  
|------------------------------------------------- | - | ----------- | -
|(in thousands of U.S. dollars)                    |   | December 31 |  
|Earnings from mine
      operations in 2015       | $ | 50,473      |  
|Differences:                                      |   |             |  
|Revenue                                           |   |             |  
|Higher realized gold price                        |   | 13,593      |  
|Lower ounces of gold
      sold                   |   | (68,335     | )
|Lower realized silver price                       |   | (3,688      | )
|Lower ounces of silver
      sold                 |   | (13,698     | )
|Lower operating expenses                          |   | 8,326       |  
|Lower depreciation and depletion                  |   | 13,909      |  
|Earnings from mine operations as reported in 2016 | $ | 580         |  

6

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Revenue

| | Gold revenue decreased by $54.7 million and silver
      revenue decreased by $17.4 million in 2016 compared to 2015 primarily as a
      result of reduced production output at both San Dimas and Black Fox (refer
      to review of operations for further discussion).
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Operating expenses

| | Operating expenses decreased in 2016 by $8.3 million,
      resulting mainly from lower mine extraction activities, reduced
      performance bonuses, the weakening peso at San Dimas and lower labour
      costs at Black Fox due to the open pit closure in late 2015.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Depreciation and depletion

| | Depreciation and depletion was $63.3 million in 2016, a
      decrease of $13.9 million from 2015 due to lower production in 2016.
|- | ----------------------------------------------------------------------------------------------------------------------------------

A summary income statement follows:

|                                                                 |   | Year ended
      December 31 |  
|---------------------------------------------------------------- | - | ---------------------------- | -
|(in thousands of U.S. dollars)                                   |   | 2016                         |  
|                                                                 |   |                              |  
|Earnings from mine operations                                    | $ | 580                          |  
|Mining interest impairment charge                                |   | (228,000                     | )
|Exploration expenses                                             |   | (3,414                       | )
|Share-based compensation                                         |   | (7,049                       | )
|General and administrative
      expenses                        |   | (14,802                      | )
|Other charges                                                    |   | (4,725                       | )
|Transaction costs                                                |   | (1,214                       | )
|Interest and finance expenses                                    |   | (9,299                       | )
|Mark-to-market gain on
      convertible debentures and warrants |   | 12,610                       |  
|Other income (expenses)                                          |   | (571                         | )
|Income tax recovery (expense)                                    |   | 21,464                       |  
|Net loss                                                         |   | ($234,420                    | )

Impairment charges

The indicators for impairment for the San Dimas mine and Black
Fox were the revised reserves and resources, a significant decline of Companys
market capitalization and the poor operating performance in 2016.

7

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

|                               |   | Year ended
      December 31 | 
|------------------------------ | - | ---------------------------- | 
|(in thousands of U.S. dollars) |   | 2015                         | 
|Mining interests:              |   |                              | 
|San Dimas Mine                 | $ | 111,000                      | 
|Black Fox Complex              |   | 117,000                      | 
|Cerro del Gallo Project        |   | -                            | 
|                               | $ | 228,000                      | 

San Dimas Mine

The San Dimas impairment test was based on the updated
life-of-mine plan, which incorporated updated reserves and resources, discount
rate factors to account for the underlying risks and managements view of the
exploration potential of the mine site.

Black Fox Complex

The impairment test for the Black Fox Complex was based on the
updated life-of-mine plan. In 2016, the resulting non-cash impairment charge for
the Black Fox Complex resulted from decreases in reserves and the resultant
shortened mine life. In 2015, the non-cash impairment charge was related to
declining metal prices, the decision to temporarily defer Grey Fox development
and changes in the Black Fox mine plan to focus primarily on higher grade
underground ore.

Cerro del Gallo Project

Decisions to delay temporarily the construction at Cerro del
Gallo because of current economic conditions resulted in an impairment to this
exploration property of $22.0 million in 2015.

Share-based compensation

Share-based compensation includes amortization on
equity-settled plans and marked-to-market adjustments on the value of units in
the Companys cash-settled plans. The 2016 decrease is attributed to the decline
in the Companys share price, offset by amortization for grants awarded during
the year.

8

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|PRIMERO MINING CORP.                                       
|-----------------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS                       
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015             
|                                                           
|General and administrative expenses and other
      charges

|                                                           |   | Year ended
      December 31 | 
|---------------------------------------------------------- | - | ---------------------------- | 
|(in thousands of U.S. dollars)                             |   | 2016                         | 
|General and administrative
      expenses                  |   |                              | 
|Salaries and wages                                         | $ | 6,673                        | 
|Rent and office costs                                      |   | 836                          | 
|Legal, accounting and consulting services                  |   | 2,547                        | 
|Directors fees and expenses                                |   | 1,238                        | 
|Other general and administrative expenses                  |   | 3,508                        | 
|                                                           | $ | 14,802                       | 
|Other charges                                              |   |                              | 
|Legal expenses associated
      with proceedings in Mexico | $ | 3,254                        | 
|Office closure costs and severance payments                |   | 1,171                        | 
|Government charges                                         |   | 300                          | 
|                                                           | $ | 4,725                        | 

The change in general and administrative expenses and other
charges was a result of the following factors:

| | Salaries and wages decreased primarily due to lower
      bonuses recognized in 2016 given the Companys underperformance during the
      year. In addition, salaries paid to the former Vancouver finance team in
      2015 and the reduction in the number of executives in 2016 contributed to
      the overall decline in salaries and wages during the year.     
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                          
| | The decrease in rent and office costs related to
      subleasing of the former Vancouver office vacated in 2015 and a portion of
      the Toronto corporate offices subleased to third parties in the second
      half of 2015.                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                          
| | The decrease in normal course legal, accounting and
      consulting services expense in 2016 is largely due to lower charges
      relating to assurance and internal control consulting matters.                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                          
| | Director fees and expenses include monthly retainer fees,
      meeting fees, travel expenses and consulting expenses relating to
      corporate governance matters. Higher charges relating to corporate
      governance matters, director education and increased number of director
      meetings accounted for the increase in director fees and expenses in 2016.
|  |                                                                                                                                                                                                                                                                                                                                                                          
| | Other general expenses include administrative expenses
      necessary to maintain the corporate office including IT and
      communications, investor relations, insurance and public company listing
      and regulatory fees.                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                          
| | The increase in other charges during 2016 is primarily
      due to higher legal expenses incurred in connection with the APA and NAFTA
      claims in relation to the Companys operation in Mexico, partly offset by
      a decrease in office closure costs and severance payments.                                                                                 

9

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Transaction costs

Transaction costs include costs allocated to the common share
purchase warrants issued in connection with the equity offering completed in
June 2016. Transaction costs in 2015 related to the issuance of the $75.0
million 5.75% Convertible Debentures.

Interest and finance expenses

Interest and finance expense decreased by $2.2 million in 2016
as compared to 2015, primarily due to the repayment in full of the 6.5%
convertible debentures in March 2016. Interest and finance expenses include
accretion costs.

Mark-to-market gain on convertible debentures and warrants

In June 2016, the Company recognized a warrant liability in
connection with the equity offering and along with the 5.75% Convertible
Debenture are measured at fair value and marked-to-market each period based on
the corresponding trading price. The Company recognized a gain of $9.0 million
from the 5.75% Convertible Debentures and $3.6 million from the common share
purchase warrants during 2016 (2015 - $13.5 million gain from the 5.75%
Convertible Debentures).

Other income (expense)

Other income (expense) includes foreign exchange gains and
losses, gains on the 6.5% convertible debenture derivative liability and other
items. The Company recorded a foreign exchange loss of $0.7 million in 2016
compared to a gain of $0.1 million in 2015. Foreign exchange gains result
primarily from the translation of Mexican peso denominated and Canadian dollar
denominated asset retirement obligations offset by foreign exchange losses from
the peso denominated taxes receivable. In 2016, the Mexican peso depreciated
while the Canadian dollar strengthened relative to the U.S. dollar (the
Companys functional currency). In 2015, both the Mexican peso and the Canadian
dollar depreciated relative to the U.S. dollar.

10

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Income tax expense

|                                                  |   | Year ended
      December 31 |  
|------------------------------------------------- | - | ---------------------------- | -
|(in thousands of U.S. dollars)                    |   | 2016                         |  
|Current tax expense                               |   |                              |  
|Mining royalty at San Dimas                       | $ | 981                          |  
|Other current tax - Mexico                        |   | 108                          |  
|                                                  | $ | 1,089                        |  
|Deferred tax expense
      (recovery)             |   |                              |  
|Withholding tax on intercompany interest          | $ | 3,308                        |  
|San Dimas change in tax basis                     |   | (18,002                      | )
|Mining royalty at San Dimas                       |   | (6,333                       | )
|Tax recovery on mining
      interest impairments |   | -                            |  
|Tax recovery on expiry of warrants                |   | -                            |  
|Other deferred tax                                |   | (1,526                       | )
|                                                  |   | ($22,553                     | )
|Total                                             |   | ($21,464                     | )

San Dimas pays income taxes based on its Mexican peso financial
statements, which include foreign exchange and other income items (permanent
differences) different than the U.S. dollar reporting financial statements. In
addition, foreign exchange losses are recognized in deferred income tax expense
when the Mexican peso denominated deferred income tax balance is translated to
its U.S. dollar reporting currency. In 2016 this decreased deferred tax recovery
by $26.6 million (2015-$25.4 million).The reduction in San Dimas tax basis
reflects the impact of this foreign exchange offset by inflation on the San
Dimas deferred income tax balances and the impact of higher book to tax
depreciation. The volatility of the exchange rate between the Mexican peso and
the U.S. dollar can result in significant adjustments to deferred tax
expense.

The poor performance of the Companys Mexican operations in
2016 generated a lower tax base of $0.1 million in comparison with the current
tax expense of $17.8 million in 2015. In addition, San Dimas current income
taxes have increased because of lower tax depreciation than accounting
depreciation. See Note 12 to the December 31, 2016 consolidated financial
statements for a full reconciliation of annual income taxes at the statutory
rate to the income tax recovery or expense in the statement of operations and
comprehensive income (loss).

The Companys Canadian operations which include the Black Fox
Complex and the corporate office, is not currently taxable and has $194.0 (2015
- $172.0) million in Canadian resource tax pools which do not expire and can be
utilized to shelter future income earned from the Black Fox Complex.

The mining royalty is deductible for tax purposes and is
calculated as 7.5% of a royalty base. The royalty base being taxable revenues
for income tax purposes (except interest and inflationary adjustment), less
allowable deductions for income tax purposes (except interest, inflationary
adjustment, depreciation and mining fees), less prospecting and exploration
expenses of the year.

11

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

The Company has taken the position that the royalty is an
income tax as it is based on a measure of revenue less certain specified costs.
On substantial enactment, a taxable temporary difference arose, as mining assets
and financial assets/liabilities had a book basis but no tax basis for purposes
of the royalty. The Company has recognized a net deferred tax liability of $22.3
million as at December 31, 2016 in respect of this royalty (2015-$28.7 million).
This deferred tax liability will be drawn down to $nil as a reduction to tax
expense over the life of mine as the mine and its related assets are
depleted/depreciated. In 2016, the liability was reduced by $6.4 million
(2015-$3.9 million).

REVIEW OF OPERATIONS

San Dimas Mine

Year endedDecember 31
    
    
    Threemonths ended2016
    
    
    2015
    
    
    31- Dec- 16
    
    
    30- Sep- 16
    
    
    30- Jun- 16
    
    
    31- Mar- 16
    
    
    31- Dec- 15Key Performance DataTonnes of ore mined
    
    762,167
    
    
    988,168
    
    
    194,670
    
    
    185,080
    
    
    231,224
    
    
    151,193
    
    
    228,539Tonnes of ore milled
    
    759,087
    
    
    993,093
    
    
    191,925
    
    
    193,553
    
    
    224,427
    
    
    149,182
    
    
    250,796Tonnes of ore milled per day
    
    2,074
    
    
    2,721
    
    
    2,086
    
    
    2,104
    
    
    2,466
    
    
    1,639
    
    
    2,726Average mill head grade
      (grams/tonne)Gold
    
    3 .94
    
    
    4.90
    
    
    3.87
    
    
    3.69
    
    
    4.10
    
    
    4.13
    
    
    5.23Silver
    
    2 28
    
    
    274
    
    
    245
    
    
    232
    
    
    231
    
    
    198
    
    
    300Average gold recovery rate (%)Gold
    
    98 %
    
    
    97%
    
    
    97%
    
    
    97%
    
    
    98%
    
    
    99%
    
    
    98%Silver
    
    96 %
    
    
    95%
    
    
    94%
    
    
    95%
    
    
    96%
    
    
    97%
    
    
    96%ProducedGold equivalent (ounces)
    
    113,968
    
    
    189,769
    
    
    28,286
    
    
    28,454
    
    
    34,327
    
    
    22,901
    
    
    50,370Gold (ounces)
    
    93,881
    
    
    151,355
    
    
    23,163
    
    
    22,162
    
    
    28,978
    
    
    19,578
    
    
    41,371Silver (million ounces)
    
    5.32
    
    
    8.30
    
    
    1.42
    
    
    1.37
    
    
    1.60
    
    
    0.92
    
    
    2.32SoldGold equivalent (ounces)
    
    118,450
    
    
    185,463
    
    
    28,252
    
    
    27,405
    
    
    33,653
    
    
    29,140
    
    
    48,466Gold (ounces)
    
    97,560
    
    
    147,706
    
    
    22,547
    
    
    21,840
    
    
    28,873
    
    
    24,300
    
    
    40,320Silver at fixed price (million ounces)
    
    5.41
    
    
    7.27
    
    
    1.57
    
    
    1.06
    
    
    1.43
    
    
    1.35
    
    
    2.10Silver at spot (million
      ounces)
    
    0.16
    
    
    0.85
    
    
    0.01
    
    
    0.15
    
    
    
    
    
    -
    
    
    -Average realized price (per ounce)Gold
    $
    1,246
    
    $
    1,150
    
    $
    1,208
    
    $
    1,335
    
    $
    1,265
    
    $
    1,178
    
    $
    1,092Silver1
    $
    4 .68
    
    $
    5.34
    
    $
    4.34
    
    $
    6.12
    
    $
    4.24
    
    $
    4.24
    
    $
    4.24Total cash costs (per gold
      ounce)2Gold equivalent basis
    $
    856
    
    $
    559
    
    $
    746
    
    $
    865
    
    $
    843
    
    $
    998
    
    $
    535By product basis
    $
    774
    
    $
    409
    
    $
    643
    
    $
    731
    
    $
    765
    
    $
    968
    
    $
    414All in sustaining costs (per ounce)3
    $
    1,117
    
    $
    680
    
    $
    994
    
    $
    1,080
    
    $
    1,063
    
    $
    1,362
    
    $
    753Revenue ($000's)
    $
    147,581
    
    $
    213,191
    
    $
    34,089
    
    $
    36,581
    
    $
    42,578
    
    $
    34,333
    
    $
    52,960Earnings from mine operations ($000's)
    $
    145
    
    $
    53,717
    
    $
    1,780
    
    $
    407
    
    $
    4,348
    
    
    ($6,390
    )
    $
    11,408


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

Production at San Dimas was impacted by the implementation of
enhanced ground support in early 2016, and later by high unplanned worker
absences and lack of compliance to the mine plans. This resulted in reduced
underground development rates and ventilation restrictions which affected mine
productivity.

12

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

In late 2016, San Dimas began to reduce the complexity of the
mining operation by prioritizing work in the higher production areas. Mining
development during the fourth quarter of 2016 were the highest quarterly total
since the second quarter of 2015, an indication that stopes will begin to be
scheduled in an improved manner. For the year, San Dimas mill throughput
averaged 2,074 TPD compared to 2,721 TPD in 2015 (based on 366-day availability
in 2016 and 365-day availability in 2015).

The Company sold 0.16 million ounces of silver at spot prices
in 2016, after meeting the annual threshold delivery to Silver Wheaton Caymans
in accordance with the silver purchase agreement. In comparison, the Company
sold 0.85 million ounces of silver at spot prices in 2015. The majority of
silver sold in 2016 was delivered to Silver Wheaton Caymans under the silver
purchase agreement. The threshold limit under the silver purchase agreement for
the 2015 contract year (August 6 of a year to August 5 of the following year) is
6.0 million ounces of silver. Once this threshold is exceeded, the Company is
able to sell 50% of the silver produced at San Dimas at spot market prices. As
of December 31, 2016, the Company has delivered 2.12 million ounces of silver
towards this annual threshold (2015  2.85 million ounces).

For the 2016 year, total operating expenses were lower than
2015 due to reduced mining and milling activity throughout the year and the
weakening of Mexican peso. Despite the lower overall costs, the lower gold and
silver production levels drove unit costs higher than 2015. Total cash costs on
a gold-equivalent and by-product basis in 2016 were $856 and $774 per ounce,
respectively, compared with $559 and $409 per ounce, respectively, in 2015.

Total capital expenditures for 2016 were below 2015 levels due
to lower underground development and drilling activities, and mill expansion
spending. All-in sustaining costs per gold ounce were $1,117 in 2016, compared
to $680 in 2015. Similar to cash costs, the lower production level drove all-in
sustaining costs higher when compared to 2015, partly offset by lower gross
capital spending levels.

As announced on February 15, 2017, there has been a complete
stoppage of mining and milling activities at San Dimas as the Company failed to
reach agreement with the union on the critical changes needed to the Collective
Bargaining Agreement (CBA) in order to return San Dimas to profitability.
Discussions with the union remain ongoing as the strike continues.

Primeros goal is to find ways to reduce the complexity and
scale of San Dimas operations to increase productivity. This mine reset is
expected to result in significant decreases to the San Dimas workforce and other
overhead costs, and is critical to ensure the long-term profitability and
sustainability of the mine. A phased re-start of mining activities, on a vein by
vein basis, is planned to ensure strict adherence to best-practice mining
techniques and compliance with underlying mine plans within a safe operating
environment.

Primero is committed to working with the union to achieve its
cost reduction goals, realign the short-term bonus system and match the labour
force with the more focused, efficient operation. Through this effort, Primero
expects to return San Dimas to profitability and positive cash flow
generation.

13

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Black Fox Mine

Year endedDecember 31
    
    
    Threemonths ended2016
    
    
    2015
    
    
    31-Dec-16
    
    
    30-Sep-16
    
    
    30-Jun-16
    
    
    31-Mar-16
    
    
    31-Dec-15Key Performance DataOpen pit miningTonnes of ore mined
    
    -
    
    
    849,668
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -Strip ratio
    
    -
    
    
    4.71
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -Average gold grade (grams/tonne)
    
    -
    
    
    2.09
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -Underground miningTonnes of ore mined
    
    234,518
    
    
    140,836
    
    
    73,597
    
    
    64,522
    
    
    57,898
    
    
    38,501
    
    
    57,041Average gold grade (grams/tonne)
    
    4.98
    
    
    4.81
    
    
    5.21
    
    
    5.18
    
    
    4.46
    
    
    4.99
    
    
    5.80Tonnes increase (decrease) in stockpile
    
    (678 ,717
    )
    
    114,671
    
    
    (152,005
    )
    
    (168,996
    )
    
    (171,764
    )
    
    (185,952
    )
    
    (172,188
    )Tonnes processedTonnes of ore milled
    
    913,235
    
    
    875,833
    
    
    225,602
    
    
    233,518
    
    
    229,662
    
    
    224,453
    
    
    229,229Tonnes of ore milled per day
    
    2,495
    
    
    2,400
    
    
    2,452
    
    
    2,538
    
    
    2,524
    
    
    2,467
    
    
    2,492Average mill head grade (grams/tonne)
    
    2.22
    
    
    2.60
    
    
    2.49
    
    
    2.29
    
    
    2.14
    
    
    1.94
    
    
    2.51Average gold recovery rate (%)
    
    96 %
    
    
    96%
    
    
    97%
    
    
    95%
    
    
    96%
    
    
    95%
    
    
    96%ProducedGold (ounces)
    
    62 ,171
    
    
    69,705
    
    
    17,512
    
    
    16,230
    
    
    15,172
    
    
    13,257
    
    
    17,785SoldGold at spot price (ounces)
    
    55 ,371
    
    
    64,597
    
    
    14,494
    
    
    14,735
    
    
    12,996
    
    
    13,146
    
    
    16,434Gold at fixed price (ounces)
    
    5,097
    
    
    5,891
    
    
    1,214
    
    
    1,409
    
    
    1,138
    
    
    1,336
    
    
    1,015Average realized gold price (per ounce)1
    $
    1,181
    
    $
    1,108
    
    $
    1,145
    
    $
    1,264
    
    $
    1,192
    
    $
    1,118
    
    $
    1,059Total cash costs (per gold ounce)2
    $
    881
    
    $
    850
    
    $
    828
    
    $
    926
    
    $
    870
    
    $
    851
    
    $
    834All- in sustaining costs (per ounce)3
    $
    1,291
    
    $
    1,163
    
    $
    1,101
    
    $
    1,286
    
    $
    1,362
    
    $
    1,404
    
    $
    1,104Revenue ($000's)
    $
    71,595
    
    $
    78,112
    
    $
    18,092
    
    $
    20,431
    
    $
    16,861
    
    $
    16,211
    
    $
    18,444Earnings (loss) from mine operations (000's)
    $
    649
    
    $
    (3,011
    )
    $
    85
    
    $
    (422
    )
    $
    328
    
    $
    658
    
    $
    (1,075
)


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

The Black Fox underground mine achieved increased production
rates averaging 641 TPD in 2016 at an average grade of 5.0 grams per tonne,
representing 66% and 4% improvements, respectively, over 2015.

Black Fox has increased gold production each quarter of 2016,
and mining operations will continue to focus on the higher-quality, more
predictable Deep Central and Central Zones of the mine, with less reliance on
the upper remnant areas. Production from the Deep Central Zone has ramped-up
since initial stoping activities began in September, and mining is now
progressing on multiple levels. Black Fox delivered 800 tonnes per day of ore
production during the fourth quarter of 2016.

During 2016, 678,717 tonnes from the low-grade stockpile were
processed through the mill. This stockpile drawdown allowed the mill to achieve
a new throughput record, averaging 2,495 TPD (based on 366-day
availability).

Despite higher grades and increased tonnage being realized from
underground mining in 2016 compared to 2015, mill head grades were lower
compared to 2015. In 2015, the mill was supplemented with ore from open pit
operations that were higher in grade than the remaining low-grade stockpile fed
to the mill in 2016. The lower mill grades were principally responsible for the
lower gold production.

14

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

The drawdown of the lower-cost stockpile to fill the mill as
opposed to open pit mining operations was the main driver of lower operating
costs in 2016 compared to 2015. Labour costs were significantly higher in 2015
due to the open pit operations.

Total cash cost per gold ounce were higher in 2016 at $881 per
ounce compared to $850 per ounce in 2015 as the lower gold production more than
offset lower operating costs.

All-in sustaining costs were higher in 2016 compared to 2015
due to the lower gold production, and slightly higher sustaining capital
expenditures due to increased development costs and costs to lift the tailings
dam. All-in sustaining costs per gold ounce were $1,291 in 2016, compared to
$1,163 in 2015.

The Company continues to evaluate and de-risk the Froome
deposit, under a combination open-pit/underground mining option to supplement
the Black Fox ore body and improve overall Complex economics. With the low-grade
stockpile expected to be fully depleted by mid-2017, Black Fox intends to
re-engineer the operation to focus on improved cost efficiency ensuring
profitability at reduced mill feed rates. This will involve optimizing surface
operations as well as streamlining capital programs. The Company also expects a
reduction in capital intensity per ounce as underground operations become
focused on production from the Deep Central Zone. Management will closely
monitor the short-term operating results and cash flow to ensure the Black Fox
mine delivers as planned, and will take necessary corrective actions, including
possible care and maintenance, if required.

FINANCIALCONDITIONREVIEW

As at December 31, 2016, the Company has a working capital
deficiency of $3.2 million, which is primarily due to the revolving credit
facility balance (see note 18 of the annual financial statements) of $50.0
million due on May 23, 2017. The Companys revolving credit facility contains
several financial covenants, which, if not met could result in an event of
default. The Company closely monitors compliance with its covenants, as any
breach of covenant could result in an event of default under the revolving
credit facility agreement, which, if not addressed, would entitle the lender to
demand repayment. The revolving credit facility also contains certain other
covenants, including cross-default provisions with the Companys 5.75%
convertible debentures. As at December 31, 2016, the Company was in compliance
with all its covenants under the revolving credit facility agreement.

The Companys ability to continue operations in the normal
course of business is dependent on several factors, including its ability to
secure additional funding, successful outcome of the strike and resumption of
the San Dimas operations to normal operating capacity. The Company has
undertaken a number of actions to reduce cash outflows, and the Companys Board
of Directors has commenced a strategic review process to explore alternatives to
improve shareholder value. The alternatives include such things as securing
additional funding, strategic investments, joint ventures and asset sales. There
can be no assurance that the Company's efforts will be successful in these
initiatives, and this represents a material uncertainty that casts substantial
doubt on the ability of the Company to continue as a going concern.

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

15

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

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

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

| | ensure that there is sufficient cash to meet
      its liabilities when they are due;                                                                                
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | evaluate its financial resources to fund
      current and long-term obligations and to meet its capital commitments in a
      cost-effective manner;               
| | maintain a liquidity cushion to address
      operational and/or industry disruptions or downturns;                                                                  
| | maintain a conservative level of debt relative
      to total capital and earnings within the context of financial forecasts
      for pricing, costs and production.

Key financial ratios the Company uses to monitor this are shown
together with the net asset table below.

|(in thousands of U.S. dollars except ratios and per share |   | As at             |  |   | As at             | 
|--------------------------------------------------------- | - | ----------------- |  | - | ----------------- | 
|amounts)                                                  |   | December 31, 2016 |  |   | December 31, 2015 | 
|                                                          |   |                   |  |   |                   | 
|Cash and cash equivalents                                 | $ | 19,875            |  | $ | 45,601            | 
|Other current assets                                      |   | 63,178            |  |   | 72,970            | 
|Non-current assets                                        |   | 594,764           |  |   | 806,397           | 
|Total assets                                              | $ | 677,817           |  | $ | 924,968           | 
|                                                          |   |                   |  |   |                   | 
|Current liabilities (excluding current debt)              | $ | 35,374            |  | $ | 61,248            | 
|Non-current liabilities
      (excluding long-term debt)  |   | 77,566            |  |   | 99,700            | 
|Current debt                                              |   | 50,841            |  |   | 52,417            | 
|Long-term debt                                            |   | 52,906            |  |   | 62,727            | 
|Total liabilities                                         | $ | 216,687           |  | $ | 276,092           | 
|                                                          |   |                   |  |   |                   | 
|Total shareholders' equity                                | $ | 461,130           |  | $ | 648,876           | 
|Total equity                                              | $ | 461,130           |  | $ | 648,876           | 
|                                                          |   |                   |  |   |                   | 
|Total common shares
      outstanding                     |   | 189,508,365       |  |   | 164,185,807       | 
|Total options outstanding                                 |   | 6,525,244         |  |   | 4,246,198         | 
|Total common share purchase warrants outstanding1         |   | 11,011,250        |  |   | -                 | 
|                                                          |   |                   |  |   |                   | 
|Key financial ratios                                      |   |                   |  |   |                   | 
|Current ratio2                                            |   | 0.96              |  |   | 1.04              | 
|Total
      liabilities-to-equity3                        |   | 0.47              |  |   | 0.43              | 
|Debt-to-total capitalization4                             |   | 0.18              |  |   | 0.15              | 

|1 | The Company has 11.0 million warrants outstanding which
      are exercisable to purchase 11.0 million common shares at a price of
      C$3.35 per common share until June 25, 2018.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2 | Current ratio is calculated as (cash and cash equivalents
      + other current asset) ÷ (current liabilities + short-term
debt).                                                    
|3 | Total liabilities-to-equity is calculated as total
      liabilities ÷ total equity.                                                                                                 
|4 | Debt-to-total capitalization is calculated as (short-term
      debt + long-term debt) ÷ (short-term debt + long-term debt + total
      equity).                                    

16

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

The Companys net assets (equity) as at December 31, 2016 were
$461.1 million compared to $648.9 million as at December 31, 2015. The current
ratio has decreased from December 31, 2015 due to lower cash and cash equivalent
balance, and the reclassification of a portion of taxes receivables to
non-current assets. The mining interest impairment charges recognized in 2016,
also caused an increase in the total liabilities-to-equity ratio and
debt-to-total capitalization ratio.

Liquidity at December 31, 2016 consisted of cash and cash
equivalents of $19.9 million. The Company expects to be able to meet all of its
commitments including repayment of the outstanding balance under its revolving
credit facility, and fulfill its exploration and capital program for 2017 from
its operating cash flows, cash balances and the new 3-year term loan with
Sprott, (see related discussion in the Highlights section). Sprott has concluded
technical due diligence and the term sheet is subject to execution of definitive
transaction documents, all regulatory and other third party approvals and
satisfaction of other customary conditions precedent.

Sources and Uses of Cash

|                                                                      |   | Year ended
      December 31 |  
|--------------------------------------------------------------------- | - | ---------------------------- | -
|(in thousands of U.S. dollars)                                        |   | 2016                         |  
|Cash flow:                                                            |   |                              |  
|Provided by operating activities before
      working capital changes | $ | 15,267                       |  
|Changes in non-cash working capital                                   |   | (2,158                       | )
|Provided by operating activities                                      |   | 13,109                       |  
|Used in investing activities                                          |   | (67,673                      | )
|Provided by financing activities and other                            |   | 28,838                       |  
|Increase (decrease) in cash                                           |   | ($25,726                     | )

Operating activities

Operating cash flows before working capital changes decreased
in 2016 due to lower gold production and sales at both San Dimas and Black Fox
and significantly higher income tax installments by PEM compared to 2015 as
income tax installments are based on the most recent fiscal year in which PEM
had earnings for tax purposes, which in this case was 2015.

The changes in non-cash working capital was a cash outflow of
$2.2 million in 2016 compared with an outflow of $1.5 million in 2015. The
higher outflow in 2016 was due mainly to the payment of the annual union bonus
at San Dimas and higher payments for trade and other payables and the build-up
of income tax and VAT receivable in Mexico. At the end of 2016 the Company has
$29.0 million of VAT and $13.0 million of income taxes pending for refund. These
were partly offset by decreases in inventory as more gold was sold than produced
at San Dimas and Black Fox and Black Fox continued to deplete their low-grade
stockpile.

17

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Investing activities

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

|                                           |   | Year ended
      December 31 | 
|------------------------------------------ | - | ---------------------------- | 
|(in millions of U.S. dollars)              |   | 20161                        | 
|Capital Expenditures                       |   |                              | 
|San Dimas Underground Development          | $ | 13.9                         | 
|San Dimas Sustaining Capital               |   | 11.4                         | 
|San
      Dimas Projects                   |   | 3.7                          | 
|San Dimas Sub Total                        | $ | 29.0                         | 
|Black Fox Underground Development          | $ | 15.1                         | 
|Black Fox Sustaining Capital               |   | 5.7                          | 
|Black Fox Projects                         |   | -                            | 
|Black Fox Complex Sub
      Total          | $ | 20.8                         | 
|Cerro del Gallo Development                |   | -                            | 
|Total Capital Expenditures                 | $ | 49.8                         | 
|                                           |   |                              | 
|Capitalized Exploration
      Expenditures |   |                              | 
|San Dimas Diamond Drilling                 | $ | 4.6                          | 
|San Dimas Drifting                         |   | 2.2                          | 
|San
      Dimas Regional Diamond Drilling  |   | 0.4                          | 
|San Dimas Sub Total                        | $ | 7.2                          | 
|Black Fox Diamond Drilling                 |   | 4.7                          | 
|Grey Fox & Regional Exploration            |   | 4.8                          | 
|Black Fox Complex SubTotal                 | $ | 9.5                          | 
|Total Capitalized Exploration Expenditures | $ | 16.7                         | 
|TOTAL CAPITAL EXPENDITURES                 | $ | 66.5                         | 

1 In 2015 Cerro del Gallos mineral property asset was
reclassified as an exploration and evaluation asset. As such, expenditures
totaling $1.5 million were recorded as exploration expenses in 2016. 2Total capital expenditures differ from cash used in investing activities
on the consolidated statements of cash flows due to timing of cash payments.

San Dimas capital spending during the year was focused on
progressing underground development, but labour issues and delays in ventilation
upgrades impacted the overall development rate. Additional equipment was
purchased earlier in the year to improve the efficiency of ground support work,
including three scissor trucks and two bolters. Project spending related to the
upgrade to the main crushing circuit and completing the back-up crusher circuit.
The back-up crusher will be used during the rainy season when material is wet
causing plugging and a reduced capacity. Sustaining capital included rebuild
work on underground equipment and various minor mill projects.

Black Fox capital expenditure continued to focus on ramp and
level development in the Deep Central Zone. The majority of the Black Fox
sustaining capital is related to the annual tailings lift project.

18

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Financing activities

On March 31, 2016, the Company repaid in full the $48.1 million
outstanding balance of the 6.5% Convertible Debentures assumed on the
acquisition of Brigus. To finance the repayment, $50.0 million was drawn on the
revolving credit facility.

In June 2016, the Company completed an equity offering pursuant
to which the Company issued 22,022,500 Units of the Company at a price of C$2.35
per Unit for aggregate gross proceeds of C$51,752,875. Each Unit consists of one
common share of Primero and one-half of one common share purchase warrant of the
Company. Each whole warrant entitles the holder to acquire one common share of
the Corporation at a price of C$3.35 per common share until June 25, 2018.

Out of the gross proceeds from the equity offering, $4.7
million was allocated to the common share purchase warrants based on their fair
value determined using the trading price at the date of closing of the
transaction, and the remaining $35.3 million was allocated to the common shares
and recorded as share capital. The common share purchase warrants were
classified as a financial liability in the statement of financial position. Fair
value changes of the common share purchase warrants are recognized in the
statement of operations and comprehensive income (loss).

Transaction costs relating to the equity offering amounted to
$2.5 million, of which $0.2 million was allocated to the common share purchase
warrants and was recognized as an expense in the statement of operations and
comprehensive loss. The balance of $2.3 million was allocated to share capital.

Debt

|                               |   | As at             |  |   | As at             | 
|------------------------------ | - | ----------------- |  | - | ----------------- | 
|(in thousands of U.S. dollars) |   | December 31, 2016 |  |   | December 31, 2015 | 
|                               |   |                   |  |   |                   | 
|Current debt                   |   |                   |  |   |                   | 
|6.5% convertible debentures    | $ | -                 |  | $ | 47,751            | 
|Revolving credit facility      | $ | 49,639            |  | $ | -                 | 
|Finance lease liabilities      |   | 1,202             |  |   | 4,666             | 
|Total current debt             | $ | 50,841            |  | $ | 52,417            | 
|Long-term debt                 |   |                   |  |   |                   | 
|5.75% convertible debentures   |   | 52,500            |  |   | 61,500            | 
|Finance lease liabilities      |   | 406               |  |   | 1,227             | 
|Total long-term debt           | $ | 52,906            |  | $ | 62,727            | 
|Total debt                     | $ | 103,747           |  | $ | 115,144           | 

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements,
other than the potential availability of the undrawn $25 million under the RCF.
The Company is not anticipating drawing down the remaining balance since it has
entered into a term sheet with Sprott with the intention to refinance the RCF.

19

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

The RCF is secured by substantially all of the Companys assets
and contains customary covenants and default clauses typical to this type of
facility.

The terms of the credit agreement were amended in December
2016. Pursuant to the amended terms of the RCF, the Company is required to
maintain the following financial covenants:

| | Tangible net worth (being equity less goodwill
      and other intangible assets) of an amount greater than or equal to the
      greater of (1) US$586 million less an amount equal to 115% of the
      impairment charge, if any, booked in respect of the Companys fixed assets
      for the year ended December 31, 2016; and (2) US$340 million, plus (in
      either case) 50% of positive net income earned from January 1, 2017.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Net debt leverage ratio (being total
      liabilities, less trade payables incurred in the ordinary course of
      business less unrestricted cash divided by rolling 4 quarter EBITDA, as
      calculated per the RCF) of less than or equal to 4.25 : 1.0 for the fiscal
  quarter ended December 31, 2016, and 3.50 : 1.0 thereafter.                                                                                                 
| | Senior net debt leverage ratio (being that
      portion of net debt that ranks pari passu with or in priority to the RCF
      divided by rolling 4 quarter EBITDA, as calculated per the RCF) of less
      than or equal to 2.50 : 1 for the fiscal quarter ended December 31, 2016,
  and 2.0 : 1 thereafter.                                                                                                                           
| | Interest coverage ratio (being EBITDA, as
      calculated per the RCF, divided by interest expense) greater than 4.50:1.                                                                                                                                                                                                                                                                                                                   

As at December 31, 2016, the Company was compliant with these
covenants. The Company closely monitors compliance to these covenants, as a
breach of a covenant would be considered an event of default under the revolving
credit agreement which, if not addressed, would entitle the lenders to make the
borrowings under the revolving credit facility immediately due and payable and
also causing borrowings under the 5.75% convertible debentures to become
immediately due and payable. Being able to remain in compliance with the
covenants is dependent upon many factors including, but not limited to,
commodity prices, exchange rates, and levels of gold production. Adverse changes
in one or more of these factors could negatively impact the Companys ability to
remain in compliance.

Shareholders Equity

Shares Issued

During the year ended December 31, 2016, the Company issued
1,445,787 common shares for the settlement of vested PSUs under the 2013 PSU
Plan and the Directors PSU Plan; 1,854,271 common shares for the acquisition of
mining concessions from Coral Silver; and 22,022,500 common shares pursuant to
the equity offering completed in June 2016.

Outstanding Share Data

As at December 31, 2016, the Company had 189,508,365 common
shares outstanding (164,185,807 as at December 31, 2015). As at the date of this
MD&A, the Company had 190,918,683 common shares outstanding.

20

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Options

As at December 31, 2016, the Company had 6,525,244 options
outstanding with a weighted average exercise price of C$4.17; of these 3,631,070
were exercisable at a weighted average exercise price of C$5.06. As at the date
of this MD&A, the total number of options outstanding was 6,062,845, of
which 4,673,416 are exercisable.

Common Share Purchase Warrants

As at December 31, 2016, the Company had 11,011,250 common
share purchase warrants outstanding. Each warrant entitles the holder to acquire
one common share of the Company at an exercise price of $3.35 until its expiry
date of June 25, 2018.

PSUs Exercisable Into Common Shares

As at December 31, 2016 and the date of this MD&A, the
Company had 74,627 Directors PSUs outstanding, which vest and expire on December
1, 2017. A director holding Director PSUs is entitled to elect to receive, at
vesting either (1) a cash amount equal to the number of Director PSUs that vest
multiplied by the volume weighted average trading price per common share over
the five preceding trading days, (2) the number of common shares equal to the
number of Directors PSUs (subject to the total number of common shares issuable
at any time under the Directors PSU Plan, combined with all other common shares
issuable under any other equity compensation arrangements then in place, not
exceeding 10% of the total number of issued and outstanding common shares of the
Company), or (3) a combination of cash and shares. If no election is made, the
Company will pay out such Directors PSUs in cash.

As at December 31, 2016 and the date of this MD&A, the
Company had 4,670,104 PSUs outstanding under the 2013 PSU Plan (2013 PSUs),
which vest and expire between February 18, 2017, and December 31, 2019. A person
holding 2013 PSUs is entitled to receive at vesting, at the Companys option,
either (1) a cash amount equal to the number of 2013 PSUs that vest multiplied
by the volume weighted average trading price per common share over the five
preceding trading days, (2) the number of common shares equal to the number of
2013 PSUs (subject to the total number of common shares issuable at any time
under the 2013 PSU Plan, combined with all other common shares issuable under
any other equity compensation arrangements then in place, not exceeding 10% of
the total number of issued and outstanding common shares of the Company) or (3)
a combination of cash and shares.

Deferred Share Units

As at December 31, 2016 and the date of this MD&A, the
Company had 315,790 deferred share units outstanding under the deferred share
unit plan which vest between May 25, 2015 and May 25, 2020. A person holding
deferred share units (DSUs) under this plan is entitled to receive at vesting,
either a cash payment equal to the redemption value of the DSUs, shares issued
from treasury equal to the number of DSUs, shares purchased on the stock
exchange, or any combination of these, such that the cash payment plus number of
shares delivered have a value equal to the redemption value of the DSUs. The
choice of settlement is solely at the Companys discretion. The redemption value
is calculated by the number of DSUs redeemed multiplied by the weighted average
price per share traded on the TSX over the last five trading days preceding the
redemption date.

21

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Contractual commitments

The following table summarizes the contractual maturities of
the Companys financial liabilities and operating and capital commitments as at
December 31, 2016:

As at
    
    
    
    
    
    As atDecember 31, 2016
    
    
    
    
    
    Dec. 31, 2015Within 1
    
    
    2-5
    
    
    Over 5
    
    
    Total
    
    
    Total(in
      thousands of U.S. dollars)
    
    year
    
    
    years
    
    
    yearsTrade and other payables and
      accrued liabilities
    $
    31,667
    
    $
    -
    
    $
    -
    
    $
    31,667
    
    $
    44,307Share based payments
    
    115
    
    
    -
    
    
    -
    
    
    115
    
    
    6616.5% Convertible debentures
      and interest
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    49,6805.75% Convertible debentures and interest
    
    4,313
    
    
    84,322
    
    
    -
    
    
    88,635
    
    
    92,959Revolving line of credit and
      interest
    
    50,811
    
    
    -
    
    
    -
    
    
    50,811
    
    
    -Finance lease payments
    
    1,202
    
    
    406
    
    
    -
    
    
    1,608
    
    
    5,893Minimum rental and operating
      lease payments
    
    1,430
    
    
    1,788
    
    
    -
    
    
    3,218
    
    
    3,630Reclamation and closure cost obligations
    
    2,427
    
    
    2,352
    
    
    45,394
    
    
    50,173
    
    
    60,637Commitment to purchase plant and equipment
    
    516
    
    
    -
    
    
    -
    
    
    516
    
    
    5,689Total
    $
    92,481
    
    $
    88,868
    
    $
    45,394
    
    $
    226,743
    
    $
    263,456


The Company expects to discharge its commitments as they come
due from its existing cash balances, cash flow from operations, collection of
receivables, and the new Debt Facility from Sprott (see related discussion in
the Financial Conditions Review section).

Other Liquidity Considerations

San Dimas

In 2004, the then owner of the San Dimas mine entered into an
agreement to sell all the silver produced at the San Dimas mine for a term of 25
years to Silver Wheaton Caymans in return for an upfront payment comprising cash
and shares of Silver Wheaton Corp. (Silver Wheaton) and a per ounce payment of
the lesser of $3.90 (adjusted for annual inflation), or the market price. The
Company was required to assume this agreement, with amendments, when it acquired
the San Dimas mine in 2010. The amendments provided that from August 6, 2014 and
for the life of the mine, the first 6.0 million ounces per annum of silver
produced by the San Dimas mine, plus 50% of the excess silver above this amount,
must be sold to Silver Wheaton Caymans at the lesser of $4.28 per ounce
(adjusted by 1% per year) and market prices. All silver not sold to Silver
Wheaton Caymans is available to be sold by the Company at market prices.

Black Fox Complex

On November 9, 2010, Brigus entered into a gold purchase
agreement with Sandstorm to sell a portion of future gold production from the
Black Fox mine and the adjoining Pike River property for an upfront cash payment
of $56.3 million and ongoing per ounce payments of the lesser of $523 per ounce
of gold (subject to an inflationary adjustment not to exceed 2% per year) and
market prices. On November 5, 2012, Brigus elected to repurchase a portion of
the stream by paying $24.4 million to Sandstorm, which resulted in Sandstorm
being entitled to 8% of the future production at the Black Fox mine and 6.3% at
the Pike River property. The Company was required to assume the gold purchase
agreement when it acquired Brigus in March 2014.Cerro del Gallo

22

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

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

| | $8 million after achieving commercial production on the
      phase I heap leach operation (the First Contingent Payment);                                                                                                                                                                                   
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | $14 million on announcement of a decision by Primero to
      construct a carbon-in-leach mill for Phase II (the Second Contingent
      Payment);                                                                                                                                                           
| | $5 million if the date of the First Contingent Payment
      occurs before December 19, 2018 and the gold price averages $1,500 or more
      per ounce for a consecutive 30 day period within one year following the
      date of the First Contingent Payment, and not later than December 19,
      2018;  
| | $5 million if the date of the Second Contingent Payment
      occurs before December 19, 2018 and the gold price averages $1,500 or more
      per ounce for a consecutive 30 day period within one year following the
      date of the Second Contingent Payment, and not later than December 19,
      2018.

Dividend Report and Policy

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

Capital management

The Companys objectives in managing capital are to:

| | ensure the Company has the financial capacity
      to support its operations in a low gold price environment;
|- | --------------------------------------------------------------------------------------------------------------
| | ensure the Company has the capital and capacity
      to support its long-term growth strategy;               
| | ensure the Company complies with its debt
      covenants; and                                                
| | provide returns for shareholders and benefits
      for other stakeholders.                                   

The Companys capital items are the following:

|                                  |   | 2016    |  |   | 2015    | 
|--------------------------------- | - | ------- |  | - | ------- | 
|Cash and cash equivalents         | $ | 19,875  |  | $ | 45,601  | 
|Undrawn revolving credit facility |   | 25,000  |  |   | 75,000  | 
|Current debt                      |   | 50,841  |  |   | 52,417  | 
|Long-term debt                    |   | 52,906  |  |   | 62,727  | 
|Shareholders' equity              |   | 461,130 |  |   | 648,876 | 

The Company has $25.0 million remaining undrawn balance in its
revolving credit facility. Further drawdowns from the facility are subject to
the lenders approval. The Company is not anticipating drawing down the
remaining balance since it has entered into a term sheet with Sprott with the
intention to refinance the RCF.

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

23

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

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

| | ensure that there is sufficient cash to meet
      its liabilities when they are due;                                                                                
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | evaluate its financial resources to fund
      current and long-term obligations and to meet its capital commitments in a
      cost-effective manner;               
| | maintain a liquidity cushion to address
      operational and/or industry disruptions or downturns; and                                                              
| | maintain a conservative level of debt relative
      to total capital and earnings within the context of financial forecasts
      for pricing, costs and production.

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.

In February 2017 the Company entered into a term sheet with
Sprott Resource Lending Partnership for a $75 million three year term loan to
replace its existing revolving credit facility, due to mature on May 23, 2017.
Sprott has concluded technical due diligence and the binding term sheet is
subject to execution of definitive transaction documents, all regulatory and
other third party approvals and satisfaction of other customary conditions
precedent. Although the Company believes that definitive agreements with Sprott
will be finalized, there can be no assurance that the Company's efforts to
obtain financing from Sprott or others will be successful.

24

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

FOURTHQUARTERRESULTS

Selected Quarterly Information

Three months ended
    
    31-Dec-16
    
    
    30-Sep16
    
    
    30-Jun-16
    
    
    31-Mar-16
    
    
    31-Dec-15Key Performance DataTonnes of ore milled
    
    417,528
    
    
    427,070
    
    
    454,089
    
    
    373,635
    
    
    480,025ProducedGold equivalent
      (ounces)
    
    45,794
    
    
    44,684
    
    
    49,499
    
    
    36,158
    
    
    68,155Gold (ounces)
    
    40,674
    
    
    38,392
    
    
    44,150
    
    
    32,835
    
    
    59,156Silver (million ounces)
    
    1.42
    
    
    1.37
    
    
    1.60
    
    
    0.92
    
    
    2.32SoldGold equivalent
      (ounces)
    
    43,925
    
    
    43,549
    
    
    47,787
    
    
    43,622
    
    
    65,915Gold (ounces)
    
    38,255
    
    
    37,984
    
    
    43,008
    
    
    38,781
    
    
    57,770Silver (million ounces)
    
    1.58
    
    
    1.21
    
    
    1.43
    
    
    1.35
    
    
    2.10Average realized pricesGold ($/ounce)2
    $
    1,182
    
    $
    1,305
    
    $
    1,241
    
    $
    1,156
    
    $
    1,081Silver($/ounce)2
    $
    4.34
    
    $
    6.12
    
    $
    4.24
    
    $
    4.24
    
    $
    4.24Total cash costs (per gold
      ounce)1Gold equivalent basis
    $
    777
    
    $
    887
    
    $
    851
    
    $
    944
    
    $
    613By-product basis
    $
    723
    
    $
    813
    
    $
    801
    
    $
    920
    
    $
    540All-in sustaining costs (per gold
      ounce)1
    $
    1,159
    
    $
    1,338
    
    $
    1,304
    
    $
    1,543
    
    $
    985Financial Data(in thousands of US
      dollars except per share amounts)Revenues
    $
    52,181
    
    $
    57,012
    
    $
    59,439
    
    $
    50,544
    
    $
    71,404Earnings from mine operations3
    
    1,818
    
    
    (65
    )
    
    4,622
    
    
    (5,795
    )
    
    10,100Net income (loss)3
    
    (190,083
    )
    
    (11,733
    )
    
    (19,432
    )
    
    (13,172
    )
    
    (98,347
    )Adjusted net income (loss)1,3
    
    (1,765
    )
    
    (8,139
    )
    
    (3,476
    )
    
    (8,761
    )
    
    (38
    )Adjusted EBITDA1
    
    11,729
    
    
    10,267
    
    
    13,555
    
    
    5,832
    
    
    21,636Basic income (loss) per share
    
    (1.01
    )
    
    (0.06
    )
    
    (0.12
    )
    
    (0.08
    )
    
    (0.60
    )Diluted income (loss) per
      share
    
    (1.01
    )
    
    (0.06
    )
    
    (0.12
    )
    
    (0.08
    )
    
    (0.60
    )Adjusted net income (loss) per share
    
    (0.01
    )
    
    (0.04
    )
    
    (0.02
    )
    
    (0.05
    )
    
    (0.00
    )Operating cash flows before
      working capital changes
    
    6,984
    
    
    5,539
    
    
    11,205
    
    
    (8,461
    )
    
    20,682Weighted average shares outstanding
      (basic)(000s)
    
    188,593
    
    
    187,928
    
    
    166,410
    
    
    164,511
    
    
    162,751Weighted average shares outstanding (diluted)
      (000s)
    
    188,593
    
    
    187,928
    
    
    166,410
    
    
    164,511
    
    
    162,751


As at
    
    31-Dec-16
    
    
    30-Sep-16
    
    
    30-Jun-16
    
    
    31-Mar-16
    
    
    31-Dec-15AssetsMining interests
    $
    577,920
    
    $
    807,270
    
    $
    804,851
    
    $
    794,601
    
    $
    790,118Total assets
    $
    677,817
    
    $
    918,057
    
    $
    938,482
    
    $
    892,204
    
    $
    924,968LiabilitiesLong-term liabilities
    $
    130,472
    
    $
    173,423
    
    $
    172,796
    
    $
    209,734
    
    $
    162,427Total liabilities
    $
    216,687
    
    $
    268,794
    
    $
    281,055
    
    $
    254,467
    
    $
    276,092Equity
    $
    461,130
    
    $
    649,263
    
    $
    657,427
    
    $
    637,737
    
    $
    648,876


|1 | See NON-GAAP measurements                                                                                                                                                                                                                                                 
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2 | Average realized gold and silver prices reflect the
      impact of the gold purchase agreement with Sandstorm at the Black Fox mine
      and the silver purchase agreement with Silver Wheaton Caymans at the San
      Dimas mine (see Other liquidity considerations).
|3 | Adjusted net income (loss) for Q3, 2016, Q2 2016, Q1 2016
      have been restated to present this measurement net of taxes. See NON-GAAP
      measurements.                                                                                                             

25

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Q4 Highlights

| | Total production of 45,794 gold equivalent ounces in Q4
      2016 compared to 68,155 gold equivalent ounces in the same period of 2015.
      Gold production was 40,674 ounces in Q4 2016 compared to 59,156 ounces in
      Q4 2015, and silver production was 1.42 million ounces from San Dimas in
      Q4 2016 compared to 2.32 million ounces in Q4 2015. The decreased gold
      production was driven by lower grades and throughput at San Dimas due to
      the areas mined and lower mine productivity due to ventilation
      restrictions and lack of compliance to mine plans.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | The Company incurred total cash costs per gold equivalent
      ounce of $777 in Q4 2016 compared to $613 in Q4 2015 and on a by-product
      basis, total cash costs per gold ounce were $723 in Q4 2016 compared to
      $540 in Q4 2015. The higher unit costs were mainly due to lower production
      at San Dimas and Black Fox.                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | San Dimas incurred total cash costs per gold equivalent
      ounce of $746 in Q4 2016 compared to $535 in Q4 2015 and on a by-product
      basis, total cash costs per gold ounce were $643 in Q4 2016 compared to
      $414 in Q4 2015. Gold equivalent production at San Dimas decreased to
      28,286 ounces in Q4 2016 from 50,370 ounces in Q4 2015.                                                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Black Fox cash costs of $828 per ounce in Q4 2016 were
      similar to the cash costs of $834 per ounce in Q4 2015. Total production
      costs were similar between the two quarters, with higher sandfill costs
      driven by additional long hole stoping and increased labour costs due to
      severances offset by lower contractor and other costs. Gold production in
      Q4 2016 of 17,512 ounces was similar to Q4 2015 production of 17,785
      ounces,                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Consolidated all-in sustaining costs per ounce were
      $1,159 in Q4 2016 compared to $985 in Q4 2015 mainly due to lower gold
      production from San Dimas and Black Fox.                                                                                                                                                                                                                                                                                                                                                                                                                  

26

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

**Review of Fourth Quarter Consolidated Financial
Information**

**Earnings from mine operations**

|                               |   | Three months ended |  
|------------------------------ | - | ------------------ | -
|                               |   | December 31        |  
|(in thousands of U.S. dollars) |   | 2016               |  
|Gold revenue                   | $ | 45,315             |  
|Silver revenue                 |   | 6,866              |  
|Operatingexpenses              |   | (334,860           | )
|Depreciation and depletion     |   | (15,503            | )
|Earnings from mine operations  | $ | 1,818              |  

The tablebelow setsout variances in the key
drivers of earnings from mine operations for the three months ended December 31,
2016 compared with three months ended December 31, 2015:

|                                                  |   | Three months |  
|------------------------------------------------- | - | ------------ | -
|                                                  |   | ended        |  
|(in thousands of U.S. dollars)                    |   | December 31  |  
|Earnings from mine
      operations in 2015       | $ | 10,100       |  
|Differences:                                      |   |              |  
|Revenue                                           |   |              |  
|Higher realized gold price                        |   | 3,931        |  
|Lower ounces of
      gold sold                   |   | (21,111      | )
|Higher realized silver price                      |   | 140          |  
|Lower ounces of
      silver sold                 |   | (2,183       | )
|Lower operating expenses                          |   | 7,695        |  
|Lower depreciation and depletion                  |   | 3,246        |  
|Earnings from mine operations as reported in 2016 | $ | 1,818        |  

| | Gold revenue decreased in Q4 2016 compared to Q4 2015
      because of a 34% decrease in gold ounces sold, partly offset by a higher
      realized sales price.                                                                                                                                                                                                                                                   
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                    
| | For Q4 2016 San Dimas sold 1.58 million ounces of silver
      under the silver purchase agreement, 32% lower than Q4 2015 primarily
      because of lower production output.                                                                                                                                                                                                                                     
|  |                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Operating expenses were $34.9 million in Q4 2016, $7.7
      million lower than Q4 2015 mostly because of lower mine extraction at San
      Dimas, which more than offset higher labour costs. In addition, cost
      savings at Black Fox due to sourcing a significant portion of the mill
      feed from the low grade, lower cost stockpile contributed to the overall
      decrease in operating expenses.

27

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

A summary income statement for the fourth quarter follows:

|                                                                 |   | Three months ended |  
|---------------------------------------------------------------- | - | ------------------ | -
|                                                                 |   | December 31        |  
|(in thousands of U.S. dollars)                                   |   | 2016               |  
|                                                                 |   |                    |  
|Earnings from mine operations                                    | $ | 1,818              |  
|Mining interest impairment charge                                |   | (228,000           | )
|Exploration expenses                                             |   | (2,262             | )
|Share-based compensation                                         |   | (1,466             | )
|General and administrative
      expenses                        |   | (3,160             | )
|Other charges                                                    |   | (548               | )
|Transaction costs                                                |   | -                  |  
|Interest and finance expenses                                    |   | (1,845             | )
|Mark-to-market gain on
      convertible debentures and warrants |   | 12,507             |  
|Other income (expenses)                                          |   | 269                |  
|Income tax recovery                                              |   | 32,604             |  
|Net loss                                                         |   | ($190,083          | )

| | Mining interest impairment charge is as described in
      Review of Annual Consolidated Financial Information.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Share-based compensation include amortization on equity
      settled plans and marked-to- market adjustments on the value of units in
      the Companys cash-settled plans. The decrease in Q4 2016 expense compared
      to Q4 2015 reflects the fact that accretion from new grants during 2016
      were calculated based on lower values compared to grants from prior year
      as a result of the decline in the Companys share price in 2016. Accretion
      from prior year grants also declined as a result of the vesting of certain
      tranches in prior quarters. In addition, expenses from marked-to-market
      cash-settled plans also decreased as a result of the decrease in share
      price during the quarter.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | General and administrative expenses decreased by were
      $2.4 million in Q4 2016 compared to Q4 2016 due mainly to lower
      performance bonuses accrued. Other charges also decreased due to severance
      and office closure costs recorded in Q4 2015 partly offset by slightly
      higher legal expenses relating to legal proceedings in Mexico.                                                                                                                                                                                                                                                                                                                                                                                   

28

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

The breakdown of general and administrative expenses and other
charges follows:

|                                                           |   | Three months ended | 
|---------------------------------------------------------- | - | ------------------ | 
|                                                           |   | December 31        | 
|(in thousands of U.S. dollars)                             |   | 2016               | 
|General and administrative
      expenses                  |   |                    | 
|Salaries and wages                                         | $ | 1,272              | 
|Rent and office costs                                      |   | 182                | 
|Legal, accounting and consulting services                  |   | 533                | 
|Directors fees and expenses                                |   | 431                | 
|Other general and administrative expenses                  |   | 742                | 
|                                                           | $ | 3,160              | 
|Other charges                                              |   |                    | 
|Legal expenses associated
      with proceedings in Mexico | $ | 248                | 
|Office closure costs and severance payments                |   | -                  | 
|Government charges                                         |   | 300                | 
|                                                           | $ | 548                | 

| | Interest and finance expense decreased by $1.8 million in
      Q4 2016 as compared to Q4 2015, primarily due to the repayment of the 6.5%
      convertible debentures during the first quarter of 2016 partly offset by
      higher interest on the revolving credit facility during the fourth
      quarter.                                                                                                                                                                                                                                                                                                 
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | The 5.75% convertible debentures issued in 2015 and the
      common share purchase warrants issued in conjunction with the equity
      offering in June 2016 are both accounted for at fair value and are
      marked-to-market each period based on the corresponding trading price. For
      Q4 2016, a gain of $12.5 million was recorded compared with $nil in Q4
      2015.                                                                                                                                                                                                                             
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | Included in other income (expenses) are foreign exchange
      gains. The Company recorded a foreign exchange gain of $0.2 million in Q4
      2016 compared to a gain of $3.4 million in Q4 2015. Foreign exchange gains
      result primarily from the translation of Mexican peso denominated and
      Canadian dollar denominated asset retirement obligations offset by foreign
      exchange losses from the peso denominated VAT receivable. In Q4 2016 and
      2015, both the Mexican peso and the Canadian dollar depreciated relative
      to the U.S. dollar (the Companys functional currency).

29

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

| | The Companys income tax expense is detailed as follows:
|- | --------------------------------------------------------

|                                                  |       | Three months ended |  
|------------------------------------------------- | ----- | ------------------ | -
|                                                  |       | December 31        |  
|(in thousands of U.S. dollars)                    |       | 2016               |  
|Current tax expense                               |       |                    |  
|Mining royalty at San Dimas                       | $     | 835                |  
|Other current tax                                 |       | (702               | )
|                                                  | $     | 133                |  
|Deferred tax expense
      (recovery)             |       |                    |  
|Withholding tax on intercompany interest          | $     | 791                |  
|San Dimas change in tax basis                     |       | (27,159            | )
|Mining royalty at San Dimas                       |       | (5,978             | )
|Tax recovery on mining
      interest impairments |       | -                  |  
|Other deferred tax                                |       | (391               | )
|                                                  | **$** | (32,737            | )
|Total                                             | **$** | ($32,604           | )

| | San Dimas pays income taxes based on its Mexican peso
      financial statements, which includes foreign exchange and other income
      items (permanent differences) different than the U.S. dollar functional
      currency financial statements. In addition, foreign exchange losses are
      recognized in deferred income tax expense when the Mexican peso
      denominated deferred income tax balance is translated to the U.S. dollar
      reporting currency. In Q4 2015 this decreased deferred tax recovery by
      $7.3 million (2015-$1.8 million). The reduction in San Dimas tax shelters
      reflects the impact of this foreign exchange offset by inflation on the
      San Dimas deferred income tax balances and the impact of higher book to
      tax depreciation. The volatility of the exchange rate between the Mexican
      peso and the U.S. dollar can result in significant adjustments to deferred
      tax expense.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Fourth Quarter Cash Flow Analysis

|                                                                      |       | Three months ended |  
|--------------------------------------------------------------------- | ----- | ------------------ | -
|                                                                      |       | December 31        |  
|(in thousands of U.S. dollars)                                        |       | 2016               |  
|Cash flow:                                                            |       |                    |  
|Provided by operating activities before
      working capital changes | $     | 6,984              |  
|Changes in non-cash working capital                                   |       | (1,959             | )
|Provided by operating activities                                      |       | 5,025              |  
|Used in investing activities                                          |       | (14,473            | )
|Provided by (used in) financing activities and other                  |       | (1,836             | )
|Increase (decrease) in cash                                           | **$** | (11,284            | )

30

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Operating activities

Operating cash flows before working capital changes decreased
in 2016 due to lower gold production and sales at both San Dimas and Black Fox.
In addition, income tax installments by PEM were significantly higher in 2016
compared to 2015. Income tax installments are based on the most recent fiscal
year in which PEM had earnings for tax purposes, which in this case was
2015.

The changes in non-cash working capital was a cash outflow of
$2.0 million in Q4 2016 compared with an inflow of $17.4 million in Q4 2015. The
outflow in 2016 was due mainly to the build-up of income tax and VAT receivable
in Mexico, the payment of the annual union bonus at San Dimas and higher
payments for trade and other payables. These were partly offset by decreases in
inventory as more gold was sold than produced at San Dimas and Black Fox and
Black Fox continued to deplete their low-grade stockpile. The inflow in Q4 2015
was attributed largely to the decrease in stockpile inventories at Black Fox and
the usage of VAT receivables to offset corporate income taxes at San Dimas.

Investing activities

San Dimas capital expenditures in the fourth quarter of 2016
were $9.0 million, focused mainly on underground development, capitalized
drilling, ventilation improvements, and equipment upgrades. This was below Q4
2015 capital expenditures, which included $8.0 million spent on the mill
expansion.

Black Fox capital expenditures were $6.0 million in the
quarter, mainly comprising underground development, capitalized drilling, and
the tailings lift project.

Financing activities

Financing activities during Q4 2016 consisted primarily of
capital lease and interest payments. In Q4 2015, the Company received $4.3
million in proceeds from the issuance of flow-through shares.

31

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Selected Consolidated Quarterly Financial Data

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

2016
    
    
    2015(in thousands of U.S.dollars except for
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1per share amounts)Financial DataRevenue
    $
    52,181
    
    $
    57,012
    
    $
    59,439
    
    $
    50,544
    
    $
    71,404
    
    $
    79,219
    
    $
    67,371
    
    $
    73,310Total cost of sales
    
    (50,363
    )
    
    (57,077
    )
    
    (54,817
    )
    
    (56,339
    )
    
    (61,304
    )
    
    (61,394
    )
    
    (56,293
    )
    
    (61,840
    )Earnings from mine operations
    $
    1,818
    
    
    ($65
    )
    $
    4,622
    
    
    ($5,795
    )
    $
    10,100
    
    $
    17,825
    
    $
    11,078
    
    $
    11,470Impairment charges
    
    (228,000
    )
    
    -
    
    
    -
    
    
    -
    
    
    (104,000
    )
    
    -
    
    
    -
    
    
    -Exploration expenses
    
    (2,262
    )
    
    (206
    )
    
    (612
    )
    
    (334
    )
    
    (599
    )
    
    (231
    )
    
    (739
    )
    
    (121
    )Share- based compensation
    
    (1,466
    )
    
    (2,268
    )
    
    (1,801
    )
    
    (1,514
    )
    
    (2,045
    )
    
    (1,153
    )
    
    (1,998
    )
    
    (1,948
    )General and administrative
      expenses
    
    (3,160
    )
    
    (4,015
    )
    
    (4,013
    )
    
    (3,614
    )
    
    (5,589
    )
    
    (3,771
    )
    
    (4,619
    )
    
    (6,065
    )Other charges
    
    (548
    )
    
    (1,940
    )
    
    (1,833
    )
    
    (404
    )
    
    (845
    )
    
    (1,323
    )
    
    (534
    )
    
    -Earnings (loss) from
      operations
    $
    (233,618
    )
    
    ($8,494
    )
    
    ($3,637
    )
    
    ($11,661
    )
    
    ($102,978
    )
    $
    11,347
    
    $
    3,188
    
    $
    3,336Transaction costs and other
      expenses
    
    -
    
    
    -
    
    
    (828
    )
    
    (386
    )
    
    (510
    )
    
    -
    
    
    -
    
    
    (3,906
    )Interest and finance expense
    
    (1,845
    )
    
    (2,314
    )
    
    (1,881
    )
    
    (3,259
    )
    
    (3,654
    )
    
    (3,057
    )
    
    (1,933
    )
    
    (2,870
    )Mark- to- market gain (loss)
    
    12,507
    
    
    2,756
    
    
    (2,278
    )
    
    (375
    )
    
    -
    
    
    9,000
    
    
    (3,705
    )
    
    8,205Other income (expenses)
    
    269
    
    
    (484
    )
    
    294
    
    
    (650
    )
    
    3,283
    
    
    (5,347
    )
    
    (213
    )
    
    3,301Income tax (expense) recovery
    
    32,604
    
    
    (3,197
    )
    
    (11,102
    )
    
    3,159
    
    
    5,512
    
    
    (17,346
    )
    
    (4,081
    )
    
    (4,482
    )Net income (loss)
    $
    (190,083
    )
    
    ($11,733
    )
    
    ($19,432
    )
    
    ($13,172
    )
    
    ($98,347
    )
    
    ($5,403
    )
    
    ($6,744
    )
    $
    3,584Basic income (loss) per share
    
    ($ 1.01
    )
    
    ($0.06
    )
    
    ($0.12
    )
    
    ($0.08
    )
    
    ($0.60
    )
    
    ($0.03
    )
    
    ($0.04
    )
    $
    0.02Diluted income (loss) per share
    
    ($ 1.01
    )
    
    ($0.06
    )
    
    ($0.12
    )
    
    ($0.08
    )
    
    ($0.60
    )
    
    ($0.03
    )
    
    ($0.04
    )
    $
    0.02


| | When the Company reaches its annual threshold for
      deliveries under the silver purchase agreement, the Company realizes
      silver sales at spot prices, increasing both revenue and net income.
      Revenue in Q4 2016, Q3 2016 and Q3 2015 included $2.9 million, $0.1
      million and $12.8 million, respectively, of silver sales at spot prices.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                 
| | In Q4 2016, an impairment of $111.0 million and $117.0
      million on mining interests relating to San Dimas and Black Fox,
      respectively, were recorded.                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                 
| | Exploration expenses reflect the costs incurred in the
      Companys exploration properties. As at December 31, 2015 Cerro del Gallo
      was reclassified as an exploration and evaluation asset and, the increase
      in Q4 2016 versus primarily reflects costs incurred with this project.                                                             
|  |                                                                                                                                                                                                                                                                                                                                                                 
| | In Q2 2015, silver sales were lower because of the loss
      of PEMs export license and higher in Q3 2015 because of the subsequent
      reinstatement.                                                                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                                                 
| | In Q4 2015, an impairment of $82.0 million and $22.0
      million on mining interests relating to Black Fox and Cerro del Gallo,
      respectively, were recorded.                                                                                                                                                                                            

32

---



|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

| | Share-based compensation fluctuates based on the share
      price of the Company.                                                                                                                                                            
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                               
| | Other charges includes legal costs associated with legal
      proceedings in Mexico (APA and NAFTA)                                                                                                                                          
|  |                                                                                                                                                                                                                                               
| | Interest and finance expense varies quarterly depending
      on the amount of debt held by the Company.                                                                                                                                      
|  |                                                                                                                                                                                                                                               
| | The 5.75% Convertible Debentures and common share
      purchase warrants are marked-to- market each quarter.                                                                                                                                 
|  |                                                                                                                                                                                                                                               
| | Other income (expense) largely includes foreign exchange
      gains or losses from the revaluation of certain local denominated assets
      and liabilities at San Dimas and Black Fox to U.S. dollars.                                     
|  |                                                                                                                                                                                                                                               
| | Income tax expense (recovery) is impacted by the effects
      of foreign exchange fluctuations on Mexican peso denominated non-cash
      deferred income taxes, which were significant in certain periods such as
      Q3 2015 and Q4 2016.

NON-GAAPMEASURES

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

Cash Costs Per Gold Ounce

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

33

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Three months ended
    
    
    Year endedDecember 31
    
    
    December 31(in thousands of U.S. dollars except for per ounce amounts)
    
    2016
    
    
    2015
    
    
    2016
    
    
    2015Operating expenses per the
      consolidated financial statements
    $
    34,860
    
    $
    42,555
    
    $
    155,267
    
    $
    163,593Share-based compensation included in
      operating expenses
    
    (364
    )
    
    (533
    )
    
    (1,536
    )
    
    (1,583
    )Inventory movements and adjustments
    
    1,091
    
    
    (236
    )
    
    (1,429
    )
    
    3,284Total cash operating costs
    $
    35,587
    
    $
    41,786
    
    $
    152,302
    
    $
    165,294Ounces of gold produced
    
    40,674
    
    
    59,156
    
    
    156,052
    
    
    221,060Gold equivalent ounces of
      silver produced
    
    5,120
    
    
    8,999
    
    
    20,087
    
    
    38,414Gold
      equivalent ounces produced
    
    45,794
    
    
    68,155
    
    
    176,139
    
    
    259,474Total cash costs per gold
      equivalent ounce
    $
    777
    
    $
    613
    
    $
    865
    
    $
    637Total cash operating costs
    $
    35,587
    
    $
    41,786
    
    $
    152,302
    
    $
    165,294By-product silver credits
    
    (6,185
    )
    
    (9,825
    )
    
    (24,879
    )
    
    (44,157
    )Cash costs, net of
      by-product credits
    $
    29,402
    
    $
    31,961
    
    $
    127,423
    
    $
    121,137Ounces of gold produced
    
    40,674
    
    
    59,156
    
    
    156,052
    
    
    221,060Total by-product cash costs per gold ounceproduced
    $
    723
    
    $
    540
    
    $
    817
    
    $
    548


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

|                                                      |   | Three months ended |  |   | Year ended  | 
|----------------------------------------------------- | - | ------------------ |  | - | ----------- | 
|                                                      |   | December 31        |  |   | December 31 | 
|                                                      |   | 2016               |  |   | 2015        | 
|                                                      |   |                    |  |   |             | 
|Silver ounces produced
      (millions) (A)           |   | 1.42               |  |   | 2.32        | 
|Average realized silver price (B)                     | $ | 4.34               |  | $ | 4.24        | 
|Average realized gold price
      (C )                | $ | 1,182              |  | $ | 1,081       | 
|Gold
      equivalent ounces of silver (A) x (B)/(C ) |   | 5,120              |  |   | 8,999       | 

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

34

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

All-in Sustaining Costs Per Gold Ounce

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

The Company has adopted the reporting of all-in sustaining
costs per gold ounce. This metric is a non-GAAP performance measure. The
Company reports this measure on a gold ounces produced basis.

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

35

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

The following table provides a reconciliation of all-in
sustaining costs per gold ounce to the consolidated financial statements for the
three months and years ended December 31, 2016 and 2015:

|                                                            |   | Three months ended |  |   | Year ended  | 
|----------------------------------------------------------- | - | ------------------ |  | - | ----------- | 
|                                                            |   | December 31        |  |   | December 31 | 
|(in thousands of U.S. dollars except for per ounce amounts) |   | 2016               |  |   | 20151       | 
|Cash costs, net of by-product
      credits                 | $ | 29,402             |  | $ | 31,961      | 
|Corporate general and administrative expenses
      1       |   | 4,626              |  |   | 7,055       | 
|Reclamation cost accretion                                  |   | 219                |  |   | 303         | 
|Sustaining capital expenditures                             |   | 12,909             |  |   | 18,928      | 
|All-in sustaining costs                                     | $ | 47,156             |  | $ | 58,247      | 
|                                                            |   |                    |  |   |             | 
|Ounces of gold produced                                     |   | 40,674             |  |   | 59,156      | 
|All-in sustaining costs per gold ounce                      | $ | 1,159              |  | $ | 985         | 

1Comparative AISC figures for 2015 have been
restated to reflect the exclusion of legal costs associated with proceedings in
Mexico.

All-in sustaining costs adjust cash costs, net of by-product
credits, for corporate general and administrative expenses, reclamation cost
accretion and sustaining capital expenditures. Corporate general and
administrative expenses are included as a line item on the Companys statement
of operations increased by the share-based compensation also included in the
statements of operations. Sustaining capital expenditures and reclamation cost
accretion are not line items on the Companys financial statements.

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

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

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

36

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Adjusted Net Income (Loss)

The Company has included the non-GAAP performance measures of
adjusted net income (loss) and adjusted net income (loss) per share, throughout
this document. Adjusted net income (loss) excludes the following from net
earnings:

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

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

Three months ended
    
    
    Year endedDecember 31
    
    
    December 31(in thousands of U.S. dollars except for per share amounts)
    
    2016
    
    
    2015
    
    
    2016
    
    
    2015Net loss
    
    ($190,083
    )
    
    ($98,347
    )
    
    ($234,420
    )
    
    ($106,910
    )Impairment charges, net of taxes
    
    188,873
    
    
    96,777
    
    
    188,873
    
    
    97,340Impact of foreign exchange on
      deferred taxes
    
    7,370
    
    
    1,776
    
    
    26,580
    
    
    25,445Adjustment to normalize inventory costs at
      San Dimas
    
    -
    
    
    -
    
    
    1,169
    
    
    -Underground support
      initiative at San Dimas
    
    -
    
    
    -
    
    
    1,286
    
    
    -Costs relating to NAFTA and APA claims
    
    186
    
    
    -
    
    
    2,392
    
    
    -(Gain) loss on derivative
      liability
    
    -
    
    
    5
    
    
    (4
    )
    
    (1,478
    )Mark-to-market (gain) loss on financial
      instruments
    
    (9,193
    )
    
    -
    
    
    (9,268
    )
    
    (13,500
    )Transaction costs attributed
      to financial instruments
    
    -
    
    
    -
    
    
    171Office closure costs, severance payments andother one-off charges
    
    1,082
    
    
    (249
    )
    
    1,082
    
    
    2,008Transaction costs on issuance of convertible debentures
    
    -
    
    
    -
    
    
    -
    
    
    3,651Adjusted net income
      (loss)
    
    ($1,765
    )
    
    ($38
    )
    
    ($22,139
    )
    $
    6,556Weighted average shares outstanding
      (000's)
    
    188,593
    
    
    162,751
    
    
    177,569
    
    
    162,341Adjusted net income (loss) per share
    
    ($0.01
    )
    
    ($0.00
    )
    
    ($0.12
    )
    $
    0.04


The effective rate used in calculating the after-tax amounts of
the above reconciling items was 26.5% in 2016 and 2015, except for impairment
charges which reflect the local enacted tax rate of the entities to which they
relate.

37

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

EBITDA and Adjusted EBITDA

The Company calculates EBITDA as net income or loss for the
period excluding interest and finance expense, income tax expense and
depreciation and depletion. Adjusted EBITDA further excludes non-cash items
including impairment charges, share-based compensation and mark-to-market gain
or loss on convertible debentures and warrants. EBITDA and adjusted EBITDA does
not have any standardized meaning prescribed by IFRS and should not be
considered in isolation or as a substitute for measures of performance prepared
in accordance with IFRS. EBITDA and adjusted EBITDA exclude the impact of cash
costs of financing activities and taxes, and the effects of changes in operating
working capital balances, and therefore are not necessarily indicative of
operating profit or cash flow from operations as determined under IFRS. Other
companies may calculate EBITDA and adjusted EBITDA differently.

A reconciliation between net loss for the period and EBITDA and
adjusted EBITDA is presented below:

|                                                                  |   | Three months ended |   |   | Year ended  |  
|----------------------------------------------------------------- | - | ------------------ | - | - | ----------- | -
|                                                                  |   | December 31        |   |   | December 31 |  
|(in thousands of U.S. dollars except for per
      share amounts) |   | 2016               |   |   | 2015        |  
|                                                                  |   |                    |   |   |             |  
|Net loss                                                          |   | ($190,083          | ) |   | ($98,347    | )
|Income tax expense (recovery)                                     |   | (32,604            | ) |   | (5,512      | )
|Interest and finance expense                                      |   | 1,845              |   |   | 3,654       |  
|Depreciation and depletion                                        |   | 15,503             |   |   | 18,749      |  
|EBITDA                                                            |   | (205,339           | ) |   | (81,456     | )
|Share-based compensation expense                                  |   | 1,824              |   |   | 2,578       |  
|Impairment charges                                                |   | 228,000            |   |   | 104,000     |  
|Mark-to-market gain on debentures &
      warrants                |   | (12,507            | ) |   | -           |  
|Other non-cash charges                                            |   | (249               | ) |   | (3,486      | )
|Adjusted EBITDA                                                   | $ | 11,729             |   | $ | 21,636      |  

RELATEDPARTYTRANSACTIONS

The Companys related parties include its subsidiaries,
associates over which it exercises significant influence, and key management
personnel. During its normal course of operation, the Company enters into
transactions with its related parties for goods and services. The Companys
related party transactions are described in Note 23 to the Companys annual
consolidated financial statements for the year ended December 31, 2016.

ACCOUNTINGPRONOUNCEMENTS

The Company continually monitors the issuance by the
International Accounting Standards Board (IASB) of new and revised accounting
pronouncements which may have an impact on the accounting, presentation and
disclosure of transactions underlying the Companys consolidated financial
statements. New and revised pronouncements issued which may have an impact in
the future on the Company are described in Note 2 to the Companys annual
consolidated financial statements for the year ended December 31, 2016.

38

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

CRITICALACCOUNTINGPOLICIES

The Companys consolidated financial statements are prepared in
accordance with IFRS as issued by the International Accounting Standards Board.
The significant accounting policies applied are described in Note 2 to the
Companys annual consolidated financial statements for the year ended December
31, 2016.

CRITICALACCOUNTINGESTIMATESANDJUDGEMENTS

The preparation of 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.

a) Accounting estimates

The significant assumptions about the future and other major
sources of estimation uncertainty as at the end of the reporting period that
have a significant risk of resulting in a material adjustment to the carrying
amounts of the Companys assets and liabilities are as follows:

(i) Estimated recoverable reserves and resources

The Company estimates its proven and probable mineral reserves
and measured and indicated and inferred mineral resources based on information
compiled by appropriately qualified persons. Estimated ounces from mineral
reserves and resources as well as estimates for exploration potential are
included in the Companys estimation of future cash flows. These cash flows are
based on factors such as estimates of foreign exchange rates, commodity prices,
future capital requirements and production costs along with geological
assumptions and judgments made in estimating the size and grade of the ore body.
Changes in estimated ounces may impact the carrying value of assets, reclamation
and remediation obligations, recognition of deferred tax amounts, depreciation
and depletion, and impairment charges.

(ii) Determination of useful lives of property, plant and
equipment

Property, plant and equipment are depreciated to their
estimated residual value over the estimated useful life of the asset. Should the
actual useful life of the property, plant or equipment vary, future depreciation
charges may change.

(iii) Impairment charges

Non-current assets are tested for impairment if there is an
indicator of impairment, and in the case of goodwill, at least annually. The
impairment analysis requires the use of estimates and assumptions, including
amongst others, long-term commodity prices, discount rates, length of mine life,
future production levels, future operating costs, future capital expenditures
and tax estimates. The estimates and assumptions are subject to risk and
uncertainty; hence, there is the possibility that changes in circumstances will
alter these projections, which may impact the recoverable amount of the assets.
In such circumstances the carrying value of the assets may be impaired or a prior periods impairment charge reversed
(with the exception of goodwill for which impairment charges are not reversed)
with the impact recorded in the statements of operations and comprehensive
income (loss).

39

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

(iv) Decommissioning liability

The Companys accounting policy for the recognition of accrued
site closure costs requires significant estimates and assumptions such as the
requirements of the relevant legal and regulatory framework, the magnitude of
possible disturbance and the timing, extent and costs of required closure,
rehabilitation activity and applicable discount rates. Changes to these
estimates and assumptions may result in actual expenditures in the future
differing from the amounts currently provided for. The decommissioning liability
is periodically reviewed and updated based on the available facts and
circumstances.

(v) Income taxes

The Company is periodically required to estimate the tax basis
of assets and liabilities. Where applicable tax laws and regulations are either
unclear or subject to varying interpretations, it is possible that changes in
these estimates could occur that materially affect the amounts of deferred
income tax assets and liabilities recorded in the financial statements. Changes
in deferred tax assets and liabilities generally have a direct impact on
earnings in the period of change. Each period, the Company evaluates the
likelihood of whether some portion or all of each deferred tax asset will not be
realized. This evaluation is based on historic and future expected levels of
taxable income, the pattern and timing of reversals of taxable temporary timing
differences that give rise to deferred tax liabilities, and tax planning
initiatives. Levels of future taxable income are affected by, among other
things, the market price for gold and silver, production costs, quantities of
proven and probable reserves, interest rates and foreign currency exchange
rates.

(vi) Valuation of inventory

All inventory, other than supplies, is valued at the lower of
average cost or net realizable value. Management is required to make various
estimates and assumptions to determine the value of stockpiled ore, in-circuit
inventories and doré inventories. The estimates and assumptions include surveyed
quantities of stockpiled ore, in-circuit process volumes, gold and silver
contents of both, costs to recover saleable ounces, recoverable ounces once
processed and the price per ounce of gold or silver when ounces of gold and
silver are expected to be recovered and sold.

(vii) Share-based compensation

The Company makes certain estimates and assumptions when
calculating the fair values of share-based compensation granted. The significant
estimations and assumptions include expected volatility, expected life, expected
dividend rate and risk-free rate of return.

40

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

b) Accounting judgments

The critical judgment that the Companys management has made
that has the most significant effect on the amounts recognized in the Companys
consolidated financial statements is as follows:

(i) Functional currency

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

(ii) Tax ruling in Mexico

On October 4, 2012, PEM received a ruling (the APA Ruling)
from the Mexican tax authority (SAT) which confirmed the appropriate price for
sales of silver under the Amended and Restated Silver Purchase Agreement. Under
Mexican tax law, an APA Ruling is generally applicable for up to a five year
period (which in the Companys case, covered the year in which the ruling
application was filed, the immediately preceding year and the three subsequent
years). The Companys APA Ruling covered the five years ending December 31,
2014.

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

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

FINANCIALINSTRUMENTS

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

41

---

|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

At December 31, 2016, the carrying amounts of cash, restricted
cash, trade and other receivables, and trade and other payables are considered
to be a reasonable approximation of their fair values due to their short-term
nature. The Companys equity investment in Fortune Bay is designated as
available for sale and is carried at fair value. Any unrealized gains on
available for sale assets are recognized in OCI. Cumulative losses recorded
under Accumulated Other Comprehensive income (loss) are reclassified from equity
to the statement of operations and comprehensive income (loss) when there is
objective evidence that the asset is impaired. Once an impairment is recognized,
all subsequent losses are recognized in the statement of operations until the
asset is derecognized. During the year ended December 31, 2016, the Company
recorded an impairment loss of $nil (2015  impairment of $0.6 million) in the
statement of operations and comprehensive income (loss) and an unrealized gain
of $1.1 million in Accumulated Other Comprehensive Loss relating to its
investment in Fortune Bay. Fortune Bay is a publicly-listed company and the fair
value is based on the trading price of its shares as at the date of the
statement of financial position.

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

The convertible debentures assumed with the acquisition of
Brigus were considered to contain an embedded derivative liability which was
initially recognized at fair value using an option pricing model, and was
subsequently measured at fair value each period during the term of the
debentures. During the year ended December 31, 2016, an unrealized derivative
gain of $nil (2015  $1.5 million) was recognized in relation to this derivative
liability.

The 5.75% convertible debentures issued by the Company on
February 9, 2015 are considered to contain multiple embedded derivatives. These
debentures and all related derivatives were accounted for as one instrument,
which was initially recognized at fair value and are subsequently measured at
fair value at the end of each period during the term of the debentures. During
the year ended December 31, 2016, a mark to market gain of $9.0 million (2015 -
$13.5 million) was recognized in relation to the debentures.

The common share purchase warrants issued by the Company on
June 24, 2016 are considered derivative liabilities and were initially
recognized at fair value and are subsequently measured at fair value at the end
of each period during the term of the warrants. During the year ended December
31, 2016, a mark-to-market gain of $3.6 million (2015 - $nil) was recognized in
relation to the common share purchase warrants.

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

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

42

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

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

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

|                                    |   | December 31 |  |   | December 31 | 
|----------------------------------- | - | ----------- |  | - | ----------- | 
|Level1                              |   | 2016        |  |   | 2015        | 
|Investment in Fortune Bay
      (1) | $ | 1,160       |  | $ | 525         | 
|5.75% convertible debentures (2)    |   | 52,500      |  |   | 61,500      | 
|Warrant liability (2)               |   | 1,066       |  |   | -           | 

|(1) | Fortune Bay is a publicly-listed company and the fair
      value is based on the trading price of its shares as at the date of the
      statement of financial position.                             
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The fair value of the 5.75% convertible debentures and
      warrant liability are calculated using the market price on the TSX
      Exchange as at the date of the statement of financial
  position.

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

Financial Instruments Risk

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:

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 and cash equivalents and restricted
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 and cash equivalents 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, 2016 is considered to be negligible. Although the Company is entitled to VAT
refunds there are 14 months of value added tax outstanding from the Mexican tax
authorities (included in taxes receivable), the Company has reactivated the VAT
refunds in compliance with Mexican law and supplied the additional information
requested by the SAT. The Company expects the amounts to be refunded or offset
against future income tax payments.

43

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

The Companys maximum exposure to credit risk at December 31,
2016 and 2015 is as follows:

|                                         |   | 2016   |  |   | 2015   | 
|---------------------------------------- | - | ------ |  | - | ------ | 
|Cash and restricted cash                 | $ | 24,452 |  | $ | 51,521 | 
|Trade and other receivables              |   | 1,962  |  |   | 1,793  | 
|Current and non-current taxes receivable |   | 41,838 |  |   | 30,689 | 
|                                         | $ | 68,252 |  | $ | 84,003 | 

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s
objectives and key guidelines for capital management, including management of
long-term debt, are described in note 21 to the Companys annual consolidated
financial statements for the year ended December 31, 2016 (see related
discussion in the Liquidity section).

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

The table below shows the Companys liquidity risk profile at
December 31, 2016:

|                                                     |   | Within 1 |   |   | 2-5      |   |   |           |  
|---------------------------------------------------- | - | -------- | - | - | -------- | - | - | --------- | -
|(in thousands of U.S. dollars)                       |   | year     |   |   | years    |   |   | **Total** |  
|                                                     |   |          |   |   |          |   |   |           |  
|Cash and cash equivalents                            | $ | 19,875   |   | $ | -        |   | $ | 19,875    |  
|Trade and other payables                             |   | (31,781  | ) |   | -        |   |   | (31,781   | )
|Revolving credit facility
      balance and interest |   | (50,811  | ) |   | -        |   |   | (50,811   | )
|Finance lease liabilities                            |   | (1,202   | ) |   | (406     | ) |   | (1,608    | )
|5.75% Convertible debentures and interest            |   | (4,313   | ) |   | (84,322  | ) |   | (88,635   | )
|Total                                                |   | ($68,232 | ) |   | ($84,728 | ) |   | ($152,960 | )

Refer to note 2(b) to the Companys annual consolidated
financial statements for the Companys plans to address liquidity risk
associated with the current working capital deficiency. On February 27, 2017,
the Company announced that it has entered into a term sheet with Sprott for a
$75.0 million three-year term Debt Facility which is intended to refinance the
Companys existing $75.0 million RCF, of which $50.0 million is currently drawn,
and partly for general corporate purposes. Although the Company believes that
definitive agreements with Sprott will be finalized, there can be no assurance
that the Company's efforts to obtain financing from Sprott or others will be
successful.

44

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

The Company has entered into commercial leases on certain types
of equipment and office space which have been classified as operating leases.
These leases have terms of between 1 and 6 years. There are no restrictions
placed on the Company as a result of entering into these leases. Some of the
leases contain renewal or purchase options at the end of the lease. The total
operating lease expense during the year ended December 31, 2016 was $0.8 million
(2015 - $1.2 million).

Market risk

(i) Currency risk

Currency risk is the risk that the fair values or future cash
flows of the Companys financial instruments will fluctuate because of changes
in foreign currency exchange rates. Exchange rate fluctuations may affect the
costs incurred in the Companys operations. Gold is sold in U.S. dollars and
costs are incurred principally in U.S. dollars, Canadian dollars and Mexican
pesos. The appreciation of the Mexican peso or the Canadian dollar against the
U.S. dollar can increase the costs of gold production and capital expenditures
in U.S. dollar terms. The Company also holds cash that is denominated in
Canadian dollars and Mexican pesos which are subject to currency risk. The
Companys head office general and administrative expenses are mainly denominated
in Canadian dollars and are translated to U.S. dollars at the average rate
during the period and as such if the U.S. dollar appreciates as compared to the
Canadian dollar, the costs of the Company would decrease in U.S. dollar terms.
The Company is further exposed to currency risk through non-monetary assets and
liabilities of its Mexican entities whose taxable profit or loss is denominated
in a non-U.S. 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, 2016, the Company recognized
a loss of $0.7 million on foreign exchange (2015 - gain of $0.1 million). Based
on the above net exposures at December 31, 2016, a 10% depreciation or
appreciation of the Mexican peso against the U.S. dollar would result in a $1.4
million increase or decrease in the Companys before-tax net earnings (loss)
(2015 - $0.03 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 before-tax net earnings (loss) (2015 - $1.6 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s exposure to interest rate risk is limited to the RCF which is subject
to a floating interest rate. An increase or decrease of 100 basis points in the
interest rate would result in a decrease or increase in profit before-tax of
$0.02 million (assuming $50 million drawn on the revolving line of credit).

45

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

(iii) Price risk

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

The table below summarizes the impact on profit before-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.

|                   |   | 2016    |   |   | 2015    |  
|------------------ | - | ------- | - | - | ------- | -
|Gold price         |   |         |   |   |         |  
|10% increase       | $ | 14,084  |   | $ | 18,091  |  
|10% decrease       |   | (14,084 | ) |   | (18,091 | )
|Silver price       |   |         |   |   |         |  
|10% increase       | $ | 222     |   | $ | 938     |  
|10%
      decrease |   | (222    | ) |   | (938    | )

RISKSANDUNCERTAINTIES

Challenge to the 2012 APA

Overview

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

Background

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

As amended and restated, the provisions of the Silver Purchase
Agreement require that, on a consolidated basis, the Company sell to Silver
Wheaton 100% of silver produced from the San Dimas concessions during a contract year (August 6th to the
following August 5th), up to 6 million ounces and 50% of silver produced
thereafter, at the lower of (i) the current market price and (ii) $4.04 per
ounce plus an annual increase of 1% (the PEM Realized Price). In 2016, the
contract price was $4.28 (2015 - $4.24) . The price paid by Silver Wheaton under
the Silver Purchase Agreement represents the total value that the Company and
its affiliates receive for the sale of silver to Silver Wheaton. The Silver
Purchase Agreement continues indefinitely in respect of any silver produced from
the San Dimas concessions.

46

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

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

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

APA

In order to provide the Company with stability and assurances
that the SAT would accept the PEM Realized Price as the proper price to use to
calculate Mexican income taxes, the Company applied for and received the APA
from the SAT. The APA confirmed the PEM Realized Price would be used as the
Companys basis for calculating taxes owed by the Company on the silver sold
under the Silver Purchase Agreement. The Company believed that the function of
an APA was to provide tax certainty and as a result made significant investments
in Mexico based on that certainty. Under Mexican law, an advanced pricing
agreement is valid for five years and therefore the APA represented the SATs
agreement to accept the PEM Realized Price as the basis for calculating taxes
for the tax years 2010 through 2014.

Challenge to APA for 2010  2014 tax years

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

47

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

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

Primero Mining Corp.s claim against the Mexican Government

On June 2, 2016, the Company has notified the Government of
Mexico that the measures taken by the SAT against PEM in connection with the
judicial proceeding seeking to retroactively nullify the APA, breached several
provisions of Chapter 11 of the North American Free Trade Agreement (NAFTA)
because these measures are arbitrary, discriminatory, unfair and inequitable. As
more than 90 days have now passed since the provision of this notice, the
Company has the option to commence international arbitration proceedings
pursuant to Article 1119 of the NAFTA at a time of its choosing. During Q3 and
Q4 2016 Primero engaged in dialogue with the Mexican Government regarding the
Mexican tax authoritys legal claim against the APA. The Company thus
temporarily suspended its advancement of international arbitration against the
Mexican Government in order to continue this dialogue.

Uncertain tax treatment for tax years following 2014

For the years ended December 31, 2016 and 2015, the Company
continued to record its revenue from the sale of silver for purposes of Mexican
tax accounting in a manner consistent with the APA on the basis that the
applicable facts and laws have not changed. The Companys legal and financial
advisors continue to believe that the Company has filed its tax returns
compliant with applicable Mexican law.. Given the legal challenge by the SAT
against the APA for the 2010-2014 tax years, the Company currently believes it
is unlikely the SAT will agree to an Advance Pricing Agreement for the 2015-2019
tax years on terms similar to the challenged APA. While the amount of additional
tax that the SAT could charge PEM for years following 2014 cannot be reasonably
estimated at this time, to the extent the SAT determines that the appropriate
price of silver sales under the Silver Purchase Agreement, for tax purposes, is
significantly different from the PEM Realized Price and, while PEM would have
rights of appeal in connection with any reassessments, it is likely to have a
material adverse effect on the Companys business, financial condition and
results of operations.

Class action

The Company has agreed to indemnify its directors and officers,
and the directors and officers of its subsidiaries, to the extent permitted
under corporate law, against costs and damages incurred as a result of lawsuits
or any other judicial, administrative or investigative proceeding in which said
directors or officers are sued as a result of their services. The directors and
officers are covered by directors and officers liability insurance.

In July 2016, the Company and certain officers were served with
a class action lawsuit that was filed earlier in the year in the State of
California seeking to recover damages for investors in the Companys common
shares under the U.S. federal securities laws. The Company filed a motion to
dismiss this action which was granted on January 30, 2017. The plaintiffs
claims were dismissed without prejudice and the plaintiffs filed an amended
complaint on February 27, 2017. The Company intends to vigorously defend this
class action lawsuit.

48

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Access to future financing

The Companys inability to achieve positive cash flows and
obtain financing to satisfy its obligations would impact the Companys ability
to achieve certain financial covenants under its existing RCF and Sprott term
sheet in 2017. Any breach of covenant could result in an event of default under
the revolving credit facility agreement or term sheet, which, if not addressed,
would entitle the lender to demand repayment.

In addition to the legal challenges above, the Companys
business contains significant risk due to the nature of mining, exploration, and
development activities. For additional discussion of these and other risk
factors, please refer to the Companys Annual Information Form for the year
ended December 31, 2015, which is available on the Companys website at
www.primeromining.com or on SEDAR at www.sedar.com, or to the Companys Annual
Information Form for the year ended December 31, 2016, which is expected to be
filed by March 31, 2017 and will be found under the Companys profile at
www.sedar.com.

INTERNALCONTROLS

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

Disclosure Controls and Procedures

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

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

49

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Internal Controls Over Financial Reporting

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

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

The effectiveness of Primeros internal control over financial
reporting as of December 31, 2016 has been audited by KPMG LLP, Primeros
independent auditors.

Management assessed the effectiveness of Primeros internal
control over financial reporting as of December 31, 2016, based on the criteria
set forth in Internal Control  Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based
on its assessment, Management concluded that the Companys internal control over
financial reporting was effective as of December 31, 2016.

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

50

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

CAUTIONARYNOTEREGARDINGFORWARD-LOOKINGINFORMATION

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

| | the ability of the Company to expand production at the
      San Dimas and Black Fox mines,                                                                                                                                                                                                     
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the ability of the Company to identify appropriate future
      acquisition opportunities, or if an opportunity is identified, to conclude
      a transaction on satisfactory terms,                                                                                                           
| | the ability of the Company to continue as a going
      concern.                                                                                                                                                                                                                                
| | the Companys requirements for additional capital to
      repay amounts under the RCF and its ability to complete contemplated and
      future financings,                                                                                                                                    
| | the actual results of exploration activities, including
      the ability of the Company to continue the historical conversion of
      resources to reserves at the San Dimas mine, and the anticipated results
      of the exploration programs at Cerro del Gallo and the Black Fox Complex,
| | actual results of reclamation activities at the San Dimas
      and Black Fox mines,                                                                                                                                                                                                            
| | the estimation or realization of Mineral Reserves and
      Resources,                                                                                                                                                                                                                          
| | the timing and amount of estimated future production,
      capital expenditures and costs, including forecasted cash costs,                                                                                                                                                                    
| | the ability of the Company to manage its work force and
      its adherence to standard work practices as well and management of union
      agreements with each operating site,                                                                                                               
| | the timing of the development of new mineral deposits,                                                                                                                                                                                                                                          
| | future prices of precious and base metals,                                                                                                                                                                                                                                                      
| | expected ore grades, recovery rates, and throughput,                                                                                                                                                                                                                                            
| | that plant, equipment or processes will operate as
      anticipated,                                                                                                                                                                                                                           
| | the occurrence of accidents, labour disputes, road blocks
      and other risks associated with the mining industry,                                                                                                                                                                            
| | the ability of the Company to obtain governmental
      approvals or permits in connection with the continued operation and
      development of the San Dimas mine and the Black Fox Complex,                                                                                                  
| | the SATs challenge to the APA ruling and the basis for
      calculating taxes on silver sold pursuant to the SPA for past and future
      periods,                                                                                                                                           
| | the ability of the Company to comply with environmental,
      safety and other regulatory requirements,                                                                                                                                                                                        
| | expectations for the Cerro del Gallo project including
      the timing of activities to lead to a sell/construction decision,                                                                                                                                                                  
| | the completion of development or construction activities,                                                                                                                                                                                                                                       
| | expectations regarding currency fluctuations,                                                                                                                                                                                                                                                   
| | title disputes relating to the Companys properties,                                                                                                                                                                                                                                            
| | the timing and possible outcome of pending litigation,
      and                                                                                                                                                                                                                                
| | the ability of the Company to maintain effective control
      over financial reporting.                                                                                                                                                                                                        

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

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

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

Forward-looking information is subject to a variety of risks
and uncertainties which could cause actual events or results to differ from
those reflected in the forward-looking statements. Such risks include, but are
not limited to: the volatility of prices of gold and other metals; uncertainty
of mineral reserves, mineral resources, exploration potential, mineral grades
and mineral recovery estimates; uncertainty of future production, exploration
and development plans; insufficient capital to complete development and
exploration plans; risks associated with developing the Cerro del Gallo and Grey
Fox projects; currency fluctuations; financing of additional capital
requirements; cost of exploration and development programs; inability to
complete proposed tunnels and access routes or other development; mining risks,
including unexpected formations and cave-ins, which delay operations or prevent
extraction of material; risks associated with foreign operations; governmental
and environmental regulation; tax law changes; the ability of the Company to
continue to pay taxes based on the realized price of silver; the volatility of
the Company's stock price; landowner dissatisfaction and disputes; delays in
permitting; damage to equipment; labour disruptions; and other interruptions. Should
one or more of these risks and uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described in forward-looking statements.

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Investors are advised to carefully review and consider the risk
factors identified in this MD&A under the heading Risk and
uncertainties, and in the Companys Annual Information Form for the year
ended December 31, 2015 as filed on SEDAR as well as the Companys Annual
Information Form for the year ended December 31, 2016 which is expected to be
filed by March 31, 2016, for a discussion of the factors that could cause the
Companys actual results, performance and achievements to be materially
different from any anticipated future results, performance or achievements
expressed or implied by the forward-looking statements. Investors are further
cautioned that the foregoing list of assumptions and risk factors is not
exhaustive and it is recommended that prospective investors consult the more
complete discussion of the Companys business, financial condition and prospects
that is included in this MD&A. The forward-looking information and
statements contained in this MD&A are made as of the date hereof and,
accordingly, are subject to change after such date.

The Company does not undertake to update any forward-looking
information, except as, and to the extent, required by applicable securities
laws. The forward-looking statements contained herein are expressly qualified by
this cautionary statement.

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|PRIMERO MINING CORP.                          
|----------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS          
|FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

CAUTIONARYNOTEFORUNITEDSTATESINVESTORS

As a British Columbia corporation and a reporting issuer
under Canadian securities laws, the Company is subject to certain rules and
regulations issued by Canadian Securities Administrators. The Company is
required to provide detailed information regarding its properties including
mineralization, drilling, sampling and analysis, on security of samples and
mineral reserve estimates under Canadian National Instrument 43-101 (NI
43-101). The United States Securities and Exchange Commission applies different
standards than the standards under NI 43-101 in order to classify mineralization
as a reserve. Accordingly, mineral reserve estimates contained in this MD&A
may not qualify as reserves under SEC standards. Further, the Company
describes any mineral resources associated with its properties utilizing
terminology such as measured resources, indicated resources or inferred
resources which are terms recognized by Canadian regulators under NI 43-101 but
not recognized by the United States Securities and Exchange Commission. United
States investors are cautioned not to assume that any part or all of the mineral
deposits in these categories will ever be converted into mineral reserves. These
terms have a greater amount of uncertainty as to their existence and feasibility
than reserves recognized by the United States Securities and Exchange
Commission. Further, inferred resources have a great amount of uncertainty as
to their existence and as to whether they can be mined legally or economically.
Therefore, United States investors are also cautioned not to assume that all or
any part of the inferred resources exist. United States investors are also
cautioned that disclosure of exploration potential is conceptual in nature by
definition and there is no assurance that exploration of the mineral potential
identified will result in any category of NI 43-101 mineral resources being
identified.

On behalf of the Board

|                              
|------------------------------
|Joseph F. Conway              
|Vice Chairman, President & CEO

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