---

|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

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 audited consolidated
financial statements of the Company as at and for the year ended December 31,
2011. Additional information on the Company, including its Annual Information
Form for the year ended December 31, 2011 and 2010, which is expected to be
filed by March 31, 2012, 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). For all
periods up to and including the year ended December 31, 2010, the Company
prepared its financial statements in accordance with Canadian generally accepted
accounting principles (Canadian GAAP or Previous GAAP). In accordance with
the standard related to first time adoption of IFRS, the Companys transition
date to IFRS was January 1, 2010 and therefore the comparative information for
2010 has been restated in accordance with the Companys IFRS accounting
policies. 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 presents financial data on Primero as well as
operating and financial data on the San Dimas Mine. The financial data on
Primero reflects operations of the San Dimas Mine from August 6, 2010, the date
of acquisition. Some of the operating and financial data on the San Dimas Mine
relates to the period before Primeros ownership, and has been derived from
internal mine records. This pre-acquisition information is being provided solely
to assist readers to understand possible trends in key performance indicators of
the mine. Readers are cautioned that some data presented in this MD&A may
not be directly comparable.

This MD&A has been prepared as of March 27, 2011.

2011 HIGHLIGHTS

- San Dimas produced 23,115 gold equivalent ounces1 in the fourth quarter and
  102,224 gold equivalent ounces in 2011, compared to 24,771 gold equivalent
  ounces and 100,266 gold equivalent ounces, respectively, in 2010;
- San Dimas produced 20,191 ounces of gold in the fourth quarter and 79,564
  ounces of gold in 2011, compared to 21,171 ounces and 85,429 ounces,
  respectively, in 2010;
- San Dimas produced 1.20 million ounces of silver in the fourth quarter and
  4.6 million ounces in 2011, compared to 1.21 million ounces and 4.53 million
  ounces, respectively in 2010. In total in 2011, the Company sold 511,752
  ounces of silver at spot prices before reaching the end of the first year of
  the silver purchase agreement, for revenue of $18.8 million.
- San Dimas incurred total cash costs per gold equivalent ounce2 of $719 for
  the fourth quarter and $640 for 2011, compared to $645 and $584, respectively,
  for 2010. On a by-product basis, cash costs per gold ounce were $580 for the
  fourth quarter and $384 for 2011, compared to $524 and $471, respectively, in
  20102;

1

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

- The Company earned net income of $36.8 million ($0.42 per share) for the
  fourth quarter and $67.8 million ($0.77 per share) for 2011, compared to net
  income of $6.9 million ($0.08 per share) and a loss of $31.5 million ($0.85
  per share), respectively, in 2010;
- The Company earned adjusted net income3of $4.7 million ($0.05
  per share) for the fourth quarter and $28.3 million ($0.32 per share) for
  2011, compared to adjusted net income of $10.2 million ($0.12 per share) and
  $5.1 million ($0.14 per share), respectively, in 2010;
- The Company realized operating cash flows before working capital changes of
  $14.6 million in the fourth quarter and $80.2 million for 2011, compared to
  $13.4 million and $12.2 million, respectively, in 2010.
- On October 19, 2011, the Company used its cash resources to repay $30
  million of the $60 million convertible note held by Goldcorp Inc. due on
  August 6, 2012.
- On October 17, 2011, the Companys Mexican subsidiary filed a formal
  application to the Mexican tax authorities for an advance ruling on a
  restructuring plan that, if successful, would result in paying taxes in Mexico
  based on revenue from actual realized prices rather than spot prices (see
  RECENT CORPORATE DEVELOPMENTS below).
- On August 15, 2011, Primero commenced trading on the New York Stock
  Exchange under the symbol PPP.
- On July 12, 2011, the Company and Northgate Minerals Corporation
  (Northgate) entered into an arrangement agreement to combine their
  respective businesses. On August 29, 2011 the arrangement agreement was
  terminated when Northgate received an alternative acquisition proposal that
  its directors deemed to be superior and Northgate paid the Company a Cdn$25
  million break-fee (before transaction costs);
- On July 4, 2011, the Company received a refund (including interest) of
  $87.2 million of VAT that it had paid on the acquisition of the San Dimas mine
  and repaid the $70 million term credit facility that had been borrowed to fund
  the VAT payment;
- The Company has changed the reserve and resource estimation methodology
  historically used at San Dimas, which has resulted in a reduction and
  reclassification of reserves and resources and the transfer of some resources
  to exploration potential.

| | 1 | Gold equivalent ounces includes silver ounces produced,
      and converted to a gold equivalent based on a ratio of the average
      commodity prices received for each period. The ratio for 2011 was 203:1
      based on the realized prices of $1,561 per ounce of gold and $7.69 per
      ounce of silver.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 2 | Total cash costs per gold equivalent ounce and total cash
      costs per gold ounce on a by-product basis are non-GAAP measures. Total
      cash costs per gold equivalent ounce are defined as costs of production
      (including refining costs) divided by the total number of gold equivalent
      ounces produced. Total cash costs per gold ounce on a by-product basis are
      calculated by deducting the by-product silver credits from operating costs
      and dividing by the total number of gold ounces produced. The Company
      reports total cash costs on a production basis. In the gold mining
      industry, these are common performance measures but do not have any
      standardized meaning, and are non-GAAP measures. As such, they are
      unlikely to be comparable to similar measures presented by other issuers.
      In reporting total cash costs per gold equivalent and total cash costs per
      gold ounce on a by-product basis, the Company follows the recommendations
      of the Gold Institute standard. The Company believes that, in addition to
      conventional measures, prepared in

2

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

| |   | accordance with GAAP, certain investors use this
      information to evaluate the Companys performance and ability to generate
      cash flow. Accordingly, it is intended to provide additional information
      and should not be considered in isolation or as a substitute for measures
      of performance prepared in accordance with GAAP. Refer to Non-GAAP
      measure  Total cash costs per gold ounce below for a reconciliation
      of cash costs per gold ounce on both a by-product and gold equivalent
      basis to reported operating expenses (the most directly comparable GAAP
      measure).                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 3 | Adjusted net income (loss) and adjusted net income (loss)
      per share are non-GAAP measures. Adjusted net income (loss) is net income
      (loss) adjusted for unusual charges. Neither of these non-GAAP performance
      measures has any standardized meaning and is therefore unlikely to be
      comparable to other measures presented by other issuers. The Company
      believes that, in addition to conventional measures prepared in accordance
      with GAAP, certain investors use this information to evaluate the
      Companys performance. Accordingly, it is intended to provide additional
      information and should not be considered in isolation or as a substitute
      for measures of performance prepared in accordance with GAAP. Refer to
      Non-GAAP measure  Adjusted net income (loss)below for a
      reconciliation of adjusted net income (loss) to reported net income
      (loss).

OVERVIEW

Primero is a Canadian-based precious metals producer with
operations in Mexico. The Company is focused on building a portfolio of high
quality, low cost precious metals assets in the Americas through acquiring,
exploring, developing and operating mineral resource properties. Primero
currently has one producing property  the San Dimas Mine, which it acquired on
August 6, 2010.

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

The Company intends to transition from a single-asset gold
producer to an intermediate gold producer in the future. The Company believes
that the San Dimas Mine provides a solid production base with short-term
opportunities to optimize mine capacity, increase mill throughput and expand
production.

RECENT CORPORATE DEVELOPMENTS

Commencement of advance tax ruling process in Mexico

On October 17, 2011, the Company filed a formal application to
the Mexican tax authorities for an advance ruling on the Company's restructuring
plan that, if successful, would result in paying income taxes in Mexico based on
revenue from actual realized prices rather than spot prices. When completed, the
advance tax ruling process will provide certainty and resolution to the
Company's restructuring plan. No tax penalties are applied in respect of the
time period during which the APA process is taking place should the Mexican tax
authorities disagree with the restructuring plan.

Upon the acquisition of the San Dimas mine, the Company assumed
the obligation to sell silver at below market prices according to a silver
purchase agreement with a subsidiary of Silver Wheaton Corp. Silver sales under
the silver purchase agreement realize approximately $4 per ounce; however, the
Company's provision for income taxes was computed based on sales at spot market
prices (see ANNUAL RESULTS OF OPERATIONS - Income taxesbelow).

The Company's restructuring plan relies on transfer pricing
analysis in order to support the ongoing sale of silver from Mexico to a related
party at the fixed price. Given the intensified scrutiny of intercompany

3

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

transactions in recent years and the significant adjustments
and penalties assessed by tax authorities, many jurisdictions (including Mexico)
allow companies to mitigate this risk by entering into an advance pricing
agreement ("APA"). The APA process is designed to resolve actual or potential
transfer pricing disputes in a principled, cooperative manner.

Primero submitted its APA application after preparation of a
detailed transfer pricing study. The APA review is an interactive process
between the taxpayer and the tax authority, which the Company has been advised
is likely to take 12 to 14 months. At the end of the APA process, the tax
authority will issue a tax resolution letter specifying the pricing method that
they consider appropriate for the Company to apply to intercompany sales under
the silver purchase agreement.

For the duration of the APA process, the taxpayer can record
its revenues and intercompany pricing under the terms that the taxpayer
considers reasonable (assuming they are compliant with applicable transfer
pricing requirements). As a result, in the fourth quarter, after filing the APA
application, the Company's Mexican subsidiary adjusted (retrospectively to the
date of the purchase of the San Dimas Mine) the revenue recorded under the
silver purchase agreement to the fixed price realized and adjusted its income
tax provision to record taxes based on realized revenue. Throughout the APA
process, the Company will identify the potential tax that would be payable if
the APA is unsuccessful as a contingent liability in the notes to its financial
statements. As at December 31, 2011, the amount of the contingent liability was
$28.6 million.

Change in reserve and resource estimation
methodology

The San Dimas deposit is a high-grade, low sulphidation,
epithermal gold-silver vein system. There are over 120 known veins in five ore
zones or blocks, from west to east: West Block (San Antonio), Sinaloa Graben,
Central Block, Tayoltita and Arana Hanging Wall. Historical production from the
San Dimas district is estimated at 11 million ounces of gold and 582 million
ounces of silver, affirming it as a world class epithermal mining province.

Inferred resources were historically estimated based on a
probability factor applied to the volume of the boiling, or Favourable Zone. The
factor was originally developed by comparing the explored area of the active
veins at the time, to the mined out areas plus the mineral reserves. Primero has
elected not to use this probability factor approach going forward and has
constrained inferred resources within wireframes created for each vein. This
decision caused a reclassification of a large portion of previous inferred
resources at San Dimas to exploration potential.

The Company has also reinterpreted the geological model used to
estimate reserves and resources at San Dimas. This has resulted in a new
geological block model that is more tightly constrained to current drilling and
channel sampling data and better reflects the variability of the mineralization
at the mine. The reinterpretation of the geological model and the use of
different estimation parameters, reflecting current operating experience, have
resulted in a reduction in the mineral resource and reserve estimates at the San
Dimas mine.

As part of the mineral resource and reserve estimation review
the Company retained AMC Consultants (AMC), an independent mining and
geological consulting firm that had not previously reported on the property. AMC
assisted the Company in its review of the best estimation method applicable at
San

4

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

Dimas and completed an independent mineral resource and reserve
estimation. The mineral resources and reserves for the San Dimas mine were
estimated as at December 31, 2011 using a two-dimensional accumulation,
geostatistical kriging method. The Company and AMC concluded that kriging
offered several advantages over the historical polygonal estimation method used
at San Dimas, including such things as removing biased estimates; considering
variations within a block; removing compensation errors and determining
correlation between samples.

San Dimas Mine Mineral Resources and Mineral Reserves as at
December 31, 2011

|Classification    | Tonnage          | Gold
      Grade | Silver Grade | Contained    | Contained   
|----------------- | ---------------- | ---------------- | ------------ | ------------ | ------------
|                  | (million tonnes) | (g/t)            | (g/t)        | Gold         | Silver      
|                  |                  |                  |              | (000 ounces) | (000 ounces)
|Mineral Resources |                  |                  |              |              |             
|Indicated         | 2.877            | 6.2              | 390          | 577          | 36,470      
|Inferred          | 5.833            | 3.8              | 320          | 704          | 60,770      
|Mineral Reserves  |                  |                  |              |              |             
|Probable          | 3.514            | 4.5              | 280          | 505          | 31,800      

|Notes to Resource Statement:
|----------------------------
|1.                          
|2.                          
|3.                          
|4.                          

|Notes to Reserve Statement:
|---------------------------
|1.                         
|2.                         
|3.                         

There is significant exploration potential at San Dimas beyond
the stated Mineral Resources and Reserves. The scale of the identified targets
is in the order of 6-10 million tonnes at grade ranges of 3-5 grams per tonne of
gold and 200-400 grams per tonne of silver. This potential mineralization is
believed to exist within the geologic model and is comprised of a portion of the
previously reported (2010) resource bases. It should be noted that these targets
are conceptual in nature. There has been insufficient exploration to define an
associated Mineral Resource and it is uncertain if further exploration will
result in the target being delineated as a Mineral Resource.

The change in reserve and resource estimates at San Dimas does
not impact Managements confidence in the ultimate mineral potential of the
mine. The Company is confident that the new estimation approach will result in
more accurate mine planning and that with further drilling a reasonable amount
of the exploration potential will be converted into inferred resources.

5

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

Convertible note prepayment

On October 19, 2011, the Company repaid $30 million (or 50%) of
  the $60 million convertible note held by Goldcorp Inc. due on August 6, 2012.
  The convertible note was issued as part of the San Dimas mine acquisition in
  August 2010. Since then the Company has generated positive cash flow and built a
  strong financial position.

Management changes

Effective March 29, 2012, Maura Lendon joined the Company as
Vice President General Counsel and Corporate Secretary. Ms. Lendon is a skilled
lawyer who has held senior management positions with several companies,
including Chief Legal Officer at a major mining company. On October 15, 2011,
Renaud Adams joined the Company as Chief Operating Officer. Mr. Adams is an
accomplished executive who was most recently a Senior Vice-President at a
leading international gold producer, where he oversaw three operating mines
producing approximately 400,000 ounces of gold and five million kilograms of
niobium annually.

On March 15, 2012, Wade Nesmith resigned as Executive Chairman
of the Company and became Chairman of the Board. Mr. Nesmith was the founder of
Primero and was instrumental in the successful acquisition of the San Dimas
mine. On November 30, 2011, Eduardo Luna retired as the Companys Executive Vice
President and President. Mr. Luna, who played a pivotal role in the integration
of the San Dimas, mine remains a member of the Company's board of directors and
a corporate advisor to the Company following his retirement.

Listing on New York Stock Exchange (NYSE)

On August 15, 2011, the Companys common shares began trading
on the NYSE under the trading symbol "PPP". The Company believes the NYSE
listing will facilitate its growth and transition to becoming a mid-tier gold
producer, improve its visibility, offer its shareholders greater trading
liquidity, and broaden its reach to the global capital markets.

Arrangement agreement with Northgate Minerals
Corporation

On July 12, 2011, the Company entered into a definitive
arrangement agreement (the Arrangement Agreement) to combine its business with
Northgate. On August 29, 2011, the parties terminated the Arrangement Agreement
as Northgate had received a Superior Proposal (as defined in the Arrangement
Agreement) from another company. As provided for in the Arrangement Agreement,
Northgate paid the Company a termination fee of Cdn$25 million. The Company
incurred transaction costs of approximately $7 million in respect of the
proposed business combination with Northgate.

VAT refund and $70 million loan repayment

On July 4, 2011, the Company received a refund of $80.6 million
of value added tax (VAT) which was paid to the Mexican government as part of
the San Dimas acquisition in 2010. The Company funded the VAT payment with $10.6
million of cash and a $70 million term credit facility. Interest on the refund
and foreign exchange gains due to the strengthening of the Mexican peso against
the US dollar since the August 2010 acquisition date increased the refund to
$87.2 million. Concurrently with the receipt of the

6

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

VAT, the Company repaid all outstanding principal and interest
on the term credit facility amounting to $70.1 million, resulting in an increase
of $17.1 million in cash resources.

7

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

SELECTED ANNUAL INFORMATION

|                                                            |   | Year ended  | 
|----------------------------------------------------------- | - | ----------- | 
|                                                            |   | December 31 | 
|                                                            |   | 2011        | 
|Operating Data                                              |   |             | 
|Tonnes of ore milled                                        |   | 662,612     | 
|Produced                                                    |   |             | 
|Gold equivalent (ounces)                                    |   | 102,224     | 
|Gold (ounces)                                               |   | 79,564      | 
|Silver (million ounces)                                     |   | 4.60        | 
|Sold                                                        |   |             | 
|Gold equivalent (ounces)                                    |   | 100,138     | 
|Gold (ounces)                                               |   | 77,490      | 
|Silver (million ounces)                                     |   | 4.63        | 
|Average realized prices                                     |   |             | 
|Gold ($/ounce)                                              | $ | 1,561       | 
|Silver ($/ounce)1                                           | $ | 7.69        | 
|Total cash costs (per gold ounce)                           |   |             | 
|Gold equivalent basis                                       | $ | 640         | 
|By-product basis                                            | $ | 384         | 
|                                                            |   |             | 
|Financial Data2                                             |   |             | 
|(in thousands of US dollars except per
      share amounts) |   |             | 
|Revenues                                                    |   | 156,542     | 
|Earnings from mine operations                               |   | 65,090      | 
|Net income/(loss)                                           |   | 67,829      | 
|Basic income/(loss) per share                               |   | 0.77        | 
|Diluted income/(loss) per share                             |   | 0.76        | 
|Operating cash flows before working capital
      changes   |   | 80,186      | 
|Assets                                                      |   |             | 
|Mining interests                                            |   | 486,424     | 
|Total assets                                                |   | 624,697     | 
|Liabilities                                                 |   |             | 
|Long-term liabilities                                       |   | 52,299      | 
|Total liabilities                                           |   | 121,419     | 
|Equity                                                      |   | 503,278     | 
|Weighted average shares outstanding
      (basic)(000's)    |   | 88,049      | 
|Weighted average shares outstanding (diluted)(000's)        |   | 96,562      | 

| | 1 | Due to a silver purchase agreement originally entered
      into in 2004, Primero sells the majority of silver produced at the San
      Dimas Mine at a fixed price (see ANNUAL RESULTS OF OPERATIONS -Silver
      purchase agreement below).
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                  
| | 2 | Financial data for the year ended December 31, 2011 and
      2010 has been presented in accordance with IFRS. Financial Data for the
      year ending December 31, 2009 was prepared in accordance with Canadian
      GAAP.                   

8

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

On August 6, 2010, the Company acquired the San Dimas Mine.
Prior to this date, the Company did not have any operating properties, hence the
operating data, revenue and earnings from mine operations in 2010 are for the
period from August 6, 2010 to December 31, 2010 and there are no operating data,
revenue and earnings from mine operations in 2009.

In 2009, the Company was focussed on searching for acquisition
opportunities, with a small management team, minimal overhead, $2.8 million in
assets (mainly comprising its option interest in the Ventanas exploration
project and cash) and no long-term liabilities. For a discussion of the factors
that caused variations between 2011 and 2010, see ANNUAL RESULTS OF OPERATIONS
below.

9

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

SELECTED QUARTERLY INFORMATION

|                                                            |   | Three Months Ended | 
|----------------------------------------------------------- | - | ------------------ | 
|                                                            |   | December 31,       | 
|                                                            |   | 2011               | 
|Operating Data                                              |   |                    | 
|Tonnes of ore milled                                        |   | 176,633            | 
|Produced                                                    |   |                    | 
|Gold equivalent (ounces)                                    |   | 23,115             | 
|Gold (ounces)                                               |   | 20,191             | 
|Silver (million ounces)                                     |   | 1.20               | 
|Sold:                                                       |   |                    | 
|Gold equivalent (ounces)                                    |   | 21,192             | 
|Gold (ounces)                                               |   | 18,487             | 
|Silver (million ounces)                                     |   | 1.11               | 
|Average realized prices                                     |   |                    | 
|Gold ($/ounce)                                              | $ | 1,679              | 
|Silver ($/ounce)                                            | $ | 4.08               | 
|Total cash costs (per gold ounce)                           |   |                    | 
|Gold equivalent basis                                       | $ | 719                | 
|By-product basis                                            | $ | 580                | 
|                                                            |   |                    | 
|Financial Data1                                             |   |                    | 
|(in thousands of US dollars except per
      share amounts) |   |                    | 
|Revenues                                                    |   | 35,645             | 
|Earnings from mine operations                               |   | 13,286             | 
|Net income/(loss)                                           |   | 36,759             | 
|Basic income/(loss) per share                               |   | 0.42               | 
|Diluted income/(loss) per share                             |   | 0.38               | 
|Operating cash flows before working capital
      changes   |   | 14,602             | 
|Assets                                                      |   |                    | 
|Mining interests                                            |   | 486,424            | 
|Total assets                                                |   | 624,697            | 
|Liabilities                                                 |   |                    | 
|Long-term liabilities                                       |   | 52,299             | 
|Total liabilities                                           |   | 121,419            | 
|Equity                                                      |   | 503,278            | 
|Weighted average shares outstanding
      (basic)(000's)    |   | 88,253             | 
|Weighted average shares outstanding (diluted)(000's)        |   | 96,720             | 

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

10

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

OUTLOOK FOR2012

In 2012, Primero expects to produce between 100,000 and 110,000
gold equivalent ounces in-line with 2011 production, based on higher throughput
at lower grades. Cash costs for 2012 are expected to be in the range of $630 to
$660 per gold equivalent ounce or between $310 and $340 per gold ounce on a
byproduct basis. Primero's 2012 outlook is summarized in the following
table.

|                                                          | Outlook 2012       
|--------------------------------------------------------- | -------------------
|Gold equivalent production
      (gold equivalent ounces) | 100,000-110,000    
|Gold production(ounces)                                   | 80,000-90,000      
|Silver production(ounces)                                 | 4,500,000-5,000,000
|Gold grade(grams per tonne)                               | 3.7                
|Silver grade(grams per tonne)                             | 225                
|Total cash costs (per gold equivalent ounce)              | $630 - $660        
|Total cash costs - by-product
      (per gold ounce)      | $310 - $340        
|Capital expenditures (US$ millions)                       | $30
      million  

Material assumptions used to forecast total cash costs for 2012
include: an average gold price of $1,600 per ounce; an average silver price of
$9.41 per ounce (calculated using the silver agreement contract price of $4.08
per ounce and assuming excess silver beyond contract requirements is sold at an
average silver price of $30 per ounce); and foreign exchange rates of 1.05
Canadian dollars and 12.8 Mexican pesos to the US dollar.

Capital expenditures in 2012 are planned to remain steady
compared with 2011, reflecting management's continued focus on growth, with
underground development and exploration drilling accounting for around 70% of
the expected $30 million expenditures. This will include a Company record 65,000
metres of diamond drilling, consisting of 35,000 metres of delineation drilling
and 30,000 metres of exploration drilling. Infrastructure drifting is expected
to total 5,000 metres plus 3,000 metres of exploration drifting. The remainder
of the capital expenditures in 2012 will be sustaining capital of $5.8 million
plus capital projects of $4.1 million.

The Company expects to make a decision to expand the milling
facility to either 2,500 tonnes per day or 3,000 tonnes per day in the third
quarter of 2012. Detailed engineering will now begin to determine the optimal
mill size.

11

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

REVIEW OF OPERATIONS

San Dimas Mine

The following table discloses operating data for the San Dimas
Mine for the years ended December 31, 2011 and 2010, as well as the quarter
ending December 31, 2011 and the preceding four quarters.

|                                      |   | Year ended  |  |   |                   
|------------------------------------- | - | ----------- |  | - | ------------------
|                                      |   | December 31 |  |   | Three months ended
|                                      |   | 2011        |  |   | 20101             
|Operating Data                        |   |             |  |   |                   
|Tonnes of ore milled                  |   | 662,612     |  |   | 612,253           
|Average mill head grade (grams/tonne) |   |             |  |   |                   
|Gold                                  |   | 3.86        |  |   | 4.46              
|Silver                                |   | 226         |  |   | 244               
|Average recovery rate (%)             |   |             |  |   |                   
|Gold                                  |   | 97%         |  |   | 97%               
|Silver                                |   | 94%         |  |   | 94%               
|Produced                              |   |             |  |   |                   
|Gold equivalent (ounces)              |   | 102,224     |  |   | 100,266           
|Gold (ounces)                         |   | 79,564      |  |   | 85,429            
|Silver (million ounces)               |   | 4.60        |  |   | 4.53              
|Sold                                  |   |             |  |   |                   
|Gold equivalent (ounces)              |   | 100,138     |  |   | 99,685            
|Gold (ounces)                         |   | 77,490      |  |   | 85,378            
|Silver @ fixed price (million ounces) |   | 4.12        |  |   | 4.37              
|Silver @ spot (million ounces)        |   | 0.51        |  |   | -                 
|Average realized price (per ounce)    |   |             |  |   |                   
|Gold                                  | $ | 1,561       |  | $ | 1,234             
|Silver                                | $ | 7.69        |  | $ | 4.04              
|Total cash operating costs ($000s)    | $ | 65,410      |  | $ | 58,524            
|Total cash costs (per gold ounce)     |   |             |  |   |                   
|Gold equivalent basis                 | $ | 640         |  | $ | 584               
|By-product basis                      | $ | 384         |  | $ | 471               

| | 1 | The San Dimas Mine was acquired by Primero on August 6,
      2010. Operating data prior to this date was derived from internal records
      maintained by DMSL.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

The San Dimas Mine consists of the San Antonio (Central Block),
Tayoltita and Santa Rita underground mines located in Mexicos San Dimas
district, on the border of Durango and Sinaloa states. The San Dimas district
has a long mining history with production first reported in 1757. The typical
mining operations employ mechanized cut-and-fill mining with primary access
provided by adits and internal ramps from an extensive tunnel system through the
steep mountainous terrain.

12

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

All milling operations are carried out at a central milling
facility at Tayoltita that processes the production from the three active mining
areas. The ore processing is by conventional cyanidation followed by zinc
precipitation of the gold and silver followed by refining to dore. The mill
currently has an operating capacity of 2,100 tonnes per day.

San Dimas produced 79,564 ounces of gold and 4.6 million ounces
of silver in 2011, 7% less and 2% more, respectively, than 2010. The reduction
in gold production was primarily due to a 14% decrease in grades in the main
production stopes. Throughout 2011, most of ore came from the deep Central Block
area where grades in the Roberta and Robertita veins were below expectations.
The impact of the decline in grade was partially offset by an 8% increase in
throughput from an average of 1,800 tonnes per day in 2010 to 1,950 tonnes per
day in 2011. The Company has focused on increasing throughput and expects to
increase it by a further 8% in 2012 to an average of 2,050 tonnes per day.

Total cash costs on a gold equivalent basis in 2011 were $640
per ounce compared with $584 per ounce in 2010 as a 12% increase in cash
operating costs was partly offset by a 2% increase in gold equivalent ounces.
The main cost increases were in personnel due to new hires and higher wages and
benefits, cyanide (because of a global shortage) and power (due to the below
average rainy season that reduced power from the Companys hydro generating
facility and required power to be purchased off the grid). In addition, a higher
proportion of exploration expenditures were incurred in the main production
areas of the mine rather than future production areas, so relatively more
exploration costs were expensed in 2011. Although gold production in 2011 was 7%
lower than 2010, the impact of selling a portion of silver production at spot
prices increased gold equivalent ounces of silver by 53% in 2011 as compared to
2010. On a by-product basis, the benefit of silver spot sales reduced total cash
costs to $384 per gold ounce in 2011 from $471 per gold ounce in 2010.

Total cash costs per tonne were $98.72 in 2011, a 1%
improvement compared to expectations, as a 4% increase in costs was offset by a
5% increase in tonnes milled. Cash costs in the fourth quarter on a gold
equivalent basis and by-product basis were $719 and $580 per ounce,
respectively, each 11% higher than the same measures in 2010. Cash operating
costs increased by 4% for the same reasons as the year-over-year change in costs
while gold equivalent ounces and gold ounces decreased by 4% and 6%,
respectively. There were no silver spot sales in the fourth quarter of 2011 or
2010.

Transition Matters

Since August 6, 2010, the transition matters relating to the
acquisition of the San Dimas Mine have largely been resolved. As at the date of
this MD&A, the only significant outstanding matter is securing a permit to
operate the aircraft. In Mexico, aircraft can only be operated through a
licensed carrier and the Company is currently operating its aircraft through the
carrier of the previous mine owner, Desarrolos Mineros San Luis, S.A. de C.V.
(DMSL) The Company is working to acquire its own carrier licence.

Ventanas Property

The Company held an option to acquire up to a 70% interest in
the Ventanas exploration property pursuant to an agreement originally entered
into on May 8, 2007. Concurrent with the acquisition of the San Dimas Mine, the
Company acquired all rights to the Ventanas property. The property is composed
of 28 near-contiguous mining concessions covering approximately 35 square
kilometres. The

13

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

Company last drilled the property in 2008 and since then the
property has been on care and maintenance.

ANNUAL RESULTS OF OPERATIONS

|                                                                     |  | For the year ended |  
|-------------------------------------------------------------------- |  | ------------------ | -
|In thousands of US dollars except per share amounts                  |  | December 31        |  
|                                                                     |  | 2011               |  
|                                                                     |  | $                  |  
|Revenue                                                              |  | 156,542            |  
|Operating expenses                                                   |  | (64,845            | )
|Depreciation and depletion                                           |  | (26,607            | )
|Total cost of sales                                                  |  | (91,452            | )
|Earnings from mine operations                                        |  | 65,090             |  
|General and administration                                           |  | (18,872            | )
|Other income (expense)                                               |  | 17,407             |  
|Foreign exchange gain (loss)                                         |  | 912                |  
|Finance income                                                       |  | 2,795              |  
|Finance expense                                                      |  | (7,810             | )
|(Loss) gain on derivative contracts                                  |  | (1,284             | )
|Earnings (loss) before income taxes                                  |  | 58,238             |  
|Income taxes                                                         |  | 9,591              |  
|Net income (loss) for the period                                     |  | 67,829             |  
|Basic income (loss) per share                                        |  | 0.77               |  
|Diluted income (loss) per share                                      |  | 0.73               |  
|Weighted average number of common shares
      outstanding - basic   |  | 88,049,171         |  
|                                                                     |  |                    |  
|Weighted average number of common shares
      outstanding - diluted |  | 96,562,288         |  

The Company acquired the San Dimas Mine on August 6, 2010,
therefore results for 2010 reflect mine operations for approximately five months
compared with 12 months in 2011. The Company earned net income of $67.8 million
($0.77 per share) in 2011 compared with a net loss of $31.5 million ($0.85 per
share) in 2010. The $99.3 million increase in net income in 2011 was mainly due
to a $50.9 million increase in earnings from mine operations (full year of
operations, higher gold prices and first spot silver sales in 2011); $39.9
million increase in other income net of other expense (Northgate net break fee
in 2011, San Dimas transaction costs and legal settlement in 2010); $20.6
million lower tax expense in 2011 (benefit of filing APA application), partly
offset by $7.9 million higher general and administrative expenses and $4.3
million more finance and other expense in 2011.

Adjusted net income for 2011 was $28.3 million ($0.32 per
share) compared with adjusted net income of $5.1 million ($0.14 per share) in
2010. The 2011 adjusted net income primarily excludes one-time gains related to
the Northgate transaction, a reduction in taxes due to a foreign exchange loss
on an

14

---

|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

intercompany loan novated during the year, realized foreign
exchange gains on the repayment of the VAT related to the purchase of San Dimas
from the Mexican government and the benefit of the APA application for the
period August 6, 2010 to December 31, 2010. Non-cash share-based payment expense
of $8.1 million (2010 - $8.6 million), or $0.09 per share (2010 - $0.23 per
share), has not been excluded in calculating adjusted net income in 2011.

Revenue

Revenue was $156.5 million for 2011 compared to $60.3 million
in 2010. Revenue in 2010 was generated between August 6, 2010 and December 31,
2010, the period when the Company owned the San Dimas Mine. During 2011, the
Company sold 77,490 ounces of gold at an average price of $1,561 per ounce and
4.6 million ounces of silver at an average price of $7.69 per ounce. The gold is
sold into the market at the prevailing spot price. On the acquisition of the San
Dimas Mine, the Company assumed the obligation to sell silver at below market
prices (see Silver purchase agreementbelow). In 2011, the Company sold
0.5 million ounces of silver at an average spot price of $36.77 per ounce and
4.1 million ounces at a fixed price of $4.06 per ounce. In 2010, the Company
sold 39,174 ounces of gold at an average price of $1,328 per ounce and 2.0
million ounces of silver all at a fixed price of $4.04 per ounce.

Silver purchase agreement

In 2004, the owner of the San Dimas Mine entered into an
agreement (the Internal SPA) to sell all the silver produced at the mine for a
term of 25 years to Silver Trading (Barbados) Ltd. (Silver Trading) at market
prices. Concurrently, in return for upfront payments of cash and shares of
Silver Wheaton, Silver Trading entered into an agreement (the External SPA) to
sell all of the San Dimas silver to Silver Wheaton Caymans at the lesser of
$3.90 per ounce (adjusted for annual inflation) or market prices.

These two silver purchase agreements were amended when the
Company acquired the San Dimas Mine. For each of the first four years after the
acquisition date, the first 3.5 million ounces per annum of silver produced by
the San Dimas Mine, plus 50% of the excess silver above this amount, must be
sold to Silver Wheaton Caymans at the lesser of $4.04 per ounce (adjusted by 1%
per year) and market prices. After four years, for the life of the mine, the
first 6 million ounces per annum of silver produced by the San Dimas Mine, plus
50% of the excess silver above this amount, must be sold to Silver Wheaton
Caymans at the lesser of $4.20 per ounce (adjusted by 1% per year) and market
prices. All silver not sold to Silver Wheaton Caymans is available to be sold by
the Company at market prices.

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

15

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

On October 11, 2011, as part of its restructuring initiatives,
the Company amended the Internal SPA to provide that the price payable by Silver
Trading to purchase silver is the same price as the fixed price charged by
Silver Trading under the External SPA.

Operating expenses

The operating expenses of the San Dimas Mine were $64.8 million
in 2011 compared to $36.3 million in 2010. The expenses are not directly
comparable given that the Company owned the San Dimas Mine for the full year in
2011, compared to part of the year (from August 6 to December 31) in 2010.
Operating costs include $1.8 million and $1.8 million of non-cash share-based
payment expense related to personnel at the mine in 2011 and 2010, respectively.
Cash production costs per gold ounce were $640 and $384, respectively, on a gold
equivalent and by-product basis in 2011 compared with $642 and $525,
respectively, in 2010. The significant reduction in by-product cash costs in
2011 was due to spot silver sales.

Depreciation and depletion expense

The depreciation and depletion expense was $26.6 million in
2011 compared to $9.9 million in 2010. The expense in 2011 reflects 12 months of
operations versus approximately five months in 2010. The Company depletes its
mineral assets on a unit-of-production basis over the estimated life of gold
reserves and a portion of gold resources expected to be converted to reserves.
For 2011 and 2010, the portion of resources used in the depletion calculation
was 50%. Historically, over the past 30 years, the San Dimas Mine has converted
approximately 90% of resources into reserves.

General and administration expenses

General and administration expenses were $18.9 million in 2011,
compared to $11.0 million in 2010, broken down as follows:

|(In thousands of
      U.S. dollars)                       |  | 2011   |  |  | 2010   | 
|---------------------------------------------------------- |  | ------ |  |  | ------ | 
|                                                           |  |        |  |  |        | 
|Share-based payment                                        |  | 6,258  |  |  | 6,731  | 
|Salaries and wages                                         |  | 5,364  |  |  | 2,221  | 
|Rent and office costs                                      |  | 1,218  |  |  | 1,030  | 
|Legal, accounting, consulting, and other professional fees |  | 3,031  |  |  | 544    | 
|Other general and administrative expenses                  |  | 3,001  |  |  | 455    | 
|                                                           |  | 18,872 |  |  | 10,981 | 

In 2010, the Company operated with minimal corporate personnel
until April when it began to staff up in anticipation of acquiring the San Dimas
Mine. Additional management personnel were hired in 2011. The increase in legal,
accounting, consulting, and other professional fees was due mainly to costs
related to the Companys restructuring initiative that culminated in the filing
of its APA application (see RECENT CORPORATE DEVELOPMENTSabove), the initial establishment of the Company post the purchase of San
Dimas and the listing of the Companys shares on the NYSE. The increase in other
general and administration expenses was mainly due to listing fees and Directors
& Officers insurance in connection with listing on the NYSE and higher
investor relations, travel, and information technology costs.

16

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

Finance expense

Finance expense was $7.8 million in 2011, compared to $5.3
million in 2010. The expense related primarily to interest and accretion accrued
on the promissory note, VAT loan and convertible debt issued in the third
quarter of 2010 concurrent with the acquisition of the San Dimas mine. Accretion
of $4.2 million was charged in 2011, compared to $2.7 million in 2010. The
convertible note was accreted over a one-year period, therefore approximately 7
months of accretion was charged in 2011 as compared to 5 months in 2010. Total
interest expense on all three loans was $5.7 million in 2011, compared to $2.2
million in 2010; the promissory note was outstanding for all of 2011, whilst the
VAT loan was repaid in early July 2011 and 50% of the convertible note was
repaid in October 2011. These repayments resulted in lower interest costs in the
second half of 2011 (see LIQUIDITY AND CAPITAL RESOURCES below).

Other income (expense)

Other income of $17.4 million in 2011 primarily comprised the
Cdn$25 million break-fee received from Northgate (see RECENT CORPORATE
DEVELOPMENTSabove), net of transaction costs. Other expense in 2010 of
$22.5 million comprised $10.3 million of transaction costs related to the
acquisition of the San Dimas Mine and $12.5 million to settle a legal claim (see
Note 7 of the consolidated financial statements for the year ended December 31,
2011).

Foreign exchange

The Company recorded a foreign exchange gain of $0.9 million in
2011 compared with a loss of $0.1 million in 2010. The gain in 2011 was mainly
due to a realized gain of $4.3 million on the VAT refund received in the third
quarter (see RECENT CORPORATE DEVELOPMENTS  VAT refund and $70
million loan repaymentabove), offset by foreign exchange losses of $2.5
million relating to accounts payable and accounts receivable, and $0.9 million
relating to deferred taxes.

Gain (loss) on derivative contracts

The Company reported a loss on derivative contracts of $1.3
million in 2011 compared with a gain on derivative contracts of $4.3 million in
2010. The 2011 loss comprised a realized loss of $0.7 million on the sale or
expiry of silver call option contracts, unrealized losses of $3.2 million on
unexpired silver call option contracts and an unrealized gain of $2.6 million
from mark-to-market adjustments to the fair value of an embedded derivative
included in the convertible note. The full amount of the gain in 2010 was due to
fair valuing the embedded derivative in the convertible note.

The Company purchased two tranches of silver call option
contracts in 2011 to mitigate the adverse tax consequences of the silver
purchase agreement. On March 18, 2011, it purchased contracts for 1.2 million
ounces of silver at a strike price of $39 per ounce for a total cost of $2.2
million. The contracts covered approximately two-thirds of the monthly silver
production sold to Silver Wheaton Caymans over the period April 1, 2011 to
September 30, 2011. Contracts for 0.8 million ounces were sold for a realized
gain of $0.6 million and contracts for 0.4 million ounces expired
out-of-the-money for a realized loss of $1.0 million. On September 15, 2011, the
Company entered into another series of monthly call option contracts to purchase
1.5 million ounces of silver at a strike price of $49 per ounce for a total cost

17

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

of $3.7 million. These contracts were designed to cover
approximately 30% of the monthly silver production sold to Silver Wheaton
Caymans over the period September 27, 2011 to September 26, 2012. As at December
31, 2011, contracts for 0.4 million ounces had expired out-of-the-money for a
realized loss of $0.3 million and contracts for 1.1 million ounces were
marked-to-market for an unrealized loss of $3.2 million.

Income taxes

The Company recorded a recovery of income taxes of $9.6 million
in 2011 compared with income tax expense of $11.0 million in 2010. The recovery
of income taxes is due to the filing of the APA application in October 2011 (see
RECENT CORPORATE DEVELOPMENTSabove) and the Companys claim for
a refund in respect of an overpayment of taxes in 2010.

The Companys reported income taxes mainly relate to operations
in Mexico. Prior to the fourth quarter of 2011, when the APA application was
filed, the Company computed income taxes in Mexico based on selling all silver
produced at the San Dimas Mine at market prices. The Companys Barbadian
subsidiary, Silver Trading, incurred losses since it purchased silver at market
prices and sold the same silver to Silver Wheaton Caymans (pursuant to a silver
purchase agreement entered into by a previous owner of the San Dimas Mine in
2004) at the lesser of approximately $4 per ounce and market prices, however,
there was no tax benefit to these losses as Barbados is a low tax jurisdiction.
From a consolidated perspective, therefore, Primero realized revenue under the
silver purchase agreement at approximately $4 per ounce, however, income taxes
were computed based on such revenue at market prices.

Primarily as a result of this situation (and losses for tax
purposes incurred in Canada which were not recognized) the Company recorded an
income tax expense of $11.0 million, based on a loss before taxes of $20.4
million, in 2010. The Company initiated a restructuring plan, which culminated
in the filing of the APA application, to deal with this inequitable situation.
In the fourth quarter of 2011, the Companys Mexican subsidiary adjusted its
revenues, retrospective to the date of acquisition of the San Dimas Mine, to
reflect silver sales under the silver purchase agreement at realized prices and
adjusted its income taxes on the same basis.

Mining interests and impairment

For the duration of 2011, the Company had a market
capitalization which was less than the carrying value of the San Dimas Cash
Generating Unit (CGU); at December 31, 2011, the market capitalization of the
Company was $287 million and the net carrying value of the CGU was $396 million.
Management considers this an impairment indicator and as such, performed an
impairment analysis on the San Dimas CGU as at December 31, 2011. The impairment
analysis performed was a value in use model (a discounted cash flow analysis);
based on the inputs to the model, there was no impairment to the San Dimas CGU
at December 31, 2011. Management believes that the net carrying value of the San
Dimas CGU is supported based on the estimates included in the model. The most
significant of the assumptions incorporated into the model are i) the estimate
of reserves, resources and exploration potential (see Change in reserve and
resource estimation methodologyunder RECENT CORPORATE DEVELOPMENTS
above), and ii) the inclusion of the benefit of a positive APA ruling on the
Companys tax position (see Commencement of advance tax ruling process in
Mexicounder RECENT CORPORATE DEVELOPMENTS above). Should any of the
assumptions in the value in use model be changed, there is a

18

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

risk that the San Dimas CGU would be impaired (see Mining
interests and impairment testingunder CRITICAL ACCOUNTING ESTIMATES
below).

19

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

FOURTH QUARTER RESULTS OF OPERATIONS

|                                                                     |  | For the three months ended |  
|-------------------------------------------------------------------- |  | -------------------------- | -
|(In thousands of US dollars except per share amounts)                |  | December 31                |  
|                                                                     |  | 2011                       |  
|                                                                     |  | **$**                      |  
|Revenue                                                              |  | 35,645                     |  
|Operating expenses                                                   |  | (15,825                    | )
|Depreciation and depletion                                           |  | (6,534                     | )
|Total cost of sales                                                  |  | (22,359                    | )
|Earnings from mine operations                                        |  | 13,286                     |  
|General and administration                                           |  | (5,066                     | )
|Other income (expense)                                               |  | (1,129                     | )
|Foreign exchange gain (loss)                                         |  | (3,723                     | )
|Finance income                                                       |  | 139                        |  
|Finance expense                                                      |  | (181                       | )
|(Loss) gain on derivative contracts                                  |  | (899                       | )
|Earnings (loss) before income taxes                                  |  | 2,427                      |  
|Income taxes                                                         |  | 34,332                     |  
|Net income (loss) for the period                                     |  | 36,759                     |  
|Basic income (loss) per share                                        |  | 0.42                       |  
|                                                                     |  |                            |  
|Diluted income (loss) per share                                      |  | 0.38                       |  
|                                                                     |  |                            |  
|Weighted average number of common shares
      outstanding - basic   |  | 88,253,347                 |  
|Weighted average number of common shares outstanding -
      diluted |  | 96,719,907                 |  

The Company earned net income of $36.8 million ($0.42 per
share) in the fourth quarter of 2011, compared with net income of $6.9 million
($0.08 per share) in the fourth quarter of 2010 due mainly to the impact of the
APA filing and the resultant recovery of income taxes retroactive to the date of
acquisition of the San Dimas Mine.

Adjusted net income for the fourth quarter of 2011 was $4.7
million ($0.05 per share), compared to an adjusted net income of $10.2 million,
or $0.12 per share in the fourth quarter of 2010. Adjusted net income for the
fourth quarter of 2011 primarily excludes the benefit of the APA application for
the period August 6, 2010 to September 30, 2011. Adjusted net income in the
fourth quarter 2010 primarily includes an adjustment for the gain on derivative
contracts. Non-cash share-based payment expense of $1.5 million (2010 - $1.5
million), or $0.02 per share (2010  $0.02 per share) has not been excluded in
calculating adjusted net earnings.

20

---

|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

Revenue

In the fourth quarter of 2011, the Company generated revenue of
$35.6 million by selling 18,487 ounces of gold at an average price $1,679 per
ounce and 1.1 million ounces of silver at an average realized price of $4.08 per
ounce. On the acquisition of the San Dimas Mine, the Company assumed the
obligation to sell silver at below market prices (see ANNUAL RESULTS OF
OPERATIONS - Silver purchase agreementabove) and all of the silver
sales in the fourth quarter were transacted at the fixed price.

In the fourth quarter of 2010, the Company generated revenue of
$41.4 million from selling 27,329 ounces of gold at an average price of $1,359
per ounce and 1.1 million ounces of silver at the fixed price of $4.04 per
ounce. Gold sales included approximately 6,000 ounces that were produced by DMSL
and were in transit to the refinery at the time of acquisition of the San Dimas
Mine.

Operating expenses

The Company incurred $15.8 million of operating expenses in the
fourth quarter of 2011, compared to $20.3 million in the fourth quarter of 2010,
in line with the difference in ounces sold. Operating costs include non-cash
share-based payment expense related to personnel at the mine of $0.2 million in
2011 and $0.1 million in 2010. Cash production costs per gold ounce were $719
and $580, respectively, on a gold equivalent and by-product basis in the fourth
quarter of 2011, up from $645 and $524, respectively, in the fourth quarter of
2010.

Depreciation and depletion expense

Depreciation and depletion expense decreased to $6.5 million in
the fourth quarter of 2011 from $7.9 million in the fourth quarter of 2010
mainly due to lower depletion expense (which is recorded on a
units-of-production basis) resulting from reduced sales in 2011.

General and administration expenses

General and administrative expenses were $5.1 million in the
fourth quarter of 2011 compared to $3.4 million in the same period in 2010,
mainly due to increased compensation costs related to new hires in 2011 and
higher legal, consulting and other professional costs.

Finance expense

The Company incurred $0.2 million of finance expense in the
fourth quarter of 2011 compared to $3.0 million in the fourth quarter 2010.
Finance expense in 2010 includes $1.7 of accretion charged on the convertible
note, which was fully accreted on August 6, 2011 and so no such charge was made
in the fourth quarter of 2011. In addition, the $70 million VAT loan, which was
advanced when the Company acquired the San Dimas Mine, was repaid in July 2011,
and $30 million of the convertible note was repaid on October 19, 2011,
therefore reducing the interest charge in the fourth quarter of 2011.

21

---

|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

Other income (expense)

Other expense of $1.1 million in the fourth quarter of 2011 was
mainly due to the write-off of obsolete fixed assets in the Companys Mexican
operations.

Foreign exchange

The Company incurred a foreign exchange loss of $3.7 million in
the fourth quarter of 2011, compared with a foreign exchange gain of $0.5
million in the fourth quarter of 2010. The amounts in both periods were
substantially unrealized. The loss in 2011 mainly relates to the impact of
recognizing the benefit of the APA in the fourth quarter for the period August
6, 2010 to September 30, 2011.

Gain (loss) on derivative contracts

The Company reported a loss on derivative contracts of $0.9
million in the fourth quarter of 2011 compared with a gain on derivative
contracts of $6.6 million in the fourth quarter of 2010. The 2011 loss comprised
a realized loss of $0.4 million on the expiry of out-of-the-money silver call
option contracts and an unrealized loss of $0.5 million on unexpired silver call
option contracts. The gain in 2010 was due to mark-to-market adjustments to the
fair value of an embedded derivative included in the convertible note.

Income taxes

Primero recorded a tax recovery of $34.3 million in the fourth
quarter of 2011, compared to a tax expense of $7.1 million for the same period
in 2010. As described under ANNUAL RESULTS OF OPERATIONS  Income taxesabove, during the fourth quarter of 2011, the Company filed an APA
application in Mexico in order to recognize revenues on sales of silver to
Silver Wheaton Caymans at realized, rather than spot prices and record taxes on
the same basis. The total impact of this filing retroactive to August 6, 2010,
the date the Company became a party to the silver purchase agreement, was
recognized in the fourth quarter 2011. The tax expense in the fourth quarter of
2010 included $6.6 million for incremental tax calculated on silver sales at
market rather than realized prices.

Dividend Report and Policy

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

22

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

SELECTED QUARTERLY FINANCIAL DATA

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

(In thousands of US$ except for per shareamounts and operating data)
        
        2011
        
        
        2010Q4
        
        
        Q3
        
        
        Q2
        
        
        Q1
        
        
        Q4
        
        
        Q3
        
        
        Q2
        
        
        Q1Revenue
        
        35,645
        
        
        46,079
        
        
        40,830
        
        
        33,988
        
        
        41,425
        
        
        18,853
        
        
        -
        
        
        -Net income (loss)
        
        36,758
        
        
        35,066
        
        
        3,897
        
        
        (7,895
        )
        
        6,893
        
        
        (35,630
        )
        
        (2,401
        )
        
        (318
        )Basic income (loss) per share
        
        0.42
        
        
        0.40
        
        
        0.04
        
        
        (0.09
        )
        
        0.08
        
        
        (0.68
        )
        
        (0.80
        )
        
        (0.11
        )Diluted income (loss) per share
        
        0.38
        
        
        0.40
        
        
        0.04
        
        
        (0.09
        )
        
        0.08
        
        
        (0.68
        )
        
        (0.80
        )
        
        (0.11
        )Operating cash flow beforeworking capital changes
        
        14,602
        
        
        50,549
        
        
        21,456
        
        
        (1,521
        )
        
        13,354
        
        
        (27
        )
        
        (2,162
        )
        
        (159
        )Cash and cash equivalents
        
        80,761
        
        
        107,227
        
        
        63,629
        
        
        65,380
        
        
        58,298
        
        
        55,007
        
        
        636
        
        
        1,011Total assets
        
        624,697
        
        
        619,416
        
        
        672,898
        
        
        658,044
        
        
        656,733
        
        
        638,001
        
        
        934
        
        
        1,367Long-term liabilities
        
        52,299
        
        
        118,191
        
        
        140,271
        
        
        114,850
        
        
        114,329
        
        
        120,392
        
        
        -Equity
        
        503,278
        
        
        465,656
        
        
        430,070
        
        
        424,769
        
        
        430,046
        
        
        422,618
        
        
        (771
        )
        
        1,226Gold produced (ounces)
        
        20,191
        
        
        19,500
        
        
        19,374
        
        
        20,498
        
        
        21,171
        
        
        10,772
        
        
        -
        
        
        -Gold sold (ounces)
        
        18,487
        
        
        19,659
        
        
        18,837
        
        
        20,506
        
        
        27,329
        
        
        11,845
        
        
        -
        
        
        -Average price realized per
          gold ounce
        
        1,679
        
        
        1,668
        
        
        1,523
        
        
        1,387
        
        
        1,359
        
        
        1,257
        
        
        
        
        
        -Cash cost per gold equivalent ounce
        
        719
        
        
        641
        
        
        586
        
        
        624
        
        
        645
        
        
        633
        
        
        -
        
        
        -Cash cost per gold ounce, net
          of silver by-products
        
        580
        
        
        222
        
        
        190
        
        
        491
        
        
        524
        
        
        526
        
        
        -
        
        
        -Silver produced (million ounces)
        
        1.20
        
        
        1.10
        
        
        1.06
        
        
        1.23
        
        
        1.21
        
        
        0.58
        
        
        -
        
        
        -Silver sold @ fixed price
          (million ounces)
        
        1.11
        
        
        0.86
        
        
        0.77
        
        
        1.37
        
        
        1.06
        
        
        0.98
        
        
        -
        
        
        -Silver sold @ spot (million ounces)
        
        -
        
        
        0.25
        
        
        0.26
        
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        -


Gold production and sales remained relatively consistent each
quarter during 2011, despite a month-long strike by the union of millworkers in
Q2. Somewhat higher grades in Q2 as compared to other quarters in 2011, and an
increase in throughput after the strike ended offset the impact of the strike.
Revenue in Q2 2011 and Q3 2011 included $9.0 million and $9.8 million,
respectively, of silver sales at spot prices, after the Company reached the
first-year threshold for deliveries under the silver purchase agreement. The
Company had no operations until it acquired the San Dimas Mine in August 2010,
hence there was no revenue in Q1 and Q2 2010 and revenue in Q3 2010 was
generated from 56 days of operations.

The significant increase in net income in Q3 2011 was due
mainly to receiving the $18.3 million Northgate termination fee, net of
transaction costs, interest income and realized foreign exchange gains of $4.3
million on the VAT refund and a reduction of $11.4 million in income taxes due
to foreign exchange losses in Mexico upon the novation of an intercompany loan.
The increase in net income in Q4 2011 was mainly due to recording the benefit of
the APA filing, retroactive to August 6, 2010. The significant loss in Q3 2010
was due mainly to the partial period of operations, San Dimas transaction costs
and the $12.5 million legal claim settlement with Alamos.

23

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

The significant increase in the cash balance during Q3 2011 was
due mainly to strong sales proceeds, the receipt of the $18.3 million Northgate
termination fee, net of transaction costs, and the $17.1 million VAT refund, net
of the VAT loan repayment. Cash in Q4 2011 was reduced by the $30 million
convertible note repayment. In Q3 2010, the Company received the net proceeds of
the equity offering to fund the San Dimas acquisition.

The increase in total assets in Q3 2010 resulted from the
acquisition of the San Dimas Mine (including the recognition of an $80.6 million
VAT refund receivable) and the receipt of cash from the subscription receipts
offering (after paying the cash portion of the purchase price).

Long-term liabilities were recognized for the first time in Q3
2010 as the $60 million convertible note and $50 million promissory note were
issued as part of the consideration for the acquisition of the San Dimas Mine.
The approximately $60 million reduction in long-term liabilities from Q1 to Q4
2011 was due to the $30 million convertible note repayment and the
reclassification of the $30 million balance of the convertible note to a current
liability based on its contractual maturity.

24

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

NON-GAAP MEASURES

Non  GAAP measure  Cash costs per gold ounce

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

Year ended
    
    
    Three months endedDecember 31
    
    
    December 312011
    
    
    2010
    
    
    2011
    
    
    2010Operating expenses per the consolidated
      financial statements ($000's)
    
    64,845
    
    
    36,270
    
    
    15,825
    
    
    20,314Fair value adjustment to acquisition date inventory
      subsequently sold ($000's)
    
    -
    
    
    (4,337
    )
    
    -
    
    
    (356
    )Share-based payment included in operating
      expenses($000's)
    
    (1,815
    )
    
    (1,839
    )
    
    (227
    )
    
    (76
    )Inventory movements and adjustments ($000's)
    
    2,380
    
    
    (6,115
    )
    
    1,024
    
    
    (3,898
    )Total cash operating costs ($000's)
    
    65,410
    
    
    23,979
    
    
    16,622
    
    
    15,984Ounces of gold produced
    
    79,564
    
    
    31,943
    
    
    20,191
    
    
    21,171Gold equivalent ounces of silver produced
    
    22,660
    
    
    5,436
    
    
    2,924
    
    
    3,600Gold equivalent ounces produced
    
    102,224
    
    
    37,379
    
    
    23,115
    
    
    24,771Total cash costs per gold equivalent
      ounce
    $
    640
    
    $
    642
    
    $
    719
    
    $
    645Total cash operating costs ($000's)
    
    65,410
    
    
    23,979
    
    
    16,622
    
    
    15,984By-product silver credits ($000's)
    
    (34,869
    )
    
    (7,218
    )
    
    (4,909
    )
    
    (4,893
    )Cash costs, net of by-product credits
      ($000's)
    
    30,541
    
    
    16,761
    
    
    11,713
    
    
    11,091Ounces of gold produced
    
    79,564
    
    
    31,943
    
    
    20,191
    
    
    21,171Total by-product cash costs per gold
      ounce produced
    $
    384
    
    $
    525
    
    $
    580
    
    $
    524


25

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

Non  GAAP measure  Adjusted net income (loss)

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

|                                                      |  | Year              |   |  | Three months      |  
|----------------------------------------------------- |  | ----------------- | - |  | ----------------- | -
|                                                      |  | ended December 31 |   |  | ended December 31 |  
|(In thousands of US dollars except per share amounts) |  | 2011              |   |  | 20101             |  
|                                                      |  | $                 |   |  | $                 |  
|Net income (loss)                                     |  | 67,829            |   |  | (31,458           | )
|Loss (gain) on derivative contracts                   |  | 1,284             |   |  | (4,271            | )
|Accretion charged on convertible debt                 |  | 4,231             |   |  | 2,669             |  
|Foreign exchange gain and finance income on           |  |                   |   |  |                   |  
|VAT loan, net of tax                                  |  | (4,620            | ) |  | -                 |  
|Reduction in taxes due to foreign exchange            |  |                   |   |  |                   |  
|loss on intercompany loan                             |  | (11,358           | ) |  | -                 |  
|Break-fees, net of transaction costs                  |  | (18,065           | ) |  | 10,310            |  
|Legal settlement                                      |  | -                 |   |  | 12,483            |  
|Fair value adjustment to inventory                    |  | -                 |   |  | 4,337             |  
|Prior period benefit of APA fi ling                   |  | (11,040           | ) |  | 11,040            |  
|Adjusted net income                                   |  | 28,261            |   |  | 5,110             |  
|                                                      |  |                   |   |  |                   |  
|Adjusted net income per share                         |  | 0.32              |   |  | 0.14              |  
|                                                      |  |                   |   |  |                   |  
|Weighted average number of common shares outstanding  |  | 88,049,171        |   |  | 37,030,615        |  

| | 1 | Adjusted net income (loss) restated to take account of
      APA filing.
| | - | ------------------------------------------------------------------------

26

---

|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

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

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

|                                                          |  | Year                        |   |  | Three months ended |  
|--------------------------------------------------------- |  | --------------------------- | - |  | ------------------ | -
|                                                          |  | **ended
      December 31** |   |  | December 31        |  
|(In thousands of US dollars)                              |  | 2011                        |   |  | 2010               |  
|                                                          |  | $                           |   |  | $                  |  
|Cash (used in) provided by operating
      activities     |  | 155,160                     |   |  | (61,041            | )
|Change in non-cash operating working capital              |  | (74,974                     | ) |  | 73,262             |  
|Operating cash flows before working capital
      changes |  | 80,186                      |   |  | 12,221             |  

27

---

|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

LIQUIDITY AND CAPITAL RESOURCES

As at December 31, 2011, the Company had cash of $80.8 million
(December 31, 2010 - $58.3 million) and working capital of $53.4 million
(December 31, 2010  $53.5 million). Net cash flows for the years ended December
31, 2011 and 2010 were as follows:

|                                           |  |                        |   |  |             |   |  | Three months ended |  
|------------------------------------------ |  | ---------------------- | - |  | ----------- | - |  | ------------------ | -
|(In thousands of US dollars)               |  | Year ended December 31 |   |  | December 31 |  
|                                           |  | 2011                   |   |  | 2010        |   |  | 2011               |  
|Cash Flow:                                 |  | **$**                  |   |  | $           |   |  | **$**              |  
|Provided by (used in) operating activities |  | 155,160                |   |  | (61,041     | ) |  | 13,037             |  
|Used in investing activities               |  | (30,893                | ) |  | (227,030    | ) |  | (8,691             | )
|Provided by (used in) financing activities |  | (101,107               | ) |  | 345,262     |   |  | (31,077            | )
|Effect of exchange rate changes on cash    |  | (697                   | ) |  | 89          |   |  | 265                |  
|Increase in cash                           |  | 22,463                 |   |  | 57,280      |   |  | (26,466            | )
|Cash as beginning of period                |  | 58,298                 |   |  | 1,018       |   |  | 107,227            |  
|Cash as end of period                      |  | 80,761                 |   |  | 58,298      |   |  | 80,761             |  

Year ended December 31, 2011 compared with the year ended
December 31, 2010

Operating activities

During the year ended December 31, 2011, the Companys net cash
flows provided by operating activities were $155.2 million. The Company recorded
net income before tax of $58.2 million, which, when adjusted for non-cash items,
resulted in cash inflows of $80.2 million before changes in working capital.
This amount primarily comprised cash earnings from mine operations of $92.2
million and a break-fee from the termination of the Northgate arrangement
agreement, net of transaction costs, of $18.3 million, offset by cash general
and administrative costs of $12.6 million, income taxes paid of $17.4 million,
and a realized loss on derivative contracts of $0.7 million. The change in
non-cash working capital was an inflow of $75.0 million mainly due to the
collection of VAT receivable from the Mexican government of $87.2 million,
offset by a decrease in payables of $9.2 million and a decrease in inventory of
$4.4 million.

During the year ended December 31, 2010, the Companys net cash
outflows from operating activities were $61.0 million. The Company recorded a
net loss before tax of $20.4 million, which, when adjusted for non-cash items,
resulted in cash inflows of $12.2 million before changes in working capital.
This amount mainly comprised cash earnings from mine operations of $30.2
million, offset by cash transaction costs related to the acquisition of San
Dimas of $4.1 million, cash general and administrative costs of $4.3 million and
income taxes paid of $8.6 million. The change in non-cash working capital was an
outflow of $73.3 million related primarily to the $80.6 million payment of the
Mexican VAT which was recovered during 2011. This outflow was offset by a $19.4
million increase in accounts payable and accrued liabilities.

28

---

|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

Working capital adjustment

The Asset Purchase Agreement for the San Dimas Mine provided
that there was an adjustment to the purchase price to the extent that net
working capital was different at August 5, 2010 than at March 31, 2010. Net
working capital was defined as the sum of trade accounts receivable, inventory
and prepaid expenses, less the sum of accounts payable and accrued payroll and
other current liabilities. The parties agreed, subsequent to December 31, 2010,
that the net working capital adjustment was $3.9 million, payable by Primero to
DMSL. This amount was paid to DMSL in the second quarter of 2011.

Investing activities

Cash outflows used in investing activities were $30.9 million
in the year ended December 31, 2011, compared with $227.0 million in the same
period in 2010. The outflow in 2010 included $216.0 million for the cash
component of the consideration to acquire the San Dimas Mine on August 6,
2010.

Capital expenditures at the San Dimas Mine were $29.8 million
in 2011 (of which $10.8 million related to exploration and evaluation), compared
to $11.2 million in 2010 (of which $2.4 million related to exploration and
evaluation). These outflows were offset by $2.8 million of interest income in
2011 (primarily related to the VAT refund), compared to $0.1 million in
2010.

Financing activities

The Company used $101.1 million of cash for financing
activities in 2011, being the repayment of the $70 million VAT loan, $30 million
(or 50%) of the convertible note held with Goldcorp Inc. and $2.2 million of
interest, offset by $1.0 million of proceeds on the exercise of options and
warrants. In 2010, financing activities provided $345.3 million of cash, mainly
comprising the receipt of $275.0 million (net of cash share issuance costs of
$17.1 million) from the issuance of common shares and share purchase warrants
and $70 million from the proceeds of the VAT loan borrowed to fund VAT related
to the San Dimas purchase.

Three months ended December 31, 2011 compared with three
months ended December 31, 2010

Operating activities

During the three months ended December 31, 2011, the Companys
net cash inflows from operating activities were $13.0 million. The Company
recorded net income before tax of $2.4 million, which, adjusted for non-cash
items, resulted in a cash inflow of $14.6 million before changes in working
capital. This amount mainly comprised cash earnings from mine operations of
$20.3 million, offset by cash general and administrative costs of $3.8 million,
income taxes paid of $0.5 million, and realized losses on derivative contracts
of $0.4 million.

The Company generated cash from operating activities of $10.8
million in the fourth quarter of 2010. The Company recorded net income before
taxes of $14.0 million, which, adjusted for non-cash items, resulted in cash
inflows of $13.3 million before changes in working capital. This amount
primarily comprised cash earnings from mining operations of $21.6 million offset
by cash interest, general and

29

---

|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

administration expenses and income taxes. The change in
non-cash working capital during the quarter was an outflow of $2.5 million.

Investing activities

Cash outflows from investing activities were $8.7 million,
compared to $9.0 million for the same period in 2010. These expenditures related
almost entirely to capital expenditures at the San Dimas mine.

Financing activities

The Company used $31.1 million of cash for financing activities
in the fourth quarter of 2011, being the $30 million (or 50%) repayment of the
principal on the convertible note held with Goldcorp Inc. and $1.1 million of
interest. In the fourth quarter of 2010, the Company received $1.0 million from
financing activities, $0.3 million of which related to the exercise of
warrants.

Debt

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

| | (i) | A convertible promissory note (the Note) in the
      principal amount of $60 million with an annual interest rate of 3%, to
      DMSL, which DMSL immediately assigned to Goldcorp. The Note may be repaid
      in cash by the Company at any time or converted, at any time up to the
      maturity date (being the Initial Maturity Date or the Second Maturity
      Date), by Goldcorp at a conversion price of Cdn$6.00 per share. In
      determining the number of common shares to be issued on conversion, per
      the Note, the principal amount to be translated will be converted into
      Canadian dollars by multiplying that amount by 1.05.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | On the first anniversary of the Note (Initial Maturity
      Date), the Note was repayable in cash or, at the option of Primero, in
      common shares at 90% of the volume weighted average trading price of the
      common shares for the five trading days ending immediately prior to the
      Initial Maturity Date (the Maturity Conversion Price). If on the Initial
      Maturity Date, Primero served notice to convert (Debtor Conversion
      Notice), Goldcorp had the right to extend the maturity Date until the
      second anniversary of the Note (the Second Maturity Date). On July 20,
      2011, Primero served notice to Goldcorp to convert the Note into common
      shares of the Company and on August 4, 2011, Goldcorp elected to extend
      the Maturity date of the Note until the Second Maturity Date, which gave
      the Company the right to (1) pay the principal amount in cash immediately
      or (2) convert the debt to shares on the Second Maturity Date at a price
      equal to the greater of a) the Maturity Conversion Price (which was
      Cdn$3.74) and b) 90% of the volume weighted average trading price of the
      common shares for the five trading days ending immediately prior to the
      Second Maturity Date.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | On October 19, 2011, the Company used its cash resources
      to repay $30 million (or 50%) of the Note plus $1.1 million of accrued
      interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

30

---

|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

| | (ii)  | A promissory note in the principal amount of $50 million
      with an annual interest rate of 6% to DMSL, which DMSL subsequently
      assigned to a wholly-owned Luxembourg subsidiary of Goldcorp. The
      promissory note is repayable in four annual installments of $5 million,
      starting on December 31, 2011, with the balance of principal due on
      December 31, 2015. On January 3, 2012, the Company repaid the first $5
      million annual installment plus accrued interest of $4.4 million. In
      addition to the annual installments, the Company is required to pay 50% of
      annual excess free cash flow (as defined in the promissory note) against
      the principal balance.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (iii) | A non-revolving term credit facility of $70 million from
      the Bank of Nova Scotia to partly pay $80.6 million of VAT due to the
      Mexican government on the acquisition of the San Dimas Mine. VAT is a
      refundable tax. The credit facility bore interest at Canadas base rate
      plus 0.75% or LIBOR plus 1.75%, depending upon the Companys choice of
      type of loan availment. Goldcorp guaranteed repayment of the credit
      facility.                                                                                                                                                                                                                                                  
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |       | On July 4, 2011, the Company received a refund of the
      $80.6 million of VAT. Interest on the refund and the strengthening of the
      Mexican peso against the US dollar since the August 2010 acquisition date
      increased the refund to $87.2 million. Concurrently with the receipt of
      the VAT from the Mexican government, the Company repaid all outstanding
      principal and interest on the $70 million non-revolving term credit
      facility with the Bank of Nova Scotia.                                                                                                                                                                                                               

Liquidity Outlook

As at December 31, 2011, the Company had cash of $80.8 million
and working capital of $53.4 million. The working capital reflects the $30
million balance of the convertible note as a current liability, and this debt
could be settled at the Companys discretion by issuing shares. The Company
expects that these resources, as well as ongoing cash flow from the San Dimas
Mine, will be sufficient to fund its operations for the foreseeable future.

On October 17, 2011, the Company filed an application to the
Mexican tax authorities for an advance pricing agreement (APA) on the
appropriate price to apply to intercompany sales under the silver purchase
agreement. As described under Commencement of advance tax ruling process in
Mexicounder RECENT CORPORATE DEVELOPMENTSabove, if the Company
were to be successful in this application to the Mexican tax authorities, it
would result in paying income taxes in Mexico based on realized rather than spot
revenue. The APA review is an interactive process between the taxpayer and the
tax authority, which the Company has been advised is likely to take 12 to 14
months to complete. For the duration of the APA process, the taxpayer can record
its revenues and intercompany pricing under the terms that the taxpayer
considers reasonable (given they are compliant with applicable transfer pricing
requirements). As a result, starting in the fourth quarter 2011, the Company's
Mexican subsidiary has recorded revenue under the silver purchase agreement at
the fixed price realized and recorded income taxes on the same basis.

31

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

Related party transactions

The Company has a convertible note and a promissory note
outstanding to Goldcorp and a wholly-owned subsidiary of Goldcorp, respectively.
Goldcorp owns approximately 36% of the Companys common shares. Interest accrues
on the promissory and convertible notes and is recorded within trade and other
payables; principal of $30 million and interest of $1.1 million were paid in
relation to the convertible note during the year. A payment of $5 million plus
accrued interest of $4.4 million was paid under the terms of the promissory note
on January 3, 2012.

During the year, an amount of $3.9 million was paid to DMSL
with respect to the working capital adjustment associated with the acquisition
of the San Dimas Mine.

During the year ended December 31, 2011, $3.8 million (2010 -
$1.5 million) was paid to DMSL for the purchase of equipment, equipment leasing
fees and services received under a transition services agreement between the
Company and DMSL. These amounts are considered to be at fair value. As at
December 31, 2011, the Company had an amount payable of $2.9 million outstanding
to DMSL (2010 -$3.9 million)

Compensation of key management personnel of the
Company

The Company defines the key management personnel to be the
President and Chief Executive Officer, Executive Chairman, President Mexico,
Chief Operating Officer, Chief Financial Officer, and all members of the Board
of Directors. Aggregate compensation recognized in respect of key management
personnel of the Company during 2011 and 2010 was as follows:

2011
    
    
    2010(In thousands of US dollars)
    
    **$**
    
    
    $Short-term employee benefits
    
    2,906
    
    
    1,426Share-based
      payment
    
    5,338
    
    
    6,3718,244
    
    
    7,797


The Company does not offer any
post-employment benefits with respect to key management personnel.

Shares issued

During the year ended December 31, 2011, the Company issued
492,076 and 28,750 common shares for proceeds of $1.0 million and $0.1 million
respectively, upon the exercise of common share purchase warrants and
options.

On July 20, 2010, the Company closed an offering of 50,000,000
subscription receipts for gross proceeds of $292 million. Issuance costs related
to the subscription receipts totalled $17.1 million. The subscription receipts
were issued at a price of Cdn$6.00 per subscription receipt. On August 6, 2010,
when the proceeds of the subscription receipts were released to the Company,
each subscription receipt was converted into one common share and 0.4 of a
common share purchase warrant. Each whole

32

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

common share purchase warrant is exercisable to purchase one
common share at a price of Cdn$8.00 per share until July 20, 2015.

During 2010, the Company also issued the following shares in
non-cash transactions: 31,151,200 shares for the acquisition of the San Dimas
Mine, 2,000,000 subscription receipts (which were converted into common shares
and common share purchase warrants on the same terms as described above) for the
settlement of a legal claim, and 1,209,373 shares in exchange for financial
advisory services received. During 2010, the Company also issued 416,018 common
shares for proceeds of $0.8 million upon the exercise of common share purchase
warrants and 20,000 common shares upon the exercise of stock options for
proceeds of $68,000.

Outstanding Share Data

Shareholders equity as at December 31, 2011 was $503.3 million
compared to $430.0 million as at December 31, 2010.

Share Capital

As at December 31, 2011, the Company had 88,259,831 common
shares outstanding (2010 -87,739,005). As at the date of this MD&A, the
total number of common shares outstanding was 88,259,831.

Options

As at December 31, 2011, the Company had 8,574,490 options
outstanding with a weighted average exercise price of Cdn$5.54. As at the date
of this MD&A, the total number of options outstanding was 8,574,490, of
which 5,895,665 are exercisable.

Common Share Purchase Warrants

As at December 31, 2011, the Company had a total of 21,276,980
common share purchase warrants outstanding with a weighted average exercise
price of Cdn$7.96 per share. As at the date of this MD&A, the total number
of common share purchase warrants outstanding was 21,276,980, all of which are
exercisable.

Convertible Note

As at December 31, 2011, the Company had a $30 million
convertible note outstanding (see LIQUIDITY AND CAPITAL RESOURCES  Debtabove). The convertible note may be converted, up to the maturity date, at
any time by the holder, Goldcorp, at a conversion price of Cdn$6.00 per share.
Alternatively, as Goldcorp elected to extend the Maturity date of the Note until
the Second Maturity Date, and the Company did not pay the principal amount in
cash immediately. the Company now has the option to convert the debt to shares
on the Second Maturity Date at a price equal to the greater of a) the Maturity
Conversion Price (which was Cdn$3.74) and b) 90% of the volume weighted average
trading price of the common shares for the five trading days ending immediately
prior to the Second Maturity Date.

Therefore, if the Company makes such an election to convert on
the second maturity date, the lowest price at which the debt would be converted
is Cdn$3.74 per share and the Company would issue

33

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

8,422,460 common shares to Goldcorp. In determining the number
of common shares to be issued on conversion, the principal amount to be
translated will be converted into Canadian dollars by multiplying that amount by
1.05.

Off-Balance Sheet Arrangements

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

ADOPTION OF NEW ACCOUNTING POLICIES

Changes in accounting policies

2011 is Primeros first reporting year under IFRS. Accounting
standards effective for periods beginning on or after January 1, 2011 have been
adopted as part of the transition to IFRS.

Recent pronouncements issued

The Company has reviewed new and revised accounting
pronouncements that have been issued but are not yet effective and determined
that the following may have an impact on the Company: IFRS 13 Fair Value
Measurement(IFRS 13) was issued by the IASB in May 2011, and is effective
for annual periods beginning on or after January 1, 2013. Early application is
permitted. IFRS 13 was issued to remedy the inconsistencies in the requirements
for measuring fair value and for disclosing information about fair value
measurement in various current IFRSs. IFRS 13 defines fair value as the price
that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date, i.e. an
exit price. The Company is currently assessing the impact IFRS 13 will have on
its consolidated financial statements.

In October 2011, the IASB issued IFRIC 20 - Stripping Costs
in the Production Phase of a Mine(IFRIC 20). IFRIC 20 clarifies the
requirements for accounting for the costs of stripping activity in the
production phase when two benefits accrue: (i) usable ore that can be used to
produce inventory and (ii) improved access to further quantities of material
that will be mined in future periods. IFRIC 20 is effective for annual periods
beginning on or after January 1, 2013 with earlier application permitted and
includes guidance on transition for pre-existing stripping assets. The adoption
of this standard will not have a material impact on Primeros consolidated
financial statements based on the Companys current operations.

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

Transition to IFRS

For all periods up to and including the year ended December 31,
2010, the Company prepared its consolidated financial statements in accordance
with Canadian GAAP (Previous GAAP). The

34

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

consolidated financial statements of the Company, for the year
ended December 31, 2011 have been prepared in accordance with IFRS.

Accordingly, the Company has prepared consolidated financial
statements which comply with IFRS applicable for periods beginning on or after
January 1, 2011, as described in the accounting policies listed in Note 2 to the
December 31, 2011 financial statements available on SEDAR.

IFRS 1 First-Time Adoption of International Financial
Reporting Standardsallows first time adopters certain exemptions from the
retrospective application of IFRSs.

The Company has applied the following exemptions:

- IFRS 2 Share-based paymentto stock options of the Company granted
  after November 7, 2002, which had vested prior to the date of transition date
  to IFRS (January 1, 2010).
- The Company has elected not to apply IFRS 3 (revised) Business
  Combinationsto all past business combinations that occurred before
  January 1, 2010, the Companys date of transition to IFRS.

The principal adjustments made by the Company in restating its
Canadian GAAP statement of financial position as at December 31, 2010 and its
previously published Canadian GAAP total comprehensive loss for the year ended
December 31, 2010 are described in Note 21 to the December 31, 2011 consolidated
financial statements. Below is a summary of the impact the changeover to IFRS
has had on the Companys financial position, net income and cash flows:

- Adjustment 1 - 275,000 post-consolidation options were awarded in July 2009
  which, under both Previous GAAP and IFRS are considered to have a grant date
  of June 28, 2010 (when amendments to the stock option plan, which were
  required before the options could be exercised, were approved by the Companys
  shareholders). Previous GAAP requires the expense relating to these options to
  be charged to the statement of operations from the grant date. However, IFRS
  requires compensation expense to be charged to the statement of operations
  with respect to stock-based compensation prior to the grant date if services
  are already being received with respect to the award. As such, under IFRS a
  compensation expense should have been recorded with respect to these options
  starting from July 9, 2009. The impact of this difference is an increase to
  opening deficit and share-based payment reserve of approximately $0.8 million
  and $0.1 million at January 1, 2010 and December 31, 2010, respectively.
- Adjustment 2 - Upon the transition to IFRS, the Company changed its
  accounting policy relating to exploration and evaluation expenditures. Under
  Previous GAAP the Company deferred all expenditures related to its mineral
  properties until such time as the properties were put into commercial
  production, sold or abandoned. The policy of the Company under IFRS is to
  defer only those costs which are expected to be recouped by future
  exploitation or

35

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

- Adjustment 3 - Under IFRS, the convertible debt issued to DMSL is
  considered to include an embedded derivative. The derivative is the conversion
  option which is set at a fixed exchange rate from US dollars to the
  Canadian-dollar denominated shares. The carrying amount of the debt, on
  initial recognition, is calculated as the difference between the proceeds of
  the convertible debt as a whole and the fair value of the embedded derivative.
  Subsequent to initial recognition, the derivative component is re-measured at
  fair value at each balance sheet date while the debt component is accreted to
  the face value of the debt using the effective interest rate. Under Previous
  GAAP, no embedded derivative was recognized; instead the debt was split
  between its debt and equity portions.The adjustment booked upon
  transition to IFRS eliminated the equity portion of $1.7 million and
  recognized a derivative liability. In addition, the derivative liability was
  marked-to- market at each reporting period with the associated movements in
  the fair value of the liability recorded in the statement of operations and
  comprehensive loss. The liability originally recognized under IFRS (net of the
  embedded derivative) was less than the amount originally recognized under
  Previous GAAP by $5.2 million, resulting in a larger accretion expense under
  IFRS. Additional accretion of $2.0 million was recorded under IFRS in the year
  ended December 31, 2010 and a mark-to-market gain of $4.3 million was
  recognized in the same period resulting in a net impact of an increase in
  income of $2.3 million.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with IFRS
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Management has identified the following
critical accounting policies and estimates; many of these accounting policies
were relevant to the Company for the first time in 2010, with the acquisition of
the San Dimas Mine.

Inventories

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

The Company records the costs of mining ore in process as
work-in-process inventories measured at the lower of cost and estimated net
realizable value. These costs are charged to earnings and included in operating
expenses on the basis of ounces of gold recovered. The estimates and assumptions
used in

36

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

the measurement of work-in-process inventories include
quantities of recoverable ounces of gold and silver in the mill processing
circuits and the price per gold ounce expected to be realized when the ounces of
gold are recovered. If these estimates or assumptions prove to be inaccurate,
the Company could be required to write down the carrying amounts of its
work-in-process inventories, which would reduce the Companys earnings and
working capital. At December 31, 2011, the average costs of inventories are
significantly below their net realizable values.

Mining interests and impairment testing

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

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

The Company reviews and evaluates its mining properties for
impairment when events or changes in circumstances indicate that the related
carrying amounts may not be recoverable. For the year ended December 31, 2011,
as a result of the Companys continuing depressed share price, the Company
reviewed its mining properties for impairment. This review was based upon the
expected discounted future net cash flows to be generated from the San Dimas
Mine and it was concluded that there was no impairment (as discussed above under
Mining interests and impairmentunder ANNUAL REVIEW OF OPERATIONS).
If the Company determines there has been an impairment because its prior
estimates of future net cash flows have proven to be inaccurate, due to
reductions in the metal price forecasts, increases in the costs of production,
reductions in the amount of reserves expected to be recovered or otherwise, or
because the Company has determined that the deferred costs may not be recovered
based on current economics or permitting considerations, the Company would be
required to write down the carrying amounts of its mining properties, which
would reduce the Companys earnings and net assets.

At December 31, 2011, the expected future cash flows of the San
Dimas Mine were derived from the Companys most recent estimates of proven and
probable reserves and value beyond proven and probable (as discussed above under
Change in reserve and resource estimation methodologyunder RECENT
CORPORATE DEVELOPMENTS above). Other estimates included in the expected future
cash flows from the San Dimas Mine were, a long-term gold price of $1,330 and a
discount rate of 6.5% for reserves and resources and 8.5% for exploration
potential. Of most significance, the impairment model used by the Company
includes the recognition of taxation on silver sales under the External SPA at
realized prices (see Commencement of advance tax ruling process in Mexicounder RECENT CORPORATE DEVELOPMENTS above).

37

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

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

Fair value of assets purchased in a business
combination

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

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

Reclamation and closure cost obligations

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

Taxation

The Company recognizes the future tax benefit related to
deferred income tax assets and sets up a valuation allowance against any portion
of those assets that it believes is not more likely than not to be realized.
Assessing the recoverability of deferred income tax assets requires management
to make significant estimates related to expectations of future taxable income,
applicable tax strategies and the expected timing of the reversals of existing
temporary differences. In making its assessments, management gives additional
weight to positive and negative evidence that can be objectively verified.
Estimates of future taxable income are based on forecasted cash flows from
operations and the

38

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

application of existing tax laws in each jurisdiction.
Forecasted cash flows from operations are based on life of mine projections
internally developed and reviewed by management.

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

The recoverability of deferred income tax assets and the
recognition and measurement of uncertain tax positions are subject to various
assumptions and management judgment. Actual results may differ from these
estimates. In circumstances where the applicable tax laws and regulations are
either unclear or subject to ongoing varying interpretations, it is reasonably
possible that changes in these estimates could occur that materially affect the
amounts of current and deferred income taxes recognized by the Company, as well
as deferred income tax assets and liabilities recorded at December 31, 2011.

For tax risks relating to the APA process, see Silver
contract under RISKS AND UNCERTAINTIES below.

Share-based payments

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

Capital management

There have been no significant changes in the Companys
objectives, policies and processes for managing its capital, including items the
Company regards as capital, during the year ended December 31, 2011. At December
31, 2011, the Company expects its capital resources and projected cash flows
from continuing operations to support its normal operating requirements on an
ongoing basis, planned development and exploration of its mineral properties,
and other expansionary plans. At December 31, 2011, there were no externally
imposed capital requirements to which the Company is subject and with which the
Company had not complied.

Financial instruments

The Companys financial instruments at December 31, 2011 and
2010 consist of cash, trade and other receivables, the derivative asset, trade
and other payables, the convertible note, the promissory note and other
long-term liabilities (being a liability with respect to the Companys phantom
share unit plan; this is accounted for in accordance with IFRS 2 
Share-based payment).

The Company has designated its derivative instruments as fair
value through profit and loss (FVTPL), which are measured at fair value. Trade
and other receivables and cash are classified as loans and receivables, which
are measured at amortized cost. Trade and other payables, the convertible note
and the promissory note are classified as other financial liabilities, which are
measured at amortized cost.

39

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

At December 31, 2011, the carrying amounts of trade and other
receivables and trade and other payables are considered to be reasonable
approximation of their fair values due to their short-term nature.

The fair value of the convertible note liability was determined
on the date of issue using a discounted future cash-flow analysis. The fair
value of the promissory note upon initial recognition was considered to be its
face value. The fair value of the phantom share plan liability was measured at
the reporting date using the Black Scholes pricing model.

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

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

At December 31, 2011, there were no financial assets or
liabilities measured and recognized in the balance sheet at fair value that
would be categorized as Level 2 or 3 in the fair value hierarchy above. There
have been no transfers between fair value levels during the reporting
period.

Derivative instruments - Embedded derivatives

Financial instruments and non-financial contracts may contain
embedded derivatives, which are required to be accounted for separately at fair
value as derivatives when the risks and characteristics of the embedded
derivatives are not closely related to those of their host contract and the host
contract is not carried at fair value. The Company regularly assesses its
financial instruments and non-financial contracts to ensure that any embedded
derivatives are accounted for in accordance with its policy. There were no
material embedded derivatives requiring separate accounting at December 31, 2011
or 2010, other than those discussed below.

| | (i) | Derivative contracts on silver                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | On March 18, 2011, the Company entered into a series of
      monthly call option contracts to purchase 1,204,000 ounces of silver at
      $39 per ounce for a total cost of $2.2 million. These contracts were
      designed to mitigate the adverse tax consequences of the silver purchase
      agreement while at the same time exposing the Company to gains from a
      potential rise in silver prices. The contracts covered approximately
      two-thirds of the monthly silver production sold to Silver Wheaton Caymans
      over the period April 1, 2011 to September 30, 2011. The Company
      markedto-market these contracts each reporting period. Since acquisition,
      contracts to purchase 774,000 ounces of silver were sold, resulting in a
      gain of $630 for the year ended December 31, 2011, and contracts to
      purchase 430,000 ounces expired, resulting in a realized loss of $978 for
      the year ended December 31, 2011. All contracts under the March 18, 2011
      purchase had expired by December 31, 2011.

40

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

| |      | On September 15, 2011, the Company entered into another
      series of monthly call option contracts to purchase 1,489,400 ounces of
      silver at $49 per ounce for a total cost of $3.7 million. These contracts
      were designed to cover approximately 30% of the monthly silver production
      sold to Silver Wheaton Caymans over the period September 27, 2011 to
      September 26, 2012. These options were intended to offset the incremental
      income tax that would be payable by the Company if spot prices exceed the
      strike price. The Company marksto-market these contracts each reporting
      period. The fair value of these contracts (which are accounted for as a
      derivative asset) was $0.2 million at December 31, 2011, based on current
      and available market information. A realized loss on expired contracts of
      $0.4 million has been recognized by the Company in the year ended December
      31, 2011. An unrealized marked-to-market loss of $3.2 million has been
      recognized on the remaining contracts for the year ended December 31,
      2011.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (ii) | Convertible note and promissory note                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |      | At December 31, 2011, the fair value of the conversion
      feature of the convertible note was $nil. This resulted in an unrealized
      gain on this non-hedge derivative of $2.6 million during 2011 (2010 - $4.3
      million loss).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |      | The fair value of the convertible note liability was
      determined using a statistical model, which contained quoted prices and
      market-corroborated inputs. The fair value of the promissory note upon
      initial recognition was considered to be its face
value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

RISKS AND UNCERTAINTIES

Financial instrument risk exposure

The following describes the types of financial risks to which
the Companys financial instruments are exposed and its objectives and policies
for managing those risk exposures:

|(a) | Credit risk
|--- | -----------

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

The Company closely monitors its financial assets and does not
have any significant concentration of credit risk with non-related parties. The
Company invests its cash in highly rated financial institutions and sells its
products exclusively to organizations with strong credit ratings. The credit
risk associated with trade receivables at December 31, 2011 is considered to be
negligible.

41

---

|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

The Companys maximum exposure to credit risk at December 31,
2011 and 2010 is as follows:

| |                              |  | 2011   |  |  | 2010   | 
| | ---------------------------- |  | ------ |  |  | ------ | 
| | (In thousands of US dollars) |  | **$**  |  |  | $      | 
| |                              |  |        |  |  |        | 
| | Cash                         |  | 80,761 |  |  | 58,298 | 
| | Trade and other receivables  |  | 5,526  |  |  | 11,738 | 
| | Taxes receivable             |  | 20,969 |  |  | 85,743 | 

|(b) | Liquidity risk
|--- | --------------

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

In the normal course of business, the Company enters into
contracts and performs business activities that give rise to commitments for
future minimum payments. The following table summarizes the contractual
maturities of the Companys financial liabilities and operating and capital
commitments at December 31, 2011:

December 31December 31, 2011
    
    
    2010Within
    
    
    
    
    
    Over1 year
    
    
    2-5
      years
    
    
    5
      years
    
    
    Total
    
    
    Total(In thousands of US dollars)
    
    $
    
    
    $
    
    
    $
    
    
    **$**
    
    
    $Trade and other payables
    
    20,553
    
    
    -
    
    
    -
    
    
    20,553
    
    
    24,474Taxes payable
    
    4,213
    
    
    
    
    
    
    
    
    4,213
    
    
    10,668Convertible debt and interest
    
    31,846
    
    
    -
    
    
    -
    
    
    31,846
    
    
    63,600Promissory note and interest
    
    17,424
    
    
    46,476
    
    
    -
    
    
    63,900
    
    
    63,208VAT loan
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    71,540Minimum rental and operating lease payments
    
    512
    
    
    603
    
    
    -
    
    
    1,115
    
    
    2,661Reclamation and closure cost obligations
    
    -
    
    
    -
    
    
    19,362
    
    
    19,362
    
    
    17,064Commitment to
      purchase plant and equipment
    
    694
    
    
    -
    
    
    -
    
    
    - 694
    
    
    1,73375,242
    
    
    47,079
    
    
    19,362
    
    
    141,683
    
    
    254,948


42

---

|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

|(c)   | Market risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(i)   | Currency risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      | Currency risk is the risk that the fair values or future
      cash flows of the Companys financial instruments will fluctuate because
      of changes in foreign currency exchange rates. Exchange rate fluctuations
      may affect the costs incurred in the operations. Gold is sold in U.S.
      dollars and costs are incurred principally in U.S. dollars and Mexican
      pesos. The appreciation of the Mexican peso against the U.S. dollar can
      increase the costs of gold production and capital expenditures in U.S.
      dollar terms. The Company also holds cash that is denominated in Canadian
      dollars and Mexican pesos which are subject to currency risk. The
      Companys head office general and administrative expenses are mainly
      denominated in Canadian dollars and are translated to US dollars at the
      average rate during the period, as such if the US dollar appreciates
      (depreciates) as compared to the Canadian dollar, the costs of the Company
      would decrease (increase) in US dollar terms. The Companys equity is
      denominated in Canadian dollars; the convertible U.S. dollar debt held by
      Goldcorp is convertible into equity at a fixed Canadian dollar price, as
      such the Company is subject to currency risk if the Canadian dollar
      depreciates against the U.S. dollar.
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      | During the year ended December 31, 2011, the Company
      recognized a gain of $0.9 million on foreign exchange (2010 - loss of $0.1
      million). Based on the above net exposures at December 31, 2011, a 10%
      depreciation or appreciation of the Mexican peso against the U.S. dollar
      would result in a $8.8 million increase or decrease in the Companys
      after-tax net earnings (loss) (2010 - $2.5 million); and a 10%
      depreciation or appreciation of the Canadian dollar against the U.S.
      dollar would result in a $0.3 million increase or decrease in the
      Companys after- tax net earnings (loss) (2010 - $1.8 million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      | The Company does not currently use derivative instruments
      to reduce its exposure to currency risk, however, management monitors its
      differing currency needs and tries to reduce its exposure to currency
      risks through exchanging currencies at what are considered to be optimal
      times.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(ii)  | Interest rate risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      | Interest rate risk is the risk that the fair values and
      future cash flows of the financial instruments will fluctuate because of
      changes in market interest rates. The exposure to interest rates is
      monitored. The Company has very limited interest rate risk as the net
      exposure of financial instruments subject to floating interest rates is
      not material.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(iii) | Price risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      | Price risk is the risk that the fair value or future cash
      flows of the Companys financial instruments will fluctuate because of
      changes in commodity prices. Profitability depends on metal 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. This risk
      includes the fixed price contracted sales of silver and associated
      taxation. As discussed above, during 2011, the Company
  entered                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

43

---

|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

into two sets of silver call options
to mitigate the adverse tax consequences of increases in the price of
silver.

The table below summarizes the impact
on earnings 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.

| |                              |  | Increase (decrease) in income
      after taxes |  
| | ---------------------------- |  | ----------------------------------------------- | -
| |                              |  | for the year ended                              |  
| | (In thousands of US dollars) |  | December 31, 2011                               |  
| |                              |  |                                                 |  
| | Gold prices                  |  |                                                 |  
| | 10% increase                 |  | 8,467                                           |  
| | 10% decrease                 |  | (8,467                                          | )
| |                              |  |                                                 |  
| | Silver prices                |  |                                                 |  
| | 10% increase                 |  | 1,317                                           |  
| | 10% decrease                 |  | (1,317                                          | )

Other risks and uncertainties

Silver contract

As part of the acquisition of the San Dimas Mine, Primero
assumed obligations under two silver purchase agreements. The Companys Mexican
subsidiary is obligated to sell all the silver produced at the San Dimas Mine,
to certain annual thresholds, to the Companys subsidiary, Silver Trading
(Barbados) Ltd. (Silver Trading) at, prior to October 11, 2011, when the
silver purchase agreement was modified, the prevailing market price and, after
October 11, 2011, at the lesser of approximately $4 per ounce (adjusted for
annual inflation) or the prevailing market price. Silver Trading is obligated to
sell all of the silver purchased to Silver Wheaton Caymans at the lesser of $4
per ounce (adjusted for inflation) and market prices.

Prior to the Company filing the APA application (see RECENT
CORPORATE DEVELOPMENTSand LIQUIDITY OUTLOOK above), the Companys
Mexican subsidiary recorded income taxes based on selling all silver produced at
the San Dimas Mine at market prices. The losses incurred by Silver Trading from
purchasing silver at market prices and selling silver at the lesser of
approximately $4 per ounce and market prices had no tax benefit since Barbados
is a low tax jurisdiction. From a consolidated perspective, therefore, the
silver sales to Silver Wheaton Caymans realized approximately $4 per ounce,
however, the Company recorded income taxes based on sales at market prices.

Having filed the APA application, the Company now records
revenues on silver sales to Silver Wheaton Caymans at realized prices and remits
income tax to the Mexican tax authorities on the same basis. Should the Company
fail in its APA application, the Company will immediately have to pay all taxes
due immediately but will incur no penalty for taxes not paid for the duration of
the APA process. Throughout the APA process, the Company intends to identify the
potential tax as a contingent liability which will be described in the notes to
its financial statements.

In the event that the Company has to revert to paying taxes
based on the spot price of silver for all sales to Silver Wheaton Caymans, the
higher the market price of silver, the greater amount of taxes the

44

---

|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

Companys Mexican subsidiary will record and have to pay. Until
recently, the market price of gold moves in the same direction as changes in the
market price of silver. If the ratio between the market prices of gold and
silver changes further in favour of silver, the Company will be adversely
affected. If the ratio moves significantly outside historical rates, the
Companys cash flow may not be sufficient to fund its obligations and Primero
could be forced to discontinue production and may lose its interest in, or may
be forced to sell, some of its properties. The maximum contingent liability in
respect of such an adverse ruling as at December 31, 2011 is $28.6 million.
Since the Company intends to continue to record taxes in Mexico based on
realized prices, the contingent liability will grow during the APA process. At
December 31, 2011, the Company reviewed its mining properties for impairment and
concluded, based on its discounted cash flow models, and assuming a favourable
ruling from the Mexican tax authorities, that there was no impairment.

In addition, as the annual threshold amounts of silver to be
sold to Silver Wheaton Caymans will increase over time under the External SPA,
the adverse tax consequences to the Company may, depending on the annual
production of silver, increase in severity and the Companys cash flow may not
be sufficient to fund its obligations, there may be an impairment loss and a
write down of the San Dimas Mine and Primero could be forced to discontinue
production and may lose its interest in, or may be forced to sell, some of its
properties. In the event of an impairment loss and a write-down of the San Dimas
Mine, the Company may not be able to meet certain tangible net worth financial
covenants under the convertible note held by Goldcorp and under the promissory
note held by Goldcorps Luxembourg subsidiary (see LIQUIDITY AND CAPITAL
RESOURCES  Debtabove) which could result in an event of default, in
which case the holders of such notes, at their option, may respectively declare
all or part of the obligations under the convertible note and under the
promissory note to be due and payable either on demand or immediately without
demand and such holders may, in their discretion, exercise any right or recourse
and proceed by any action, suit, remedy or proceeding against the Company for
the recovery of the obligations under the convertible note and under the
promissory note. In the event that such holders declare obligations under the
convertible note and/or obligations under the promissory note in excess of $5
million to be due and payable or any enforcement steps are taken by such holders
following an event of default under the convertible note or the promissory note,
an event of default will occur under the External SPA. Upon the occurrence of an
event of default under the External SPA, Silver Wheaton Caymans, at its option,
may take any or all of the following actions (i) declare all amounts thereunder
due and payable, (ii) terminate the External SPA, or (iii) enforce its security
under the External SPA.

Also, in the event that the Company has to revert to paying
taxes based on the market price of silver for all sales to Silver Wheaton
Caymans, the Companys cash flow may not be sufficient to meet certain financial
covenants under the convertible note held by Goldcorp and under the promissory
note held by Goldcorps Luxembourg subsidiary and could also result in an event
of default, with the same potential consequences as set out above for certain
tangible net worth financial covenants under the convertible note and promissory
note are not met.

See Commodity Prices(below) for a discussion of risks
associated with decline in silver prices.

45

---

|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

Exploration, development and operating risk

Mining operations generally involve a high degree of risk.
Primeros operations are subject to all the hazards and risks normally
encountered in the exploration, development and production of gold and silver
including unusual and unexpected geologic formations, seismic activity, rock
bursts, cave-ins, flooding and other conditions involved in the drilling and
removal of material, any of which could result in damage to, or destruction of,
mines and other producing facilities, damage to life or property, environmental
damage and possible legal liability. Although appropriate precautions to
mitigate these risks are taken, milling operations are subject to hazards such
as equipment failure or failure of retaining dams around tailings disposal areas
which may result in environmental pollution and consequent liability.

The exploration for and development of mineral deposits
involves significant risks which even a combination of careful evaluation,
experience and knowledge may not eliminate. While the discovery of an ore body
may result in substantial rewards, few properties which are explored are
ultimately developed into producing mines. Major expenses may be required to
locate and establish mineral reserves, to develop metallurgical processes and to
construct mining and processing facilities at a particular site. It is difficult
to ensure that the exploration or development programs planned by Primero will
result in a profitable commercial mining operation. Whether a mineral deposit
will be commercially viable depends on a number of factors, some of which are:
the particular attributes of the deposit, such as size, grade, metallurgy and
proximity to infrastructure; metal prices which are highly cyclical; and
government regulations, including regulations relating to prices, taxes,
royalties, land tenure, land use, importing and exporting of minerals and
environmental protection.

The exact effect of these factors cannot be accurately
predicted, but the combination of any of these factors may result in Primero not
receiving an adequate return on invested capital. There is no certainty that
expenditures made by Primero towards the search and evaluation of mineral
deposits will result in discoveries of commercial quantities of ore.

Commodity prices

The price of the common shares of the Company, Primeros
financial results and exploration, development and mining activities are
significantly adversely affected by declines in the price of gold and, to a
limited extent, silver. Gold and silver prices fluctuate widely and are affected
by numerous factors beyond Primeros control such as the sale or purchase of
metals by various central banks and financial institutions, interest rates,
exchange rates, inflation or deflation, fluctuation in the value of the United
States dollar and foreign currencies, global and regional supply and demand, and
the political and economic conditions of major metals-producing countries
throughout the world. The price of gold and silver has fluctuated widely in
recent years, and future serious price declines could cause continued
development of and commercial production from Primeros properties to be
impracticable. Depending on the price of gold and silver, cash flow from mining
operations may not be sufficient and Primero could be forced to discontinue
production and may lose its interest in, or may be forced to sell, some of its
properties. Future production from the San Dimas Mines is dependent on gold and
silver prices that are adequate to make these properties economic.

Furthermore, reserve calculations and life-of-mine plans using
significantly lower gold and silver prices could result in material write-downs
of Primeros investment in mining properties and increased

46

---

|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

amortization, reclamation and closure charges. See Silver
contract(above) for a discussion of risks associated with a material
write-down of Primeros investment in its mining properties, and for a
discussion of risks associated with taxes and the APA relating to an increase in
silver prices.

Uncertainty in the estimation of reserves and mineral
resources

The figures for reserves and mineral resources contained in
this MD&A and used in the Companys mine models are estimates only and no
assurance can be given that the anticipated tonnages and grades will be
achieved, that the indicated level of recovery will be realized or that reserves
could be mined or processed profitably. There are numerous uncertainties
inherent in estimating reserves and mineral resources, including many factors
beyond Primeros control. Such estimation is a subjective process, and the
accuracy of any reserve or resource estimate is a function of the quantity and
quality of available data and of the assumptions made and judgments used in
engineering and geological interpretation. Short-term operating factors relating
to the reserves, such as the need for orderly development of the ore bodies or
the processing of new or different ore grades, may cause the mining operation to
be unprofitable in any particular accounting period. In addition, there can be
no assurance that gold or silver recoveries in small scale laboratory tests will
be duplicated in larger scale tests under on-site conditions or during
production. Fluctuation in gold and, to a lesser extent, silver prices, results
of drilling, metallurgical testing and production and the evaluation of mine
plans subsequent to the date of any estimate may require revision of such
estimate. The volume and grade of reserves mined and processed and recovery
rates may not be the same as currently anticipated. Any material reductions in
estimates of reserves and mineral resources, or of Primeros ability to extract
these reserves, could have a material adverse effect on Primeros results of
operations and financial condition including, without limitation, an impairment
loss and a write down of the San Dimas Mine, discontinuance of production, and
loss of interest in, or sale of, some of Primeros properties. In addition to
other adverse consequences, recording an impairment loss and a write-down may
result in Primero breaching certain tangible net worth financial covenants under
the convertible note and under the promissory note held by Goldcorps Luxembourg
subsidiary that could constitute an event of default. See Silver contract(above) for a discussion of risks associated with an impairment loss and a
material write-down of Primeros investment in its mining properties. See also
Cautionary Note for United States Investors below.

Uncertainty relating to inferred mineral resources and
exploration potential

Inferred mineral resources and exploration potential that are
not mineral reserves do not have demonstrated economic viability. Due to the
uncertainty which may attach to inferred mineral resources and exploration
potential, there is no assurance that inferred mineral resources and exploration
potential will be upgraded to proven and probable mineral reserves as a result
of continued exploration.

47

---

|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

Need for additional mineral reserves

Since the San Dimas Mines have limited lives based on proven
and probable mineral reserves, Primero will be required to continually replace
and expand its mineral reserves as its mines produce gold and silver. Primeros
ability to maintain or increase its annual production of gold and silver will be
dependent in significant part on its ability to expand mineral reserves at
existing mines, to bring new mines into production and to complete
acquisitions.

Indebtedness

Primero has significant consolidated indebtedness, consisting
of a $30 million convertible note held by Goldcorp Inc, and a $50 million
promissory note held with a wholly-owned subsidiary of Goldcorp Inc. As a result
of this indebtedness, Primero will be required to use a portion of its cash flow
to service principal and interest on its debt, which will limit the cash flow
available for other business opportunities.

Primeros indebtedness could have important consequences to
Primero and the value of the common shares of the Company, including:

- limiting Primeros ability to borrow additional amounts for working
  capital, capital expenditures, debt service requirements, execution of
  Primeros growth strategy or other purposes;
- limiting Primeros ability to use operating cash flow in other areas of the
  business because a portion of these funds must be dedicated to service the
  debt;
- increasing Primeros vulnerability to general adverse economic and industry
  conditions, including increases in interest rates;
- limiting Primeros ability to capitalize on business opportunities and to
  react to competitive pressures and adverse changes in government regulation;
  and
- limiting Primeros ability or increasing the costs to refinance
  indebtedness.

Given the covenants imposed under the indebtedness and the
restrictions on incurring additional debt under the San Dimas Silver Purchase
Agreement, Primero may be significantly limited in its operating and financial
flexibility, limited in its ability to respond to changes in its business or
competitive activities and may be restricted in its ability to engage in
mergers, acquisitions or dispositions of assets. A failure to comply with
covenants under these debt agreements or any other additional debt agreements
entered into by Primero, including a failure to meet applicable financial tests
or ratios, would likely result in an event of default under the debt agreements
and would allow the lenders to accelerate the debt under these agreements. If
the debt is accelerated, Primeros assets may not be sufficient to repay such
debt in full.

Additional capital

The mining, processing, development and exploration of
Primeros properties, may require substantial additional financing, including
capital for expansion of mining operations at the San Dimas Mine in

48

---

|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

accordance with Primeros business plans. Failure to obtain
sufficient financing may result in delaying or indefinite postponement of
exploration, development or production on any or all of Primeros properties or
even a loss of property interest. There can be no assurance that additional
capital or other types of financing will be available if needed or that, if
available, the terms of such financing will be favourable to Primero. Declines
in gold and silver prices could have the result of making additional capital
unavailable to Primero.

Exchange rate fluctuations

Exchange rate fluctuations may affect the costs that Primero
incurs in its operations. Revenues from sales of gold and silver are in United
States dollars, whereas the Companys expenses associated with gold and silver
production are incurred principally in Mexican pesos, United States dollars and
Canadian dollars. In the recent past, the Mexican peso has experienced high
volatility which has affected the results of San Dimas operations. The
appreciation of non-United States dollar currencies against the United States
dollar can increase the cost of gold and silver production and capital
expenditures in United States dollar terms, with the result that the Companys
profitability would decrease.

Title to property

Title to mineral properties involves certain inherent risks due
to the difficulties of determining the validity of certain claims, as well as
the potential for problems arising from the frequently ambiguous conveyance
history characteristic of many mineral properties. There is no guarantee that
title to the properties comprising the San Dimas Mine will not be challenged or
impugned. Mineral property interests may be subject to prior unrecorded
agreements or transfers or the claims of local people and title may be affected
by undetected defects. There may be valid challenges to the title of these
properties which, if successful, could require the Company to modify its
operations or plans for development of the San Dimas Mine.

There can be no assurance that the Company will be able to
secure the grant or the renewal of mining concessions on terms satisfactory to
it, or that governments in the jurisdictions in which the properties comprising
the San Dimas Mine are situated will not revoke or significantly alter such
permits or other tenures or that such mining concessions will not be challenged
or impugned. Third parties may have valid claims underlying portions of the
Companys interests and the mining concessions may be subject to prior
unregistered agreements or transfers and title may be affected by undetected
defects. If a title defect exists, it is possible that the Company may lose all
or part of its interest in the properties comprising the Sans Dimas Mine or any
property it may acquire.

Local groups

An Ejido is a communal ownership of land recognized by the
federal laws in Mexico. While mineral rights are administered by the federal
government through federally issued mining concessions, an Ejido controls
surface rights over communal property through a board of directors which is
headed by a president. An Ejido may also allow individual members of the Ejido
to obtain title to specific parcels of land and thus the right to rent or sell
the land. While the Company has written agreements with the Ejidos that impact
the San Dimas Mine, these agreements are subject to renegotiation. Changes to
the existing agreements may have a significant impact on operations at San Dimas
Mine. In the event that

49

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

the Company conducts activities in areas where no written
agreements exist with owners which are Ejidos, the Company may face some form of
protest, road blocks, or other forms of public expressions against the Companys
activities. If the Company is not able to reach an agreement for the use of the
lands with the Ejido, the Company may be required to modify its operations or
plans for the development of the San Dimas Mine.

Four of the properties included in the San Dimas mine are
subject to legal proceedings commenced by local Ejidos. None of the proceedings
name the Company as a defendant; in all cases, the defendants are previous
owners of the properties, either deceased individuals who, according to certain
public deeds, owned the properties more than 80 years ago or corporate entities
that are no longer in existence. In addition, three proceedings name the
Tayoltita Property Public Registry as co-defendant. In all four proceedings, the
local Ejido is seeking title to the property. In one case, which was commenced
before the Companys acquisition of the mine and was brought without the
knowledge of DMSL, the court initially ruled in favour of the Ejido. Proceedings
will be initiated in an attempt to annul this order on the basis that the
initial proceeding was brought without the knowledge of DMSL and other legal
arguments. With respect to the other properties, since Primero is not a party to
the proceeding, the Company has been advised to allow the proceeding to conclude
and, in the event that the decision is in favour of the Ejido, to seek an
annulment on the basis that it is in possession of the property and is the
legitimate owner. If these legal proceedings (or any subsequent challenges to
them) are not decided in favour of the Company, then the San Dimas mine could
face higher operating costs associated with agreed or mandated payments that
would be payable to the local Ejidos in respect of use of the properties. No
provision has been made in in the consolidated financial statements respect of
these proceedings.

Government regulations, consents and
approvals

Exploration and development activities and mining operations at
San Dimas are subject to laws and regulations governing health and work safety,
employment standards, environmental matters, mine development, prospecting,
mineral production, exports, taxes, labour standards, reclamation obligations
and other matters. It is possible that future changes in applicable laws,
regulations, agreements or changes in their enforcement or regulatory
interpretation could result in changes in legal requirements or in the terms of
permits and agreements applicable to the Company or the San Dimas properties
which could have a material adverse impact on the Companys operations and
exploration program and future development projects. Where required, obtaining
necessary permits and licences can be a complex, time consuming process and
there can be no assurance that required permits will be obtainable on acceptable
terms, in a timely manner or at all. The costs and delays associated with
obtaining permits and complying with these permits and applicable laws and
regulations could stop or materially delay or restrict the Company from
proceeding with the development of an exploration project or the operation or
further development of a mine. Any failure to comply with applicable laws and
regulations or permits, even if inadvertent, could result in interruption or
closure of exploration, development or mining operations or material fines,
penalties or other liabilities, which could have an adverse effect on the
business, financial condition or results of operation of the Company. Due to
stringent government regulation, the Company may experience difficulties in
obtaining permits for the use of explosives in Mexico and these difficulties
could interrupt operations at the San Dimas Mine.

50

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

Environmental risks and hazards

Primeros operations at San Dimas are subject to Mexican and
applicable state environmental regulation. These regulations mandate, among
other things, the maintenance of air and water quality standards and land
reclamation. They also set forth limitations on the generation, transportation,
storage and disposal of solid and hazardous waste. Environmental legislation is
evolving in a manner which will likely require stricter standards and
enforcement, increased fines and penalties for non-compliance, more stringent
environmental assessments of proposed projects and a heightened degree of
responsibility for companies and their officers, directors and employees. There
is no assurance that future changes in environmental regulation, if any, will
not adversely affect Primeros results of operations. Environmental hazards may
exist at the San Dimas Mine which are unknown to Primero at present and which
have been caused by previous or existing owners or operators of the
properties.

Government approvals and permits are currently, and may in the
future be, required in connection with operations at the San Dimas Mine. To the
extent such approvals are required and not obtained, Primero may be curtailed or
prohibited from continuing its mining operations or from proceeding with planned
exploration or development of mineral properties.

Failure to comply with applicable laws, regulations and
permitting requirements may result in enforcement actions thereunder, including
orders issued by regulatory or judicial authorities causing operations to cease
or be curtailed, and may include corrective measures requiring capital
expenditures, installation of additional equipment, or remedial actions. Parties
engaged in mining operations or in the exploration or development of mineral
properties may be required to compensate those suffering loss or damage by
reason of the mining activities and may have civil or criminal fines or
penalties imposed for violations of applicable laws or regulations.

Amendments to current laws, regulations and permits governing
operations and activities of mining and exploration companies, or more stringent
implementation thereof, could have a material adverse impact on Primero and its
results of operations and cause increases in exploration expenses, capital
expenditures or production costs or reduction in levels of production at
producing properties or require abandonment or delays in development of new
mining properties.

Operations at the San Dimas Mine may cause damage to the
environment, which could lead to government environmental authorities imposing
fines, total or partial closures, compensatory measures or mandated investment
in infrastructure. Examples of environmental damage that could result from
operations include, but are not limited to, industrial fires, forest fires, oil
spills, tailings dam spills, unforeseen emissions to the atmosphere and
hazardous material soil filtrations.

The San Dimas Mine is presently involved in an environmental
certification process. As part of this process, the Company may be required to
invest in new facilities, systems, infrastructure or buildings or undertake
compensatory measures such as reforestation, dam dredging, soil cleansing, and
flora and wildlife preservation measures.

51

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

San Dimas tailings management risks

Although Primero believes the design and operation of tailings
containment sites in the San Dimas district complies with existing permits and
legal requirements in Mexico, existing tailings containment sites do not comply
with international guidelines. Tailings containment sites which existed at the
time of DMSLs acquisition of the San Dimas Mine were not subjected to
comprehensive geotechnical investigation before construction, normal safety
factors in dam design, seepage monitoring or control, or controls on public or
wildlife access to cyanide solution ponds or pumping installations. Work was
undertaken to address the deficiencies with the tailings management aspect of
the operations and capital investments were initiated in 2005 to upgrade the
containment structures and tailings operations.

The Company anticipates that further expenditures will be
required to maintain compliance with applicable environmental regulations, which
are becoming more stringent and can be expected to become more aligned with
international guidelines in the future. The Company will incur environmental
liability for mining activities conducted both prior to and after it acquires
ownership of the San Dimas Mine. To the extent that the Company is subject to
uninsured environmental liabilities, the payment for such liabilities would
reduce funds otherwise available and could have a material adverse effect on the
Company. Should the Company be unable to fund fully the cost of remedying an
environmental problem, the Company may be required to suspend operations or
enter into interim compliance measures pending completion of required
remediation, which could have a material adverse effect on the Company.

Labour and employment matters

In March 2011, a strike by the union of millworkers stopped
production for approximately a month. The Company believes that its current
relations with employees and the unions are good. Production at the San Dimas
Mines is dependent upon the ability of Primero to continue to maintain good
relations with its employees and the unions. In addition, relations between
Primero and its employees may be impacted by changes in the scheme of labour
relations which may be introduced by the relevant governmental authorities in
Mexico. Adverse changes in such legislation or in the relationship between
Primero with its employees and unions at the San Dimas Mine may have a material
adverse effect on Primeros business, results of operations and financial
condition.

Infrastructure

Mining, processing, development and exploration activities
depend, to one degree or another, on adequate infrastructure. Reliable roads,
bridges, power sources and water supply are important determinants which affect
capital and operating costs. Unusual or infrequent weather phenomena, terrorism,
sabotage, government or other interference in the maintenance or provision of
such infrastructure could adversely affect the Companys operations, financial
condition and results of operations. With respect to the San Dimas Mine, any
interruption in power supply from the hydroelectric project could adversely
impact on operations at the San Dimas Mine.

52

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

Insurance and uninsured risks

Operations at the San Dimas Mine are subject to a number of
risks and hazards generally, including adverse environmental conditions,
industrial accidents, labour disputes, unusual or unexpected geological
conditions, ground or slope failures, cave-ins, changes in the regulatory
environment and natural phenomena such as inclement weather conditions, floods,
hurricanes and earthquakes. Such occurrences could result in damage to mineral
properties or production facilities, personal injury or death, environmental
damage to Primeros properties or the properties of others, delays in mining,
monetary losses and possible legal liability.

Although Primero maintains insurance to protect against certain
risks in such amounts as it considers reasonable, its insurance will not cover
all the potential risks associated with a mining companys operations. Primero
may also be unable to maintain insurance to cover these risks at economically
feasible premiums. Insurance coverage may not continue to be available or may
not be adequate to cover any resulting liability. Moreover, insurance against
risks such as loss of title to mineral property, environmental pollution, or
other hazards as a result of exploration and production is not generally
available to Primero or to other companies in the mining industry on acceptable
terms. Primero might also become subject to liability for pollution or other
hazards which may not be insured against or which Primero may elect not to
insure against because of premium costs or other reasons. Losses from these
events may cause Primero to incur significant costs that could have a material
adverse effect upon its financial performance and results of operations.

Competition

The mining industry is competitive in all of its phases.
Primero faces strong competition from other mining companies in connection with
the acquisition of properties producing, or capable of producing, precious and
base metals. Many of these companies have greater financial resources,
operational experience and technical capabilities than Primero. As a result of
this competition, Primero may be unable to maintain or acquire attractive mining
properties on terms it considers acceptable or at all. Consequently, Primeros
revenues, operations and financial condition could be materially adversely
affected.

Risks inherent in acquisitions

The Company is actively pursuing the acquisition of
exploration, development and production assets consistent with its acquisition
and growth strategy. From time to time, the Company may also acquire securities
of or other interests in companies with respect to which it may enter into
acquisitions or other transactions. Acquisition transactions involve inherent
risks, including but not limited to:

- accurately assessing the value, strengths, weaknesses, contingent and other
  liabilities and potential profitability of acquisition candidates;
- ability to achieve identified and anticipated operating and financial
  synergies;
- unanticipated costs;

53

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

- diversion of management attention from existing business;
- potential loss of the Companys key employees or key employees of any
  business acquired;
- unanticipated changes in business, industry or general economic conditions
  that affect the assumptions underlying the acquisition; and
- decline in the value of acquired properties, companies or securities.

Any one or more of these factors or other risks could cause the
Company not to realize the anticipated benefits of an acquisition of properties
or companies, and could have a material adverse effect on the Companys
financial condition.

Acquisition identification and integration
Risks

While the Company may seek acquisition opportunities consistent
with its growth strategy, there is no assurance that the Company will be able to
identify projects or companies that are suitable or that are available for sale
at reasonable prices or that it will be able to consummate any acquisition, or
integrate any acquired business into its operations successfully. Acquisitions
may involve a number of special risks, circumstances or legal liabilities. These
and other risks related to acquiring and operating acquired properties and
companies could have a material adverse effect on the Companys results of
operations and financial condition.

To acquire properties and companies, the Company may be
required to use available cash, incur debt, issue additional common shares of
the Company or other securities, or a combination of any one or more of these.
This could affect the Companys future flexibility and ability to raise capital,
to operate, explore and develop its properties and could dilute existing
shareholders and decrease the trading price of the common shares of the Company.
There is no assurance that when evaluating a possible acquisition, the Company
will correctly identify and manage the risks and costs inherent in the business
to be acquired. Restrictions on incurring additional indebtedness in the San
Dimas Silver Purchase Agreement may limit the ability of the Company to borrow
to finance acquisitions.

There may be no right for the Company shareholders to evaluate
the merits or risks of any future acquisition undertaken by the Company, except
as required by applicable laws and regulations.

Foreign operations risks

All of the Companys mining and mineral exploration operations
are conducted in Mexico and as such Primeros operations will be exposed to
various levels of political, economic and other risks and uncertainties. These
risks and uncertainties include, but are not limited to, terrorism; hostage
taking; military repression; expropriation; extreme fluctuations in currency
exchange rates; high rates of inflation; labour unrest; the risks of war or
civil unrest; renegotiation or nullification of existing concessions, licenses,
permits and contracts; illegal mining; changes in taxation policies;
restrictions on foreign exchange and repatriation; and changing political
conditions, currency controls and governmental regulations that favour or
require the awarding of contracts to local contractors or require foreign
contractors to employ citizens of, or purchase supplies from, a particular
jurisdiction.

54

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

Changes, if any, in mining or investment policies or shifts in
political attitude in Mexico may adversely affect Primeros operations or
profitability. Operations may be affected in varying degrees by government
regulations with respect to, but not limited to, restrictions on production,
price controls, export controls, currency remittance, income taxes,
expropriation of property, foreign investment, maintenance of claims,
environmental legislation, land use, land claims of local people, water use and
mine safety.

Failure to comply strictly with applicable laws, regulations
and local practices relating to mineral right applications and tenure, could
result in loss, reduction or expropriation of entitlements, or the imposition of
additional local or foreign parties as joint venture partners with carried or
other interests. The occurrence of these various factors and uncertainties
cannot be accurately predicted and could have an adverse effect on Primeros
operations or profitability.

Mining operations in Mexico

The San Dimas Mine is located, and the Companys mineral
exploration activities are conducted, in the States of Durango and Sinaloa,
Mexico. Mexico is a developing country and obtaining financing or finding or
hiring qualified people or obtaining all necessary services for the Companys
operations in Mexico may be difficult. Mexicos status as a developing country
may make it more difficult for the Company to attract investors or obtain any
required financing for its mining projects. The Company also hires some of its
employees or consultants in Mexico to assist it in conducting its operations in
accordance with Mexican laws and purchases certain supplies and retains the
services of various companies in Mexico to meet its business plans. It may be
difficult to find or hire qualified people in the mining industry who are
situated in Mexico or to obtain all the necessary services or expertise in
Mexico or to conduct operations on its projects at reasonable rates. If
qualified people and services or expertise cannot be obtained in Mexico, the
Company may need to seek and obtain those services from people located outside
Mexico, which will require work permits and compliance with applicable laws and
could result in delays and higher costs to the Company to conduct its operations
in Mexico.

Key personnel

The Companys ability to successfully operate the San Dimas
Mine and execute on its business strategy depends on its key executives and on
certain operating personnel in Canada and Mexico. The Companys ability to
manage administration, production, exploration and development activities and
acquisition strategies, and hence its success, will depend in large part on the
efforts of these individuals. The Company cannot be certain that it will be able
to retain such personnel or attract a high calibre of personnel in the future.
As such, the loss of any key officer of the Company could have an adverse impact
on the Company, its business and its financial position. The Company has not
purchased any key-man insurance with respect to any of its directors or
officers as of the date hereof. The Company faces intense competition for
qualified personnel, and the loss of the services of one or more of such key
personnel could have a material adverse effect on the Companys business or
operations.

Conflicts of interest

The directors and officers of the Company are directors and
officers of other companies, some of which are in the same business as the
Company. In particular, Mr. Nesmith and Mr. Luna are each directors of

55

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

Silver Wheaton with which the Company has entered into the San
Dimas Silver Purchase Agreement, and Mr. Hazelton and Mr. Jauristo are each
employees of Goldcorp Inc., which owns 36% of the Companys common shares and
holds the convertible and promissory notes. The directors and officers of the
Company are required by law to act in the best interests of the Company. They
have the same obligations to the other companies in respect of which they act as
directors and officers. Discharge by the directors and officers of their
obligations to the Company may result in a breach of their obligations to the
other companies and, in certain circumstances, this could expose the Company to
liability to those companies. Similarly, discharge by the directors and officers
of their obligations to the other companies could result in a breach of their
obligation to act in the best interests of the Company. Such conflicting legal
obligations may expose the Company to liability to others and impair its ability
to achieve its business objectives.

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

Internal controls over financial reporting

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

- pertain to the maintenance of records that accurately
and fairly reflect, in reasonable detail, the transactions and dispositions of
assets of the Company; - provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with IFRS and that the Companys receipts and expenditures are made
only in accordance with authorizations of management and the Companys
Directors; and

56

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

- 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 financial reporting changes that resulted from the
application of IFRS accounting policies which were implemented during the year
ended December 31, 2011 have not materially affected, or are not reasonably
likely to materially affect, the Companys internal control over financial
reporting.

As of December 31, 2011, an evaluation was carried out, under
the supervision of the CEO and CFO, of the design and operating effectiveness of
the Companys internal controls over financial reporting. Based on this
evaluation, the CEO and CFO concluded that the internal controls over financial
reporting are designed and were operating effectively as at December 31, 2011 to
provide reasonable assurance that the Companys financial reporting is reliable
and that the preparation of the Companys financial statements for external
purposes were prepared in accordance with IFRS.

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

Cautionary Statement on Forward-Looking Statement
Information

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

- the ability to be successful in its APA application with the intention of
  paying taxation on silver sales to Silver Wheaton Caymans at realized prices,
- the ability of the Company to expand production at the San Dimas Mine,
- the ability of the Company to identify appropriate acquisition
  opportunities, or if an opportunity is identified, to conclude a transaction
  on satisfactory terms,
- the actual results of exploration activities, including the ability of the
  Company to continue the historical conversion of resources to reserves at the
  San Dimas Mine,
- actual results of reclamation activities at the San Dimas Mine,
- the estimation or realization of Mineral Reserves and Resources,

57

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

- the timing and amount of estimated future production, capital expenditures
  and costs, including forecasted cash costs,
- the timing of the development of new mineral deposits,
- the Companys requirements for additional capital and ability to complete
  future financings,
- future prices of precious and base metals,
- expected ore grades, recovery rates, and throughput
- that plant, equipment or processes will operate as anticipated,
- accidents, labour disputes, road blocks and other risks of the mining
  industry,
- the ability of the Company to obtain governmental approvals or permits in
  connection with the continued operation and development of the San Dimas Mine,
- the ability of the Company to comply with environmental, safety and other
  regulatory requirements,
- 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

Such forward-looking information is necessarily based upon a
number of factors and assumptions that, while considered reasonable by the
Company as of the date of such statements, are inherently subject to significant
business, economic and competitive uncertainties and contingencies. The
assumptions made by the Company in preparing the forward looking information
contained in this MD&A, which may prove to be incorrect, include, but are
not limited to: the expectations and beliefs of management; the specific
assumptions set forth above in this MD&A; assumptions relating to the
existence of companies that may wish to dispose of producing or near-term
producing precious metals assets,; that there are no significant disruptions
affecting operations, whether due to labour disruptions, supply disruptions,
damage to or loss of equipment, whether as a result of natural occurrences
including flooding, political changes, title issues, intervention by local
landowners, loss of permits, or environmental concerns or otherwise; that there
are no disruptions in the supply of power from the Las Truchas power generation
facility, whether as a result of damage to the facility or unusually limited
amounts of precipitation; that development and expansion at San Dimas proceeds
on a basis consistent with current expectations and the Company does not change
its development and exploration plans; that the 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 Companys current
estimates of mineral reserves, mineral resources, exploration potential, mineral
grades and mineral recovery are accurate; that the Company identifies higher
grade veins in sufficient quantities of minable ore in the Central Block and
Sinaloa Graben; that the geology and vein structures in the Sinaloa Graben are
as expected; that the Company completes the Sinaloa Graben/Central Block tunnel;
that the ratio of gold to silver price is maintained in accordance with the
Companys expectations; and that there are no material variations in the current
tax and regulatory environment; that the Company will receive required permits
and access to surface rights; that the Company can access financing, appropriate
equipment and sufficient labour and that the political environment within Mexico
will continue to support the development of environmentally safe mining
projects.

58

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

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

Forward-looking information is subject to a variety of risks
and uncertainties which could cause actual events or results to differ from
those reflected in the forward-looking statements. Such risks include, but are
not limited to: the volatility of prices of gold and other metals; uncertainty
of mineral reserves, mineral resources, exploration potential, mineral grades
and mineral recovery estimates; uncertainty of future production, delays in
completion of the mill expansion, exploration and development plans;
insufficient capital to complete mill expansion, development and exploration
plans; currency fluctuations; financing of additional capital requirements; cost
of exploration and development programs; inability to complete the Sinaloa
Graben/Central Block tunnel or other development; mining risks, including
unexpected formations and cave-ins, which delay operations or prevent extraction
of material; risks associated with foreign operations; governmental and
environmental regulation; the volatility of the Company's stock price; landowner
dissatisfaction and disputes; delays in permitting; damage to equipment; labour
disruptions; interruptions. Should one or more of these risks and uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those described in forward-looking statements.

Investors are advised to carefully review and consider the risk
factors identified in this MD&A under the heading Risk Factors and
in the Companys short form prospectus dated July 9, 2010 under the heading
Risk Factors for a discussion of the factors that could cause the
Companys actual results, performance and achievements to be materially
different from any anticipated future results, performance or achievements
expressed or implied by the forward-looking statements. Investors are further
cautioned that the foregoing list of assumptions and risk factors is not
exhaustive and it is recommended that prospective investors consult the more
complete discussion of the Companys business, financial condition and prospects
that is included in this MD&A. The forward-looking information and
statements contained in this MD&A are made as of the date hereof and,
accordingly, are subject to change after such date.

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

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|PRIMERO MINING CORP.                            
|------------------------------------------------
|MANAGEMENTS DISCUSSION AND ANALYSIS            
|OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010  

Cautionary Note for United States Investors

As a British Columbia corporation and a reporting issuer
under Canadian securities laws, the Company is subject to certain rules and
regulations issued by Canadian Securities Administrators. The Company is
required to provide detailed information regarding its properties including
mineralization, drilling, sampling and analysis, on security of samples and
mineral reserve estimates under Canadian National Instrument 43-101 (NI
43-101). The United States Securities and Exchange Commission applies different
standards than the standards under NI 43-101 in order to classify mineralization
as a reserve. Accordingly, mineral reserve estimates contained in this MD&A
may not qualify as reserves under SEC standards. Further, the Company
describes any mineral resources associated with its properties utilizing
terminology such as inferred or indicated 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 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

|/s/ Joseph F. Conway        | 
|--------------------------- | 
|Joseph F. Conway            | 
|President, CEO and Director | 

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