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ANNUAL INFORMATION FORM

FOR THE YEAR-ENDED DECEMBER 31, 2011









MARCH 30, 2012





PRIMERO MINING CORP.Suite 1640, 505 Burrard
StreetVancouver, British Columbia, Canada V7X 1M6

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TABLE OF CONTENTS

|INTRODUCTORY NOTES                                                      | 1 
|----------------------------------------------------------------------- | --
|                                                                        |   
|CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS                    | 1 
|CURRENCY                                                                | 3 
|GOLD
      PRICES                                                       | 3 
|TECHNICAL INFORMATION                                                   | 3 
|CAUTIONARY NOTE TO UNITED STATES INVESTORS                              | 4 
|                                                                        |   
|CORPORATE
      STRUCTURE                                               | 6 
|                                                                        |   
|GENERAL DEVELOPMENT OF
      THE BUSINESS                               | 7 
|                                                                        |   
|INITIAL ORGANIZATION AND OPERATIONS                                     | 7 
|CURRENT OPERATIONS                                                      | 7 
|                                                                        |   
|ACQUISITION OF SAN DIMAS MINE                                           | 8 
|                                                                        |   
|BUSINESS OF PRIMERO                                                     | 9 
|                                                                        |   
|OVERVIEW                                                                | 9 
|PRODUCT SUMMARY                                                         | 10
|SAN DIMAS MINE                                                          | 11
|AMENDED AND RESTATED SILVER PURCHASE AGREEMENT                          | 12
|VENTANAS EXPLORATION
      PROPERTY                                     | 16
|COMPETITIVE CONDITIONS                                                  | 16
|CHANGES TO CONTRACTS                                                    | 16
|ENVIRONMENTAL PROTECTION                                                | 16
|EMPLOYEES                                                               | 17
|FOREIGN OPERATIONS                                                      | 17
|ENVIRONMENTAL,
      SOCIAL AND GOVERNANCE POLICIES                     | 17
|                                                                        |   
|SAN DIMAS MINE                                                          | 18
|                                                                        |   
|PROPERTY DESCRIPTION
      AND LOCATION                                 | 19
|ACCESS, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND
      PHYSIOGRAPHY | 21
|MINERAL
      CONCESSIONS, ROYALTIES AND PERMITS                        | 22
|ENVIRONMENTAL MATTERS                                                   | 22
|TAXES                                                                   | 23
|HISTORY                                                                 | 24
|GEOLOGICAL SETTING                                                      | 25
|EXPLORATION AND DRILLING (GENERAL)                                      | 28
|EXPLORATION AND
      DRILLING (2011/ EARLY 2012)                       | 29
|CONTEMPLATED EXPLORATION AND DEVELOPMENT ACTIVITIES                     | 30
|DEPOSITS AND
      MINERALIZATION                                       | 31
|SAMPLING, ASSAYING AND SECURITY                                         | 33
|MINERAL
      RESOURCE AND MINERAL RESERVE ESTIMATES                    | 34
|MINING OPERATIONS                                                       | 37

|LAS TRUCHAS HYDRO GENERATING POWER PLANT/ LINE                                                           | 38
|-------------------------------------------------------------------------------------------------------- | --
|TAYOLTITA TAILINGS                                                                                       | 38
|SAN
      ANTONIO TAILINGS                                                                               | 39
|ENVIRONMENTAL
      CAPITAL EXPENDITURES                                                                 | 39
|                                                                                                         |   
|RISK FACTORS                                                                                             | 40
|                                                                                                         |   
|DIVIDENDS                                                                                                | 50
|                                                                                                         |   
|CAPITAL STRUCTURE                                                                                        | 50
|                                                                                                         |   
|COMMON SHARES                                                                                            | 50
|PREFERRED SHARES                                                                                         | 50
|OPTIONS AND WARRANTS                                                                                     | 51
|PROMISSORY AND CONVERTIBLE PROMISSORY NOTES                                                              | 51
|                                                                                                         |   
|MARKET FOR
      SECURITIES                                                                              | 52
|                                                                                                         |   
|COMMON SHARES                                                                                            | 52
|COMMON SHARE
      WARRANTS                                                                              | 52
|PRIOR SALES                                                                                              | 53
|                                                                                                         |   
|ESCROWED SECURITIES
      AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTIONS ON
      TRANSFER           | 54
|                                                                                                         |   
|ESCROWED SECURITIES                                                                                      | 54
|CONTRACTUAL
      RESTRICTIONS ON TRANSFER                                                               | 54
|                                                                                                         |   
|DIRECTORS AND OFFICERS                                                                                   | 54
|                                                                                                         |   
|PRINCIPAL
      OCCUPATIONS AND OTHER INFORMATION ABOUT PRIMEROS DIRECTORS AND EXECUTIVE
      OFFICERS | 55
|CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS                                                 | 59
|CONFLICTS OF
      INTEREST                                                                              | 60
|                                                                                                         |   
|LEGAL PROCEEDINGS AND REGULATORY
      ACTIONS                                                           | 60
|                                                                                                         |   
|TRANSFER AGENT AND REGISTRAR                                                                             | 61
|                                                                                                         |   
|MATERIAL CONTRACTS                                                                                       | 61
|                                                                                                         |   
|INTERESTS OF EXPERTS                                                                                     | 61
|                                                                                                         |   
|ADDITIONAL INFORMATION                                                                                   | 62
|                                                                                                         |   
|ADDITIONAL INFORMATION                                                                                   | 62
|AUDIT COMMITTEE                                                                                          | 62

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INTRODUCTORY NOTES

Cautionary Note Regarding Forward Looking Statements

This annual information form (the Annual Information Form or AIF) contains
forward-looking information under the provisions of Canadian provincial
securities laws. When used in this AIF, words such as believe, intend,
may, will, should, plans, anticipates, believes, potential,
intends, expects, estimates, forecasts, likely, goal and similar
expressions are intended to identify such forward-looking statements.
Forward-looking statements reflect our current expectations and assumptions, and
are subject to a number of known and unknown risks, uncertainties and other
factors which may cause our actual results, performance or achievements to be
materially different from any anticipated future results, performance or
achievements expressed or implied by the forward-looking statements.

Forward-looking statements in this Annual Information Form include those that
relate to: the ability of the Company (as defined under Corporate Structure)
to expand production at the San Dimas Mine (as defined under Acquisition of San
Dimas Mine); the ability of the Company to successfully operate 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 expected results of exploration activities; the
recording of revenue under the Amended and Restated Silver Purchase Agreement
(as defined under Business of Primero  Amended and Restated Silver Purchase
Agreement) at the fixed price realization and the recording of taxes on this
basis; the identification of the potential taxes as a contingent liability and
retaining access to sufficient cash to satisfy such contingent liability;
increased delineation at the San Dimas Mine that will lead to better grade
control and the attainment of more consistent production targets in the future;
expected results of reclamation activities at the San Dimas Mine; the estimation
of Minerals Reserves (as defined under Introductory Notes  Technical
Information) and Mineral Resources (as defined under Introductory Notes 
Technical Information) and the realization of Mineral Reserve estimates
(including all assumptions); the ability to identify new Mineral Resources and
convert Mineral Resources into Mineral Reserves; the impact of new estimation
methodologies on mine and production planning; the timing and success of
exploration activities; the timing and the ability to expand the mill; the
timing and amount of estimated future production; the ability to generate cash
flows that exceed capital requirements; intentions to becoming an intermediate
gold producer; capital expenditures and costs, including forecasted cash costs;
the timing of the development of new mineral deposits; the sufficiency of future
cash flows; the Companys requirements for additional capital and ability to
complete future financings to raise additional capital for exploration,
development and operational activities and for acquisitions; projected gold and
silver production; expected ore grades, recovery rates and through-put; the
ability of the Company to comply with environmental, safety and other regulatory
requirements; expected or proposed development or construction activities,
including additional tunnels, plant expansion, tailings improvements and
hydro-electric improvements, and the expected costs thereof; expected
environmental capital expenditures; expectations regarding currency
fluctuations; the ability of the Company to achieve a favourable advance ruling
on its restructuring plan from Mexican tax authorities; the timing and results
of union contract negotiations; the resolution of title disputes relating to the
Companys properties; the timing and possible outcome of pending litigation;
future prices of precious and base metals; the ability of the Company to obtain
government approvals or permits in connection with the continued operation and
development of the San Dimas Mines.

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 AIF, which may
prove to be incorrect, include, but are not limited to: the specific assumptions
set forth in this AIF; the expectations and beliefs of management; 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 the San
Dimas Mine 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 or as set out in this AIF; that prices for gold and silver
remains 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 and is
consistent with estimates; that plant, equipment and processes will operate as
anticipated; that the Company identifies higher grade veins in sufficient
quantities of minable ore in the Central Block and Sinaloa Graben and is
consistent with estimations; that the Companys current estimates of Mineral
Reserves, Mineral Resources, mineral grades and mineral recovery are accurate;
that the geology and vein structures in the Sinaloa Graben are as expected; that
the Company completes the proposed tunnels and access routes; that the ratio of
gold to silver price is maintained in accordance with the Companys
expectations; that there are no material variations in the current tax and
regulatory environment or the tax positions taken by the Company; that the
Company will maintain access to surface rights; that the Company will be able to
obtain and maintain government approvals or permits in connection with the
continued operation and development of the San Dimas Mine; that the Company will
be able to repay its indebtedness under the Promissory Note and Convertible
Promissory Note (both as defined below); that the Company can access financing,
appropriate equipment and sufficient labour; and that the political environment
within Mexico will continue to support the development of environmentally safe
mining projects. No assurance can be given that these assumptions will prove to
be correct. These assumptions should be considered carefully by readers. Readers
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.

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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,
silver and other metals; the ratio between the market prices of gold and silver;
uncertainty of Mineral Reserves, Mineral Resources, Inferred Mineral Resources (as defined under Introductory Notes 
Technical Information), 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; inability to maintain or acquire
attractive mining properties on terms it considers acceptable or at
all; other risks inherent with
acquisitions; potentially unknown liabilities
associated with the acquisition of the San Dimas Assets (as
defined under Corporate Structure) and the shares of Silver Trading (as
defined under Corporate Structure);
delays in obtaining governmental approvals, permits or financing or in
the completion of development or construction activities; the Companys ability
to repay its indebtedness under the Promissory Note and Convertible Promissory
Noteand the Companys limited ability to incur
additional indebtedness; Mexican tax
authorities may not provide a favourable advance ruling supporting the Companys
restructuring plan; if the Company is required to
revert to paying taxes based on the market price of silver for all sales
under the Amended and Restated Silver Purchase Agreement to SW Caymans
(as defined under Acquisition of San Dimas Mine), the Company may be
required to pay higher taxes with higher silver prices, and the adverse tax
consequences to the Company may, depending onthe 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 the Company could be
forced to discontinue production and may lose
its interest in, or may be forced to sell, some of its
properties; the ability of the
Company to achieve projected gold and silver production and, gold and silver
grades; projected cash costs of production and capital expenditures may be
greater than anticipated; currency fluctuations; limitations on insurance
coverage; financing of additional capital requirements; commercial viability of
mineral deposits; cost of exploration and development programs; inability to
complete the proposed tunnels, access routes or other development, for whatever
reason;risks associated with having adequate
infrastructure, including unexpected
interruptions in power supply from the hydroelectric project; mining risks,
including unexpected formations and cave-ins, which delay operations or prevent
extraction of material; risks associated with competition in the mining
industry; risks associated with the ability
to retain key executives and certain operating personnel; risks
associated with conflicting legal obligations of directors and officers of
the Company who are directors and/or officers of other companies; risks
associated with foreign operations;
adverse changes to in labour relations legislation or in the relationship
between the Company with its employees and unions at the San Dimas Mine; title
disputes or claims; changes in governmental and environmental regulation that
result in increased costs; cost of environmental expenditures and potential
environmental liabilities; landowner dissatisfaction and disputes; failure of
plant, equipment or processes to operate as anticipated; accidents, labour
disputes and road blocks; and risks associated with the
Company having a significant shareholder. 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.

Readers are advised to carefully review and consider the risk factors identified
in this AIF 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. Readers 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 AIF. The forward-looking information and statements
contained in this AIF 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.

2

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Currency

Unless otherwise stated, references herein to $ are to the Canadian dollar.
References to US$ are to the United States dollar. The following table
reflects the low and high rates of exchange for one United States dollar,
expressed in Canadian dollars, during the periods noted, the rates of exchange
at the end of such periods and the average rates of exchange during such
periods, based on the Bank of Canada noon spot rate of exchange.

|                                      |   | Year ended December 31 | 
|------------------------------------- | - | ---------------------- | 
|                                      |   | 2011                   | 
|Low for the period                    | $ | 0.9449                 | 
|High for the period                   |   | 1.0604                 | 
|Rate at the end of the period         |   | 1.0170                 | 
|Average noon spot rate for the period |   | 0.9891                 | 

On March 29, 2012, the Bank of Canada noon spot rate of exchange was US$1.00
   $0.9999.

Gold Prices

The high, low, average and closing afternoon fixing gold prices in United States
  dollars per troy ounce for each of the three years in the period ended December
  31, 2011, as quoted by the London Bullion Market Association, were as follows:

|                          |  | Year ended December 31 | 
|------------------------- |  | ---------------------- | 
|                          |  | 2011                   | 
|Low for the period        |  | US$1319                | 
|High for the period       |  | 1,895                  | 
|Average for of the period |  | 1,571                  | 
|Closing for the period    |  | 1,531                  | 

|(1) | Primero (as defined under Corporate Structure) acquired
      the San Dimas Mine on August 6, 2010. Before that date, Primero had no
      mining operations.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

On March 29, 2012, the closing afternoon fixing gold price in United States
dollars per troy ounce, as quoted by the London Bullion Market Association, was
US$1,657.50.

Technical Information

The estimated Mineral Reserves and Mineral Resources for the San Dimas Mine have
been prepared in accordance with the Canadian Institute of Mining, Metallurgy
and Petroleum (CIM)  Definitions adopted by CIM Council on December 11, 2005
(the CIM Standards) which were adopted by the Canadian Securities
Administrators National Instrument 43-101 Standards of Disclosure for
Mineral Projects(NI 43-101). The following definitions are reproduced
from the CIM Standards:

The term Preliminary Feasibility Study means a comprehensive study of
the viability of a mineral project that has advanced to a stage where the mining
method, in the case of underground mining, or the pit configuration, in the case
of an open pit, has been established and an effective method of mineral
processing has been determined, and includes a financial analysis based on
reasonable assumptions of technical, engineering, legal, operating, economic,
social, and environmental factors and the evaluation of other relevant factors
which are sufficient for a Qualified Person, acting reasonably, to determine if
all or part of the Mineral Resource may be classified as a Mineral Reserve.

The term Mineral Resourcemeans a concentration or occurrence of
diamonds, natural solid inorganic material, or natural solid fossilized organic
material including base and precious metals, coal, and industrial minerals in or
on the Earths crust in such form and quantity and of such a grade or quality
that it has reasonable prospects for economic extraction. The location, quantity, grade, geological
characteristics and continuity of a Mineral Resource are known, estimated or
interpreted from specific geological evidence and knowledge. Mineral Resources
are subdivided, in order of increasing geological confidence, into Inferred,
Indicated and Measured categories.

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The term Inferred Mineral Resourcemeans that part of a Mineral
Resource for which quantity and grade or quality can be estimated on the basis
of geological evidence and limited sampling and reasonably assumed, but not
verified, geological and grade continuity. The estimate is based on limited
information and sampling gathered through appropriate techniques from locations
such as outcrops, trenches, pits, workings and drill holes.

The term Indicated Mineral Resourcemeans that part of a Mineral
Resource for which quantity, grade or quality, densities, shape and physical
characteristics, can be estimated with a level of confidence sufficient to allow
the appropriate application of technical and economic parameters, to support
mine planning and evaluation of the economic viability of the deposit. The
estimate is based on detailed and reliable exploration and testing information
gathered through appropriate techniques from locations such as outcrops,
trenches, pits, workings and drill holes that are spaced closely enough for
geological and grade continuity to be reasonably assumed.

The term Measured Mineral Resourcemeans that part of a
Mineral Resource for which quantity, grade or quality, densities, shape,
physical characteristics are so well established that they can be estimated with
confidence sufficient to allow the appropriate application of technical and
economic parameters, to support production planning and evaluation of the
economic viability of the deposit. The estimate is based on detailed and
reliable exploration, sampling and testing information gathered through
appropriate techniques from locations such as outcrops, trenches, pits, workings
and drill holes that are spaced closely enough to confirm both geological and
grade continuity.

The term Mineral Reservemeans the economically mineable
part of a Measured or Indicated Mineral Resource demonstrated by at least a
Preliminary Feasibility Study. This study must include adequate information on
mining, processing, metallurgical, economic and other relevant factors that
demonstrate, at the time of reporting, that economic extraction can be
justified. A Mineral Reserve includes diluting materials and allowances for
losses that may occur when the material is mined.

The term Probable Mineral Reservemeans the economically
mineable part of an Indicated Mineral Resource and, in some circumstances, a
Measured Mineral Resource demonstrated by at least a Preliminary Feasibility
Study. This study must include adequate information on mining, processing,
metallurgical, economic and other relevant factors that demonstrate, at the time
of reporting, that economic extraction can be justified.

The term Proven Mineral Reservemeans the economically
  mineable part of a Measured Mineral Resource demonstrated by at least a Preliminary
  Feasibility Study. This study must include adequate information on mining, processing,
  metallurgical, economic and other relevant factors that demonstrate, at the
  time of reporting, that economic extraction is justified.

Cautionary Note to United States Investors

The disclosure in this Annual Information Form uses terms that comply with
reporting standards in Canada and certain estimates are made in accordance with
NI 43-101. NI 43-101 is a rule developed by the Canadian Securities
Administrators that establishes standards for all public disclosure an issuer
makes of scientific and technical information concerning mineral projects.
Unless otherwise indicated, all reserve and resource estimates contained in or
incorporated by reference in this Annual Information Form have been prepared in
accordance with NI 43-101. These standards differ significantly from the
requirements of the United States Securities and Exchange Commission (the
SEC), and reserve and resource information contained herein and incorporated
by reference herein may not be comparable to similar information disclosed by
U.S. companies.

This Annual Information Form includes estimates of Mineral Reserves that have
been calculated in accordance with NI 43-101, as required by Canadian securities
regulatory authorities. For United States reporting purposes, SEC Industry Guide
7 (under the United States Securities Exchange Act of 1934, as amended), as
interpreted by Staff of the SEC, applies different standards in order to
classify mineralization as a reserve. As a result, the definitions of Proven and Probable Mineral Reserves
used in NI 43-101 differ from the definitions in the SEC Industry Guide 7. Under
SEC standards, mineralization may not be classified as a reserve unless the
determination has been made that the mineralization could be economically and
legally produced or extracted at the time the reserve determination is made.
Among other things, all necessary permits would be required to be in hand or
issued imminently in order to classify mineralized material as reserves under
the SEC standards. Accordingly, Mineral Reserve estimates contained in this
Annual Information Form may not qualify as reserves under SEC standards.

4

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In addition, this Annual Information Form uses the terms Indicated Mineral
Resources and Inferred Mineral Resources to comply with the reporting
standards in Canada. We advise United States investors that while those terms
are recognized and required by Canadian regulations, the SEC does not recognize
them. United States investors are cautioned not to assume that any part or all
of the mineral deposits in these categories will ever be converted into Mineral
Reserves. Indicated Mineral Resources and Inferred Mineral Resources have a
great amount of uncertainty as to their existence, and great uncertainty as to
their economic and legal feasibility.

Further, Inferred Mineral Resources have a great amount of uncertainty as to
their existence and as to whether they can be mined legally or economically.
Therefore, United States investors are also cautioned not to assume that all or
any part of the inferred resources exist. In accordance with Canadian
securities laws, estimates of Inferred Mineral Resources cannot form the basis
of feasibility or other economic studies, other than in certain limited
circumstances.

It cannot be assumed that all or any part of Indicated Mineral Resources or
Inferred Mineral Resources will ever be upgraded to a higher category.
Investors are cautioned not to assume that any part of the reported Indicated
Mineral Resources, or Inferred Mineral Resources in this Annual Information
Form is economically or legally mineable.

NI
43-101 also permits the inclusion of disclosure regarding the potential quantity
and grade, expressed as ranges, of a target for further exploration provided
that the disclosure (i) states with equal prominence that the potential quantity
and grade is conceptual in nature, that there has been insufficient exploration
to define a mineral resource and that it is uncertain if further exploration
will result in the target being delineated as a mineral resource, and (ii)
states the basis on which the disclosed potential quantity and grade has been
determined. Disclosure regarding exploration potential has been included in this
Annual Information Form. United States investors are cautioned that disclosure
of such exploration potential is conceptual in nature by definition and there is
no assurance that exploration of the mineral potential identified will result in
any category of NI 43-101 Mineral Resources being identified.

In addition, disclosure of resources using contained ounces is permitted under
Canadian regulations; however, the SEC only permits issuers to report
mineralization that does not qualify as a reserve as in place tonnage and grade
without reference to unit measures.

For the above reasons, information contained in this Annual Information Form may
not be comparable to similar information made public by U.S. companies subject
to the reporting and disclosure requirements under the United States federal
securities laws and the rules and regulations thereunder.

5

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CORPORATE STRUCTURE

Primero Mining Corp. is incorporated under the British Columbia Business
Corporations Act (the Act). On August 6, 2010, Primero acquired the San
Dimas Mine, mill and related assets (the San Dimas Assets) from Desarrollos
Mineros San Luis, S.A. de C.V. (DMSL) and the shares of Silver Trading
(Barbados) Ltd. (Silver Trading) from Goldcorp Silver (Barbados) Ltd.
(GSBL), each indirect, wholly-owned subsidiaries of Goldcorp Inc.
(Goldcorp). See Acquisition of San Dimas Mine.

In this Annual Information Form, the terms Company or Primero refer to
Primero Mining Corp. and all its subsidiaries together unless the context
otherwise clearly requires. Certain terms used herein are defined in the
disclosure to which the term relates.

Primero has three active, wholly-owned subsidiaries  Primero Empresa Minera,
  S.A. de C.V. (Primero Empresa), which is incorporated under the
  laws of Mexico, Silver Trading, which is incorporated under the laws of Barbados,
  and Primero Mining Luxembourg s.à r.l., which is incorporated under the
  laws of Luxembourg. The following chart shows the organization of Primero and
  the ownership of its principal properties. Primero Empresa has two directly
  wholly-owned service companies  Primero Compañía Minera, S.A.
  de C.V. and Primero Servicios Mineros, S.A. de C.V.  and one indirectly
  wholly-owned service company: Primero Auxiliares de Administración, S.A.
  de C.V.



|(1) | Eduardo Luna, a director of the Company and a Mexican
      resident, holds one share to meet Mexican corporate legal
    requirements.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------
|(2) | Primero Mining Luxembourg s.à r.l. is a holding company
      used by the Company to finance its operations.                           
|(3) | Primero Empresa Minera, S.A. de C.V. is the operator of
      the San Dimas Mine.                                                      
|(4) | Silver Trading (Barbados) Ltd. is a trading and holding
      company.                                                                 
|(5) | Primero Compañía Minera, S.A. de C.V. is a service
      company.                                                                      
|(6) | Primero Servicios Mineros, S.A. de C.V. is a service
      company.                                                                    
|(7) | Primero Auxiliares de Administración, S.A. de C.V. is a
      service company.                                                         

6

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The head office of Primero is located at Suite 1640, 505 Burrard Street,
Vancouver, British Columbia, Canada, V7X 1M6, telephone (604) 669-0040,
facsimile (604) 669-0014. Primero also has a corporate office located at Suite
1202, 120 Adelaide Street West, Toronto, Ontario, Canada, M5H 1T1, telephone
(416) 814-3160, facsimile (416) 814-3170. The Companys registered office is
located at Suite 1500, 1055 West Georgia Street, Vancouver, British Columbia,
Canada, V6E 4N7, telephone (604) 689-9111, facsimile (604) 685-7084. The
Companys website address is www.primeromining.com.

GENERAL DEVELOPMENT OF THE BUSINESS

Over the last three years, Primero has transformed itself from a capital pool
corporation listed on the TSX Venture Exchange (the TSXV) to a gold and silver
producer listed on the Toronto Stock Exchange (the TSX) and, since August 15,
2011, the New York Stock Exchange (NYSE). Effective June 24, 2011, Primero was
added to the Russell Global Index and effective September 16, 2011, Primero was
added to the S&P/TSX SmallCap Index.

Initial Organization and Operations

The Company was incorporated as Apoka Capital Corporation in November, 2007.
In July 2008, the Company was listed on the TSXV as a Capital Pool Company
under the symbol ACK.P.

In October 2008, the Company completed its qualifying transaction under the
TSXVs Capital Pool Company policy (the Qualifying Transaction) by acquiring
privately-owned Mala Noche Resources Corp. (Mala Noche). The Qualifying
Transaction was a reverse takeover under Canadian GAAP and the policies of the
TSXV whereby the Company acquired all of the outstanding securities of Mala
Noche in exchange for common shares of the Company (Common Shares) and options
to purchase Common Shares.

Concurrent with the completion of the Qualifying Transaction, the Company, as
the resulting issuer, changed its name to Mala Noche Resources Corp. In
October 2008, the Company commenced trading on the TSXV as a Tier 2 Mining
Issuer under the symbol MLA.

At the time of the Qualifying Transaction, Mala Noche held an option to acquire
  the Ventanas property. The Company last drilled on the Ventanas property in
  2008 and since then the property has been on care and maintenance. After placing
  the Ventanas property into care and maintenance, the Company focused its efforts
  to pursue an acquisition of a producing property. See Business of Primero
   Ventanas Exploration Property.

Current Operations

On August 6, 2010, the Company completed the acquisition of the San Dimas Mine
and related assets. See Acquisition of San Dimas Mine, Business of Primero
and San Dimas Mine.

On July 12, 2011, the Company entered into a definitive arrangement agreement
(the Arrangement Agreement) to combine its business with Northgate Minerals
Corporation (Northgate). On August 29, 2011, the Arrangement Agreement was
terminated as Northgate had received a proposal from another company. As a
result and as provided for in the Arrangement Agreement, Northgate paid the
Company a termination fee of $25 million.

The Company has implemented a number of initiatives at San Dimas to increase
production, reduce costs and expand Mineral Reserves and Mineral Resources.

Initiatives designed to increase production include ensuring that daily
throughput is at capacity (currently 2,100 tonnes per day), improving
productivity per man shift, controlling mining dilution, accelerating mine
development to increase the number of working faces, completing strategic tunnel
connections and enhancing mine planning. 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.

7

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Productivity improvements and completing strategic tunnels will also help to
reduce costs. Cash production costs are expected to be $630 to $660 per gold
equivalent ounce in 2012, similar to actual costs in 2011 despite the increase
in planned throughput.

In early 2012, prompted by a lack of predictability between mine production and
the historical Mineral Reserve and Mineral Resource model, the Company completed
a review of the Mineral Reserve and Mineral Resource estimation methodology used
at San Dimas. As a result of this review, the Company changed its estimation
methodology from a polygonal to a geostatistical approach, reducing the
estimated Mineral Reserves and Mineral Resources and reclassifying a substantial
portion of Inferred Mineral Resources to exploration potential. The Company has
planned an extensive exploration program in 2012 in order to increase the
Mineral Reserves and Mineral Resources at San Dimas. Exploration target
selection and prioritization for 2012 focuses on the mineralized veins that
occur in the prolific central corridor of the district. This south-west to
north-east trending corridor contains the Roberta and Robertita veins, both
systems being noted for their thickness, high-grade and lateral extensions. A
primary objective of 2012 is to examine the potential north-east and south-west
extensions of the Roberta and Robertita vein systems. Capital expenditures in
2012 are planned to remain steady with 2011, with underground development and
exploration drilling accounting for around 70% of the expected $30 million
expenditure. This includes 65,000 metres of diamond drilling, consisting of
35,000 metres of delineation drilling and 30,000 metres of exploration drilling
and 5,000 metres of infrastructure drifting plus 3,000 metres of exploration
drifting.

ACQUISITION OF SAN DIMAS MINE

On August 6, 2010, Primero completed the acquisition (the Acquisition) of the
San Dimas gold-silver mining operations (the San Dimas Mine) from DMSL and the
shares of Silver Trading from GSBL. Each of DMSL and GSBL is an indirect,
wholly-owned subsidiary of Goldcorp. The Acquisition was completed pursuant to
the terms of an Asset Purchase Agreement (the Asset Purchase Agreement) and a
Share Purchase Agreement (the Share Purchase Agreement), each dated July 29,
2010. As part of the Acquisition, Primero also acquired the mill at San Dimas,
all facilities and equipment attached and related to the San Dimas Mine, a plane
and helicopter used to support the San Dimas operations, a hydroelectric
generation project that provides power to the San Dimas Mine and the Ventanas
exploration properties on which the Company held an option.

Primero purchased the San Dimas Mine and related assets for an aggregate
purchase price of US$489 million (the Purchase Price) and assumed all
liabilities associated with the San Dimas Mine, including environmental and
labour liabilities. The San Dimas Mine was acquired on an as is, where is
basis. The Purchase Price was paid as to (a) US$220 million in cash, (b) the
issuance and delivery of 31,151,200 Common Shares with a value of US$159
million, (c) the issuance of the US$50 million Promissory Note and (d) the
issuance of the US$60 million Convertible Promissory Note (of which US$30
million was repaid on October 19, 2011).

To fund the cash portion of the purchase price for the Acquisition, on July 20,
2010 the Company completed an offering of 50,000,000 subscription receipts at an
offering price of $6.00 per subscription receipt for gross proceeds of $300
million. Immediately before the completion of the Acquisition, the Company
consolidated its Common Shares on the basis of one new Common Share for every 20
pre-consolidation Common Shares. On the closing of the Acquisition, each
subscription receipt was automatically converted into one post-consolidation
Common Share of the Company and 0.4 of one common share purchase warrant. Each
whole warrant entitles the holder to purchase one additional post-consolidation
common share at a price of $8.00 per share until July 20, 2015.

Concurrent with the completion of the Acquisition, DMSL entered into a
transition services agreement dated August 6, 2010 with the Company and its
subsidiary, Primero Empresa (the Transition Services Agreement). As certain
matters related to the sale of the San Dimas Mine could not be completed by the
closing time of the acquisition, the Transition Services Agreement provided for
the orderly transfer of the operations of the San Dimas Mine to Primero Empresa.
A majority of these transition issues have now been resolved. The only
significant outstanding matter is obtaining a permit to operate aircraft used to
supply the mine and the registration of surface land rights. Primero is
currently operating its aircraft through a licensed carrier owned by DMSL.

8

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Before the Acquisition, an amount of refined silver equal to all silver produced
  from the San Dimas Mine was sold to Silver Wheaton (Caymans) Ltd. (SW
  Caymans), a subsidiary of Silver Wheaton Corp. (Silver Wheaton),
  under a restated silver purchase agreement dated March 30, 2006 entered into
  with Silver Trading (the Restated Silver Purchase Agreement). SW
  Caymans made upfront payments comprised of cash and shares of Silver Wheaton
  as consideration for its rights to purchase silver under this agreement at fixed
  prices. Concurrent with the closing of the Acquisition, Silver Trading was acquired
  by the Company and the Restated Silver Purchase Agreement was amended and restated
  effective August 6, 2010 (the Amended and Restated Silver Purchase Agreement).
  The August 6, 2010 amendments included the introduction of an annual threshold
  for silver deliveries to SW Caymans. For the first four years after the Acquisition,
  the first 3.5 million ounces of an amount of refined silver equal to all silver
  produced at the San Dimas Mine plus 50% of the excess are required to be sold
  to SW Caymans. After the fourth year, for the life of the mine, the first 6
  million ounces of an amount of refined silver equal to all silver produced at
  the San Dimas Mine plus 50% of the excess are required to be sold to SW Caymans.
  Any silver not required to be sold to SW Caymans is available to be sold by
  the Company at market prices. The Amended and Restated Silver Purchase Agreement
  now governs all purchases of silver produced from the San Dimas Mine by SW Caymans.

Under the Asset Purchase Agreement, the Company has agreed that it will not,
directly or indirectly, acquire any interests or other rights to mineral
properties, royalty interests, surface rights or water rights within specified
areas (the Goldcorp Area of Interest) until after August 6, 2013. The Goldcorp
Area of Interest will extend 20 kilometres from the external boundary of each
mineral property in Mexico owned by Goldcorp and its affiliates.

On the closing of the Acquisition, the Company entered into an agreement with
DMSL that grants to DMSL certain pre-emptive share purchase rights and the right
to nominate directors of the Company (the Participation Agreement). Provided
DMSL and its affiliates (which include Goldcorp) continue to beneficially own at
least 10% of the issued and outstanding Common Shares, DMSL will have the right
to

- maintain their aggregate percentage of issued Common Shares following
  completion of the Acquisition, and
- designate, after consultation with the Company, a number of individuals
  (the DMSL Director Nominees) to be initially appointed and to serve as
  directors of the Company and thereafter to be nominated at each meeting of
  shareholders at which directors are to be elected.

The number of DMSL Director Nominees will be determined from time to time by
multiplying (a) the percentage of the issued and outstanding Common Shares held
beneficially by DMSL and its affiliates (excluding shares issuable on the
exercise of any outstanding warrants held by DMSL and its affiliates), by (b)
the number of directors constituting the board of directors of the Company (the
Board) at such time, with the product rounded down to the closest whole number
of directors. Currently, there are two DMSL Director Nominees on the Board  Mr.
Timo Jauristo and Mr. Rohan Hazelton, the Executive Vice President, Corporate
Development and Vice President, Finance, respectively, of Goldcorp. This
pre-emptive purchase right will not, however, apply to Common Shares issued by
the Company under any of its share incentive plans. See Risk Factors 
Significant Shareholder.

A Form 51-102F4 Business Acquisition Report in respect of the Acquisition,
  and copies of the Asset Purchase Agreement, Share Purchase Agreement and Amended
  and Restated Silver Purchase Agreement have been filed on www.sedar.com.

BUSINESS OF PRIMERO

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, located in Mexicos San Dimas district, on the border
  of Durango and Sinaloa states, and one exploration property, Ventanas, located
in Durango state, Mexico.

9

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The Company intends to transition from being a single-asset gold producer to
  become an intermediate gold producer. The San Dimas Mine is an established property
  with a long operating history and a record of Mineral Reserve replacement, Mineral
  Resource conversion and exploration success. The Company plans to achieve its
  goal of being an intermediate gold producer, with a target of 375,000 ounces
  of annual gold production within the next two years, by increasing production
  at the San Dimas Mine and by considering and, if appropriate, making further
  acquisitions of precious metal properties in Latin America.

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. The Company expects to produce between 100,000
and 110,000 ounces (gold equivalent) in 2012, based on higher throughput at
lower grades. Underground development in 2012 will be focused in the main mining
(Central Block) and exploration (Sinaloa Graben) blocks. In 2012 the majority of
the ore is anticipated to come from the Central Block with approximately 20%
from the higher-grade Sinaloa Graben. 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 begin early in 2012
to determine the optimal mill size given the Mineral Reserve and Mineral
Resource grade and the level of planned development.

The Company believes that it can continue to expand Mineral Reserves capacity by
focussing new drilling programs on areas of good exploration potential 
principally the prolific central corridor of the district. This southwest to
north-east trending corridor contains the Roberta and Robertita veins, both
systems being noted for their thickness, high-grade and lateral extensions. A
primary objective of 2012 is to examine the potential north-east and south-west
extensions of the Roberta and Robertita vein systems, particularly in the
Sinaloa Graben. Previous workings at the San Fernando area of the mine to the
north-east and the West Block to south-west were also noted for above average
grade and thickness. See San Dimas Mine  Exploration and Drilling (2011 /
Early 2012) and San Dimas Mine  Contemplated Exploration and Development
Activities. Cash flow from the San Dimas Mine is expected to provide the
Company with an internal source of capital to fund mine development and
exploration projects. The Company estimates that gold production at San Dimas
can average 130,000 ounces (175,000 gold equivalent ounces) annually over the
next five years.

Product Summary

The Companys principal products are gold and silver. There are worldwide gold
and silver markets into which the Company can sell. The Company is not dependent
on a particular purchaser with regard to the sale of gold, but a significant
portion of its silver is sold to SW Caymans under the Amended and Restated
Silver Purchase Agreement. See Business of Primero  Amended and Restated
Silver Purchase Agreement. The following table sets out the Companys revenue
by product for each of the last two financial years (before August 6, 2010, the
Company had no mining operations):

|       |  | Financial year ended | 
|------ |  | -------------------- | 
|       |  | December 31          | 
|       |  | 2011                 | 
|       |  | US$                  | 
|Gold   |  | 120,957,000          | 
|Silver |  | 35,585,000           | 
|Total  |  | 156,542,000          | 

|(1) | Before August 6, 2010, the Company had no mining
      operations.                                                                                      
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Substantially all silver is sold at a below market, fixed
      price. See Business of Primero  Amended and Restated Silver Purchase
      Agreement.

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San Dimas Mine

The San Dimas Mine consists of three underground gold and silver mining
operations at Tayoltita, San Antonio (Central Block) and Santa Rita. In 2011,
the San Dimas Mine produced 79,564 ounces of gold and 4.6 million ounces of
silver. The San Dimas Mine is located approximately 125 kilometres northeast of
Mazatlan, Sinaloa or approximately 150 kilometres west of the city of Durango in
the state of Durango, Mexico. The Santa Rita mine is located approximately three
kilometres upstream from the Tayoltita mine while the San Antonio mine is seven
kilometres west of Tayoltita.

The typical mining operations employed are mechanized cut-and-fill mining with
primary access provided by adits and internal ramps from an extensive tunnel
system through the steep mountainous terrain. All milling operations are now
carried out at a central milling facility at Tayoltita that processes the
production from the three active mining areas in San Dimas. The ore processing
is by conventional cyanidation followed by zinc precipitation of the gold and
silver followed by refining to doré. The mill currently has an installed
capacity of 2,100 tonnes per day. In 2011, the mill averaged 1,950 tonnes per
day (based on 340 days of production).

Recent Operating History for the San Dimas Mine

During the year ended December 31, 2011, San Dimas produced 102,224 gold
equivalent ounces (comprised of 79,564 ounces of gold and 4.6 million ounces of
silver), 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. 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.

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.

Significant portions of the remediation plan for up-grading the Tayoltita
tailings dam to international standards were completed in 2007 and work has
continued on improving this dam, with the most important work being the
construction in 2009 of two basins in the back of the dam and the completion in
2011 of a third tailings filter, which significantly increases the efficiency of
the tailings filtering process.

Exploration and Development Plans for the San Dimas Mine

In 2012, Primero expects to produce between 100,000 and 110,000 gold equivalent
ounces, which is in-line with 2011 production, based on higher throughput at
lower grades. Capital expenditures in 2012 are planned to remain steady compared
with 2011, with underground development and exploration drilling accounting for
around 70% of the expected US$30 million expenditure. This will include 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 US$5.8 million
plus capital projects of US$4.1 million. As a result of the Company undertaking
a review of its Mineral Reserve and Mineral Resource estimation methods, the
decision to expand the milling facility to 2,500 or 3,000 tonnes per day is
expected to be made later in 2012. See San Dimas Mine  Mineral Resource and
Mineral Reserve Estimates.

The underground development in 2012 will be focused in the main mining (Central
Block) and exploration (Sinaloa Graben) blocks. In 2012, the majority of the ore
is expected to come from the Central Block, with approximately 20% from the higher-grade Sinaloa Graben block.
Exploration target selection and prioritization for 2012 focuses on the
mineralized veins that occur in the prolific central corridor of the district.
This south-west to north-east trending corridor contains the Roberta and
Robertita veins, both systems being noted for their thickness, high-grade and
lateral extensions. A primary objective of 2012 is to examine the potential
north-east and south-west extensions of the Roberta and Robertita vein systems.

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Environmental Matters for the San Dimas Mine

On January 3, 2012, tailings containing 5 ppm cyanide was spilled into the
Piaxtla River, impacting a total area of 2.5 kilometres. The spillage was the
result of a hole that developed in a tailings pipe. The Company notified Mexican
governmental authorities of the accident. The Mexican federal attorney for
environmental protection, Procuraduría Federal de Protección al Ambiente
(PROFEPA), and the Mexican national water commission, Comisión National del
Aqua (CNA), visited the site in January 2012. The Company understands that
both the PROFEPA and the CNA considered the spillage to be localized. On January
5, 2012, the municipality of San Dimas, Durango, Mexico confirmed in a letter to
the Company that they considered the incident as localized and under control.
The letter specifies that the efficiency of the emergency response limited the
damages to death of small concentrations of fish, without any impact on animals.
Following the spill, the Company has taken a number of corrective actions
including building a temporary containment structure for the tailings pipe
(design specifications for a permanent solution are under consideration) and
conducting a preliminary assessment to confirm that there is no residual impact
to Piaxtla River aquatic life (an external expert will conduct a further
assessment during the second quarter of 2012). The CNA will remit the final
report and impose fines, if any, against the Company following their receipt of
PROFEPAs final report and recommendations. See Risk Factors  San Dimas
Tailings Management Risks.

Amended and Restated Silver Purchase Agreement

As part of the Acquisition, Primero assumed, with amendments, the Amended and
Restated Silver Purchase Agreement. The Amended and Restated Silver Purchase
Agreement governs purchases of silver produced from the San Dimas Mine by SW
Caymans. After meeting its contractual obligations to SW Caymans, Primero is
free to sell all other produced silver at market prices. The following is a
summary of the material terms of the Amended and Restated Silver Purchase
Agreement:

|• | the term of the Amended and Restated Silver Purchase
      Agreement will be for the life of the San Dimas Mine, with an initial term
      expiring October 15, 2029 (the Initial Term) with automatic renewals for
      additional terms of ten years each, subject to SW Caymans right to
      terminate;
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                  
|• | Silver Trading will sell annually (a Contract Year) to
      SW Caymans an amount of refined silver (Refined Silver) determined as
      follows:                                                                                                                                                            
|  |                                                                                                                                                                                                                                                                                                                  
|  | o                                                                                                                                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                  
|  | o                                                                                                                                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                  
|• | the purchase price for the Refined Silver will be equal
      to the lesser of (a) a fixed price of US$4.04 plus an increase of one
      percent annually (US$4.20 commencing in August 2014 plus an annual one
      percent increase) and (b) the market price of Refined Silver at the time
      of sale;   

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|• | if, by October 15, 2031, 215 million ounces of Refined Silver (the
  Minimum Silver Amount) have not been sold and delivered to SW Caymans by
  Silver Trading under the Amended and Restated Silver Purchase Agreement
  (including amounts produced under predecessor agreements equal to
  approximately 37.25 million ounces as at April 30, 2010), then Silver Trading
  will be obligated to pay to SW Caymans an amount (the Minimum Silver
  Payment) equal to:
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

multiplied by

| | o | US$0.50 per ounce;
| | - | ------------------

- until the third anniversary of the Acquisition and the satisfaction of certain
    financial covenants, the Company and its affiliates are prohibited from incurring
    financial indebtedness in excess of US$50 million, excluding the Promissory
    Note and Convertible Promissory Note, issued to DMSL in partial payment of
    the Purchase Price, without the prior written consent of SW Caymans, such
    consent not to be unreasonably withheld, provided that such consent is not
    required after the third anniversary of the completion of the Acquisition
    for any additional proposed financial indebtedness in excess of US$50 million
    in the event that: o
        the Promissory Note has been repaid in full, or provision
      for such payment has been made on terms satisfactory to SW Caymans; ando
        the Company will be in compliance with certain financial
      ratios relating to consolidated indebtedness to total capitalization, debt
      service coverage, and leverage related to net indebtedness after incurring
      the proposed financial indebtedness;

- the Company and Silver Trading will cause all silver produced by Primero
  Empresa to be sold, on standard commercial terms, to a third party, or
  offtaker, that purchases or takes delivery of the silver for the purpose of
  smelting, refining or other beneficiation of the silver for the benefit of
  Primero Empresa and its affiliates;
- the Company and Silver Trading will cause Primero Empresa to operate the
  San Dimas Mine in a commercially prudent manner and in accordance with good
  mining, processing, engineering and environmental practices prevailing in the
  mining industry, and in particular all short and long term mine planning,
  processing decisions and production decisions must include silver prices
  typical of normal industry practice and be made on the basis that Primero
  Empresa is receiving all of the silver production;
- the Company and Silver Trading will cause Primero Empresa not to abandon
  any of the mineral properties that constitute the San Dimas Mine, allow or
  permit any of them to lapse or cease conducting mining operations or
  activities on them, unless reasonable evidence can be provided to SW Caymans
  showing that it is not economical to mine minerals from the mineral properties
  that Primero Empresa proposes to abandon or let lapse;
- the Company has granted a right of first refusal to SW Caymans to meet any
  offer of a third party to enter into an agreement similar (in structure or
  economic impact) to the Amended and Restated Silver Purchase Agreement with respect to any metal produced from any other mining properties
  or projects owned by the Company or any of its affiliates or in which any of
  them have a right, title or interest; and

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- the mineral properties that form the San Dimas Mine may not be sold without
    the consent of SW Caymans, such consent not to be unreasonably withheld.

Silver Trading is currently entitled to purchase from Primero Empresa silver
produced from the San Dimas Mine under a silver purchase agreement that provides
that

- Primero Empresa will sell to Silver Trading an amount of Refined Silver
  equal to the amount of Refined Silver to be sold by Silver Trading to SW
  Caymans under the Silver Purchase Agreement; and
- Silver Trading will pay to Primero Empresa a price for all Refined Silver
  equal to the lesser of approximately US$4 per ounce (adjusted for inflation)
  and the prevailing market price of Refined Silver at the time of sale.

See Risk Factors  Silver Contract and Taxes, Risk Factors  Indebtedness,
Risk Factors  Acquisition Identification and Integration Risks, Risk Factors
 Conflicts of Interest, and Risk Factors  Additional Debt.

Agreements in Support of the Silver Purchase Agreement

Silver Trading has granted to SW Caymans first ranking security interests,
subject only to certain permitted encumbrances, in all of its present and after
acquired personal property as security for its obligations under the Amended and
Restated Silver Purchase Agreement. In addition, the Company and Primero Empresa
have guaranteed the obligations of Silver Trading under the Amended and Restated
Silver Purchase Agreement. In support of its guarantee, the Company has granted
in favour of SW Caymans a first ranking security interest, subject only to
certain permitted encumbrances, in all of its present and after acquired
personal property, which security will include stock pledges of the Companys
interests in Silver Trading and Primero Empresa. In support of its guarantee,
Primero Empresa has granted in favour of SW Caymans a first ranking security
interest, subject only to certain permitted encumbrances, in all of its present
and after acquired personal property and granted, on the completion of all
property transfers to Primero Empresa,a first ranking mortgage, subject
only to certain permitted encumbrances, against the mining concessions, real
property and mineral processing facility relating to the San Dimas Mine. The
security granted or to be granted will be subject to the following
qualifications:

- the security will exclude mining properties and concessions, real property,
  contracts and tangible personal property not related to the San Dimas Mine,
  and any shares or other equity interest in a company that does not own any
  interest in Primero Empresa or the collateral granted by Primero Empresa; and
- the security granted may be subordinated, other than with respect to the
  first mortgage against the San Dimas mining concessions based on the value of
  the silver to be delivered to SW Caymans under the Amended and Restated Silver
  Purchase Agreement, with respect to financial indebtedness permitted under the
  Amended and Restated Silver Purchase Agreement, as described above, up to a
  limit of US$50 million and subject to the execution of an inter-creditor
  agreement between SW Caymans and the applicable lender.

Concurrent with the entering into of the Amended and Restated Silver Purchase
Agreement, Goldcorp delivered to SW Caymans a guarantee (the Guarantee) and
Primero and certain of its affiliates entered into an indemnity agreement (the
Indemnity Agreement) with Goldcorp and an affiliate of Goldcorp. The Guarantee
and the Indemnity Agreement provide that:

- Goldcorp guarantees to SW Caymans the performance of the obligations of
  Silver Trading under the Amended and Restated Silver Purchase Agreement with
  respect to (a) delivery and sale of refined silver to SW Caymans and (b)
  payment of any deficiency payment resulting from failure of Silver Trading to
  deliver and sell the Minimum Silver Amount;

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- the Company and its affiliates have agreed to indemnify Goldcorp for any
  payments that Goldcorp is required to make under the Guarantee, other than in
  respect of any deficiency payment resulting from the failure to deliver and
  sell the Minimum Silver Amount (except to the extent that a deficiency payment
  with respect to the Minimum Silver Amount arises as a result of Silver
  Tradings failure to sell and deliver produced silver to SW Caymans under the
  Amended and Restated Silver Purchase Agreement);
- Goldcorp has agreed to indemnify the Company and its affiliates for any
  deficiency payments payable by the Company or Silver Trading to SW Caymans
  under the Amended and Restated Silver Purchase Agreement if the Minimum Silver
  Amount is not sold and delivered to SW Caymans (except to the extent that a
  deficiency payment with respect to the Minimum Silver Amount arises as a
  result of Silver Tradings failure to sell and deliver produced silver to SW
  Caymans under the Amended and Restated Silver Purchase Agreement); and
- the Company and its affiliates have provided security to Goldcorp to
  support their indemnity, on substantially the same terms as, and ranking in
  priority immediately after, the security granted and to be granted to SW
  Caymans and such security will be subject to substantially the same
  restrictions on indebtedness and other covenants in favour of SW Caymans and
  the Company as are provided for in the Amended and Restated Silver Purchase
  Agreement (other than the right of first refusal and the incurring of
  additional indebtedness).

Advance Tax Ruling Application

During 2011, silver sales under the Amended and Restated Silver Purchase
Agreement realized approximately US$4.00 per ounce; however, the Companys
provision for income taxes before and including the third quarter of 2011 was
based on sales at market prices. 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 for silver. The review of the Companys application is likely to take 12
to 14 months, at the end of which the tax authority will issue a tax resolution
letter specifying the pricing method that it considers appropriate for the
Company to apply to intercompany sales under the Amended and Restated Silver
Purchase Agreement. During this application process, the Company may record its
revenues and intercompany pricing under the terms that it considers reasonable.
Commencing in the fourth quarter of 2011, after completing a restructuring, the
Company recorded revenue under the Amended and Restated Silver Purchase
Agreement at the fixed price realized and recorded income taxes on the same
basis. The Company intends to continue to record revenue and taxes on this basis
for the foreseeable future. Throughout the application process, the Company
intends to identify the potential tax as a contingent liability and plans to
retain access to sufficient cash to satisfy that contingent liability in the
event of an unfavourable ruling. As at December 31, 2011, the amount of cash
retained to satisfy this contingent liability was US$9.8 million. See Risk
Factors  Silver Contract and Taxes.

Silver Call Options

As part of its ongoing tax mitigation strategy, in September 2011, the Company
purchased call options (the Call Options) on 1,489,400 ounces of silver at a
strike price of US$49.00 on 30% of silver production expected to be sold under
the Amended and Restated Silver Purchase Agreement over the period from October
1, 2011 to September 30, 2012. By covering 30% of expected sales under the
Amended and Restated Silver Purchase Agreement, the Call Options were designed
to offset the incremental income tax that would be payable by the Company if
spot prices exceed the strike price. As of December 31, 2011, contracts for
400,000 ounces of silver had expired out of-the money (for a realized loss of
US$367,460) and contracts for 1.1 million ounces of silver were marked-to-market
(for an unrealized loss of US$3.2 million).

This was the second tranche of silver call options that the Company purchased in
2011. In March 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. The contracts covered approximately two-thirds of the
monthly silver production sold to SW Caymans over the period April 1, 2011 to
September 30, 2011 (to cover the tax exposure and to potentially gain from a rise in the price of silver). All
contracts under the March 18, 2011 purchase had expired by December 31, 2011,
realizing an aggregate loss of US$348,000.

15

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Ventanas Exploration Property

As part of the Acquisition, Primero acquired the Ventanas exploration property
located in the Ventanas mining district in Durango State, Mexico. This property
was previously under option to Primero. This exploration property is comprised
of 28 near-contiguous mining concessions covering approximately 3,470 hectares
or 35 square kilometres. The Company last drilled on the property in 2008 and
since then the property has been on care and maintenance. Primero is assessing
its future plans for the Ventanas property.

Competitive Conditions

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. Further, Primero has
agreed not to acquire any mineral interest in Mexico that is within 20
kilometres of any mineral property in Mexico owned by Goldcorp and its
affiliates. See Risk Factors  Competition.

Changes to Contracts

As at December 31, 2011, Primero had 567 unionized employees at the San Dimas
Mine who are members of two unions: Sindicato Nacional de Trabajadores Mineros
and Metalúrgicos, Siderúrgicos y Similares de la República Mexicana. The union
contracts are renegotiated every two years, except for the compensation aspects,
which are reviewed annually. In 2012, only the compensation aspects of the union
contracts are due to be negotiated. Primero believes that its current relations
with its employees and the unions are good and that the effect of the contract
negotiations in 2012 will be in line with its budgets. See Business of Primero
 Employees and Risk Factors  Labour and Employment Matters.

Environmental Protection

The Companys mining, exploration and development activities are subject to
various levels of Mexican federal and state laws and regulations relating to the
protection of the environment, including requirements for closure and
reclamation of mining properties, all of which the Company is currently in
material compliance. The financial and operational effects of environmental
protection requirements on capital expenditures, earnings, expenditures and the
Companys competitive position during the fiscal year ended December 31, 2011
were not material, other than completion of the third tailings filter for a cost
of US$1.3 million in 2011. In 2012 the Company plans to purchase additional
pumps to transport tailings to the tailings facility at a cost of US$1.4
million.

In March 2012, the Company was awarded the ESR designation by CEMEFI, the
Mexican Center for Philanthropy. The ESR award is given to companies operating
in Mexico that are committed to sustainable economic, social and environmental
operations in all areas of corporate life, including business ethics,
involvement with the community and preservation of the environment. Only 572
companies in Mexico currently have the ESR award.

The Company has accounted for its asset retirement obligation, consisting of
reclamation and closure costs for the San Dimas Mine, in its financial
statements. See San Dimas Mine  Environmental Matters, San Dimas Mine 
Tayoltita Tailings, San Dimas Mine  San Antonio Tailings, San Dimas Mine 
Environmental Capital Expenditures, and Risk Factors  Environmental Risks and
Hazards.

16

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Employees

As at December 31, 2011, the Company had the following employees and contractors:

|                   |  | Full-Time |  |  | Hourly  |  |  |             |  |  |       | 
|------------------ |  | --------- |  |  | ------- |  |  | ----------- |  |  | ----- | 
|Location           |  | Salaried  |  |  | (Union) |  |  | Contractors |  |  | Total | 
|Mexico City Office |  | 13        |  |  | Nil     |  |  | Nil         |  |  | 13    | 
|San Dimas Mine     |  | 488       |  |  | 567     |  |  | 131         |  |  | 1,186 | 
|Vancouver Office   |  | 5         |  |  | Nil     |  |  | 1           |  |  | 6     | 
|Toronto Office     |  | 7         |  |  | Nil     |  |  | Nil         |  |  | 7     | 
|Total              |  | 513       |  |  | 567     |  |  | 132         |  |  | 1,212 | 

Foreign Operations

All of the Companys mining and mineral exploration operations are currently
conducted in Mexico, and as such Primeros operations are exposed to various
levels of political, economic and other risks and uncertainties. These risks and
uncertainties include, but are not limited to, terrorism; organized crime;
hostage taking; military repression; theft; 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. Any changes in regulations or shifts in political attitudes in
Mexico are beyond the control of the Company and may adversely affect its
business. Future development and operations may be affected in varying degrees
by such factors as government regulations (or changes thereto) with respect to
the restrictions on production, export controls, income taxes, expropriation of
property, repatriation of profits, environmental legislation, land use, water
use, land claims of local people and mine safety. The effect of these factors
cannot be accurately predicted. See Risk Factors  Local Groups, Risk Factors
 Foreign Operations Risks and Risk Factors  Mining Operations in Mexico.

Environmental, Social and Governance Policies

Primeros operating practices are governed by the principles set out in its
Health and Safety Policy and Code of Ethics. The Environmental, Health and
Safety Committee of the Board, which was appointed in December 2010 and reports
to the Board, provides oversight in occupational health and safety, community
relations, and environmental management. Internal weekly and quarterly reporting
tracks performance indicators including human resources, health and safety
performance, environmental monitoring, compliance with permits, materials inputs
and outputs, and community relations activities. Primeros Board and senior
management team have committed to the sustainability reporting process and
report publicly on performance through the Annual Report and website.

Primero has an active and continuous corporate social responsibility (CSR)
program focused on health and safety, positive community relations and
protection of the environment.

Health and safety at San Dimas is administered by the Central Safety Committee,
which is chaired by the general manager of the mine and its members include all
superintendents of operations and services. The Central Safety Committee meets
monthly to consider all aspects of industrial safety. Employees are recognized
for their safety awareness each month as a way to encourage safe practices. The
Central Safety Committee oversees a number of subcommittees, including the
Documentary System Subcommittee, which defines (documents) standard work
procedures for each job function; the Preventative Observations Subcommittee,
which encourages the reporting of unsafe practices, so that they can be
publicized and eliminated, and conducts ad hoc safety reviews, and the
Subcommittee on Accident and Incident Investigation, which analyses each
accident or incident (there were 13 in 2011), makes recommendations and monitors
compliance with its recommendations. In 2011, Primero participated in the
Self-management Program for Safety and Health at Work in conjunction with the
Ministry of Labour and determined that its compliance with health and safety
regulations at work was 93%. The Company also has monthly campaigns focused on a particular health or safety
issue, for example defensive driving, safe handling of sodium cyanide and
security in high altitude work. Primeros rescue squad has a regular program of
training and emergency response exercises. In 2011, the mine rescue squad placed
first in a national competition of rescue squads organized by the Mining Chamber
of Mexico. These health and safety programs are yielding results as the total
accident frequency index declined in 2011 for the sixth consecutive year.

17

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With respect to community relations, in 2011, Primero carried out a study to
determine the economic, social and cultural development of the communities in
which it operates, with the aim to improve community development. Surveys were
sent to 925 households (representing 95% coverage) to gather information about
housing, demographic data, health data, family relationships and community
involvement. Primero supports community education and provides a 75% tuition
subsidy to all students who attend the school in Tayoltita. In 2011, 220
students were enrolled at the school. Other community initiatives in 2011
included rehabilitation of Tayoltitas child care facilities; the provision of
workshops on the prevention of addictions in community schools, and the creation
of a bi-monthly magazine to serve as a communication channel between workers and
the community to promote interest in the mining industry and stimulate sharing
of ideas and experiences. In March 2012, the Company was awarded the prestigious
Socially Responsible Company (ESR) designation by CEMEFI, the Mexican Center
for Philanthropy, in recognition of its commitment to sustainable economic,
social and environmental operations.

Primero introduced a number of campaigns in 2011 to increase environmental
awareness, including collecting and disposing of outdated household appliances
(three tons of appliances were shipped to Durango for proper disposal);
organizing schools, the municipality and its workforce to clear up the debris
along the Piaxtla River (16 tons of garbage was removed), complemented by talks
to encourage respect for the environment, and, in collaboration with the
Ministry of Education and the Youth Integration Centre, holding talks on water
care, energy and the environment. The Company carried out various aquatic life
studies in the Piaxtla River to identify fish species and macro invertebrates
and assess their habitats, and to test water quality at four monitoring
stations, both upstream and downstream from the mine. Primero also carried out
an atmospheric study in collaboration with a third-party environmental
consulting company. Results of the study confirmed that particle emissions
generated by various functions (for example, the plant, the crushing facility
and the smelting furnace) were all below regulatory limits established by
SEMARNAT (the Mexican environmental protection agency) and that air quality at
San Dimas was at acceptable levels.

In 2011, the Company completed the installation of a third tailings filter (the
project started construction in 2010). The third filter has a capacity of
353,160 tonnes per year, adding to the combined capacity of the first two
filters of 410,400 tonnes per year. With the new filter, San Dimas achieved 85%
efficiency in the tailings filtering process. In the five months that the new
filter was operating in 2011, the Company was able to recover an average of
43,000 tonnes of solution each month to be recycled into the leaching process.
The third filter also provides redundancy in the event that any one of the
filters is not operating.

The Company plans to continue to promote and expand the CSR programs that it has
already implemented in 2012. Building employee and community awareness of health
and safety issues and protection of the environmental will remain a priority.
The mine is the economic and social driving force of the community and Primero
will continue to strengthen its involvement in the community.

SAN DIMAS MINE

Except for information after March 1, 2011, scientific and technical information
under the headings Property Description and Location, Access, Climate, Local
Resources, Infrastructure and Physiography, Environmental Matters, History,
Geological Setting, Exploration and Drilling (General), Deposits and
Mineralization, Las Truchas Hydro Generating Power Plant/Line, Tayoltita
Tailings, San Antonio Tailings and Environmental Capital Expenditures has
been summarized from the technical report entitled Technical Report on the
Tayoltita, Santa Rita and San Antonio Mines, Durango, Mexico for Primero Mining
Corporation dated March 11, 2011 (the WGM Technical Report), prepared by
Velasquez Spring, P.Eng., Senior Geologist and Gordon Watts, P.Eng., Senior
Associate Mineral Economist of Watts, Griffis and McOuat Limited in accordance
with NI 43-101. The WGM Technical Report is available for review under the
Companys profile on the SEDAR website located at www.sedar.com.

18

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The information under the headings Mineral Concessions, Royalties and Permits,
Taxes, Exploration and Drilling (2011/early 2012), Contemplated
Exploration and Development Activities, Sampling, Assay and Security and
Mining Operations and all other information after March 1, 2011 (other than
the disclosure under Mineral Resource and Mineral Reserve Estimates), have
been prepared by Primero and are not part of the WGM Technical Report. The
scientific and technical information regarding exploration results contained
under such headings or after March 1, 2011 (other than such disclosure under
Mineral Resource and Reserve Estimates) has been prepared by the Company based
upon information prepared by or under the supervision of Mr. Joaquin
Merino-Marquez, P.Geo. Vice President, Exploration for Primero.

On January 17, 2012, Primero announced that it was undertaking a review of its
reserve and resource estimation methods in order to assess whether the use of
other estimation methodologies might allow Primero to improve mine planning and
more accurately predict actual grade and therefore production. On March 28, 2012
Primero announced the results of that review and new resource and reserve
estimates. See San Dimas Mine  Mineral Resource and Mineral Reserve
Estimates.

The change in reserve and resource estimates at San Dimas does not impact
Managements confidence in the ultimate mineral potential of the mine. Primero
believes that the new estimation approach and further drilling and mine
development will result in more accurate mine planning, new mineral discoveries
and a reasonable amount of the exploration potential being converted into
Mineral Resources. Over 300,000 ounces of gold in the current Inferred Mineral
Resource are within current infrastructure and constrained within the
mineralization envelope of the known veins, ready to be infill drilled with the
aim of converting to Mineral Reserves.

The scientific and technical information under the heading Mineral Resource and
Mineral Reserve Estimates contained herein is based on information prepared by
or under the supervision of Mr. Rodney Webster, MAIG, Mr. Herbert A. Smith
P.Eng. and Mr. J. Morton Shannon P.Geo., all of AMC Mining Consultants (AMC)
and each a Qualified Person for the purposes of NI 43-101. Mr. Webster, Mr.
Smith and Mr. Shannon are independent of the Company and have not previously
reported on the San Dimas Mine. This information was also included in a press
release issued by Primero on March 28, 2012. AMC is in the process of completing
a new technical report on the San Dimas mine (the AMC Technical Report) that
will be prepared under NI 43-101 and will replace the WGM Technical Report.
While under NI 43-101 the AMC Technical Report is required to be filed on SEDAR
concurrent with the filing of this AIF, pursuant to the terms of an exemption
order issued by the Canadian Securities Administrators, the AMC Technical Report
can be filed not later than May 15, 2012.

Property Description and Location

The San Dimas mining district is centered on latitude 24°06N and longitude
105°56 W located about 125 kilometres NE from Mazatlan, Sinaloa or
approximately 150 kilometres west of the city of Durango. The following map
shows the location of the San Dimas Mine.

19

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The San Dimas District located on the border of Durango and Sinaloa states is
divided into 5 different mines (or blocks) and includes: West Block, Sinaloa
Graben Block, Central Block, Tayoltita and Santa Rita mines. The San Dimas
properties are surveyed and contained in a contiguous block in an area of
24,965.51 ha. Primero also holds 28 mining concessions (3,470.4 ha) at Mala
Noche-Ventanas-San Cayetano (the Ventanas Project) a former small, underground
mine located approximately 23 kilometres SE from the San Dimas mine. The West
Block, Sinaloa Graben Block, Central Block, Tayoltita and Santa Rita mines
locations are shown on the following map.



20

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Access, Climate, Local Resources, Infrastructure and
Physiography

Access to the San Dimas area is by air or road from the city of Durango. By road
the trip requires approximately 10 hours. Primero maintains a de Havilland Twin
Otter aircraft and a helicopter, both of which are based at Tayoltita. Travel
from either Mazatlan or Durango to Tayoltita requires an approximate half hour
flight in the Twin Otter aircraft. Most of the personnel and light supplies for
the San Dimas Mine arrive on Primeros regular flights from Mazatlan and
Durango. Heavy equipment and supplies are brought in by road from Durango.

Originally, access to the San Dimas district was from the town of San Ignacio,
Sinaloa along a 55 kilometres long narrow mule trail, carved in the steep valley
wall above the high water level of the Piaxtla River. A rough road, paralleling
the mule trail, now follows the river bed to San Ignacio but the road is only
accessible for approximately six months of the year during the spring dry
season. San Ignacio is connected to Mazatlan by approximately 70 kilometres of
paved roads.

The climate of the San Dimas area is semi-tropical, characterized by relatively
high temperatures and humidity, with hot summers (maximum about 35 TM C) and
mild winters. At higher elevations in the Sierra, frosty nights occur in the
winter (November to March). The majority of the precipitation occurs in the
summer (June through September) however tropical rainstorms during October to
January can result in considerable additional rainfall. The total average annual
rainfall varies from about 66 to 108 cm. Weather does not affect the operations
and mining is carried out throughout the year.

Mining at the San Dimas Mine is done by a mixture of contract mining and Primero
personnel. Tayoltita is the most important population centre in the area with
approximately 5,000 inhabitants including mining company personnel. Subsistence
farming, ranching, mining and timber cutting are the predominant activities of
the regions population, and population outside the mining and sawmill camps is
sparse.

Water for the mining operations is obtained from wells and from the Piaxtla
River. Water is also supplied by Primero to the town of Tayoltita from an
underground thermal spring at the Santa Rita mine.

Electrical power is provided by a combination of Primeros own hydro generation
  system (Las Truchas) and the Federal Power Commission Supply System (the FPCSS).
  Primero operates hydroelectric and back-up diesel generators, which are interconnected
  with the FPCSS. Primero ́s hydro electrical power provides about 75% of
  the total requirement of San Dimas Mine during nine months of the year. During
  the remaining three months of the year, corresponding to the dry season, the
  operations of San Dimas are mainly supplied by the FPCSS. The Company is considering
  installing additional turbines at a lower elevation point in the river to increase
  the power generation of the Las Truchas facility from 50 GW to 150 GW.

The main infrastructure of the San Dimas district consists of; roads, townsite,
airport, crushing and processing facilities (Tayoltita mill), old San Antonio
mill and the Tayoltita/Cupias and San Antonio tailings facilities (the San
Antonio facility is currently under reclamation), Las Truchas hydro generation
facilities, diesel power plant and San Dimas mines divided in 5 blocks.

The Tayoltita mine is the closest operation to the process plant and town site
of Tayoltita and is located 400 metres North East the process plant.

The Santa Rita mine is located three kilometres upstream from Tayoltita. The ore
from the Santa Rita mine is trucked along a winding road that follows the
Piaxtla River to the Tayoltita mill.

The Central block is currently the most active mine and is located 2,000 metres
downstream from the process plant. The ore from this operation is hauled by a
road parallel to the Piaxtla River and sent directly into the mill.

The Sinaloa Graben Mine is the most recent operation integrated to production,
and right now where the major exploration and growth is expected; the Sinaloa
Graben is located 1,000 metres downstream from the Central Block mine.

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The West Block mine is located seven kilometres west of the Tayoltita Mine in
the State of Sinaloa. The mine is accessed from Tayoltita by a three kilometre
road paralleling the Piaxtla River, opposite the town of Tayoltita to the portal
of the San Luis Tunnel, through the tunnel and then by road, or along the San
Vicente creek bed to the Contraestaca village, for a total drive of
approximately 45 minutes.

The San Dimas district is located in the central part of the Sierra Madre
Occidental, a mountain range characterized by very rugged topography with steep,
often vertical walled valleys and narrow canyons. Elevations vary from 2,400
metres above mean sea level (amsl) on the high peaks to elevations of 400
metres amsl in the valley floor of the Piaxtla River.



Mineral Concessions, Royalties and Permits

As per Mexican requirements for grant of tenure, the concessions comprising the
San Dimas Mine have been surveyed on the ground by a licensed surveyor. All
appropriate payments have been made to the relevant authorities, and the
licences are in good standing. Surface rights have been secured by either
acquisition of private and public land or by entering into temporary occupation
agreements with surrounding communities.

There are no royalties payable to any entity. Current Mexican legislation does
not require government royalty payments. Primero also holds the appropriate
permits under local, State and Federal laws to allow mining operations.

Environmental Matters

At the time of Goldcorps acquisition of the San Dimas operations (through a
predecessor company, Wheaton River Minerals Ltd. (Wheaton River)), the
practice in the design and operation of tailings containment sites in the San
Dimas district complied with the requirements of Mexico and with the permits
issued for the dams. To bring the facilities to international guidelines, a
series of improvements were identified as necessary to reduce risk as well as the potential environmental impact. Since the
acquisition by Goldcorp in 2002, a number of improvements have been made; all
improvements suggested by the international consultants were completed in 2008
and related to the stability of the dams and in 2011 for the management of the
tailings. Since 2011, the tailings containment sites are 100% operational and
now comply with the international regulations.

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DMSLs practice had been to discharge tailings from the cyanidation mills to
unlined structures designed to settle the solids and collect solutions for
recycle to the milling operations. The containment dams were typically
constructed with cyclone underflow, and the overflow drains to decant structures
in the central portion of the dam. Previously the tailings containment sites had
not been subjected to comprehensive geotechnical investigations before
construction, normal safety factors in dam design nor monitoring or control of
seepage.

The deficiencies with the tailings management aspect of the operations were
  addressed by the previous owner of the mine and capital investments were made
  to upgrade the containment structures and tailings operations to bring them
  more in line with accepted practice. Capital expenditures for environmental
  purposes since 2004 have totaled approximately US$13.90 million at Tayoltita/Cupias
  and US$9.8 million at San Antonio. In 2005, US$1.3 million was spent on the
  San Antonio tailings, and US$2.2 million in 2006 and US$1.6 million in 2007.
  Investment in the Tayoltita tailings dam in 2005 was US$1.6 million, US$0.6
  million in 2006, US$3.2 million in 2007, US$1.5 million in 2010 and US$3.2 million
  in 2011.

As a result of the spill from a tailings pipe in January 2012, Primero has taken
  a number of corrective actions including building a temporary containment structure
  for the tailings pipe (design specifications for a permanent solution are under
  consideration) and conducting a preliminary assessment to confirm that there
  is no residual impact to Piaxtla River aquatic life (an external expert will
  conduct a further assessment during the second quarter of 2012). See Business
  of Primero  San Dimas Mine  Environmental Matters for the San Dimas
  Mines.

Environmental requirements in Mexico can be expected to become more aligned with
world standards in the future. The planned capital expenditures and changes to
upgrade the San Dimas tailings management operations are expected to continue to
comply with the operating standards required in Mexico and international
guidelines.

Taxes

Corporate profits in Mexico are taxed only by the Federal Government. Through
2008, there were two federal taxes in Mexico that applied to mining company
operations in Mexico; a Flat Rate Business Tax (FRBT) and a corporate income
tax. Mexican corporate income tax is calculated based on gross revenue less
deductions for all refining and smelting charges, direct operating costs, all
head office general and administrative costs, and depreciation deductions.
During 2008 and 2009, the corporate income tax rate in Mexico was 28%, it is 30%
from 2010 to 2012, and it will be 29% during 2013 and 28% for 2014 and
subsequent taxation years. 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 for silver. See Business of Primero  Amended and Restated Silver
Purchase Agreement  Advance Tax Ruling Application.

The FRBT is a minimum tax that applies in addition to the corporate income tax.
The tax is applicable to the taxpayers net income from the (i) sale of goods;
(ii) performance of independent services; and (iii) lease of goods at the rate
of 16.5% during 2008, 17% during 2009 and 17.5% from 2010 to 2012. The base to
which the FRBT is applied is determined by deducting from gross income certain
items, such as expenses associated with purchasing goods, rendering independent
services, and leasing goods, or expenses incurred in connection with the
administration of such activities. Some expenses that are deductible in
determining taxable income for income tax purposes, such as salaries, interest
in some cases and royalties with foreign related parties are not deductible in
determining the FRBT. However, certain tax credits are available to offset the
FRBT, including income tax paid during the same fiscal year; a credit on certain
salary-related expenses and social security contributions paid by an employer; a
credit on losses, a credit on fixed assets; and monthly FRBT payments. The FRBT
follows a cash flow system, which could distort the crediting of income tax
against the FRBT. Finally, special rules apply to certain taxpayers, such as
corporate groups that file consolidated tax returns.

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History

The San Dimas district has experienced a long mining history. Precious metal
production was first reported in 1757 by a group of Spanish families living at
Las Queleles (near the present town of Tayoltita). Government and religious
authorities made several unsuccessful attempts to determine the location of the
Queleles group of mines. By 1795, a town of 10,000 residents had been
established upstream at Guarisamey where other gold and silver veins had been
discovered. The Spanish continued working several of the mines until the start
of the Mexican War of Independence in 1810. Mining activity in the district then
decreased and did not start up again until the 1880s when agents of William
Randolph Hearst of San Francisco and American Colonel Daniel Burns arrived in
the area. W.R. Hearst acquired the Tayoltita mine under the name of the San Luis
Mining Company. In 1883, when Colonel Burns took control of the Candelaria mine,
modern mining methods began. Later the Contraestaca (San Antonio) mine was
discovered along with several large bonanza grade orebodies.

In 1904, the first cyanide mill in Mexico was built at Tayoltita. By 1940, the
Candelaria mine had been mined out and the properties of the Mexican Candelaria
and Contraestaca mines were purchased by the San Luis Mining Company.

Historical production through 2011 from the San Dimas Mine is estimated at 11
  million ounces of gold and 582 million ounces of silver, placing the district
  third in Mexico for precious metal production after Pachuca and Guanajuato.
  Production from the San Dimas Mine during 2011 was 79,564 ounces of gold and
  4.6 million ounces of silver, while production in 2010 was 85,429 ounces of
  gold and 4.5 million ounces of silver (31,943 ounces of gold and 1.79 million
  ounces of silver, respectively, from August 6, 2010 to December 31, 2010). Historical
  production for the San Dimas Mine from 2003 to 2011 is summarized in the following
  table:

San Dimas Mine Production

Grade
      
      
      Contained OuncesSan Dimas Mine
      
      Tonnes
      
      
      g
        Au/t
      
      
      g
        Ag/t
      
      
      Au
      
      
      Ag2003
      
      423,673
      
      
      5.25
      
      
      428
      
      
      70,831
      
      
      5,824,5132004
      
      397,647
      
      
      6.90
      
      
      525
      
      
      88,214
      
      
      6,717,0552005
      
      507,529
      
      
      7.40
      
      
      497
      
      
      120,749
      
      
      8,114,6622006
      
      688,942
      
      
      7.76
      
      
      438
      
      
      171,906
      
      
      9,706,1312007
      
      685,162
      
      
      6.27
      
      
      341
      
      
      138,163
      
      
      7,500,6952008
      
      657,479
      
      
      4.25
      
      
      259
      
      
      89,838
      
      
      5,479,0842009
      
      673,300
      
      
      5.36
      
      
      247
      
      
      115,748
      
      
      5,355,7862010(1)
      
      612,253
      
      
      4.46
      
      
      244
      
      
      85,429
      
      
      4,532,0062011(1)
      
      662,612
      
      
      3.86
      
      
      226
      
      
      79,564
      
      
      4,602,844


|(1) | Primero acquired the San Dimas Mine on August 6, 2010.
      From August 6, 2010 to December 31, 2011, mine production was 919,840
      tonnes, grading 3.89 grams of gold and 229 grams of silver per tonne and
      having 114,923 contained ounces of gold and 6,778,318 contained ounces of
      silver.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

24

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Geological Setting

The general geological setting of the San Dimas district is illustrated in the
diagram below. Two major volcanic successions totalling approximately 3,500
metres in thickness have been described, the Lower Volcanic Group (LVG) and
the Upper Volcanic Group (UVG) separated by an erosional and depositional
unconformity.



The LVG is of Eocene age predominantly composed of andesites and rhyolitic flows
and tuffs and has been locally divided into five units. The LVG outcrops along
the canyons formed by major westward drainage systems and has been intruded by
younger members of the batholith complex of granitic to granodioritic
composition. The Socavón rhyolite is the oldest volcanic unit in the district,
its lower contact destroyed by the intrusion of the Piaxtla granite.

More than 700 metres thick, the Socavón rhyolite is host for several productive
veins in the district. Overlying the Socavón rhyolite is the 20 to 75 metres
thick, well-bedded Buelna andesite that is remarkably present throughout the
area. The Buelna andesite is overlain by the Portal rhyolite, a grey, cream to
purple coloured rock containing potassic feldspar and quartz cementing small (5
to 10 mm) volcanic rock fragments. It ranges in thickness from 50 to 250 metres
and is also prevalent throughout the district.

25

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The overlying Productive Andesite is more than 750 metres in thickness and has
been divided into two varieties based on grain size, but of identical
mineralogy. One variety is fragmental (varying from a lapilli tuff to a coarse
agglomerate), the other has a porphyritic texture (1 to 2 mm plagioclase
phenocrysts).

The overlying Camichin unit, composed of purple to red interbedded rhyolitic and
andesite tuffs and flows, is more than 300 metres thick. It is the host rock of
most of the productive ore shoots of Patricia, Patricia 2, Santa Rita and other
lesser veins in the Santa Rita Mine.

The Las Palmas Formation, at the top of the LVG, consists of green conglomerates
at the base and red arkoses and shales at the top, with a total thickness of
approximately 300 metres. This unit outcrops extensively in the Tayoltita area.
The lower contact between the LVG and the underlying Productive Andesite is
unconformable.

The predominant plutonic events in the district resulted in intrusion of the LVG
by granitic to granodioritic intrusives, part of the Sinaloa composite
batholith.

Other intrusives cutting the LVG include the Intrusive Andesite, the Elena
aplite and the Santa Rita dacitic dikes. The even younger Bolaños rhyolite dike,
and the basic dykes intrude both the LVG and UVG. Intrusive activity in the
western portion of the Sierra Madre Occidental has been dated continuously from
102 to 43 million years.

The UVG overlies the eroded surface of the LVG unconformably. In the San Dimas
district, the UVG is divided into a subordinate lower unit composed mainly of
lavas of intermediate composition called Guarisamey Andesite and an upper unit
called the Capping Rhyolite. The Capping Rhyolite is mainly composed of
rhyolitic ash flows and air-fall tuffs and is up to 1,500 metres thick in the
eastern part of the district however within most of the district is about 1,000
metres thick.

The San Dimas district lies within an area of complex normal faulting along the
western edge of the Sierra Madre Occidental. Compressive forces first formed
predominantly east-west and east-northeast tension gashes, that were later cut
by transgressive north-northwest striking slip faults. The strike-slip movements
caused the development of secondary north-northeast faults, with right lateral
displacement.

The following diagrams represent a structural mapping and a geological section
across, the San Dimas district. Five major north-northwest-trending normal
faults divide the district into five tilted fault blocks generally dipping 35°
to the east. In most cases, the faults are post ore in age and offset both the
LVG and UVG.

26

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27

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All major faults display northeast-southwest extension and dip from near
vertical (Peña fault) to less than 55° (Guamuchil fault). Offsets on the blocks
range from a downthrow of 150 metres on the Peña and Arana faults, to more than
1,500 metres on the Guamuchil fault.

Exploration and Drilling (General)

Typical of epithermal systems, the gold and silver mineralization at the San
Dimas Mine exhibits a vertical zone with a distinct top and bottom that the
prior owner of the mine termed the Favourable Zone. At the time of deposition,
this Favourable Zone was deposited in a horizontal position paralleling the
erosional surface of the LVG on which the UVG was extruded. The following
diagram shows a schematic section of the Favourable Zone.

28

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(Source: San Dimas Geological
Office)

This favourable, or productive, zone at San Dimas Mine is some 300 metres to 600
metres in vertical extent and can be correlated, based both on stratigraphic and
geochronologic relationships, from vein system to vein system and from fault
block to fault block. Using this concept of the dip of the unconformity at the
base of the UVG, the various mine owners, over the years, have been able to
infer the dip of the Favourable Zone and with considerable success explore and
predict the Favourable Zone in untested areas.

Historically, exploration of the Favourable Zone at San Dimas Mine has been
  done both by diamond drilling and by underground development work. Diamond drilling
  is predominantly done from underground stations as both the rugged topography,
  (i.e. access to surface drill stations) and the great drilling distance from
  the surface locations to the target(s) makes surface drilling both challenging
  and expensive. All exploration drilling and the exploration underground development
  work are done both in-house and by use of contractors. Diamond drilling is of
  NQ/HQ size with excellent core recoveries at a cost of approximately US$130/metre.

Exploration and Drilling (2011/ early 2012)

Exploration of the Favourable Zone at San Dimas Mine is done both by diamond
drilling and by underground development work.

Primero conducts a continuous program of exploration/development diamond
drilling throughout the year at each of its mines with its own rigs. Fourteen
diamond drill rigs and crews are employed in the mines, of which three are
contracted.

Exploration in 2011 and early 2012 was concentrated on the Sinaloa Graben,
located between the West Block (San Antonio Mine) and the Central Block, the
Central Block (Robertita), and the Arana Hanging Wall, located between the
Tayoltita mine and the Santa Rita mine. The Sinaloa Graben is a North-South
trending block more than 7 kilometres long by almost 2 kilometres wide, bounded
by two regional faults, Limoncito on the east and Sinaloa on the west,
containing more than 20 veins of which only two, San Juan and San Vicente veins
have been mined with the remainder of the veins unexplored. Approximately
US$10.8 million was spent during 2011 on exploration with 56,000 metres of exploration drilling in 184
holes, and 5,742 metres of exploration drifting being completed. For 2012 the
exploration budget was increased to US$12 million.

29

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Central Block

In the Central Block, 100 holes were completed in 2011 for a total of 25,572
metres of drilling. Drilling was focused on upgrading the Inferred Mineral
Resources to Proven and Probable Mineral Reserve categories and to expand the
knowledge at depth of the mineralized system. Drilling indicated that the known
mineralization extends to a depth of at least 150 metres below the deepest
current exploitation level.

Sinaloa Graben

In the Sinaloa Graben, 63 holes were completed for a total of 18,242 metres of
drilling. Drilling was focused on improving the certainty of the Inferred
Mineral Resource and to confirm that the mineralization (ore shoots) were a
continuation of the ore shoots of the Central Block. The exploration results at
Sinaloa Graben continue to confirm higher grade mineralization than existing
Mineral Reserves and Mineral Resources. The Aranza vein, discovered while
drifting in Sinaloa Graben, yielded 5.2g/t of gold and 543g/t of silver over 2.2
metres. The newly discovered Elia vein, along the same drift also showed
high-grade, with 12.9g/t of gold and 1,125g/t of silver over 3 metres.

Results have also proven high-grade mineralization extends beyond the Sinaloa
Graben to the west (West Block) and at depth. The Victoria vein, another
high-grade vein system, 300 metres to the west of Sinaloa Graben, showed
12.64g/t of gold and 685g/t of silver over 1.47 metres true width and 10.5 g/t
of gold and 498 g/t of silver over 3.68 metres true width, which is much higher
grade and width than the current average. This area has never been explored in
detail and has now been included into the 2012 exploration plan.

Arana Hanging Wall

In the Arana Hanging Wall area, 21 holes were completed in 2011 for a total of
12,638 metres of drilling. The objective of the 2011 exploration program in the
Arana Hanging Wall area was to confirm the presence of the large ore shoots
suggested by previous results.

Drilling results successfully confirmed the presence of mineralization at above
average Mineral Reserve grade but at narrow widths. Holes A-25-230 (2) and
A-25-230 (3) returned 3.03 g/t of gold and 581 g/t of silver in a width of 0.60
metres and 5.9 g/t of gold and 234 g/t of silver over 0.40 metres of true width.

The Company has prioritized other exploration targets in the Central Block and
particularly in the Sinaloa Graben Block. No exploration drilling is planned in
the Arana Hanging Wall in 2012.

Contemplated Exploration and Development Activities

The San Dimas US$12 million 2012 exploration program includes a record of
approximately 65,000 metres of diamond drilling employing 14 rigs, broken into
30,000 metres of exploration drilling and 35,000 metres of delineation drilling
plus 3,000 metres of exploration drifting.

The current main production area is located in a prolific central corridor that
runs south-west to north-east across the property. This central corridor
historically contains vein systems that are noted for their high-grade nature,
above average thickness and significant lateral extensions.

The San Dimas 2012 exploration program is designed to aggressively drill the
exploration potential located in this prolific central corridor. San Dimas will
systematically target mineralization located in close proximity to existing
infrastructure along this high-grade central corridor. A primary objective of
2012 is to explore the southwest lateral extensions of the currently producing
Roberta and Robertita vein systems into the adjacent Sinaloa Graben.

30

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The Sinaloa Graben is the next high-grade mineralized zone at San Dimas, and
represents a considerable portion of the potential mid to long term production
for the mine. This block contains more than 20 known veins of which only two
have been mined with the remainder of the veins unexplored. A north-south tunnel
currently extending 4.5 kilometres (planned to extend to 8.0 kilometres) through
the centre of the Sinaloa Graben has been developed and provides direct
underground access to the east-west mineralization projected within the high
grade central corridor.



Since acquiring the mine, Primero has discovered the Elia and Aranza high-grade
veins in the southern end of the central corridor in the Sinaloa Graben. The
Elia and Aranza veins are separated by 250 metres and run almost parallel to the
central corridor of mineralization. Drifting results from Elia and Aranza
continue to exceed expectations suggesting that the Sinaloa Graben contains much
higher than the average grade and width of mineralization than reserves and
resources in the Central Block.

On March 28, 2012 Primero announced the discovery of the Victoria vein, located
in the Sinaloa Graben, 1.0 kilometre north of the Elia vein. Primero has several
high-grade intercepts of the Victoria vein, which exhibits similar grades,
widths and mineralization as the prolific Robertita vein system in the adjacent
Central Block. The Robertita vein is an important component of the Companys
Mineral Reserves and currently supplies a meaningful portion of the ore at San
Dimas.

The discovery of the Victoria vein is a promising result of the Companys 2012
objective to validate the existence of the south-west lateral extensions of the
Roberta and Robertita vein systems into the Sinaloa Graben. San Dimas is
currently drilling the Victoria vein from former underground workings of the El
Pilar vein with two rigs, and expects to extend the known ore-shoot along strike
and at depth. Access to the Victoria vein area has improved recently as a result
of underground development advancing west from the Central Block and north via
the Sinaloa Graben tunnel. San Dimas is now able to drill the Victoria vein and
the wider Sinaloa Graben from three strategic underground locations.

The Companys goal in 2012 is to add to the estimated Mineral Reserves and
Mineral Resources, net of depletion, and to convert mineralization from
exploration potential to Inferred Mineral Resources through new discoveries. See
San Dimas Mine  Mineral Resource and Mineral Reserve Estimates.

Deposits and Mineralization

The deposits of the San Dimas district are high grade, silver-gold-epithermal
vein deposits characterized by low sulphidation and adularia-sericitic
alteration formed during the final stages of igneous and hydrothermal activity
from quartz-monzonitic and andesitic intrusions.

31

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As is common in epithermal deposits, the hydrothermal activity that produces the
epithermal vein mineralization began a few million years after the intrusion of
the closely associated plutonic rocks and several million years after the end of
the volcanism that produced the rocks that host the hydrothermal systems. At San
Dimas, based on age determinations, the average period between the end of late
stage of plutonism and the hydrothermal activity is 2.1 million years, however
hydrothermal activity continued for at least another 5.0 million years. Older
veins appear more common in the eastern part of the district whereas younger
veins are found in the western part.

The mineralization is typical of epithermal vein structures with banded and
drusy textures. Within the San Dimas district, the veins occupy east-west
trending fractures except in southern part of Tayoltita where they strike mainly
northeast and in the Santa Rita mine where they strike north-northwest. The
veins were formed in two different systems. The east-west striking veins were
the first system developed, followed by a second system of north-northeast
striking veins. Veins pinch and swell and commonly exhibit bifurcation,
horse-tailing and sigmoidal structures. The veins vary from a fraction of a
centimetre in width to 8 metres, but average 1.5 metres. They have been followed
underground from a few metres in strike-length to more than 1,500 metres. An
example of a vein with mineralization in the Favourable Zone extending for more
than 2,000 metres in the Tayoltita Mine, the San Luis Vein, is illustrated
below.



Three major stages of mineralization have been recognized in the district: 1)
early stage; 2) ore forming stage; and 3) late stage quartz. Three distinct
sub-stages of the ore forming stage also have been identified, each
characterized by distinctive mineral assemblages with ore grade mineralization
always occurring in the three sub-stages: 1) quartz-chlorite-adularia; 2)
quartz-rhodonite; and 3) quartz-calcite.

32

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The minerals characteristic of the ore forming stage are composed mainly of
white, to light grey, medium to coarse grained crystalline quartz with
intergrowths of base metal sulphides (sphalerite, chalcopyrite and galena) as
well as pyrite, argentite, polybasite, stromeyerite, native silver and electrum.

The ore shoots within the veins have variable strike lengths (5 to 600 metres);
however, most average 150 metres in strike-length. Down-dip extensions of ore
shoots are up to 200 metres but are generally less than the strike length.

Sampling, Assaying and Security

Other than the control samples collected at the mill for material balance, two
principal types of samples are collected daily from the mine workings: 1)
samples of the mineralized zones exposed by the mine workings; and 2) samples of
the diamond drill core from the exploration/development drilling.

Samples are also collected but on a less routine basis, from mine cars and from
the blasted rock pile in a stope. Individual samples collected from a mineral
shoot in certain veins can show considerable variation both vertically and
horizontally in the vein as observed by samples from subsequent slices of the
stope or from samples taken from the top of the pile of blasted rock in the
stope compared to the samples from the back. Grade control in these veins is
achieved in part by the considerable number of samples taken. All mine samples
(except for diamond drilling samples) are sent to the San Dimas laboratory for
assaying.

Drill core samples after being sawn in half are bagged, tagged and sent to
external laboratory of SGS located in Durango, Mexico.

At each of the mines, the mine workings are sampled under the direction of the
Geological Department initially across the vein, at 1.5 metre intervals. Splits
are also taken along the sample line to reflect geological changes. Once the ore
block has been outlined and the mining of the block begins the sample line
spacing may be increased to 3.0 metres. Sampling is done by chip-channel (the
channel approximately 10 cm wide), cut across the vein, or across the whole
development drift. Sample chips of similar size are collected on a canvas sheet
then broken into smaller sized fragments, coned and quartered to produce a 1 to
2 kg sample, which is sent for fire assay to the mine assay laboratory. Sampled
intervals are clearly marked on the underground rock faces with spray paint.

33

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As part of the Mineral Resource and Reserve estimation review, Primero decided
in late-January 2012 that it would be prudent to engage an independent mining
consultant. As such, the Company retained AMC, an independent mining and
geological consulting firm that had not previously reported on the property, and
another consultant that carried out a site assay laboratory audit. The quality
control and data verification review performed as part of the Mineral Resource
and Reserve estimation at San Dimas noted poor quality data. For this reason
there are currently no Measured Mineral Resources, nor Proven Reserves stated.
Indicated Mineral Resources are estimated using a distance of approximately 15
metres from data and Inferred Mineral Resources are estimated 30 metres from
data. The Company has implemented revised quality control procedures and is
utilizing an external laboratory for all drill samples until equipment at site
can be replaced.

Mineral Resource and Mineral Reserve Estimates

As part of the Mineral Resource and Reserve estimation review AMC assisted
Primero in its review of the most appropriate estimation method currently
applicable at San Dimas and completed an independent Mineral Resource and
Reserve estimation for veins in the blocks which make up the current Mineral
Reserves. The remaining veins outside the December 2011 Mineral Reserves were
critically examined on the basis of support, and reclassified, mainly as
Inferred Mineral Resources. The Total Probable Reserves by Diamond Drilling
quoted in the previous (2010) statement, was included in this review.

Primero and AMC selected a block modeling approach using a kriging interpolation
method. The block modeling approach consisted of blocks 10 metres by 10 metres
by width of the vein, in dimension. The Mineral Resources were constrained in 15
individual geological models based on wireframes of the various veins. These
wireframes were modeled along the vein contracts, and were defined by structural
geology, quartz veining and mineral alteration. Grade capping was not considered
necessary based on the results of log probability plots of the accumulated gold
and silver grades.

Due to the quality of the data not being up to industry standards and after
discussions with Primero, a set of tasks was put in place in order to underpin
the Mineral Resources and Mineral Reserves. The most important activity involved
a review of the reconciliation process and the actual comparison based on the
laboratory figures to the metal in doré. The fact that San Dimas is an operating
mine that has been successfully producing precious metals for many decades means
that reconciliation is an important indicator of the reliability of Mineral
Resource and Mineral Reserve estimates, particularly when data underpinning
those estimates is of questionable reliability.

AMC decided that all block modeled resource should be classified as Indicated
Mineral Resource. The lack of Measured Resources reflects current concerns over
the reliability of the underlying data. However, it was decided that the
relatively conservative approach to the block modeled estimates, together with
support from mine to mill reconciliation, justified the Indicated Mineral
Resource classification. Classification is based as follows: Indicated Mineral
Resource approximately 15 metres from data, Inferred Mineral Resources 30 metres
from data, for the block modelled Mineral Resources. To convert Mineral
Resources to Mineral Reserves, mining dilution has been added and mining
recovery factors applied on an individual vein basis.

AMC has assumed that the current drill-jumbo and jackleg cut and fill mining
methods would continue to be practised at San Dimas, with respective minimum
mining widths of 3 metres and 1 metre. On a general basis, vein widths up to 2.2
metres have been assumed to be mined by jackleg, and those over 2.2 metres by
jumbo. For both jackleg and jumbo mining, unplanned dilution of 0.2 metres on
each side of the planned mining width and 0.2 metres of fill floor dilution has
been assumed. Overall average dilution, planned and unplanned, is estimated at
58%. For the Indicated Mineral Resource material in the 15 veins upon which the
Mineral Reserve estimate is based, the respective mined tonnes from jumbo and
jackleg mining are estimated at 45% and 55% respectively. A mining recovery
factor of 95% has been assumed, other than for the top 4 metres of sills where
the factor is 75%.

34

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The block model for each vein has parent block dimensions of 10 metres by 10
metres by the width of the vein with sub-celling to 2 metres by 2 metres x vein
width. For vein volume estimation, AMC has reviewed the vein in 10 metres
Easting sections at 2 metres height and has calculated a true vein width for
each section based on the average azimuth and dip of that section. Dilution for
each block has been added to the block volume calculation as per the above
minimum mining width and unplanned dilution factors.

Reserve
metal prices of $1,250/oz Au and $20/oz Ag have been adopted, with a Mine
Cut-off Grade of 2.52 g/t AuEq. Where all development to a given mining area is
in place, a Mining Block Cut-off Grade of 2.14 g/t AuEq has been used (Marginal
1-Type Ore). Where mining in a given vein is underway and a choice is to be made
on in-vein material being sent to the mill as ore or used as waste, a Cut-off
Grade of 0.75 g/t AuEq has been employed (Marginal 2-Type Ore). Percentages of
Marginal 1- and Marginal 2-Type Ores in the Reserves are 6% tonnes and 1% ounces
and 8% tonnes and 1% ounces respectively.

Cautionary Note to Investors Concerning Reserve
      EstimatesThe following Mineral Reserve estimates that have been
      calculated in accordance with NI 43-101, as required by Canadian
      securities regulatory authorities. For United States reporting purposes,
      SEC Industry Guide 7 under the Exchange Act, as interpreted by Staff of
      the SEC, applies different standards in order to classify mineralization
      as a reserve. As a result, the definitions of proven and probable reserves
      used in NI 43-101 differ from the definitions in the SEC Industry Guide 7.
      Under SEC standards, mineralization may not be classified as a reserve
      unless the determination has been made that the mineralization could be
      economically and legally produced or extracted at the time the reserve
      determination is made. Among other things, all necessary permits would be
      required to be in hand or issuance imminent in order to classify
      mineralized material as reserves under the SEC standards. Accordingly,
      mineral reserve estimates contained in this AIF may not qualify as
      reserves under SEC standards. In addition, disclosure of contained
      ounces is permitted disclosure under Canadian regulations; however, the
      SEC only permits issuers to report mineralization as in place tonnage and
      grade without reference to unit measures.


Cautionary Note to Investors Concerning Estimates of
      Indicated and Inferred ResourcesThis section uses the terms Indicated Mineral Resources
      and Inferred Mineral Resources. We advise investors that while such
      terms are recognized and required by Canadian regulations, the SEC does
      not recognize them. Inferred Mineral Resources have a great amount of
      uncertainty as to their existence, and great uncertainty as to their
      economic and legal feasibility. It cannot be assumed that all or any part
      of an Inferred Mineral Resource will ever be upgraded to a higher
      category. Under Canadian rules, estimates of Inferred Mineral Resources
      may not form the basis of feasibility or other economic studies, except in
      rare cases. Mineral Resources that are not Mineral Reserves do not have
      demonstrated economic viability. None of the following mineralization has
      been demonstrated to be ore nor is considered to be a Mineral Reserve.
      Investors are cautioned not to assume that all or any part of
      Indicated Mineral Resources will ever be converted into Mineral Reserves.
      Investors are also cautioned not to assume that any part or all of
      an Inferred Mineral Resource exists, or is economically or legally
      mineable. See Risk Factors.


Cautionary Note to Investors Concerning Technical
      Disclosure Not Supported by Technical ReportCertain technical disclosure in this AIF relating to the
      Mineral Resource and Mineral Reserve estimate for the San Dimas Mine (and
      the disclosure supporting such estimate, including quality assurance /
      quality control disclosure) has not been supported by a technical report
      prepared in accordance with NI 43-101. The technical report is being
      prepared by qualified persons under NI 43-101 and it will be available on
      the SEDAR website located at www.sedar.com under Primeros profile on or
      before May 15, 2012. Readers are advised to refer to that technical report
      when it is filed.


35

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The results of the estimation work are shown in the table below, which shows a
summary of the Mineral Resources and Mineral Reserves at December 2011. As noted
above, the Inferred Mineral Resource is a mix of block modeled and polygonal
estimates. The relevant cut off and price data is shown in the footnotes.

San Dimas Mine Mineral Resources and Mineral
        Reserves(as of December 2011)Tonnage
      
      Gold
      
      Silver
      
      Contained
      
      Contained(metric
      
      Grade
      
      Grade
      
      Gold
      
      SilverClassification
      
      Tonnes)
      
      (g/t)
      
      (g/t)
      
      (ounces)
      
      (ounces)ReservesProbable
      
      3,514,000
      
      4.5
      
      280
      
      505,000
      
      31,800,000ResourcesIndicated
      
      2,877,000
      
      6.2
      
      390
      
      577,000
      
      36,470,000Inferred
      
      5,833,000
      
      3.8
      
      320
      
      704,000
      
      60,770,000


|(1) | Mineral Resources include Mineral Reserves.                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | A 2 g/t AuEq cutoff grade is applied and the AuEq is
      calculated at a gold price of US$1,400 per troy ounce and silver price of
      US$25 per troy ounce.
|(3) | A constant bulk density of 2.7 tonnes/M3has
      been used.                                                                                                    

Notes to Mineral Reserves Statement

|(1) | Cutoff grade of 2.5 g/t AuEq, based on total operating
      cost of US$98.5/t. Metal prices assumed are Au  US$1,250 per troy ounce
      and Ag  US$20 per troy ounce. Silver supply contract obligations have
      been referenced in determining overall vein reserve estimate
    viability.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Processing recovery factors for gold and silver of 97%
      and 94% assumed.                                                                                                                                                                                                                       
|(3) | Exchange rate assumed is 13
  pesos/US$1.00.                                                                                                                                                                                                                                                        

As a simple sensitivity exercise, prices of US$1,700/oz for Au and US$30 for Ag
were applied to the final reserve estimate, giving a total of 3.8 m tonnes at
4.2 g/t Au and 270 g/t Ag for 514,000 oz Au and 32 m oz Ag. AMC believes that a
more detailed assessment at these metal prices would result in a further
incremental increase in tonnes and Au ounces with an incremental decrease in
grade.

Cautionary Note to Investors Concerning Exploration
      PotentialNI 43-101 permits the inclusion of disclosure regarding
      the potential quantity and grade, expressed as ranges, of a target for
      further exploration provided that the disclosure (i) states with equal
      prominence that the potential quantity and grade is conceptual in nature,
      that there has been insufficient exploration to define a mineral resource
      and that it is uncertain if further exploration will result in the target
      being delineated as a mineral resources, and (ii) states the basis on
      which the disclosed potential quantity and grade has been determined.
      Disclosure regarding exploration potential has been included in this
      Annual Information Form. United States investors are cautioned that
      disclosure of such exploration potential is conceptual in nature by
      definition and there is no assurance that exploration of the mineral
      potential identified will result in any category of NI 43-101 Mineral
      Resources being identified.


There is significant exploration potential at San Dimas in addition to the
stated Mineral Resources and Mineral Reserves. The scale of the identified
targets is in the order of 6-10 million tonnes at grade ranges of 3-5 grams per
tonne of gold and 200-400 grams per tonne of silver. This potential
mineralization has been estimated from geological and grade modelling, and
includes portions of the previously reported (2010) Mineral Resource that have
been excluded from the 2011 Mineral Resource base. These targets are conceptual
in nature. There has been insufficient exploration to define an associated
Mineral Resource and it is uncertain if further exploration will result in the
targets being delineated as a Mineral Resource.

36

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Mining Operations

The mines of the San Dimas district consist of five underground gold and silver
mining operations and include the West Block, the Sinaloa Graben Block, the
Central Block, the Tayoltita and the Santa Rita mines. With the current and near
term mine plans, the Central Block is scheduled to provide the majority of the
San Dimas mine production during 2012. Production is programmed to come from 11
veins (46 stopes) in the Central Block. With completion of the San Luis Tunnel,
development of the Central Block has evolved to connect with the West Block
mining area. This mining area is characterized by veins that dip 75° with
variable widths and is currently being developed as an important mining area for
San Dimas. The typical mining operations employ mechanized cut-and-fill mining
using load, haul and dump equipment. Primary access is provided by adits and
internal ramps from an extensive tunnel system through the steep mountainous
terrain. All milling operations are now carried out at a central milling
facility at Tayoltita which has a capacity of 2,100 tpd. The ore processing is
by conventional cyanidation followed by zinc precipitation of the gold and
silver followed by refining to doré.

The West Block Antonio Mill operation was put into care and maintenance in
November 2003 with all milling consolidated to the Tayoltita Mill and all former
San Antonio mine production considered part of the Central Block Mine operation.
In 2011, the mill averaged 1,950 tpd (340 days of operations).

The production from the San Dimas operations in 2011 was 662,612 tonnes at an
average grade of 3.86 g Au/t and 226 g Ag/t for production of 79,564 oz gold and
4.6 million oz silver at recoveries of 97% and 94%, respectively. In 2010,
production was 612,253 tonnes at an average grade of 4.46 g Au/t and 244 g Ag/t
for production of 85,429 oz gold and 4.53 million oz silver at recoveries of 97%
and 94%, respectively. Information regarding 2010 production prior to the August
6, 2010 acquisition of the San Dimas Mine by Primero was from the previous owner
of the San Dimas Mine.

Operating costs for San Dimas Mines during 2011 averaged US$98.72 per tonne. The
San Dimas operations have achieved reductions in operating costs by increasing
the scale of operations as well as improvements in efficiencies of operating
methods. All operations will incur some increase in operating costs associated
with future tailings operations and associated environmental monitoring, and
ongoing inflation within the mining industry.

The following summarizes the performance of the San Dimas milling operations
  during 2011 and 2010.

|                       |  | Year Ended   |  |  | Year Ended   | 
|---------------------- |  | ------------ |  |  | ------------ | 
|                       |  | December 31, |  |  | December 31, | 
|                       |  | 2011         |  |  | **2010(1)**  | 
|Tonnes milled          |  | 662,612      |  |  | 612,253      | 
|Average Grade Au (g/t) |  | 3.86         |  |  | 4.46         | 
|Average Grade Ag (g/t) |  | 226          |  |  | 244          | 
|Average Recovery (Au)  |  | 97%          |  |  | 97%          | 
|Average Recovery (Ag)  |  | 94%          |  |  | 94%          | 
|Recovered Oz (Au)      |  | 79,564       |  |  | 85,429       | 
|Recovered Oz (Ag)      |  | 4,602,844    |  |  | 4,532,006    | 

|(1) | Primero acquired the San Dimas Mine on August 6, 2010.
      Includes operating information from the previous owner of the San Dimas
      Mine.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------

The Tayoltita mill presently employs two-stage crushing and two ball mills (12
x 14) that can operate simultaneously or separately to achieve 70% to 75%
passing 200 mesh. Leaching is completed in a series of tanks providing 72 hours
of leach residence time. The pregnant solution is recovered in a counter current
decant (CCD) circuit with the gold and silver recovered from solution in a
zinc precipitation circuit. Two pumping systems have been installed to transport
the high density tailings (53% solids) slurry to a box canyon 1,847 metres east
and up 125 metres from the mill site for permanent disposal. Refining uses an
induction furnace to produce 1,000 oz gold and silver doré bars (average 98%
pure).

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The Tayoltita Mill has undergone a series of plant expansions over its operating
life which has resulted in two small ball mills in parallel as well as a series
of small tanks in the leaching and CCD circuit. An expansion at Tayoltita in
2003 increased the nominal capacity to 2,300 tpd (or 2,150 tpd at 94% mill
availability) to replace the capacity required for shutdown of the San Antonio
Mill. For 2011, the Tayoltita Mill operated at 1,950 tpd. The 2,150 tpd
expansion since 2003 included a new cone crusher and dust collection/system and
the installation of a 1,000 hp ball mill providing two stage grinding and the
Putzmeister tailings pump. The expansion retrofitted a number of existing tanks
for higher capacity for solid liquid separation. Included in the expansion were
increased automation and process controls as well as a general upgrade of the
plant power distribution and control system. To achieve 850,000 tpa Primero will
have to expand the mill capacity to a nominal capacity of approximately 2,500
tpd. Primero 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 begin to determine the optimal mill size given the
ability for the mine to explore and develop new mining areas while optimizing
current mining processes.

Las Truchas Hydro Generating Power Plant/ Line

The construction of the Las Truchas hydro generation power line that began in
2005 was completed in 2008. This 34 kVA power line from the Las Truchas Dam, 42
kilometres north of the San Dimas Mine, has expanded the former available power
from 1.4 MW to 7.0 MW (Stage 1) and reduced power costs from 11 cents/kWh to 1.5
cents/kWh. More than US$33.0 million has been invested since 2005 to complete
Stage 1, which involved both the relocation of the town at the dam site and the
construction of a new power house. The Company is considering installing
additional turbines at a lower elevation point in the river to increase the
power generation of the Las Truchas facility from 50 GW to 150 GW.

Tayoltita Tailings

The very rugged mountainous terrain and steep walled canyons in the San Dimas
district have presented formidable challenges to tailings management as the
scale of operations grew and storage areas were depleted. The Tayoltita
operation has developed numerous tailings disposal sites in the valley near the
mill and in more recent years, the tailings dam has been moved up the valley to
the east of the mill. At that time the operation relied on 10 pumping stations
to elevate the tailings to the containment site. The operation included the
tailings line and solution return line on cable supports to cross the river
valley without any provisions for spill containment in the event of a line
failure.

The historical construction practice has been to gradually build containment
basins on the steep hillsides using thickened tailings while continuously
decanting the solutions for recycle to the mill. On abandonment, the dried
tailings were left to dehydrate and efforts to establish a natural vegetation
cover have been undertaken. The abandoned dams in the area are subject to
erosion and instability until remediation measures are taken. On three of the
older tailings dams near the Tayoltita mill, the land has been reclaimed for use
as a soccer field, a softball field, and a garden nursery.

Monitoring of the Piaxtla River downstream of the Tayoltita tailings deposits
has not shown any environmental impact on the water quality, but it may be
impacted with higher suspended solids in periods of heavy rainfall. Under the
current San Dimas plan, the Tayoltita Mill operation and future expansion will
process all ore mined in the district with all tailings deposited in the
currently active Cupias tailings disposal dam. Over the past few years
significant capital improvements have been made at the Tayoltita tailings
operation and further improvements to the dam and operating practices are
planned.

During 2007, stages II and III of the AMEC (a geotechnical consulting company,
based in Vancouver) remediation of the Tayoltita tailings dam were completed
with the reinforcement of the dam bank with the compaction of 621,800 cubic
metres of borrowed material. The 10 relay tailings pumping stations were
replaced with three positive displacement pumps operating in parallel and a new
tailings pumping system installed with the capacity to pump high density
tailings (53% solids) a distance of 1,847 metres and up a 125 metres difference
in elevation to the dam. High capacity thickeners have been added to the mill to
increase the tailings density and reduce the solution containment, hydrostatic
heads, and return capacity required at the tailings dam. At the river crossing,
the tailings lines are suspended in a spill recovery trough with provision to
divert any spills into a containment area.

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Construction of the initial phase of an earthen berm against the downstream side
of the dam was completed to increase the safety factor of the containment
structure. During the past year, the most important works were the construction
of the third belt filter, comprising excavating the foundation, constructing the
building, filter and auxiliary equipment installation and filter
instrumentation. This filter allows the operation of the process plant to filter
up to 2,100 tpd in a continuous way.

On January 3, 2012, tailings containing 5 ppm cyanide was spilled into the
Piaxtla River, impacting a total area of 2.5 kilometres. The spillage was the
result of a hole that developed in a tailings pipe. The Company notified Mexican
governmental authorities of the accident. The Mexican federal attorney for
environmental protection, PROFEPA, and the Mexican national water commission,
CNA, visited the site in January 2012. The Company understands that both the
PROFEPA and the CNA considered the spillage to be localized. On January 5, 2012,
the municipality of San Dimas, Durango, Mexico confirmed in a letter to the
Company that they considered the incident as localized and under control. The
letter specifies that the efficiency of the emergency response limited the
damages to death of small concentrations of fish, without any impact on animals.
Following the spill, the Company has taken a number of corrective actions
including building a temporary containment structure for the tailings pipe
(design specifications for a permanent solution are under consideration) and
conducting a preliminary assessment to confirm that there is no residual impact
to Piaxtla River aquatic life (an external expert will conduct a further
assessment during the second quarter of 2012). The CNA will remit the final
report and impose fines, if any, against the Company following their receipt of
PROFEPAs final report and recommendations. See Risk Factors  San Dimas
Tailings Management Risks.

San Antonio Tailings

Due primarily to the exhausted capacity of the tailings dam, the San Antonio
Mill was shutdown in 2003. The tailings dam site is located in a turn in a steep
walled river canyon downstream of the mill operation. The river has been
diverted through two tunnels which have been excavated in the canyon wall on the
inside of the river bend. A third tunnel for road access has been excavated and
also serves as an additional channel for the river in high flow periods. In the
2002 due diligence by Wheaton River, the San Antonio tailings dam was identified
as a risk to failure due to a low safety factor in the dam, risk associated with
an unknown hydrostatic head in the active tailings deposition area, and possible
erosion due to a flood event in the adjacent river.

Since the shutdown of the mill operations, some of the risk has been removed by
elimination of the hydrostatic head in the dam and diversion of a local drainage
channel. It has been proposed that the dam safety factor be increased by
extending the concrete wall on the upstream side of the dam and protection of
the downstream side by covering with mine waste rock. These measures would also
decrease the erosion potential of the tailings. Some of this work has been
initiated while options to close and reclaim the tailings dam were studied. DMSL
received approval to reclaim the San Antonio dam by stabilizing the tailings in
their current location after an environmental assessment, which demonstrated the
validity of the plan, was submitted. A scale model was developed that through a
series of tests determined the best design from the hydraulic aspect and to
determine if some of the design features needed to be augmented. During 2007, in
agreement with the design by Knight Piesold (Canadian geotechnical consultant),
the emplacement of rock filled berm began with about 60% completed, however, the
rains and lack of an access road significantly affected progress.

During 2008, the works were completed with a cover of compacted concrete on the
dam face that will form a three step waterfall in the case of a maximum flow of
water (rainfall). The present hydraulic dam design was confirmed during 2008
through a series of tests.

In the last three years, a monitoring phase on the downstream slope was carried
  out in order to determine if settlement caused by the construction of the rock-fill
  for the stability on the slope were suitable to place a concrete cover on top
  of it. The study was completed and the settlements in the last year was minimal,
  leading the Company to conclude that the concrete can be placed without being
  affected by these settlements.

Environmental Capital Expenditures

Capital expenditures for environmental purposes since 2004 totalled
approximately US$13.9 million at Tayoltita/Cupias and US$9.8 million at San
Antonio. The storage capacity at Cupias is more than 30 years (at a mill rate of 2,500 tpd). In 2011, approximately $1.5 million was
spent installing a third tailings filter (the project was started in 2010). The
full project was completed by December 31, 2011 at a total cost of $3.2
million.

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RISK FACTORS

The operations of the Company are speculative due to the high-risk nature of its
business which is the acquisition, financing, exploration, development and
operation of precious metals properties. These risk factors could materially
affect the Companys future operating results and could cause actual events to
differ materially from those described in forward-looking statements relating to
the Company.

Exploration, Development and Operating Risk

Primeros activities are primarily directed towards mining operations at the San
Dimas Mine. Primeros activities also include the exploration for and
development of mineral deposits.

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,
  delaying or indefinite postponement of exploration, development or production,
  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. See Business of Primero  San Dimas Mine
   Environmental Matters for the San Dimas Mine.

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 the 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, Primeros financial results and its 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 Mine is dependent on gold and
silver prices that are adequate to make these properties economic.

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Also, Mineral 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 its mining properties and increased amortization, reclamation and
closure charges. See Risk Factors  Silver Contract and Taxes for a discussion
of risks associated with a material write-down of Primeros investment in its
mining properties.

Further, see Risk Factors  Silver Contract and Taxes for a discussion of
risks associated with taxes and the Amended and Restated Silver Purchase
Agreement relating to an increase in silver prices.

Silver Contract and Taxes

As part of the acquisition of the San Dimas Mine, Primero assumed obligations
under two silver purchase agreements. Primeros Mexican subsidiary, Primero
Empresa, is obligated to sell all the silver produced at the San Dimas Mine, to
certain annual thresholds, to Primeros Barbadian subsidiary, 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 US$4 per ounce (adjusted for inflation) and the prevailing market
price. Silver Trading is obligated to sell all of the silver purchased to SW
Caymans at the lesser of approximately US$4 per ounce (adjusted for inflation)
and market prices.

Prior to the Company filing its formal application to the Mexican tax
authorities for an advance ruling on the Companys restructuring plan, Primero
Empresa 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 US$4 per ounce and market prices had no tax benefit since Barbados
is a low tax jurisdiction. Therefore, from a consolidated perspective, the
silver sales to SW Caymans realized approximately US$4 per ounce; however, the
Company recorded income taxes based on sales at market prices.

Having filed the formal application to the Mexican tax authorities for an
advance ruling on the Companys restructuring plan, the Company now records
revenues on silver sales to SW Caymans at realized prices and remits income tax
to the Mexican tax authorities on the same basis. Should the Company fail in its
application and have to revert to paying taxes on sales to SW Caymans based on
the market price of silver, the Company will immediately have to pay all taxes
due but will incur no penalty for taxes not paid for the duration of the
application process. Throughout the application process, the Company intends to
identify the potential tax as a contingent liability.

In the event that the Company has to revert to paying taxes based on the market
price of silver for all sales to SW Caymans, the higher the market price of
silver, the greater amount of taxes Primero Empresa will record and have to pay.
Until recently, the market price of gold has moved 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 contingent liability in
respect of such an adverse ruling as at December 31, 2011 is $28.6 million, of
which $18.8 million has already been paid by the Company in cash prior to the
filing of the formal application in respect of 2010 and 2011 silver sales; as
such, the cash that would have to be paid to satisfy the contingent liability at
December 31, 2011 is $9.8 million. Since the Company intends to continue to
record taxes in Mexico based on realized prices, the contingent liability will
grow during the formal application 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 SW Caymans
will increase over time under the Amended and Restated Silver Purchase Agreement
(see Business of Primero  Amended and Restated Silver Purchase Agreement),
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 Promissory Note held by Goldcorp and under the Promissory
Note held by Goldcorps Luxembourg subsidiary 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
Promissory 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 Promissory Note and under the Promissory Note. In the event that
such holders declare obligations under the Convertible Promissory 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 Promissory Note or the Promissory Note, an event
of default will occur under the Amended and Restated Silver Purchase Agreement.
Upon the occurrence of an event of default under the Amended and Restated Silver
Purchase Agreement, SW Caymans, at its option, may take any or all of the
following actions (i) declare all amounts thereunder due and payable, (ii)
terminate the Amended and Restated Silver Purchase Agreement, or (iii) enforce
its security under the Amended and Restated Silver Purchase Agreement.

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Also, in the event that the Company has to revert to paying taxes based on the
market price of silver for all sales to SW Caymans, the Companys cash flow may
not be sufficient to meet certain financial covenants under the Convertible
Promissory 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 Promissory Note and the
Promissory Note are not met.

See Risk Factors  Commodity Prices for a discussion of risks associated with
decline in silver prices.

Uncertainty in the Estimation of Reserves and Mineral
Resources

The figures for Mineral Reserves and Mineral Resources contained in this Annual
Information Form 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 Mineral
Reserves could be mined or processed profitably. There are numerous
uncertainties inherent in estimating Mineral Reserves and Mineral Resources,
including many factors beyond Primeros control. Such estimation is a subjective
process, and the accuracy of any Mineral Reserve or Mineral 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 Mineral 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 Mineral Reserves
mined and processed and recovery rates may not be the same as currently
anticipated. Any material reductions in estimates of Mineral Reserves and
Mineral Resources, or of Primeros ability to extract these Mineral 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 Promissory Note and under the Promissory Note held by Goldcorps
Luxembourg subsidiary that could constitute an event of default. See Risk
Factors  Silver Contract and Taxes for a discussion of risks associated with
an impairment loss and a material write-down of Primeros investment in its
mining properties. See Introductory Notes  Cautionary Note to United States
Investors.

Uncertainty Relating to Inferred Mineral Resources and
Exploration Potential

Inferred Mineral Resources that are not Mineral Reserves do not have
demonstrated economic viability. Due to the uncertainty which may attach to
Inferred Mineral Resources, there is no assurance that Inferred Mineral
Resources will be upgraded to Mineral Resources with sufficient geological
continuity to constitute Proven and Probable Mineral Reserves as a result of continued exploration.
The 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 Mineral Resources being identified.

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Need for Additional Mineral Reserves

Because the San Dimas Mines have limited lives based on 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

As a result of completion of the Acquisition, Primero has significant
consolidated indebtedness, which includes the indebtedness to a wholly-owned
Luxembourg subsidiary of Goldcorp under the Promissory Note and the indebtedness
to Goldcorp under the Convertible Promissory Note. As a result of this
indebtedness, Primero is required to use a portion of its cash flow to service
principal and interest on its debt, which limits the cash flow available for
other business opportunities.

Primeros indebtedness could have important consequences to Primero and the
value of the Common Shares, 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 indicated to service
    the debt;
- increasing Primeros vulnerability to general adverse economic and
    industry conditions;
- 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 Amended and Restated 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 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.

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Exchange Rate Fluctuations

Exchange rate fluctuations may affect the costs that Primero incurs in its
operations. Revenues from sales of gold and silver from the San Dimas Mine are
in United States dollars, whereas the Companys expenses associated with gold
and silver production are incurred principally in United States dollars,
Canadian dollars and Mexican pesos. In the recent past, the Mexican peso has
experienced high volatility which has affected the results of operations of the
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 Mines 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 sell or lease lands directly to a private entity, it also may 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 agreements with
the Ejidos that impact the San Dimas Mine, some of these agreements may be
subject to renegotiation. Changes to the existing agreements may have a
significant impact on operations at San Dimas Mine. In the event that the
Company conducts activities in areas where no 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 properties that comprise the San Dimas
Mine are subject to four separate legal proceedings commenced by local Ejidos
where the local Ejido is seeking title to the property.

The first proceeding was brought without the knowledge of DMSL and resulted in
an initial order 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. In the event that annulment proceedings are not
successful, then the Company plans to pursue negotiation of a temporary
occupancy agreement with the Ejido. If the Ejido refuses to negotiate a
temporary occupancy permit, then the Company plans to initiate proceedings under
Mexican law which provide for priority rights for mining activities.

The remaining proceeding were brought by the local Ejido claiming ownership of
the properties on the principal of adverse possession or acquisition by
prescription, which are methods of acquiring ownership rights to property,
against the owner and other third parties, through possession of the property
for an uninterrupted period of time. The Company is not a party to any of these proceeding.
In the event that the Ejido is successful in its proceedings, the Company will
take steps to annul the verdict or commence an action as an affected third
party. 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.

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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.

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. Primero did not complete an
environmental audit or other comparable environmental due diligence in
connection with the Acquisition.

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.

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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. See Risk Factors  San Dimas Tailings
Management Risks.

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.

San Dimas Tailings Management Risks

As a result of a hole that developed in a tailings pipe on January 3, 2012,
tailings from the San Dimas Mine spilled into the Piaxtla River. The Company has
since taken a number of corrective actions including building a temporary
containment structure for the tailings pipe while a permanent solution is
currently being designed. The Mexican governmental authorities consider the
spillage localized and under control. Following the spillage, the Company has
taken a number of corrective actions including building a temporary containment
structure for the tailings pipe and conducting an assessment to confirm that
there is no residual impact to Piaxtla River aquatic life. The Mexican
authorities may impose fines although any fines would not be expected to be
significant. See Business of Primero  San Dimas Mine  Environmental Matters
for the San Dimas Mine.

Although Primero believes the design and operation of tailings containment sites
  in the San Dimas district comply 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.
  Further amounts were spent in 2006 and 2007 to remediate the Tayoltita tailings
  dam, including completing the reinforcement of the dam bank with the compaction
  of 621,800 cubic metres of borrowed material and replacing the 10 relay tailings
  pumping stations with three positive displacement pumps operating in parallel
  with the capacity to pump high density tailings (53% solids) a distance of 1,847
  metres and up a 125 metres difference in elevation to the dam. In addition,
  high capacity thickeners were added to the mill to increase the tailings density
  and reduce the solution containment and the tailings lines above the river were
  suspended in a spill recovery trough with provision to divert any spills into
  a containment area. In 2009, two basins were constructed in the back of the
  dam to collect and neutralize the contact water (the water that
  falls on the dam) that could contaminate the dry tailings deposited and a second
  basin (in series with the previous basin) in case the first basins capacity
  is exceeded. A perimeter wire fence was also constructed around the tailings
  dam area to neutralize the contact water dam area to limit the access by persons
  and animals. The project included the construction of a seepage drainage and
  collection channel below the dam.

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 before and after it acquired 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.

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The Asset Purchase Agreement and the Share Purchase Agreement do not provide for
any indemnities from DMSL and GSBL (together the San Dimas Vendors) against
any potential environmental liabilities, including, but not limited to, those
that may arise from possible failure of the San Antonio tailings dam. Primero
has indemnified DMSL for any future environmental claims or liabilities.

Labour and Employment Matters

In March 2011, a strike by the union of millworkers stopped production for a
month. The Company believes that its current relations with employees and the
unions are good. Production at the San Dimas Mine will continue to be 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.

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 plans to maintain 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. Further, Primero has
agreed not to acquire any mineral interest in Mexico that is within 20
kilometres of any mineral property in Mexico owned by Goldcorp and its
affiliates.

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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; 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 Amended
and Restated 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 currently
conducted in Mexico, and as such Primeros operations are exposed to various
levels of political, economic and other risks and uncertainties. These risks and
uncertainties include, but are not limited to, terrorism; organized crime;
hostage taking; military repression; theft; 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.

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.

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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. Wade Nesmith and Mr. Eduardo Luna are each directors of Silver Wheaton, with
which the Company has entered into the Amended and Restated Silver Purchase
Agreement, and Mr. Timo Jauristo and Mr. Rohan Hazelton are each officers of
Goldcorp, from which the Company acquired the San Dimas Mine. 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.

Potential Unknown Liabilities Associated with the
Acquisition

The San Dimas Assets and the shares of Silver Trading were acquired on an as
is, where is basis and the representations and warranties and indemnities
provided by the San Dimas Vendors in respect of the San Dimas Assets are
limited. Consequently, the recourse the Company may have against the San Dimas
Vendors is limited. Further, there may be liabilities that the Company failed to
discover or was unable to quantify in its due diligence. The Company may not be
indemnified for some or all of these liabilities.

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Additional Debt

The Companys ability to incur additional indebtedness and to secure additional
indebtedness is limited under the Amended and Restated Silver Purchase
Agreement. The Amended and Restated Silver Purchase Agreement permits the
Company to incur additional financial indebtedness up to US$50 million, subject
to increase after three years after payout of the Promissory Note and subject to
satisfaction of certain financial covenants. These limitations restrict the
additional indebtedness that the Company may incur, with the result that the
Company may not be able to pursue capital expansions, additional exploration
programs, acquisitions, or other components of its future business plans.

Significant Shareholder

Goldcorp owns approximately 35.3% of the issued and outstanding Common Shares,
other than Common Shares issuable upon the conversion of the Convertible
Promissory Note. Goldcorp is entitled to maintain this proportionate ownership
interest and is entitled to proportionate Board representation. The current DMSL
Director Nominees on the Board are Mr. Jauristo and Mr. Hazelton. Subject to
applicable law, Goldcorp may be able to effectively cause or prevent a change in
control of the Company.

DIVIDENDS

The Company has paid no dividends since its incorporation and currently has no
plans to do so in the foreseeable future.

CAPITAL STRUCTURE

Primeros authorized share capital consists of an unlimited number of Common
Shares without par value and an unlimited number of preferred shares without par
value. As of December 31, 2011, there were 88,259,831 Common Shares issued and
outstanding as fully paid and non-assessable and no preferred shares issued and
outstanding. As of the date of the AIF, 88,259,831 Common Shares of the Company
are issued and outstanding and no preferred shares are issued and
outstanding.

Common Shares

Subject to the rights of the holders of the preferred shares of the Company,
  holders of Common Shares of the Company are entitled to dividends if, as and
  when declared by the directors. Holders of Common Shares of the Company are
  entitled to one vote per Common Share at meetings of shareholders except at
  meetings at which only holders of a specified class of shares are entitled to
  vote. Upon liquidation, dissolution or winding-up of the Company, subject to
  the rights of holders of preferred shares, holders of Common Shares of the Company
  are to share ratably in the remaining assets of the Company as are distributable
  to holders of Common Shares. The Common Shares are not subject to call or assessment
  rights, redemption rights, rights regarding purchase for cancellation or surrender,
  or any pre-emptive or conversion rights.

Preferred Shares

Preferred shares may be issued from time to time in one or more series, ranking
equally on winding-up, to repayment of the amount paid up on such shares, and to
carry and be subject to, as a class, the following special rights and
restrictions pertaining to (but not limited to) dividends, redemption or
purchase rights, rights of retraction, rights of conversion, terms and
conditions of any share purchase plan or sinking fund, rights upon dissolution
of the Company, and voting, as the directors of the Company may, from time to
time, determine by resolution. Currently the preferred shares rank in priority
over Common Shares as to dividends and return of paid up capital upon
dissolution or winding up of the Company. Holders of preferred shares are not
entitled to notice or to vote at meetings of shareholders (except where holders
of a specified class or series are entitled to a separate vote in accordance
with the Act). The Company may at any time purchase for cancellation or redeem
the preferred shares that may be issued and holders of preferred shares may require
the Company to retract such shares in accordance with the terms upon which such
have been issued.

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Options and Warrants

As of the date of this AIF, the Company also had outstanding obligations to
  issue up to 29,374,490 Common Shares, as follows:

- warrants to purchase an aggregate of 20,800,000 Common Shares at a price of
  $8.00, expiring on July 20, 2015; and
- stock options to purchase an aggregate of 8,574,490 Common Shares at a
  price ranging from $2.70 to $6.00, expiring between July 29, 2013 and November
  8, 2016, all of which are governed by the Companys amended and restated 10%
  rolling stock option plan, which was approved by shareholders on June 28, 2010
  and became effective on August 19, 2010.

Promissory and Convertible Promissory Notes

As part of the purchase price for the San Dimas Mine, the Company issued to
DMSL:

- a subordinate secured promissory note in the principal amount of US$50
  million (the Promissory Note), which DMSL subsequently assigned to a
  wholly-owned Luxembourg subsidiary of Goldcorp and of which US$5 million plus
  interest was repaid on December 31, 2011; and
- a US$60 million principal amount subordinate secured convertible promissory
  note with a term of one year, subject to a one year extension (the
  Convertible Promissory Note), which DMSL subsequently assigned to Goldcorp
  and of which US$30 million was repaid on October 19, 2011.

The Promissory Note and the Convertible Promissory Note are secured by the San
Dimas Mine and by a guarantee of the Company.

Promissory Note

The principal amount of the Promissory Note bears interest at a rate of 6% per
annum until fully repaid, which interest will be payable annually on December 31
of each year. The principal will be repaid in equal annual instalments of $5
million during each of the four years beginning on December 31, 2011, with the
balance of the unpaid principal being repaid on December 31, 2015, provided that
if the free cash flow from the San Dimas Mine exceeds $40 million in any year,
then 50% of such excess will be used to repay the Promissory Note. On July 12,
2011, the Promissory Note was amended whereby the definition of Tangible Net
Worth was modified to include the total of equity plus the total dollar amount
recorded as the value of share purchase warrants of Primero less intangibles as
characterized under IFRS. On December 31, 2011, the Company made a payment of
US$5 million plus interest with respect to the Promissory Note.

Convertible Promissory Note

The Convertible Promissory Note carries an annual interest rate of 3%, is
convertible by Goldcorp into Common Shares at $6.00 per share (with the
principal amount owing converted into Canadian dollars by multiplying such
amount by 1.05, which was the approximate exchange rate at the time of the
Acquisition), and is repayable at maturity by the Company in cash or Common
Shares.

Goldcorp had the option to extend the term of the note by one year if the
Company exercised its option to convert at the maturity date. On July 20, 2011,
the Company served notice to Goldcorp to convert the Convertible Promissory Note
into Common Shares and, on August 4, 2011, Goldcorp elected to extend the term
of the Convertible Promissory Note by one year. On October 19, 2011, the Company
paid US$30 million of the Convertible Promissory Note.

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As Goldcorp elected to extend the term of the Convertible Promissory Note by one
year, and the Company did not pay the principal amount in cash immediately, the
Company now has the option to convert the Convertible Promissory Note to shares
on the second maturity date at a price equal to the greater of (a) the 90% of
the volume weighted average trading price of the Common Shares for the five
trading days ending immediately prior to the first maturity date, which was
$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 $3.74
per Common Share and the Company would issue 8,422,460 Common Shares to
Goldcorp.

Under the terms of the Convertible Promissory Note, while the Convertible
Promissory Note is outstanding, the Company is required to apply the proceeds
from any exercise of the warrants, and any further public or private equity
offering of securities of the Company, to the repayment of the Convertible
Promissory Note.

On July 12, 2011, the Convertible Promissory Note was amended whereby the
definition of Tangible Net Worth was modified to include the total of equity
plus the total dollar amount recorded as the value of share purchase warrants of
Primero less intangibles as characterized under IFRS.

MARKET FOR SECURITIES

Common Shares

The Companys Common Shares are traded on the TSX under the symbol P.
  Commencing on August 15, 2011, the Companys Common Shares began trading
  on the NYSE under the symbol PPP. The following table shows the
  high and low trading prices and monthly trading volume of the Common Shares
  of Primero on the TSX for the periods listed:

|Period        |  | High (CDN$) |  | Low (CDN$) |  | Volume    
|------------- |  | ----------- |  | ---------- |  | ----------
|2011          |  |             |  |            |  |           
|January       |  | 4.70        |  | 3.85       |  | 8,057,125 
|February      |  | 4.48        |  | 3.95       |  | 3,075,666 
|March         |  | 4.14        |  | 3.38       |  | 7,517,330 
|April         |  | 5.09        |  | 3.64       |  | 7,244,945 
|May           |  | 4.95        |  | 4.32       |  | 3,934,388 
|June          |  | 4.37        |  | 3.03       |  | 7,834,543 
|July          |  | 4.60        |  | 3.17       |  | 14,034,202
|August        |  | 4.59        |  | 3.38       |  | 9,985,165 
|September     |  | 3.70        |  | 2.31       |  | 11,686,409
|October       |  | 3.13        |  | 2.51       |  | 2,800,524 
|November      |  | 3.62        |  | 2.71       |  | 5,234,061 
|December      |  | 3.70        |  | 3.07       |  | 3,162,148 
|2012          |  |             |  |            |  |           
|January       |  | 3.78        |  | 3.08       |  | 4,301,453 
|February      |  | 3.23        |  | 2.75       |  | 5,057,603 
|March 1 to 29 |  | 2.91        |  | 2.28       |  | 3,880,581 

Common Share Warrants

The Companys common share warrants are traded on the TSX under the symbol
  P.WT. The following table shows the high and low trading prices
  and monthly trading volume of the common share warrants of Primero on the TSX
  for the periods listed:

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|Period        |  | High (CDN$) |  | Low (CDN$) |  | Volume   
|------------- |  | ----------- |  | ---------- |  | ---------
|2011          |  |             |  |            |  |          
|January       |  | 1.52        |  | 1.06       |  | 76,258   
|February      |  | 1.33        |  | 1.20       |  | 114,520  
|March         |  | 1.25        |  | 1.00       |  | 102,201  
|April         |  | 1.30        |  | 0.88       |  | 1,419,374
|May           |  | 1.24        |  | 0.98       |  | 314,170  
|June          |  | 0.96        |  | 0.49       |  | 429,430  
|July          |  | 0.90        |  | 0.61       |  | 2,147,466
|August        |  | 0.90        |  | 0.45       |  | 1,840,185
|September     |  | 0.65        |  | 0.40       |  | 970,501  
|October       |  | 0.52        |  | 0.355      |  | 199,700  
|November      |  | 0.53        |  | 0.36       |  | 1,002,152
|December      |  | 0.49        |  | 0.275      |  | 504,250  
|2012          |  |             |  |            |  |          
|January       |  | 0.44        |  | 0.27       |  | 1,114,535
|February      |  | 0.40        |  | 0.27       |  | 280,490  
|March 1 to 29 |  | 0.34        |  | 0.20       |  | 262,337  

Prior Sales

During the financial year ended December 31, 2011, Primero issued or granted
  the following Common Shares or securities convertible into Common Shares:

|                       |  | Number and Type of            |  | Issue or Exercise 
|---------------------- |  | ----------------------------- |  | ------------------
|Date of
      Issuance |  | Securities Issued             |  | Price Per Security
|January 17, 2011       |  | 41,666 Common
      Shares(1) |  | $2.00             
|March 7, 2011          |  | 175,000 stock options         |  | $3.99(3)          
|April 4, 2011          |  | 81,738 Common
      Shares(1) |  | $1.60             
|April 19, 2011         |  | 7,500 Common Shares(1)        |  | $2.00             
|April 25, 2011         |  | 10,000 Common
      Shares(1) |  | $1.60             
|April 26, 2011         |  | 4,583 Common Shares(1)        |  | $1.60             
|June 6, 2011           |  | 39,166 Common
      Shares(1) |  | $2.00             
|June 12, 2011          |  | 6,416 Common Shares(1)        |  | $2.00             
|June 13, 2011          |  | 4,512 Common
      Shares(1)  |  | $1.60             
|June 13, 2011          |  | 71,082 Common Shares(1)       |  | $2.00             
|June 16, 2011          |  | 13,750 Common
      Shares(1) |  | $2.00             
|June 21, 2011          |  | 33,000 Common Shares(1)       |  | $2.00             
|June 22, 2011          |  | 41,666 Common
      Shares(1) |  | $2.00             
|June 23, 2011          |  | 20,832 Common Shares(1)       |  | $2.00             
|June 27, 2011          |  | 333 Common
      Shares(1)    |  | $2.00             
|June 28, 2011          |  | 82,499 Common Shares(1)       |  | $2.00             
|June 28, 2011          |  | 3,750 Common
      Shares(2)  |  | $3.00             
|June 28, 2011          |  | 15,000 Common Shares(2)       |  | $2.70             
|June 30, 2011          |  | 33,333 Common
      Shares(1) |  | $2.00             
|November 8, 2011       |  | 300,000 stock options         |  | $3.47(3)          
|November 29, 2011      |  | 10,000 Common
      Shares(2) |  | $2.70             

|(1) | Common Shares issued on the exercise of common share
      purchase warrants.
|--- | -----------------------------------------------------------------------------

|(2) | Common Shares issued on the exercise of stock
      options.                                         
|--- | -----------------------------------------------------------------------------------------------------
|(3) | Reflects the exercise price of stock options and common
      share purchase warrants, as applicable.

53

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ESCROWED SECURITIES AND SECURITIES SUBJECTTO CONTRACTUAL RESTRICTIONS ON TRANSFER

Escrowed Securities

As of December 31, 2011, no securities of the Company were held in escrow.

Contractual Restrictions on Transfer

Pursuant to the terms of the Participation Agreement, DMSL has agreed that, up
to August 6, 2013, neither DMSL nor its affiliates, which include Goldcorp, will
sell any Common Shares that result in DMSL and its affiliates, collectively,
owning less than 31,151,200 Common Shares.

Pursuant to a support agreement dated as of August 6, 2010 among SW Caymans,
  Mr. Luna and Mr. Nesmith (the Support Agreement), until August 6,
  2013, Mr. Luna and Mr. Nesmith each agreed that he will not sell any Common
  Shares that result in him owning less than 101,840 Common Shares (less than
  approximately 0.1% of the issued and outstanding Common Shares) and 157,176
  (less than approximately 0.1% of the issued and outstanding Common Shares),
  respectively. Before Mr. Lunas resignation as Executive Vice President
  and President (Mexico) of the Company on November 30, 2011, Mr. Luna was released
  from his Common Share ownership obligations under the Support Agreement. Effective
  March 15, 2012, upon Mr. Nesmiths resignation as Executive Chairman and
  appointment as Chairman of the Company, the Support Agreement was terminated.

DIRECTORS AND OFFICERS

The following table is as at the date of the AIF and sets out the name,
province/state of residence, positions and/or offices held with the Company, and
principal occupations of each person who is a director and/or an executive
officer of the Company, as well as the period during which each person, if
applicable, has been a director of the Company. Mr. Timo Jauristo and Mr. Rohan
Hazelton, the Executive Vice President, Corporate Development and Vice
President, Finance, respectively, of Goldcorp were nominated as directors by
Goldcorp, pursuant to DMSLs rights under the Participation Agreement.

The term of office of each director of the Company ends immediately before the
election of directions at the annual meeting of shareholders each year.

|Name and
      Residence                         |  | Position(s) with the Company                             |  | Principal Occupation                                       |  | Director Since
|------------------------------------------------ |  | -------------------------------------------------------- |  | ---------------------------------------------------------- |  | --------------
|                                                 |  |                                                          |  |                                                            |  |               
|JOSEPH CONWAY(1)(2)Ontario,
      Canada         |  | President and Chief Executive
      Officer and Director |  | President and Chief Executive
      Officer of the Company |  | June 28, 2010 
|                                                 |  |                                                          |  |                                                            |  |               
|RENAUD ADAMS Ontario, Canada                     |  | Chief Operating Officer                                  |  | Chief Operating Officer of the
      Company               |  | N/A           
|                                                 |  |                                                          |  |                                                            |  |               
|DAVID BLAIKLOCK(1)British
      Columbia, Canada |  | Chief Financial Officer                                  |  | Chief Financial Officer of the
      Company               |  | N/A           
|                                                 |  |                                                          |  |                                                            |  |               
|JOAQUIN MERINO-MARQUEZ Ontario, Canada           |  | Vice-President, Exploration                              |  | Vice President, Exploration of
      the Company           |  | N/A           
|                                                 |  |                                                          |  |                                                            |  |               
|DAVID SANDISON Ontario, Canada                   |  | Vice-President, Corporate
      Development              |  | Vice-President, Corporate
      Development of the Company |  | N/A           
|                                                 |  |                                                          |  |                                                            |  |               
|TAMARA BROWN(1)Ontario,
      Canada             |  | Vice-President, Investor
      Relations                 |  | Vice-President, Investor
      Relations of the Company    |  | N/A           

54

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|Name and
      Residence                          |  | Position(s) with the Company                                  |  | Principal Occupation                                                  |  | Director Since  
|------------------------------------------------- |  | ------------------------------------------------------------- |  | --------------------------------------------------------------------- |  | ----------------
|                                                  |  |                                                               |  |                                                                       |  |                 
|H. MAURA LENDON Ontario, Canada                   |  | Vice-President, General
      Counsel and Corporate Secretary |  | Vice-President, General
      Counsel and Corporate Secretary         |  | N/A             
|                                                  |  |                                                               |  |                                                                       |  |                 
|WADE NESMITH British Columbia, Canada             |  | Chairman and Director                                         |  | Chairman of the Company                                               |  | October 29, 2008
|                                                  |  |                                                               |  |                                                                       |  |                 
|EDUARDO LUNA(2)Mexico
      State, Mexico         |  | Director                                                      |  | Director of the Company                                               |  | October 29, 2008
|                                                  |  |                                                               |  |                                                                       |  |                 
|DAVID DEMERS(3)(4)(5)British Columbia, Canada     |  | Director                                                      |  | Chief Executive Officer of
      Westport Innovations Inc.            |  | October 29, 2008
|                                                  |  |                                                               |  |                                                                       |  |                 
|GRANT EDEY(4)(5)(6)Ontario,
      Canada          |  | Director                                                      |  | President and Chief Executive
      Officer of Khan Resources Inc.    |  | June 28, 2010   
|                                                  |  |                                                               |  |                                                                       |  |                 
|ROHAN HAZELTON(2)(5)(6)British Columbia, Canada   |  | Director                                                      |  | Vice President, Finance of
      Goldcorp                             |  | August 25, 2010 
|                                                  |  |                                                               |  |                                                                       |  |                 
|TIMO JAURISTO(3)British
      Columbia, Canada    |  | Director                                                      |  | Executive Vice President,
      Corporate Development of Goldcorp     |  | August 25, 2010 
|                                                  |  |                                                               |  |                                                                       |  |                 
|ROBERT QUARTERMAIN(3)(4)British Columbia, Canada  |  | Director                                                      |  | President and Chief Executive
      Officer of Pretium Resources Inc. |  | June 28, 2010   
|                                                  |  |                                                               |  |                                                                       |  |                 
|MICHAEL RILEY(5)(6)British
      Columbia, Canada |  | Director                                                      |  | Director of the Company                                               |  | April 22, 2010  

|(1) | Member of the Disclosure Committee. Mr. Blaiklock is the
      Chair of the Disclosure Committee.                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Member of the Health, Safety and Environmental Committee.
      Mr. Luna is the Chair of the Health, Safety and Environmental
      Committee.                                                                                                 
|(3) | Member of the Human Resources Committee. Mr. Demers is
      the Chair of the Human Resources Committee.                                                                                                                                       
|(4) | Member of the Governance and Nominating Committee. Mr.
      Edey is the Chair of the Governance and Nominating Committee.                                                                                                                     
|(5) | Member of the Special Committee established on May 17,
      2011 for the proposed business combination with Northgate, which was
      terminated on August 29, 2011. Mr. Hazelton resigned from the Special
      Committee on June 28, 2011.
|    | Mr. Demers was the Chair of the Special
  Committee.                                                                                                                                                                                           
|(6) | Member of the Audit Committee. Mr. Riley is the Chair of
      the Audit Committee.                                                                                                                                                            

As of the date of this AIF, the directors and executive officers of the Company,
  as a group, beneficially own, directly or indirectly, or exercise control or
  direction over 1,442,048Common Shares, being 1.6% of the issued Common Shares
  on a non-diluted basis. The statement as to the number of Common Shares beneficially
  owned, directly or indirectly, or over which control or direction is exercised
  by the directors and executive officers of the Company, as a group, is based
  upon information furnished by the directors and executive officers.

Principal Occupations and Other Information about Primeros
Directors and Executive Officers

The principal occupations of each of the Companys directors and executive
officers within the past five years are disclosed in the biographies set forth
below.

Joseph Conway  President, Chief Executive Officer and
Director

Mr. Conway was appointed President and Chief Executive Officer of the Company on
June 1, 2010 and has been a director of the Company since June 28, 2010. Mr.
Conway has been a director of Dalradian Resources Inc. since June 2010. He
served as President and Chief Executive Officer of IAMGOLD Corporation
(IAMGOLD) from January 2003 until January 2010, and was a director of IAMGOLD
from January 2004 until December 2009. Mr. Conway was President, Chief Executive
Officer and a director of Repadre Capital Corporation from September 1995 until January 2003. From 1989 until 1995, he was Vice
President and a director of Nesbitt Burns, a Canadian investment dealer. He was
a stock analyst with Walwyn Stodgell Cochran and Murray from 1987 to 1989, and a
mine and exploration geologist from 1981 to 1985. Mr. Conway has a Bachelor of
Science degree from Memorial University and a Master of Business Administration
degree from Dalhousie University.

55

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Renaud Adams  Chief Operating Officer

Mr. Adams has been Chief Operating Officer of the Company since November 1,
2011. From February 2010 to October 2011, Mr. Adams was Senior Vice-President,
Operations Americas of IAMGOLD, during which time he was responsible for the
operations and organic growth of IAMGOLD within the Americas. From May 2007 to
February 2010, he was Vice President and General Manager of the Rosebel Gold
Mine in Suriname for IAMGOLD, which saw him responsible for administration,
operations and near-mine exploration, as well as social and legal aspects of the
mines business. Previously, from January 2005 to May 2007, he was Vice
President and General Manager of the El Mochito Mine in Honduras for Breakwater
Resources Ltd. and, from August 2000 to December 2004, he was Mine Manager and
Mill Superintendent of El Toqui Mine in Southern Chile. Mr. Adams holds
actuarial and engineering degrees from Laval University.

David Blaiklock  Chief Financial Officer

Mr. Blaiklock has been Chief Financial Officer of the Company since July 6,
2009. Mr. Blaiklock is a Chartered Accountant with 20 years public company
experience in a senior financial role. From March 1997 to December 2008 he was
Vice President and Corporate Controller of Intrawest Corporation, a large
multinational owner, developer and operator of mountain destination resorts.
During his years with Intrawest, Mr. Blaiklock was involved with all aspects of
running the financial operations of a growth-oriented and acquisition-focused
public company. Previously, he was Corporate Controller of a number of public
and private companies, primarily involved in real estate development. He
graduated with a B.A. (Honours) degree from the University of Sheffield and
received his designation as a Chartered Accountant (England & Wales) in 1979
and British Columbia in 1981 while with the international accounting firm of
Deloitte & Touche.

Joaquin Merino-Marquez  Vice President, Exploration

Mr. Merino-Marquez joined the Company on February 23, 2011, as Vice President,
Exploration. Between 2006 and 2011, Mr. Merino-Marquez was Vice President,
Exploration for Apogee Minerals Ltd., a Toronto-based Company with interest in
polymetallic deposits in Bolivia. From 2003 to 2006, Mr. Merino-Marquez was the
exploration manager at Porgera Mine, in Papua New Guinea, for Placer Dome Inc.
Before that Mr. Merino-Marquez was a mine geologist at La Camorra mine in
Venezuela, a high grade gold deposit in the Greenstone Belt. Mr. Merino-Marquez
worked as an exploration and mine geologist for the Chilean government and for
junior companies in a number of South America countries. During these years he
has been involved in the negotiation and acquisition of various exploration
projects in Chile, Ecuador, Argentina and Peru. He has also carried out numerous
economic evaluations on precious and base metal projects all over South America.
He holds a Master degree in Sciences from Queens University (Ontario), and a
Bachelor degree in Geology from University of Seville (Spain). Mr.
Merino-Marquez is a member of the Association of Professional Geoscientists of
Ontario.

David Sandison  Vice President, Corporate Development

Mr. Sandison has been Vice-President, Corporate Development of the Company since
  October 18, 2010. From January 2010 to September 2010, he was Vice-President,
  Corporate Development of Clarity Minerals, a private company with investments
  in Canadian and African gold mining and exploration. From February 2009 to December
  2009, he was a mining consultant. From June 1984 to January 2009, he worked
  in senior management capacities with the Noranda Group of Companies (subsequently
  Falconbridge and Xstrata plc). From September 2006 to January 2009, he was Director
  Corporate Development of Xstrata Zinc Canada. From February 2005 through September
  2006, he was Vice-President of Novicourt Inc., a public Noranda subsidiary.
  From July 2001 through August 2006, he was Director Corporate Development for
  Noranda Inc. Before this he held senior management positions with Noranda subsidiaries
  in Chile and the United States. Mr. Sandison has a Bachelor of Applied Science
  (Geological Engineering  1982) degree from The University of Toronto and
  a Master of Business Administration (1984) degree from Queens University.

56

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Tamara Brown  Vice President, Investor Relations

Ms. Brown has been Vice President, Investor Relations of the Company since June
1, 2010. From April 2009 to April 2010, Ms. Brown was Director of Investor
Relations for IAMGOLD. Ms. Brown was responsible for all aspects of investor
relations including being a member of its disclosure committee. Previously, she
was an investor relations consultant for several junior exploration companies
and partner of a boutique investment banking firm and a professional engineer in
the mining industry. She graduated with a Bachelor of Engineering degree from
Curtin University in Australia and has completed the Chartered Business Valuator
course at York University.

H. Maura Lendon  Vice President, General Counsel and
Corporate Secretary

Ms. Lendon has been Vice President, General Counsel and Corporate Secretary of
the Company since March 29, 2012. From May 2011 until March 2012, Ms. Lendon was
President of Aurah Advisory Services Inc., during which time she provided
strategic and governance advisory services to diverse businesses. From April
2008 to May 2011 she was Senior Vice President, Corporate Services, Chief Legal
Officer and Corporate Secretary of HudBay Minerals Inc. From 2004 to April 2008,
she was Chief Counsel, Canada and Chief Privacy Officer (Canada) of AT&T.
Ms. Lendon holds a Master of Laws from Osgoode Hall Law School, a Master of
Business Administration from the Richard Ivey School of Business and a Bachelor
of Laws from University of Western Ontario. She has been a member of the Ontario
Bar since 1990.

Wade Nesmith  Director and Chairman of the Board

Mr. Nesmith is the Chairman of the Board and a director of Primero. He has
served in the capacity of director of the Company since October 29, 2008. He
acted as President from October 29, 2008 to September 28, 2009, and Chief
Executive Officer from October 29, 2008 to June 1, 2010, at which time he was
appointed Executive Chairman of the Board. On March 15, 2012, Mr. Nesmith
resigned as Executive Chairman of the Board and was appointed Chairman of the
Board. He also served as Co-Chair of the Company from November 2008 until June
1, 2010. He was the President, Chief Executive Officer, Chief Financial Officer
and a director of 0777551 B.C. Ltd., a private company that was a predecessor to
the Company, from December 2006 to December 2009. Mr. Nesmith obtained his
Bachelor of Law degree from York University  Osgoode Hall, Ontario in 1977. He
is the former Superintendent of Brokers for the Province of British Columbia
from 1989 until 1992. He was a senior partner, specializing in securities law,
with Lang Michener LLP (now McMillan LLP) from 1993 until 1998, and an Associate
Counsel at Lang Michener LLP (now McMillan LLP) from January 2004 to December
2007. He was an executive with Westport Innovations Inc. (Westport
Innovations) from 1998 until 2003, helping to lead their public markets
activities and retiring as President, Westport Europe. He is a founding director
and remains a director of Silver Wheaton Corp. (TSX, NYSE), and is Chairman of
Selwyn Resources Ltd. (TSX-V).

Eduardo Luna  Director

Mr. Luna has been a director of the Company since October 29, 2008 and was
Executive Vice President and President (Mexico) of the Company from June 1, 2010
to November 30, 2011. He was Co-Chair of the Company from November 2008 until
June 1, 2010, and President and Chief Operating Officer of the Company from
September 28, 2009 until June 1, 2010. From July 2008 until December 2009 he was
a director of 0777551 B.C. Ltd., a private company that was a predecessor to the
Company. Mr. Luna was Chairman of Silver Wheaton Corp. from October 2004 to
April 2009 and its Chief Executive Officer from October 2004 to April 2006;
Executive Vice President of Wheaton River from June 2002 to April 2005,
Executive Vice President of Goldcorp from March 2005 to September 2007, and
President of Luismin, S.A. de C.V. from 1991 until 2007. He is a director of
Rochester Resources Ltd. He holds a degree in Advanced Management from Harvard
University, a Master of Business Administration degree from Instituto
Tecnólogico de Estudios Superiores de Monterrey and a Bachelor of Science degree
in Mining Engineering from Universidad de Guanajuato. He held various executive
positions with Minera Autlan for seven years and with Industrias Penoles for
five years. He was on two occasions President of the Mexican Mining Chamber and
he was also a former President of the Silver Institute. He serves as Chairman of
the Advisory Board of the Faculty of Mines at the University of Guanajuato and
of the Mineral Resources Council in Mexico.

57

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David Demers  Director

Mr. Demers has been a director of the Company since October 28, 2008. He is a
founder of Westport Innovations, a provider of proprietary technology that
allows engines to operate on clean-burning gaseous fuels, and has been Chief
Executive Officer and a director of Westport Innovations since the company was
formed in March 1995. Before founding Westport Innovations, Mr. Demers worked
for IBM Canada Ltd. and then founded and served as president of a closely-held
consulting company specializing in software marketing, finance and business
transformation for early stage technology companies. Mr. Demers obtained a
Bachelor of Physics degree in 1976 and a Bachelor of Law degree in 1978, both
from the University of Saskatchewan. Mr. Demers is also a member of the board of
directors of Cummins Westport Inc., a private company in which Westport
Innovations has a 50% investment, and Juniper Engines Inc., a private company in
which Westport Innovations has a 49% investment.

Grant Edey  Director

Mr. Edey has been a director of the Company since June 28, 2010, and has been
the President and Chief Executive Officer of Khan Resources Inc., since July
2010 and a director of Khan Resources Inc. since February 2007. Mr. Edey was
Chief Financial Officer of IAMGOLD from 2002 until August 2007. From 1996 until
2002, he was the Vice President, Finance, Chief Financial Officer and Corporate
Secretary of Repadre Capital Corporation. Before joining Repadre Capital
Corporation, Mr. Edey held senior positions with Strathcona Mineral Services
Limited, TransCanada Pipelines Limited, Eldorado Nuclear Limited, Rio Algom
Limited and INCO Limited. Mr. Edey has a Masters degree in Business
Administration from the Ivey School of Business, University of Western Ontario
and a Bachelor of Science (Mining Engineering) degree from Queens University.

Rohan Hazelton  Director

Mr. Hazelton has been a director of the Company since August 25, 2010. Mr.
Hazelton is a Chartered Accountant with over 15 years of finance experience, ten
of those years at senior positions within the mining industry. Mr. Hazelton has
been the Vice President, Finance at Goldcorp since March 2006, where he is
responsible for, amongst other duties, Goldcorps sales programs. He was
formerly Corporate Controller for Goldcorp, before Goldcorps merger with
Wheaton River, he was a key member of Wheatons management team. Mr. Hazelton
was a director of Gryphon Gold Corp. from July 2005 to December 2008, and he was
the director of Terrane Metals Corporation from August 2008 to October 2010. Mr.
Hazelton worked for Deloitte & Touche LLP and Arthur Andersen LLP from
September 1999 to November 2002 as a senior auditor. From October 1996 to
January 1998, he was a commercial loans officer for Dialog Bank in Moscow,
Russia. Mr. Hazelton has a B.A. in Math and Economics from Harvard University.

Timo Jauristo  Director

Mr. Jauristo has been a director of the Company since August 25, 2010. Mr.
Jauristo is a geologist with over 30 years of international experience in the
mining industry in gold, base metals and uranium. Mr. Jauristo has been the Vice
President of Corporate Development for Goldcorp since June 2009. From January
1990 to June 2005, Mr. Jauristo was the General Manager of Corporate Development
for Placer Dome Inc. Mr. Jauristo was the Chief Executive Officer of Zincore
Metals Inc. (Zincore) from October 2006 to May 2009. He was the interim Chief
Executive Officer of Southwestern Resources Inc. (Southwestern Resources) from
June 2005 to May 2009. Both Zincore and Southwestern Resources are junior mining
companies with exploration and development assets mostly in Peru. He was
involved in numerous merger and acquisition transactions in many of the major
gold producing regions of the world. Mr. Jauristo was also part of the team that
discovered the Osborne copper-gold deposit in Queensland.

Robert Quartermain  Director

Dr. Quartermain, D.Sc., has been a director of the Company since June 28, 2010.
He has been the President and Chief Executive Officer and a director of Pretium
Resources Inc. since October 2010. He served as President of Silver Standard
Resources Inc. from January 1985 until January 2010, and as Chief Executive
Officer from January 2004 until January 2010. Dr. Quartermain worked for the
Geological Survey of Canada and in private industry on mapping and exploration programs from 1976 until 1982. He also
worked for Teck Corp. before becoming President of Silver Standard Resources
Inc. in 1985. Dr. Quartermain has a Bachelor of Science degree in geology from
the University of New Brunswick, and a Master of Science degree in mineral
exploration from Queens University. He was awarded an honorary Doctor of
Science degree from the University of New Brunswick in May 2009.

58

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Michael Riley  Director

Mr. Riley has been a director of the Company since April 22, 2010. He retired as
a senior audit partner from Ernst & Young LLP in September 2006 more than 25
years with the firm. He became a partner in the firms Montreal office in 1985,
where he worked with clients in the retail, pharmaceutical, manufacturing and
resource industries. He relocated to the firms Vancouver office in 1995, where
his responsibilities included serving as the lead audit engagement partner for
the offices largest Canadian and U.S.-listed public company clients in mining,
transportation, and banking. He also spent two years leading its Vancouver
offices mergers & acquisitions due diligence practice. Mr. Riley is a
director, the Chair of the Governance Committee and a member of the Audit
Committee of Canalaska Uranium Ltd. (TSX). Mr. Riley is also a director and
Chairman of the Audit Committee of British Columbia Lottery Corporation, and a
director of the Vancouver Symphony Society and the BCAA Road Safety Foundation.
Mr. Riley has been a Chartered Accountant since 1978 and is a member of both the
Institute of Chartered Accountants of B.C. and the Ordre des comptables agréés
du Quebec. He graduated with a Bachelor of Commerce degree from Concordia
University in 1975 majoring in operations research and quantitative methods. He
also earned a graduate degree in public accounting from McGill University in
1977.

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

Cease Trade Order

No director or executive officer of Primero is, as at the date of this AIF, or
has been, within the last ten years before the date of this AIF, a director,
chief executive officer, or chief financial officer of any company (including
Primero) that was:

| | (a) | subject to an order that was issued while the director or
      executive officer was acting in the capacity as director, chief executive
      officer or chief financial officer; or                                                                                                                                                      
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                             
| | (b) | subject to an order that was issued after the director or
      executive officer ceased to be a director, chief executive officer or
      chief financial officer and which resulted from an event that occurred
      while that person was acting in the capacity as director, chief executive
      officer or chief financial officer.

For the purpose of the above paragraph, order means (a) a cease trade order,
(b) an order similar to a cease trade order, or (c) an order that denied the
relevant company access to any exemption under securities legislation, that was
in effect for a period of more than 30 days.

Bankruptcy

Except as set out below, no director or executive officer of Primero, or a
shareholder holding a sufficient number of securities of Primero to affect
materially the control of Primero is, as at the date of this AIF, or has been,
within ten years before the date of this AIF, a director or executive officer of
any company (including Primero) that:

| | (a) | while that person was acting in that capacity, or within
      a year of ceasing to act in that capacity, became bankrupt, made a
      proposal under any legislation relating to bankruptcy or insolvency, or
      was subject to or instituted any proceedings, arrangement or compromise
      with creditors, or had a receiver, receiver manager or trustee appointed
      to hold its assets; or
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                          
| | (b) | became bankrupt, made a proposal under any legislation
      relating to bankruptcy or insolvency, or become subject to or instituted
      any proceedings, arrangement or compromise with creditors, or
  had a receiver, receiver manager, or
  trustee appointed to hold the assets of the director, executive officer or
  shareholder.                                                             

59

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In
December 2003, Wade Nesmith was appointed to the board of Oxford Automotive Inc.
(Oxford), a private company based in Michigan. In December 2004, with the
support of its secured creditors, Oxford filed a plan of bankruptcy for certain
of its North American subsidiaries under U.S. Chapter 11 bankruptcy legislation.
It emerged from bankruptcy protection in March, 2005. Mr. Nesmith is the
Chairman and a director of Primero.

Sanctions

No director or executive officer of Primero, or a shareholder holding a
sufficient number of securities of Primero to affect materially the control of
Primero has been subject to:

| | (a) | any penalties or sanctions imposed by a court relating to
      securities legislation or by a securities regulatory authority or has
      entered into a settlement agreement with a securities regulatory
      authority; or
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                 
| | (b) | any other penalties or sanctions imposed by a court or
      regulatory body that would likely be considered important to a reasonable
      investor in making an investment decision.                                         

Conflicts of Interest

Several directors of Primero also serve as directors of one or more other
resource companies involved in mineral exploration and/or development. It may
occur from time to time that as a consequence of his activity in the mineral
industry and serving on such other boards that a director may become aware of
potential resource property opportunities which are of interest to more than one
of the companies on whose boards that person serves. Accordingly, situations may
arise in the ordinary course that involve a director in an actual or potential
conflict of interest as well as issues in connection with the general obligation
of a director to make corporate opportunities available to the company on which
the director serves. In all such events, any director who might have a
disclosable financial interest in a contract or transaction by virtue of office,
employment or security holdings or other such interest in another company or in
a property interest under consideration by the Primero Board, would be obliged
to abstain from voting as a Primero director in respect of any transaction
involving that other company(s) or in respect of any property in which an
interest is held by him. The directors will use their best business judgment to
help avoid situations where conflicts or corporate opportunity issues might
arise and they must at all times fulfill their duties to act honestly and in the
best interests of Primero. See Risk Factors  Conflicts of Interest.

LEGAL PROCEEDINGS AND REGULATORY ACTIONS

Four of the properties included in the properties that comprise the San Dimas
Mine are subject to four separate legal proceedings commenced by local Ejidos
where the local Ejido is seeking title to the property.

The first proceeding was brought without the knowledge of DMSL and resulted in
an initial order 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. In the event that annulment proceedings are not
successful, then the Company plans to pursue negotiation of a temporary
occupancy agreement with the Ejido. If the Ejido refuses to negotiate a
temporary occupancy permit, then the Company plans to initiate proceedings under
Mexican law which provide for priority rights for mining activities.

The remaining proceeding were brought by the local Ejido claiming ownership of
the properties on the principal of adverse possession or acquisition by
prescription, which are methods of acquiring ownership rights to property,
against the owner and other third parties, through possession of the property
for an uninterrupted period of time. The Company is not a party to any of these
proceeding. In the event that the Ejido is successful in its proceedings, the
Company will take steps to annul the verdict or commence an action as an
affected third party. 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.

60

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TRANSFER AGENT AND REGISTRAR

The co-transfer agent and registrar for the Common Shares in Canada is
Computershare Investor Services Inc. at its principal office in Toronto,
Ontario. The co-transfer agent and registrar for the Common Shares in the United
States is Computershare Trust Company, Inc. at its principal office in Golden,
Colorado.

MATERIAL CONTRACTS

The material contracts entered into by the Company within the financial year
  ended December 31, 2011 or before such time that is still in effect, other than
  in the ordinary course of business, are the following:

|(a) | Second amended and restated silver purchase agreement
      among Silver Trading, SW Caymans, the Company and Silver Wheaton,
      originally dated as of October 15, 2004, restated as of March 30, 2006,
      amended and restated as of August 6, 2010. See Acquisition of San Dimas
      Mine and Business of Primero  Amended and Restated Silver Purchase
      Agreement;
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                         
|(b) | Convertible promissory note issued by the Company to DMSL
      on August 6, 2010, as assigned to Goldcorp on August 6, 2010, amended on
      July 12, 2011. See Acquisition of San Dimas Mine and Capital Structure
       Promissory and Convertible Promissory Notes;                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                         
|(c) | Promissory note issued by Primero Mexico to DMSL on
      August 6, 2010, as assigned to a wholly- owned Luxembourg subsidiary of
      Goldcorp on August 6, 2010, and amended on July 12, 2011. See Acquisition
      of San Dimas Mine and Capital Structure  Promissory and Convertible
      Promissory Notes;                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                         
|(d) | Participation agreement between DMSL and the Company,
      made as of August 6, 2010. See Acquisition of San Dimas Mine and
      Escrowed Securities and Securities Subject to Contractual Restrictions on
      Transfer;                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                         
|(e) | Deed of indemnity among Silver Trading, the Company and
      Goldcorp, made as of August 6, 2010. See Business of Primero  Amended
      and Restated Silver Purchase Agreement  Agreements in Support of the
      Silver Purchase Agreement;                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                         
|(f) | Common share purchase warrant indenture, dated July 20,
      2010, and supplemental warrant indenture, dated July 28, 2010, between the
      Company and Computershare Trust Company of Canada. See Acquisition of San
      Dimas Mine;                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                         
|(g) | Asset purchase agreement among DMSL, Primero Empresa and
      the Company, together with vendor disclosure letter from DMSL to Primero
      Empresa and the Company, and purchaser disclosure letter from Primero
      Empresa and the Company to DMSL, all made as of July 29, 2010. See
      Acquisition of San Dimas Mine; and                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                         
|(h) | Share purchase agreement between GSBL and the Company,
      dated July 29, 2010. See Acquisition of San Dimas
Mine.                                                                                                                                                                                                                                                                  

INTERESTS OF EXPERTS

The following is a list of the persons or companies named as having prepared or
certified a report, valuation, statement or opinion described or included in a
filing, or referred to in a filing, made under National Instrument 51-102
Continuous Disclosure Obligations by Primero during, or relating to,
Primeros most recently completed financial year, and whose profession or business gives
  authority to the report, valuation, statement or opinion made by the person
or company:

61

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- Velasquez Spring, P.Eng., Senior Geologist and Gordon Watts, P.Eng., Senior
  Associate Mineral Economist of Watts, Griffis and McOuat Limited who authored
  the Technical Report; and
- Rodney Webster, MAIG, Herbert A. Smith, P.Eng. and J. Morton Shannon,
  P.Geo. of AMC Consultants who prepared or supervised the preparation of
  information upon which the scientific and technical information under the
  heading San Dimas Mine  Mineral Resource and Mineral Reserve Estimates is
  based.

To the Companys knowledge, each of the aforementioned firms or persons held
less than 1% of the outstanding securities of the Company or of any associate or
affiliate of the Company when they prepared the reports referred to above or
following the preparation of such reports. None of the aforementioned firms or
persons received any direct or indirect interest in any securities of the
Company or of any associate or affiliate of the Company in connection with the
preparation of such reports.

Based on information provided by the relevant persons, none of the
aforementioned firms or persons, nor any directors, officers or employees of
such firms, are currently expected to be elected, appointed or employed as a
director, officer or employee of the Company or of any associate or affiliate of
the Company.

The Companys auditors, Deloitte & Touche LLP, are independent within
  the meaning of the Rules of Professional Conduct of the Institute of Chartered
  Accountants of British Columbia.

ADDITIONAL INFORMATION

Additional Information

Additional information relating to the Company may be found on SEDAR at
www.sedar.com.

Additional information, including directors and officers remuneration and
indebtedness, principal holders of the Companys securities, and securities
authorized for issuance under equity compensation plans is contained in the
management information circular for Primeros annual and special meeting of
shareholdersheld on May 17, 2011, which is available on SEDAR at
www.sedar.com.

Additional financial information is also provided in Primeros audited
consolidated financial statements and Managements Discussion and Analysis for
the year ended December 31, 2011, which may be found on SEDAR at www.sedar.com.

Audit Committee

Audit Committee Charter

The Audit Committee is ultimately responsible for the policies and practices
relating to integrity of financial and regulatory reporting, as well as internal
controls to achieve the objectives of safeguarding of corporate assets;
reliability of information; and compliance with policies and laws.

The Audit Committees charter sets out its mandate and responsibilities, and is
attached to this AIF as Schedule A.

Composition of Audit Committee

Michael Riley (Chair), Grant Edey and Rohan Hazelton are the members of
Primeros Audit Committee. Each of Messrs. Riley, Edey and Hazelton are
independent and financially literate within the meaning of National Instrument
52-110 Audit Committees.

62

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Relevant Education and Experience

For a description of the education and experience of each audit committee member
that is relevant to the performance of his responsibilities as an audit
committee member, see Directors and Officers  Principal Occupations and Other
Information about Primeros Directors and Executive Officers. Such education
and experience provides each member with:

- an understanding of the accounting principles used by the Company to
  prepare its financial statements;
- the ability to assess the general application of such accounting principles
  in connection with the accounting for estimates, accruals and reserves;
- experience preparing, auditing, analyzing or evaluating financial
  statements that present a breadth and level of complexity of accounting issues
  that are generally comparable to the breadth and complexity of issues that can
  reasonably be expected to be raised by the Companys financial statements, and
- an understanding of internal controls and procedures for financial
  reporting.

Pre-Approval Policies and Procedures

The Audit Committees charter sets out responsibilities regarding the provision
of non-audit services by the Companys external auditor. This policy encourages
consideration of whether the provision of services other than audit services is
compatible with maintaining the auditors independence and requires Audit
Committee pre-approval of permitted audit and audit-related services.

External Auditor Service Fees

For the financial years ended December 31, 2011 and 2010, the Company paid the
external auditor, Deloitte & Touche LLP, $572,290 and $348,480,
respectively, as detailed below:

|                         |  |   | Fees Incurred to  |     |   | Fees Incurred to  |    
|------------------------ |  | - | ----------------- | --- | - | ----------------- | ---
|                         |  |   | Auditor in Year   |     |   | Auditor in Year   |    
|                         |  |   | Ended             |     |   | Ended             |    
|Nature of
      Services |  |   | December 31, 2011 |     |   | December 31, 2010 |    
|Audit Fees(1)            |  | $ | 357,250           | (5) | $ | 331,440           | (6)
|Audit-Related Fees(2)    |  | $ | 0                 |     | $ | 0                 |    
|Tax Fees(3)              |  | $ | 215,040           |     | $ | 17,040            |    
|All Other Fees(4)        |  | $ | 0                 |     | $ | 0                 |    
|Total                    |  | $ | 572,290           |     | $ | 348,480           |    

|(1) | Audit Fees include fees necessary to perform the annual
      audit and quarterly reviews of the Companys consolidated financial
      statements and include fees for review of tax provisions and for
      accounting consultations on matters reflected in the financial statements.
      Audit Fees also include audit or other attest services required by
      legislation or regulation, such as comfort letters, consents, reviews of
      securities filings and statutory audits.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Audit-Related Fees include services that are
      traditionally performed by the auditor. These audit-related services
      include employee benefit audits, due diligence assistance, accounting
      consultations on proposed transactions, internal control reviews and audit
      or attest services not required by legislation or regulation.                                                                                                                                        
|(3) | Tax Fees include fees for all tax services other than
      those included in Audit Fees and Audit-Related Fees. This category
      includes fees for tax compliance, tax planning and tax advice. Tax
      planning and tax advice includes assistance with tax audits and appeals,
      tax advice related to mergers and acquisitions, and requests for rulings
      or technical advice from tax authorities.                                                                       
|(4) | All Other Fees include all other non-audit
    services.                                                                                                                                                                                                                                                                                                                                                                                                                                        

63

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|(5) | $52,500 of these fees are with respect to the United
      States Securities and Exchange Commission Form 40-F in connection with the
      NYSE listing application. 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) | $63,600 of these fees are with respect to the Short Form
      Prospectus filed in connection with the Companys offering of subscription
      receipts in July 2010.

64

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SCHEDULE AAUDIT COMMITTEE CHARTER

|I. | PURPOSE AND PRIMARY
  RESPONSIBILITY
|-- | ------------------------------------

**A.**           
**Purpose**

The purpose of this Audit Committee
charter is to clearly set out the Audit Committees purpose, composition, member
qualification, member appointment and removal, responsibilities, operations,
manner of reporting to the Board of Directors (the Board), annual evaluation
and compliance with this charter.

**B.**           
**Primary responsibility**

The primary responsibility of the Audit
Committee is that of oversight of the financial reporting process on behalf of
the Board. This includes oversight responsibility for financial reporting and
continuous disclosure, oversight of external audit activities, oversight of
financial risk and financial management control, and oversight responsibility
for compliance with tax and securities laws and regulations as well as whistle
blowing procedures. The Audit Committee is also responsible for other matters as
set out in this charter and/or as may be directed by the Board from time to
time. The Audit Committee should exercise continuous oversight of developments
in these areas.

|II. | MEMBERSHIP
|--- | ----------

A.            
Each member of the Audit Committee must be an independent director of the
Company in accordance with the Companys Board Manual.

B.            
The Audit Committee will consist of at least three members, all of whom shall be
financially literate. An Audit Committee member who is not financially literate
may be appointed to the Audit Committee provided that the member becomes
financially literate within a reasonable period of time following his or her
appointment.

C.            
The members of the Audit Committee will be appointed annually (and from time to
time thereafter to fill vacancies on the Audit Committee) by the Board. An Audit
Committee member may be removed or replaced at any time at the discretion of the
Board and will cease to be a member of the Audit Committee on ceasing to be an
independent director.

D.            
For so long as the common shares of the Company are registered under Section
12(b) of the United States Securities and Exchange Act of 1934, as amended (the
Exchange Act), at least one member of the Audit Committee must meet and
satisfy the qualifications, as determined by the board of directors of the
Company, of an audit committee financial expert, as such term is defined in
Item 407 of Regulation S-K under the Exchange Act, or in any rule adopted by the
United States Securities and Exchange Commission that supercedes such
definition.

|III. | AUTHORITY
|---- | ---------

In addition to all authority required
to carry out the duties and responsibilities included in this charter, the Audit
Committee has specific authority to:

A.            
engage, and set and pay the compensation for, independent counsel and other
advisors as it determines necessary to carry out its duties and responsibilities
and any such consultants or professional advisors retained by the Audit
Committee will report directly to the Audit Committee;

65

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B.            
communicate directly with management and any internal auditor, and with the
external auditor without management involvement; and

C.            
to incur ordinary administrative expenses that are necessary or appropriate in
carrying out its duties, such expenses to be paid for by the Company.

|IV. | DUTIES AND
RESPONSIBILITIES
|--- | ---------------------------

The duties and responsibilities of the
Audit Committee include:

A.            
recommending to the Board the external auditor to be nominated by the Board;

B.            
recommending to the Board the compensation of the external auditor, to be paid
by the Company, in connection with (i) preparing and issuing the audit report on
the Companys financial statements, and (ii) performing other audit, review or
attestation services;

C.            
reviewing the external auditors annual audit plan, fee schedule and any related
services proposals (including meeting with the external auditor to discuss any
deviations from or changes to the original audit plan, as well as to ensure that
no management restrictions have been placed on the scope and extent of the audit
examinations by the external auditor or the reporting of their findings to the
Audit Committee);

D.            
overseeing the work of the external auditor;

E.            
ensuring that the external auditor is independent by receiving a report annually
from the external auditors with respect to their independence, such report to
include a disclosure of all engagements (and fees related thereto) for non-audit
services provided to Company;

F.            
ensuring that the external auditor is in good standing with the Canadian Public
Accountability Board by receiving, at least annually, a report by the external
auditor on the audit firms internal quality control processes and procedures,
such report to include any material issues raised by the most recent internal
quality control review, or peer review, of the firm, or any governmental or
professional authorities of the firm within the preceding five years, and any
steps taken to deal with such issues;

G.            
ensuring that the external auditor meets the rotation requirements for partners
and staff assigned to the Companys annual audit by receiving a report annually
from the external auditors setting out the status of each professional with
respect to the appropriate regulatory rotation requirements and plans to
transition new partners and staff onto the audit engagement as various audit
team members rotation periods expire;

H.            
reviewing and discussing with management and the external auditor the annual
audited and quarterly unaudited financial statements and related Management
Discussion and Analysis (MD&A), including the appropriateness of the
Companys accounting policies, disclosures (including material transactions with
related parties), reserves, key estimates and judgements (including changes or
variations thereto) and obtaining reasonable assurance that the financial
statements are presented fairly in accordance with GAAP and the MD&A is in
compliance with appropriate regulatory requirements;

I.            
reviewing and discussing with management and the external auditor major issues
regarding accounting principles and financial statement presentation including
any significant changes in the selection or application of accounting principles
to be observed in the preparation of the financial statements of the Company and
its subsidiaries;

J.            
reviewing and discussing with management and the external auditor the external
auditors written communications to the Audit Committee in accordance with
generally accepted auditing standards and other applicable regulatory
requirements arising from the annual audit and quarterly review engagements;

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K.            
reviewing and discussing with management and the external auditor all earnings
press releases, as well as financial information and earnings guidance provided
to analysts and rating agencies before such information being disclosed;

L.            
reviewing the external auditors report to the shareholders on the Companys
annual financial statements;

M.            
reporting on and recommending to the Board the approval of the annual financial
statements and the external auditors report on those financial statements, the
quarterly unaudited financial statements, and the related MD&A and press
releases for such financial statements, before the dissemination of these
documents to shareholders, regulators, analysts and the public;

N.            
satisfying itself on a regular basis through reports from management and related
reports, if any, from the external auditors, that adequate procedures are in
place for the review of the Companys disclosure of financial information
extracted or derived from the Companys financial statements that such
information is fairly presented;

O.            
overseeing the adequacy of the Companys system of internal accounting controls
and obtaining from management and the external auditor summaries and
recommendations for improvement of such internal controls and processes,
together with reviewing managements remediation of identified weaknesses;

P.            
reviewing with management and the external auditors the integrity of disclosure
controls and internal controls over financial reporting;

Q.            
reviewing, monitoring, discussing and assessing the processes in place to
identify and manage the principal risks that could impact the financial
reporting of the Company and discussing policies with respect to risk assessment
and risk management, which discussions will include (i) the Companys major
financial risk exposures and the steps management has taken to monitor and
control such exposures, and (ii) guidelines and policies to govern the process
by which risk assessment and management is undertaken;

R.            
satisfying itself that management has developed and implemented a system to
ensure that the Company meets its continuous disclosure obligations through the
receipt of regular reports from management and the Companys legal advisors on
the functioning of the disclosure compliance system, (including any significant
instances of non-compliance with such system) in order to satisfy itself that
such system may be reasonably relied upon.;

S.            
resolving disputes between management and the external auditor regarding
financial reporting;

T.            
establishing procedures for:

i.            
the receipt, retention and treatment of complaints received by the Company from
employees and others regarding accounting, internal accounting controls or
auditing matters and questionable practises relating thereto; and

ii.            
the confidential, anonymous submission by employees of the Company of concerns
regarding questionable accounting or auditing matters.

U.            
reviewing and approving the Companys hiring policies with respect to partners
or employees (or former partners or employees) of either a former or the present
external auditor;

V.            
pre-approving all non-audit services to be provided to the Company or any
subsidiaries by the Companys external auditor (The Chair of the Audit Committee
has the authority to pre-approve in between regularly scheduled Audit Committee
meetings any non-audit service of less than $25,000, however such approval will
be presented to the Audit Committee at the next scheduled meeting for formal
approval);

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W.            
overseeing compliance with regulatory authority requirements for disclosure of
external auditor services and Audit Committee activities; and

X.            
establishing procedures for:

i.            
reviewing the expenses of the Chair of the Board, and the Chief Executive
Officer (the CEO) on a semi-annual basis

ii.            
reviewing the adequacy of the Companys insurance coverage (excluding Directors
and Officers insurance coverage, which is reviewed by Governance and Nominating
Committee)

iii.           
reviewing activities, organizational structure, and qualifications of the Chief
Financial Officer (CFO) and the staff in the financial reporting area and
ensuring that matters related to succession planning within the Company are
raised for consideration at the Board

iv.            obtaining
reasonable assurance as to the integrity of the CEO and other senior management
and that the CEO and other senior management strive to create a culture of
integrity throughout the Company

v.            
reviewing fraud prevention policies and programs, and monitoring their
implementation

vi.            reviewing
regular reports from management and others (e.g., external auditors, legal
counsel) with respect to the Companys compliance with laws and regulations
having a material impact on the financial statements including:

| | a) | tax and financial reporting laws and
  regulations;
| | -- | ---------------------------------------------------
| |    |                                                    
| | b) | legal withholding requirements;                    
| |    |                                                    
| | c) | environmental protection laws and
  regulations.   

|   | Y.            
      A regular part of Audit Committee meetings involves the appropriate
      orientation of new members as well as the continuous education of all
      members. Items to be discussed include specific business issues as well as
      new accounting and securities legislation that may impact the
      organization. The Chair of the Audit Committee will regularly canvass the
      Audit Committee members for continuous education needs and in conjunction
      with the Board education program, arrange for such education to be
      provided to the Audit Committee on a timely basis.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Z.            
      On an annual basis the Audit Committee shall review and assess the
      adequacy of this charter taking into account all applicable legislative
      and regulatory requirements as well as any best practice guidelines
      recommended by regulators or stock exchanges with whom the Company has a
      reporting relationship and, if appropriate, recommend changes to the Audit
      Committee charter to the Board for its approval.                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|V. | MEETINGS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | A.            
      The quorum for a meeting of the Audit Committee is a majority of the
      members of the Audit Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | B.            
      The Board of Directors will appoint the Chair of the Audit Committee. The
      Chair of the Audit Committee shall be responsible for leadership of the
      Audit Committee, including scheduling and presiding over meetings,
      preparing agendas, overseeing the preparation of briefing documents to
      circulate during the meetings as well as pre-meeting materials, and making
      regular reports to the Board. The Chair of the Audit Committee will also
      maintain regular liaison with the CEO, CFO, and the lead engagement
      partner of the external auditor.        

68

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|      | C.            
      The Audit Committees schedule of meetings and agendas will be set
      annually by the Audit Committee. Dates and locations will be provided to
      the Board, the Audit Committee members, the external auditors and
      management in advance.                                                                                                                                                                                        
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|      | D.            
      The Audit Committee will meet in camera separately with the CEO and
      separately with the CFO of the Company at least annually to review the
      financial affairs of the Company.                                                                                                                                                                                                                                                      
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|      | E.            
      The Audit Committee will meet with the external auditor of the Company in
      camera at least once each year, at such time(s) as it deems appropriate,
      to review the external auditors examination and report.                                                                                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|      | F.            
      The external auditor must be given reasonable notice of, and has the right
      to appear before and to be heard at, each meeting of the Audit
      Committee.                                                                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|      | G.            
      Each of the chair of the Audit Committee, members of the Audit Committee,
      Chair of the Board, external auditor, CEO, CFO or secretary shall be
      entitled to request that the Chair of the Audit Committee call a meeting
      which shall be held within 48 hours of receipt of such request to consider
      any matter that such individual believes should be brought to the
      attention of the Board or the shareholders.
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|VI.   | REPORTS                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|      | A.           
      The Audit Committee will report, at least quarterly, to the Board
      regarding the Audit Committees examinations and recommendations, and
      annually to the Board regarding the Audit Committees compliance with this
      Charter.                                                                                                                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|      | B.            
      The Audit Committee will report its activities to the Board to be
      incorporated as a part of the minutes of the Board meeting at which those
      activities are reported.                                                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|VII.  | MINUTES                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|      | A.            
      The Audit Committee will maintain written minutes of its meetings, which
      minutes will be filed with the minutes of the meetings of the
  Board.                                                                                                                                                                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|VIII. | ANNUAL PERFORMANCE EVALUATION                                                                                                                                                                                                                                                                                                                                                                                                                                      
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|      | A.            
      The Board will conduct an annual performance evaluation of the Audit
      Committee, taking into account the Charter, to determine the effectiveness
      of the Committee.                                                                                                                                                                                                                                                                 

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