Mr. Joseph Conway reports

PRIMERO ANNOUNCES EXPANSION OF ITS SAN DIMAS MINE TO 3,000 TPD

Primero Mining Corp. has approved the second-phase expansion of its San Dimas gold-silver mine in Mexico. The company previously elected a staged approach to the full expansion and after successfully completing the first phase of the expansion has now approved the required capital to expand the San Dimas mine and mill to 3,000 tonnes per day or approximately 210,000 to 220,000 gold equivalent ounces per year(1, 2, 3). Construction of the mill expansion is expected to begin during the first quarter of 2015, with an estimated completion during the second quarter of 2016.

(Please note that all dollar amounts in this news release are expressed in U.S. dollars unless otherwise indicated.)

Highlights:

• Attractive economics: 78 per cent after-tax internal rate of return(1) and a payback period within 12 months of project completion;
• Increases production: increases production by more than 25 per cent over 2014 levels to approximately 215,000 gold equivalent ounces(1, 2, 3);
• Reduces cash costs: cash costs(2) are expected to drop by around $50 per ounce from current levels to approximately $530 per gold equivalent ounce, or $300 per gold ounce on a byproduct basis;
• Low capital cost: currently estimated at $26.4-million including a 30-per-cent contingency;
• Increases exposure to spot silver: the expansion increases Primero's exposure to spot silver sales even with the increase in the annual silver threshold of the San Dimas silver purchase agreement.

"We are very pleased to announce the second phase of the expansion of our San Dimas mine," said Joseph F. Conway, chief executive officer. "We have already successfully expanded the mine from the approximately 1,500 tpd it was operating at when we acquired it in 2010 to the 2,500 tpd today. By taking a staged approach to expansion we significantly derisked the project by confirming the mine is capable of delivering ore at the expanded rate. The expansion to 3,000 tonnes per day is the next stage of development that will bring San Dimas to operating at approximately 215,000 gold equivalent ounces per year by the end of the second quarter of 2016. Additionally we are also reviewing optimization strategies to increase profitability even further."

Background

The company has been committed to expanding and optimizing the San Dimas operation since its acquisition in 2010. The company increased production by over 40 per cent to the end of 2013 as a result of optimization, reserve and resource growth and the implementation of long-hole mining.

The company completed phase one of the expansion of San Dimas mill to 2,500 tonnes per day during the first quarter of 2014, which is expected to result in a further 15-per-cent growth in production in 2014.

Following the completion of the San Dimas 2013 mineral reserve and mineral resource estimation earlier this year the company confirmed that it had replaced and added mineral reserves in the majority of areas currently being mined and in addition added new areas of mineral reserves. Since the company updated its reserve and resource estimation approach at the end of 2011, following the acquisition of the mine, it has increased mineral reserves by 72 per cent and replaced depletion by 188 per cent.

The San Dimas mine's long history of replacing mineral reserves, combined with the company's success identifying new areas of mineralization, gives management the confidence that with continued investment in exploration at San Dimas it is likely to continue to replace and expand mineral reserves.

Following the completion of the 2013 mineral reserve and mineral resource estimation the company completed an updated five-year underground mine plan at 3,000 tonnes per day. This new mine plan shows average production of approximately 215,000 gold equivalent ounces per year. Cash costs are expected to be reduced by around $50 per ounce from current levels to an average of approximately $530 per gold equivalent ounce or $300 per gold ounce on a byproduct basis.

Mining optimization to achieve 3,000 tonnes per day

The mining optimization of San Dimas is continuing, with the results of the first phase of this optimization facilitating the recent expansion to 2,500 tonnes per day. The company continues to implement a series of operating initiatives that will contribute to the required throughput increase to achieve 3,000 tonnes per day. These initiatives include:

• Long-hole mining: The company initiated long-hole mining at San Dimas in 2013 and subsequently mined approximately 20 per cent of the ore with this more productive method in 2013. The company believes it can ultimately mine 40 per cent of the ore at San Dimas using long-hole methods.
• Haulage optimization: The company is in the process of completing internal tunnels that connect the existing main mining area (Central block) with the new high-grade area of mineralization (Sinaloa graben). These tunnels will allow for shortened hauling routes, reducing costs and improving productivity. The company has also been reducing the number of trucks, by upsizing trucks from 20 to 30 tonnes.
• Shift optimization: The company is currently trialling the implementation of 24-hour, seven-day-per-week shifts at the San Dimas mine, representing a significant opportunity to improve productivity from the current 5.5-day eight-hour shifts.

Mill expansion to 3,000 tonnes per day

The company designed the recent mill expansion to 2,500 tonnes per day such that a further expansion to 3,000 tonnes per day could be achieved with minimized capital and operational downtime. The expansion of the mill to 2,500 tonnes per day was only completed at the end of the first quarter 2014. Management believes that with further debottlenecking and optimization, the existing mill infrastructure could reliably support higher than 2,500-tonne-per-day throughput. During the first half of 2014, the company completed a preliminary internal assessment of expanding the San Dimas mill to 3,000 tonnes per day or 1,095,000 tonnes per year (3,190 tonnes per day at 94-per-cent availability).

The expansion of the San Dimas mill will include an improvement and/or expansion of the current crushing, grinding, leaching and tailings thickening facilities. The existing dry tailings and waste dump storage facilities each have in excess of 10 years capacity at the expanded 3,000-tonne-per-day rate. The total current power supply capacity at San Dimas of 11 megawatts (including the combined expanded hydroelectric capacity, grid capacity and on-site generator capacity) is also anticipated to be sufficient for the 3,000-tonne-per-day operation.

The company will require a modification of its existing permit in order to process at the expanded dore rate. The San Dimas mine's existing permit allows for 240 tonnes per year of dore production and the expansion would require a permit for 275 tonnes per year of dore production. The permit process is expected to take approximately 180 days and does not need to be in place until the expansion work is completed in approximately 18 months.

The company currently estimates that expanding the San Dimas mill to 3,000 tonnes per day will require approximately $26.4-million of capital investment, with approximately $6-million expenditure expected in 2014 and the remainder spread over the following 18 months. As a result of the preliminary nature of the capital assessment a contingency factor of 30 per cent has been included in the capital estimate.

The start of construction is expected in the first quarter of 2015 and completion by the end of the end of the second quarter of 2016.

              MILL EXPANSION PRELIMINARY CAPITAL ESTIMATE                      
                     (in millions of U.S. dollars)

Crushing and fine ore bins                                        $    7.6
Filtration plant                                                       4.5
Oxygenation tower and processing tank                                  1.9
Controls systems and automation                                        3.0
Backup diesel generator                                                1.8
General and administrative                                             1.9
Contingency                                                            5.7
                                                                  --------
Total                                                             $   26.4

Detailed engineering

The company has retained an engineering firm with extensive plant design experience in the mining sector to assist with an optimization project that could significantly reduce the estimated capital cost for the expansion of the San Dimas mill to 3,000 tonnes per day and at the same time create operating cost savings through process improvement. Together with the company, it will finalize the debottlenecking and process equipment sizing started by the company's plant engineers and will then proceed with detailed engineering and procurement of the plant modifications. The main areas of focus include the following:

• Crushing plant and conveying;
• Grinding plant feed systems (fine ore bins);
• Leaching, thickening and pumping systems;
• Tailings pumping and filtration;
• Overall plant automation and control systems.

Increased exposure to spot silver

The expansion of the San Dimas mine will ensure shareholders have improved exposure to silver following the increase in the annual silver purchase agreement threshold to six million ounces.

The expansion to 3,000 tonnes per day is expected to allow for the company to increase its exposure to spot silver sales to approximately two million ounces per year from the current 1.5 million ounces estimated in 2014 with the threshold at 3.5 million ounces. This was an important contributor to the positive economics and return of the expansion project.

Notes:

1. Major assumptions include a flat gold price per ounce of $1,300, a flat silver price per ounce of $22;
2. Average of first five years;
3. Gold equivalent ounces include silver ounces produced, and converted to a gold equivalent based on a ratio of 1,300:22;
4. According to the silver purchase agreement between the company and Silver Wheaton Corp., until Aug. 6, 2014, Primero will deliver to Silver Wheaton a per-year amount equal to the first 3.5 million ounces of silver produced at San Dimas and 50 per cent of any excess at $4.08 per ounce (increasing by 1 per cent per year). Thereafter Primero will deliver to Silver Wheaton a per-year amount equal to the first six million ounces of silver produced at San Dimas and 50 per cent of any excess at $4.20 per ounce (increasing by 1 per cent per year). The company will receive silver spot prices only after the annual threshold amount has been delivered.

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