Mr. Joseph Conway reports

PRIMERO REPORTS SECOND QUARTER 2014; SAN DIMAS DELIVERS RECORD PRODUCTION

Primero Mining Corp. has released operational and financial results for the second quarter ended June 30, 2014. During the second quarter the company reported record production of 63,414 gold equivalent ounces, compared with 39,089 gold equivalent ounces in the same period of 2013 and adjusted net income of $1.1-million (one cent per share).

"The second quarter highlighted the value and success of the first phase of the expansion of the San Dimas mine," stated Joseph F. Conway, chief executive officer. "The San Dimas mill successfully operated at close to its new capacity of 2,500 tonnes per day for the entire second quarter delivering record production for the company. We are also very pleased to have announced earlier today the approval of the second phase of the expansion at San Dimas to 3,000 tonnes per day, elevating annual production from that mine to approximately 215,000 gold equivalent ounces from the end of the second quarter of 2016. During the second quarter we were also focused on improving the operating results from our recently acquired Black Fox mine. We have begun the process of investing in and optimizing the operation and are encouraged by the 29-per-cent increase in gold production this quarter over last quarter, although the grades mined were below expectation and the current low level of long-hole mining needs to be addressed. We understand what needs to be achieved and look forward to continuing to deliver improving results from Black Fox throughout the year."

Second quarter highlights

Record quarterly production

• Production increased by 62 per cent to 63,414 gold equivalent ounces (including a record 32,895 ounces of gold and 1.5 million ounces of silver from San Dimas and 17,166 ounces of gold from Black Fox), compared with 39,089 gold equivalent ounces in the same period of 2013.

Record revenue

• Record revenues of $79.7-million, with adjusted net income of $1.1-million (one cent per share) and operating cash flow before working capital changes of $26.4-million (17 cents per share).

Line of credit established

• Cash position of $44.2-million plus available credit of $45-million at June 30, 2014.

Highest spot silver sales

• Highest ever silver sales at spot prices of 800,000 ounces, compared with 600,000 ounces in the same period in 2013.

Construction decision on San Dimas expansion to 3,000 tonnes per day

• The company announced earlier today a further expansion of the San Dimas mine and mill to 3,000 tonnes per day.

San Dimas delivers record production; Black Fox shows positive progress

The company produced a total of 63,414 gold equivalent ounces in second quarter 2014, a 62-per-cent increase compared with 39,089 gold equivalent ounces in second quarter 2013. Gold and silver production increased to 50,061 ounces and 1.49 million ounces, respectively, in second quarter 2014 from 26,904 ounces and 1.46 million ounces in second quarter 2013.

The company incurred combined total cash costs per gold equivalent ounce of $672 for second quarter 2014, compared with $551 for second quarter 2013. On a byproduct basis, total cash costs per gold ounce were $508 for second quarter 2014, compared with $167 for second quarter 2013. All-in sustaining costs per ounce were $1,228 for second quarter 2014, compared with $659 in second quarter 2013.

San Dimas produced 46,248 gold equivalent ounces (32,895 ounces of gold and 1.5 million ounces of silver) during the second quarter of 2014, 18 per cent more than the same period in 2013. The increase in production was mainly due to throughput 9 per cent higher and a gold grade 17 per cent higher when comparing the same periods. The throughput increase was due to the mill expansion to 2,500 tonnes per day being completed during the first quarter, with throughput in the second quarter averaging 2,405 tonnes per day. Throughput was impacted by a planned nine-day shutdown at the company's hydropower facility in order to expand its capacity.

San Dimas total cash costs on a gold equivalent and byproduct basis in the second quarter 2014 were $551 and $252 per ounce, respectively, consistent with $551 and $167 per ounce, respectively, in the second quarter 2013. Higher operating costs were offset by an 18-per-cent increase in gold equivalent ounces produced. All-in sustaining costs at San Dimas were $626 per ounce in the second quarter 2014, compared with $588 per ounce in the same period of 2013. Increased sustaining capital expenditures were offset by a 22-per-cent increase in gold ounces produced in the second quarter of 2014 compared with the second quarter of 2013.

Black Fox produced 17,166 ounces of gold during the second quarter of 2014, the first full quarter for which the company owned the Black Fox mine. This represented a 29-per-cent increase in production compared with the previous quarter and 26-per-cent decline compared with the prior-year period. The lower year-over-year production was mainly the result of lower underground and open-pit grades and lower underground throughput as a result of insufficient investment in underground development and exploration. This led to a lack of available underground stopes for mining in the first half of 2014. Since acquiring the Black Fox mine, the company has significantly increased investment in underground development and exploration, which management believes will allow the mine to return to higher production levels by the end of 2014.

Black Fox total cash costs per gold ounce increased 22 per cent from $820 in second quarter 2013 to $998 in second quarter 2014, due mainly to the lower production. The Black Fox mine incurred all-in sustaining costs per gold ounce of $1,771 in second quarter 2014, compared with $1,154 in second quarter 2013 mainly due to lower production and higher sustaining capital expenditures in second quarter 2014 than second quarter 2013, primarily due to increased exploration and development and capitalization of waste. The overall strip ratio during the second quarter was 9:1, resulting in $271 per ounce of capitalized waste being included in the all-in sustaining costs. This is expected to decline significantly in the second half of 2014 as the strip ratio declines to the life-of-mine average of 5:1.

Revenue increases with expanded production

Revenues increased to $79.7-million in the second quarter of 2014 as a result of selling 48,596 ounces of gold at an average realized price of $1,264 per ounce, and 1.58 million ounces of silver at an average realized price of $11.56 per ounce, up from $52.5-million in the second quarter of 2013, with the acquisition of Black Fox mine on March 5, 2014, accounting for $20.9-million of the increase. Revenues at San Dimas were $6.3-million higher in second quarter 2014 than second quarter 2013 due to a 23-per-cent increase in gold sales volumes and a 27-per-cent increase in silver spot sales, partially offset by an 8-per-cent decrease in average realized gold prices.

Gold produced at Black Fox is subject to a gold purchase agreement and as a result 1,334 ounces were sold to Sandstorm Gold Ltd. at a fixed price of $509 per ounce. Silver produced at San Dimas is subject to a silver purchase agreement and as a result 818,573 ounces of silver were sold to Silver Wheaton Corp. at a fixed price of $4.16 per ounce and 760,603 ounces of silver were sold at an average spot price of $19.52, compared with 603,476 ounces at an average price of $21.88 in second quarter 2013.

Operating cash flow before working capital changes in the second quarter of 2014 was $26.4-million (17 cents per share), compared with $16.9-million (16 cents per share) in the second quarter of 2013. The increase was mainly due to $7.6-million higher cash earnings from mine operations.

The company generated net income of $600,000 (nil per share) in second quarter 2014 compared with net income of $4.2-million (four cents per share) in second quarter 2013. Adjusted net income, which primarily excludes transaction costs and the impact of foreign exchange rate changes on deferred tax balances, was $1.1-million (one cent per share) for the second quarter 2014, compared with adjusted net income of $17.0-million (16 cents per share) for the same period in 2013. The second quarter 2014 adjusted net income includes $6.2-million more share-based payment expense and $11.5-million more depreciation and depletion expense than the second quarter of 2013. The second quarter adjusted net income includes a share-based payment expense of $3.5-million (two cents per share).

Line of credit provides financial flexibility

The company's cash position was $44.2-million at June 30, 2014, down from the March 31, 2014, balance of $86.4-million. The cash balance decreased in second quarter 2014 as a result of repaying $20.9-million in senior secured notes and $1.9-million of the convertible debentures both assumed upon the acquisition of Brigus, as well as the remaining balance of $27.2-million of the Goldcorp promissory note, partially offset by the company drawing down a net amount of $28.2-million on the new line of credit.

Capital expenditures during the second quarter 2014 totalled $31.2-million, up from $16.0-million spent in second quarter 2013. The increase was partly as a result of spending on the Black Fox complex, which was not owned in the same period of 2013, and partly due to increased expenditure at the San Dimas mine due to increased equipment purchases. In 2014, capital expenditures are expected to total approximately $80.0-million excluding capitalized exploration expenses of $35.0-million.

On May 23, 2014, the company closed a three-year $75-million revolving line of credit. In order to provide the lenders with the required security, coincident with the closing the company repaid the $27.2-million promissory note outstanding to a subsidiary of Goldcorp Inc. by drawing down $30-million of the line of credit.

At June 30, 2014, the balances outstanding on the convertible debentures and finance leases were $48.1-million and $15.0-million, respectively.

Outlook maintained for 2014

Primero maintains its 2014 production guidance of between 225,000 and 245,000 gold equivalent ounces, an increase of up to 70 per cent over 2013. Cash costs for 2014 are expected to be in the range of $650 to $700 per gold equivalent ounce.

San Dimas expansion to 3,000-tonne-per-day construction decision

Earlier today, the company announced that it has approved the second phase of the San Dimas expansion to 3,000 tonnes per day. The preliminary scoping study completed by the company shows an attractive 78-per-cent aftertax IRR and a payback period of less than 12 months after project completion.

Annual production after project completion is expected to increase by more than 25 per cent over 2014 levels to approximately 215,000 gold equivalent ounces. Cash costs are expected to drop by approximately $50 per ounce from current levels to approximately $530 per gold equivalent ounce, or $300 per gold ounce on a byproduct basis.

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. 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 this estimated capital cost and at the same time create operating cost savings through process improvement. An important feature of the expansion to 3,000 tonnes per day is that it increases the company's exposure to spot silver sales as it coincides with the increase in the annual silver threshold of the San Dimas silver purchase agreement.

Black Fox making progress

After acquiring the Black Fox complex in March, 2014, the company immediately began to invest in underground development, definition and delineation drilling. During the second quarter the company successfully increased underground development by 54 per cent, completing 1,881 metres of underground development compared with 1,329 metres in the first quarter of 2014. The company also initiated its exploration program during the second quarter of 2014 and completed 15,500 metres of exploration and delineation drilling and 12,760 metres of definition drilling.

The company increased underground throughput during the second quarter by 15 per cent to approximately 460 tonnes per day, as a result of increasing the available cut-and-fill stopes. It still only mined from a single underground long-hole stope, impacting underground productivity. The company targeted 60-per-cent long-hole mining at Black Fox and only achieved 40 per cent during the second quarter. During the remainder of 2014 the company will be focused on opening new underground long-hole mining stopes and increasing the underground production rate.

On July 9, 2014, the company released an updated mineral reserve and mineral resource estimation for the Black Fox complex (including both the Black Fox mine and the adjacent Grey Fox exploration property). The company elected to use more conservative estimation parameters, in part, in order to improve the accuracy of its mine planning. Drilling results released at the same time confirmed the extension of the Black Fox deposit at depth.

The grades mined at Black Fox during the second quarter were below the company's mine plan created using the recent mineral reserve and mineral resource estimation. As a result, the company has initiated a review of the Black Fox underground grades and short-term underground mine plan that it expects to complete by the end of August, 2014. The open-pit grades are expected to improve throughout the remainder of 2014 and the strip ratio is expected to decline to the average life-of-mine ratio of 5:1.

Cerro del Gallo project construction decision delayed

On July 30, 2014, the company provided an update on its Cerro del Gallo development project located in Guanajuato, Mexico. Primero has advanced the development of the project but has delayed a construction decision until early 2015 so it can complete the planned 2014 metallurgical testwork and drilling programs.

Primero has spent $3.9-million of its 2014 $12.9-million budget and completed basic engineering and water rights acquisition and advanced land acquisition and permitting. The company aims to complete the necessary metallurgical tests, 10,000 metres of drilling, all required land purchases and submit the permit application by the end of 2014. The company remains focused on achieving its desired rate of return and once the 2014 program is completed can assess the economics of the project in order to make a potential construction decision in early 2015.

Conference call and webcast details

The company's senior management will host a conference call today, Thursday, Aug. 7, 2014, at 10 a.m. Eastern Time to discuss the second quarter operating and financial results.

This release should be read in conjunction with Primero's second quarter 2014 financial statements and MD&A report on the company's website in the financial reports section under investors, or on the SEDAR website.

Participants may join the call by dialling North America toll-free 1-866-229-4144 or 1-416-216-4169 for calls outside Canada and the U.S. and entering the participant pass code 7403645 followed by the number sign.

A live and archived webcast of the conference call will also be available at the company's website under the news and events section.

A recorded playback of the call will be available until, Friday, Nov. 6, 2014, by dialling North America toll-free 1-888-843-7419 or 1-630-652-3042 for calls outside Canada and the U.S. and entering the call-back pass code 7403645 followed by the number sign.

                 SUMMARIZED FINANCIAL AND OPERATING RESULTS       
              (in thousands of dollars, except where indicated)
                                                 
                                       Three months ended    Six months ended
                                                 June 30,            June 30,
                                           2014      2013      2014      2013
Key performance data 
Tonnes of ore milled                    428,778   201,680   667,344   385,491
Produced
Gold equivalent (ounces)                 63,414    39,089   103,172    66,745
Gold (ounces)                            50,061    26,904    82,339    51,095
Silver (million ounces)                    1.49      1.46      3.00      2.83
Sold
Gold equivalent (ounces)                 62,791    37,555   100,040    66,029
Gold (ounces)                            48,596    25,692    79,179    50,428
Silver (million ounces)                    1.58      1.42      2.93      2.90
Average realized prices
Gold ($/ounce)                           $1,264    $1,398    $1,276    $1,510
Silver ($/ounce)                         $11.56    $11.66     $9.20     $7.82
Average gold London PM fix               $1,288    $1,415    $1,291    $1,523
Total cash costs (per gold ounce)
Gold equivalent basis                      $672      $551      $677      $620
Byproduct basis                            $508      $167      $522      $377
All-in sustaining costs (per gold
ounce)                                   $1,228      $659    $1,288      $943
Revenues                                 79,669    52,475   127,938    98,796
Earnings from mine operations            19,676    23,593    27,941    39,299
Net income (loss)                           572     4,241    (8,513)   21,565
Adjusted net income (loss)                1,052    17,039    (1,828)   26,140
Basic income (loss) per share              0.00      0.04     (0.06)     0.21
Diluted income (loss) per share            0.00      0.04     (0.06)     0.21
Adjusted net income (loss) per share       0.01      0.16     (0.01)     0.26
Operating cash flows before working
capital changes                          26,431    16,932    32,344    36,443
Assets
Mining interests                        955,587   600,525   955,587   600,525
Total assets                          1,207,602   780,316 1,207,602   780,316
Liabilities
Long-term liabilities                   189,743    49,678   189,743    49,678
Total liabilities                       249,388    95,567   249,388    95,567
Equity                                  958,214   684,749   958,214   684,749

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