Primero Mining Corp.

Headnote

Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions -- business combination -- related party of an issuer has entered into a connected transaction to a business combination -- related party has agreed to amend agreements with the issuer in order to facilitate the business combination and without any economic enhancements or ancillary benefits to the related party -- MI 61-101 requires that the votes attached to securities of interested parties to the business combination, including related parties that a party to a connected transaction, cannot be included in the minority approval of the business combination - relief granted allowing the votes attached to the related party's shares to be included as part of the minority.

Applicable Legislative Provisions

Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, ss. 8.1(2), 9.1(2).

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

PRIMERO MINING CORP.

DECISION

UPON the application (the "Application") of Primero Mining Corp. ("Primero") to the Ontario Securities Commission (the "Commission") for a decision pursuant to section 9.1 of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101") exempting Primero from the requirement to exclude the votes attached to common shares of Primero held by (i) Goldcorp Inc. ("Goldcorp"), (ii) its related parties, and (iii) joint actors of (i) and (ii), as a result of the Commercial Agreement (defined below), in determining minority approval of the Proposed Transaction (defined below) pursuant to section 4.5 of MI 61-101 (the "Requested Relief");

AND UPON considering the Application and the recommendation of staff of the Commission;

AND UPON Primero having represented to the Commission that:

1. Primero is a corporation existing under the laws of British Columbia. Primero is a reporting issuer in each province and territory in Canada, except Québec, and is not in default of securities legislation in any province or territory of Canada.

2. The authorized share capital of Primero consists of an unlimited number of common shares (the "Primero Shares") and an unlimited number of preferred shares without par value, of which approximately 88,249,829 Primero Shares and no preferred shares are issued and outstanding as at July 19, 2011. The Primero Shares are listed and posted for trading on the TSX under the symbol "P".

3. Northgate Minerals Corporation ("Northgate") is a corporation existing under the laws of British Columbia. Northgate is a reporting issuer in each province and territory in Canada.

4. The authorized share capital of Northgate consists of 100,000,000,000,000 common shares (the "Northgate Shares"), 100,000,000,000,000 Class A preferred shares and 100,000,000,000,000 Class B preferred shares, of which approximately 291,975,845 Northgate Shares and no Class A or Class B preferred shares are issued and outstanding as at July 19, 2011. The Northgate Shares are listed and posted for trading on the TSX under the symbol "NGX" and on NYSE AMEX under the symbol "NXG".

5. Goldcorp is the largest shareholder of Primero, holding approximately 35.5% of the outstanding Primero Shares.

6. Goldcorp is a corporation existing under the laws of Ontario. Goldcorp's common shares trade on the TSX and the New York Stock Exchange. Goldcorp is a reporting issuer in each province and territory in Canada.

7. Primero and Northgate have entered into a definitive arrangement agreement dated July 12, 2011 (the "Arrangement Agreement") pursuant to which Northgate will acquire all of the issued and outstanding Primero Shares (the "Proposed Transaction") on the basis of 1.5 Northgate Shares per Primero Share (the "Exchange Ratio").

8. The transaction will be effected by way of a plan of arrangement completed under the Business Corporations Act (British Columbia) (the "Arrangement"). Completion of the Arrangement is subject to, among other things, receipt of all necessary approvals, including regulatory and shareholder approvals and consents.

9. Upon completion of the transaction, existing Northgate and Primero shareholders will own approximately 69% and 31%, respectively, of the outstanding shares of the combined company. Goldcorp is expected to own approximately 11% of the outstanding shares of the combined company.

10. Goldcorp has entered into an agreement to vote in favour of the Arrangement at the meeting of Primero shareholders. Certain directors and officers of Primero and Northgate have also entered into agreements to vote in favour of the Arrangement at their respective shareholder meetings.

11. On July 12, 2011, Primero, Goldcorp, and Northgate, among others, entered into the commercial agreement ("Commercial Agreement") to amend the terms of certain agreements and debt instruments previously entered into by Primero with Goldcorp at the time of Primero's acquisition of the San Dimas Mine from Goldcorp in August 2010 (the "Acquisition").

12. The Acquisition was completed for a purchase price consisting of cash, Primero Shares, a convertible promissory note in the principal amount of US$60 million dated August 6, 2010 (the "Convertible Promissory Note") payable by Primero to a subsidiary of Goldcorp, and a promissory note in the principal amount of US$50 million dated August 6, 2010 (the "Promissory Note") payable by a subsidiary of Primero to a subsidiary of Goldcorp. The Convertible Promissory Note and the Promissory Note are collectively referred to as the "Primero Notes".

13. Concurrent with the completion of the Acquisition, a subsidiary of Goldcorp entered into a transition services agreement (the "Transition Services Agreement") with Primero and a subsidiary of Primero, which provided for the orderly transfer of the operations of the San Dimas Mine to the subsidiary of Primero.

14. On the closing of the Acquisition, Primero entered into a participation agreement with a subsidiary of Goldcorp (the "Participation Agreement"). Under the terms of the Participation Agreement, Goldcorp and its affiliates will, provided they continue to beneficially own at least 10% of the issued and outstanding Primero Shares, have the right to (i) maintain their aggregate percentage of issued Primero Shares following completion of the Acquisition, and (ii) designate, after consultation with Primero, a number of individuals (currently two persons) to be initially appointed and to serve as directors of Primero and thereafter to be nominated at each meeting of shareholders at which directors are to be elected.

15. The Promissory Note bears interest at a rate of 6% per annum, 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 due and payable 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.

16. The Convertible Promissory Note has an initial maturity date of August 6, 2011 (the "Initial Maturity Date") and carries an annual interest rate of 3%. In certain circumstances, the holder of the Convertible Promissory Note may extend the maturity date to August 6, 2012 (the "Extended Maturity Date"). The Convertible Promissory Note is convertible into Primero Shares at the option of the holder at any time before the Initial Maturity Date at a price of $6.00 per share.

17. On the Initial Maturity Date, Primero has the option to repay the principal amount of the Convertible Promissory Note in cash or in Primero Shares (the "Primero Share Payment Option"). Primero's ability to exercise the Primero Share Payment Option at the Initial Maturity Date is subject to the ability of the holder to extend the maturity date to the Extended Maturity Date.

18. Pursuant to the Commercial Agreement, Primero has agreed to provide notice to Goldcorp that it intends to exercise the Primero Share Payment Option and Goldcorp has agreed to elect to extend the Initial Maturity Date to the Extended Maturity Date.

19. The Primero Notes contain two covenants linked to the financial performance of Primero (the "Financial Covenants"), each of which is to be measured at the end of each of Primero's fiscal quarters and fiscal years.

20. The first financial covenant requires Primero to maintain on a consolidated basis a Tangible Net Worth of at least US$400 million dollars (the "Tangible Net Worth Test"). The Primero Notes define Tangible Net Worth as the total of the Company's "Equity" less "intangibles, deferred charges, leasehold improvements and deferred tax credits". "Intangibles" are defined as "assets lacking physical substance", and "Equity" is defined as "the total of share capital (excluding preferred shares redeemable within one year), contributed surplus and retained earnings" plus postponed debt.

21. The second financial covenant requires Primero, commencing at the end of Primero's first fiscal quarter following August 6, 2011, to maintain on a consolidated basis, Free Cash Flow (as defined in the Primero Notes) of at least US$10 million calculated on a rolling four fiscal quarter basis (the "Free Cash Flow Test"). The Primero Notes defined "Free Cash Flow" as cash provided by operating activities as set out in the consolidated statement of cash flows of Primero (as determined on a consolidated basis in accordance with Canadian generally accepted accounting principles ("Canadian GAAP")) less, to the extent not already deducted, all capital expenditures of the San Dimas Mine, all principal and interest payable to the holders of the Primero Notes pursuant to the terms and conditions of the Primero Notes, and up to US$5 million per year on account of acquisition opportunities.

22. The wording of the Tangible Net Worth Test under the Primero Notes as described above had implications that fell outside the intention of Primero and the parties to the Primero Notes. Primero and Goldcorp had intended that Primero's share purchase warrants (the "Share Purchase Warrants") be included in the calculation of Tangible Net Worth. However, as Primero discloses the Share Purchase Warrants separately from its share capital on its balance sheet, the Share Purchase Warrants fell outside the definition of Equity under each of the Primero Notes.

23. Furthermore, warrants are treated differently under International Financial Reporting Standards ("IFRS") than under Canadian GAAP. Under Canadian GAAP, the fair value of the Share Purchase Warrants is classified as shareholders' equity and qualified as Equity for the purposes of the Tangible Net Worth Test under the Primero Notes. Under IFRS, however, Share Purchase Warrants that are denominated in a currency other than a company's functional currency are classified as liabilities and would not be treated as Equity under the Primero Notes.

24. In addition, and as noted above, the definition of Tangible Net Worth under each of the Primero Notes described "intangibles" as assets lacking physical substance, which is not a definition typically used in determining if an asset is an intangible asset. Under this definition, assets such as cash and receivables could, on a strict interpretation, be considered intangibles and not included in the calculation of Primero's Tangible Net Worth. The practice of Primero and Goldcorp, however, was to include intangibles that would normally be considered current assets, such as cash and receivables, in calculating Primero's Tangible Net Worth, which was reflected in the quarterly compliance certificates delivered under the Primero Notes and accepted by the holders of the Primero Notes.

25. The Tangible Net Worth Test called for Primero's Tangible Net Worth to be at least US$400 million. This limited Primero's flexibility to respond to economic and market fluctuations.

26. With respect to the Free Cash Flow Test, the definition of "Free Cash Flow" under each of the Primero Notes combined cash flows from Primero's consolidated financial statements and the San Dimas Mines statements. The inclusion of the capital expenditures associated with the San Dimas Mine in the Free Cash Flow Test further limited Primero's financial flexibility.

27. On July 12, 2011, Primero entered into the Commercial Agreement with Goldcorp, two subsidiaries of Goldcorp, and Northgate (collectively, the "Parties") whereby, in connection with the Proposed Transaction, the Parties (i) agreed that the Participation Agreement will terminate on completion of the Proposed Transaction, (ii) obtained certain consents and acknowledgements from Goldcorp and its affiliates in connection with the Primero Notes, the Participation Agreement, an indemnity provided by Primero to Goldcorp in connection with a silver purchase agreement with an affiliate of Silver Wheaton Corp. (the "Indemnity"), and the Transition Services Agreement, and (iii) amended each of the Primero Notes to establish financial covenants which would provide Primero with greater financial flexibility.

28. Upon termination of the Participation Agreement, Goldcorp will cease to have the right to nominate members of the Primero board of directors and will cease to have pre-emptive share purchase rights for the Primero Shares. Goldcorp has also agreed to trading restrictions on the Northgate Shares to be received by Goldcorp on completion of the Arrangement, which restrictions are modelled on the restrictions in respect of the Primero Shares currently in the Participation Agreement.

29. With respect to the Primero Notes, the Parties agreed to amend, effective on completion of the Proposed Transaction, the definition of Tangible Net Worth in each of the Primero Notes to ensure that the Share Purchase Warrants are included in the calculation of Tangible Net Worth under the Tangible Net Worth Test. The explicit reference to the Share Purchase Warrants in the definition of Tangible Net Worth also ensures that the Share Purchase Warrants are captured in view of the reclassification of the Share Purchase Warrants under IFRS. Furthermore, to avoid the possible non-inclusion of assets such as cash and receivables from Tangible Net Worth, the Parties amended, effective the date of the Commercial Agreement, the definition of Tangible Net Worth to remove the reference to intangibles being assets without physical substance and replaced it with a reference to intangibles as characterized by GAAP. Lastly, the Parties agreed to reduce, effective on completion of the Proposed Transaction, the financial threshold of the Tangible Net Worth Test from US$400 million to US$220 million, the effect of which will be to provide the combined company with greater financial flexibility to react to economic and market fluctuations.

30. The Parties also agreed to amend, effective on completion of the Proposed Transaction, the Free Cash Flow Test in each of the Primero Notes, by, in part, limiting the definition of "Free Cash Flow" to cash flow from operating activities in Primero's consolidated financial statements only. Although the Free Cash Flow threshold was increased by US$2.5 million from US$10 million to US$12.5 million, the removal of costs such as the capital expenditures of the San Dimas Mine from the Free Cash Flow Test effectively results in a threshold for the Free Cash Flow Test which is easier for Primero to satisfy, and will provide the combined company with further financial flexibility.

31. The Parties further agreed effective on completion of the Proposed Transaction, to deem the Proposed Transaction a "Capital Reorganization" as contemplated under the Convertible Promissory Note, with the effect that if the holder of the Convertible Promissory Note exercises the right to convert the Convertible Promissory Note after the completion of the Proposed Transaction, the holder will be entitled to receive the Northgate Shares calculated in accordance with the Exchange Ratio, rather than Primero Shares.

32. Furthermore, effective on the date of the Commercial Agreement, Goldcorp and its two subsidiaries agreed, as and if required, to consent to the Proposed Transaction under each of the Primero Notes, the Indemnity and the Transition Services Agreement, as applicable, and Goldcorp and one of its subsidiaries agreed to acknowledge and confirm that they will not take any action with respect to any breach of the financial covenants in each of the Primero Notes which may have occurred prior to the effective date of the Arrangement Agreement.

33. The overall effect of the Commercial Agreement is to terminate Goldcorp's rights under the Participation Agreement, clarify and confirm the intentions of the Parties with respect to the Primero Notes and, by amending the terms of the Tangible Net Worth Test and the Free Cash Flow Test, improve Primero's (and therefore the combined company's) financial flexibility and clarify that Goldcorp will not take any action with respect to any past breach. The changes effected or to be effected by the Commercial Agreement do not provide any economic enhancements or other ancillary benefits to Goldcorp.

34. The Commercial Agreement may be considered a "connected transaction" to the Proposed Transaction. The Proposed Transaction could reasonably be determined to constitute a "business combination" under MI 61-101 because Goldcorp, a related party to Primero, is a party to a connected transaction to the Proposed Transaction. As a consequence, Goldcorp would be an "interested party" in respect of the business combination and prevented from voting as part of the "minority" to approve the Arrangement pursuant to subsection 8.1(2) of MI 61-101.

35. As Goldcorp is a related party of Primero, the Commercial Agreement as it relates to the amendments to the Primero Notes (the "Note Amendments") could reasonably be determined to constitute a "related party transaction" under MI 61-101. However, pursuant to section 5.1 of MI 61-101, the provisions relating to related party transactions in Part 5 of MI 61-101 (the "Related Party Requirements") do not apply to Primero because the Proposed Transaction is a business combination for Primero.

36. Assuming the Related Party Requirements did apply to the Proposed Transaction, Primero would not be required to obtain a formal valuation of the Commercial Agreement under section 5.4 of MI 61-101 as neither of the Note Amendments are a related party transaction described in any of paragraphs (a) to (g) of the definition of "related party transaction" in MI 61-101. Therefore, Primero is not required to obtain a valuation of the Proposed Transaction pursuant to clause 4.3(1)(b) of MI 61-101.

37. In the absence of the relief sought, subsection 8.1(2) of MI 61-101 would require Primero to exclude the votes attached to Primero Shares held by (i) Goldcorp, (ii) its related parties, and (iii) joint actors of (i) and (ii), in determining minority approval of the Proposed Transaction pursuant to section 4.5 of MI 61-101.

AND UPON the Commission being satisfied to do so would not be prejudicial to the public interest;

IT IS DECIDED pursuant to section 9.1 of MI 61-101 that the Requested Relief is granted.

Dated August 3, 2011.