Cerro Resources and Primero Mining C$119M Merger Progressing

Cerro Resources and Primero Mining C$119M Merger Progressing Cerro
Del Gallo and Forming New Explorer 
TORONTO, ONTARIO -- (Marketwire) -- 12/13/12 --   
(All dollar amounts in this news release are expressed in Australian
dollars unless otherwise indicated.)  
Cerro Resources NL ("Cerro") (ASX:CJO)(TSX VENTURE:CJO) today
announces that it has entered into a definitive agreement (the
"Agreement") with Primero Mining Corp. ("Primero") (TSX:P)(NYSE:PPP)
aimed at progressing the planned Cerro del Gallo gold/silver heap
leach mine in Mexico, under which: 

--  Primero will acquire all issued and outstanding ordinary shares of Cerro
    by way of a scheme of arrangement (the "Share Arrangement") under the
    Australian Corporations Act 2001 ("Act"), at the ratio of 0.023 of a
    Primero share for each 1 Cerro share ("Share Ratio"); 
--  the terms of all issued and outstanding options of Cerro will be amended
    by way of a scheme of arrangement (the "Option Arrangement") under the
    Act, so that on exercise of the Cerro options, the optionholders will
    receive Primero shares based on the Share Ratio; and 
--  a new company ("Spinco") will be created to retain Cerro's non-Cerro del
    Gallo projects and interests. Existing Cerro shareholders will receive
    80.01% of the ordinary shares in Spinco. Primero will fund Spinco in the
    amount of $A4M and will receive a 19.99% stake in Spinco with anti-
    dilution rights for 2 years and be entitled to appoint one director to
    Spinco's board. 

The Share Arrangement represents a 77% premium to the spot closing
price of Cerro shares on the ASX on December 13, 2012, excluding
additional value through the creation of Spinco.  
Cerro currently owns 69%(1) of the Cerro Del Gallo feasibility stage
project in Guanajuato, Mexico, a gold-silver deposit with 1.15
million ounces of in-pit gold equivalent proven and probable reserves
and 1.58 million ounces of in-pit gold equivalent measured and
indicated resources (excluding P&P reserves).(2) Cerro also owns 100%
interests in the Namiquipa silver and Espiritu Santo gold/silver
exploration projects in Mexico, as well as Australian
project/investment assets.  
Primero operates the 100,000oz Gold eq pa San Dimas gold/silver mine
in Durango State Mexico, currently under expansion to 160,000oz Gold
eq pa. Primero currently has a $133M pro-forma cash position and last
traded at $C6.63 per share for a market capitalisation of $C650M.  
Post transaction, the business combination would see:  

--  the merged 'Primero' entity positioned as a leading mid-tier gold growth
    stock, with a forecast 24% annualised production growth rate to at least
    260,000 ounces of gold production by 2016, while 
--  "Spinco" will be focused on unlocking the high value potential Namiquipa
    silver and Espiritu Santo gold/silver Mexican exploration projects, with
    approximately $A4 million in cash funding.  

For current Cerro shareholders, the merger offer represents an
implied 62% premium to Cerro's 20-day volume weighted average price
("VWAP") and a 77% premium to the spot closing price on the ASX at
December 13, 2012 - not including a 'Spinco' valuation.   
Upon completion, Cerro securityholders will own approximately 15% of
the issued common shares of pro-forma Primero. The total transaction
value is approximately C$119 million.  
Cerro Resources Managing Director, Mr. Tony McDonald commented:
"Cerro management has recognised the investment market's prevailing
preference to see new precious metals operations funded out of
existing cash flows."   
"By undertaking this transaction, Cerro shareholders benefit
immediately from Primero's balance sheet and cash flow, enabling the
Cerro del Gallo project to be constructed without external financing.
Importantly, this should ensure returns from an operationalised Cerro
del Gallo are maximised, while appreciably lowering the combined
average operating cost per ounce of the merged group - benefitting
all shareholders."  
"Cerro shareholders should also benefit from improved market
liquidity of their Primero shareholding and the combination with
Primero's proven management team who have a demonstrated track record
of successfully growing precious metals mining companies."  
"At the same time, this deal will free "Spinco" to focus its time and
resources on fast tracking the high potential Namiquipa and Espiritu
Santo projects in Mexico - and enable those projects to be more
readily valued without being overshadowed by market focus on Cerro
del Gallo's operation."  
Primero's President and Chief Executive Officer, Joseph Conway said,
"Cerro del Gallo is a very promising, undeveloped, large resource
base opportunity in Mexico. Primero has the operational and financial
strength to advance the project on a timely basis which will be
beneficial for all stakeholders involved. This also represents a
significant opportunity for Cerro shareholders in terms of continuing
participation in Primero shares and their potential upside."  
Benefits to Cerro securityholders: 

--  Offer represents an implied premium of 62% to the 20 trading day VWAP of
    Cerro shares on the ASX as at December 13, 2012.  
--  Immediate exposure to strong balance sheet and cash flow sufficient to
    fund the development of Cerro del Gallo, as well as finance further
    growth opportunities including a potential further expansion of
    Primero's existing San Dimas mine. 
--  Addresses key project funding requirement through effectively funding at
    a premium to alternative funding sources, while maximising long term
    operational earnings. 
--  Enables Cerro's shareholders to maintain exposure to the Cerro del Gallo
--  Primero has an existing in-house management team with proven mine
    construction and operational expertise - potentially fast-tracking
--  Provides opportunity to participate in valuation re-rating as the
    combination has a greater market capitalisation, liquidity and immediate
    cash flows. 
--  Increases analyst following and exposure of the Cerro del Gallo
--  Creates a new purpose-specific vehicle to progress Cerro's existing
    world class suite of exploration assets through 80.01% ownership of

Benefits to Primero Shareholders: 

--  Attractive long-life, precious metals project. 
--  Diversifies near-term production with an additional 95,000 gold
    equivalent ounces per year, a 55% increase in currently estimated near-
    term production. 
--  Doubles reserves and triples measured and indicated resources. 
--  Leverages Primero's regional expertise and solidifies Primero's presence
    in Mexico, one of the world's most supportive mining districts, with
    further consolidation opportunities. 
--  Accretive to Primero on key metrics and an attractive total acquisition
--  Asset diversification reduces risk and volatility in cash flow and
--  Allows participation in upside potential of non-Cerro del Gallo assets
    through 19.99% ownership of "Spinco". 
--  Enhanced capital markets profile and re-rating potential as a junior
    gold producer with a proven operating team, a superior growth profile
    and significant exploration upside. 
--  Delivers on Primero's strategy of creating value for shareholders
    through low risk exposure to precious metals in the Americas. 

Transaction Summary  
Under the terms of the Share Arrangement, each Cerro shareholder will
receive 0.023 of a Primero common share for each Cerro ordinary share
held (the "Share Consideration"). Cerro shareholders will also
receive 80.01% of the ordinary shares of a newly incorporated company
("Spinco"). Spinco will own Cerro's interests in the Namiquipa,
Espiritu Santo, Mt Philp, the Kalman joint venture interest, shares
in Syndicated Metals and approximately $4 million in cash. Primero
will receive a 19.99% stake in Spinco with anti-dilution rights for
two years. Primero will also be entitled to appoint a board member to
sit on the board of directors of Spinco. Cerro's outstanding options
and its option plan will be substantially assumed by Primero, subject
to adjustment to reflect the Share Ratio and adjusted exercise price. 
The transaction includes a loan for USD 5 million from Primero to
Cerro ("Loan") to fund the ongoing development of the Cerro del Gallo
project pending completion of the merger. Subject to termination or
repayment after the maturity date, the interest rate under the Loan
will be 6%. The maturity date for the loan will be 24 months from the
date of the Agreement unless terminated early in accordance with its
The transaction will be carried out by way of two court-approved
schemes of arrangement (the Share Arrangement and the Option
Arrangement). Each of the Share Arrangement and the Option
Arrangement will require the approval of Cerro's shareholders and
optionholders respectively. The transaction is subject to these
approvals being obtained and also the Cerro shareholders approving at
general meeting aspects of the deal with Spinco.   
The transaction is also subject to applicable regulatory approvals
and the satisfaction of certain other closing conditions customary in
transactions of this nature. It is anticipated that the Cerro
securityholder meetings will be held in April 2013. Primero does not
require a shareholder vote to complete the transaction.  
The Share Arrangement also includes customary provisions, including
no solicitation of alternative transactions, right to match superior
proposals, a reimbursement fee payable by Cerro in certain events and
fiduciary-out provisions.   
Cerro will engage an independent expert to provide a report to
securityholders on the transaction to assist them in determining
their vote at the relevant meeting(s) to approve the transaction.
Each of the directors of Cerro have agreed to enter into voting
support agreements and have agreed to vote in favour of the
transaction, subject to receipt of a 'Superior Proposal'.   
Primero is listed on TSX and NYSE and will provide for listing of the
Primero shares issued on the merger on ASX as CHESS Depository
Next steps  
Securityholders will receive a booklet on the transaction and the
Share Arrangement and the Option Arrangement (Scheme Booklet). The
Scheme Booklet will contain full details of the proposed Share
Arrangement and the Option Arrangement, including the basis for the
recommendation of the Directors. 
It is anticipated that Cerro will send the Scheme Booklet to
Securityholders in late February or early March 2013. The relevant
meetings to approve the transaction and the Share Arrangement and the
Option Arrangement are expected to be held in March or early April
2013, with the transaction expected to close in early May 2013
subject to all approvals being obtained and conditions precedent
being satisfied. 
Advisors and Counsel 
Cerro's Canadian financial advisor in relation to the Canadian
aspects of the transaction is National Bank Financial Inc. Its
Canadian legal advisor is Wildeboer Dellelce LLP and its Australian
legal advisor is GRT Lawyers.  
Primero's financial advisors in relation to the transaction are TD
Securities Inc. Its Canadian legal advisor is Stikeman Elliot LLP and
its Australian legal advisor is ClarkeKann Lawyers LLP.  
(1) Cerro del Gallo is owned 69% by Cerro and 31% by Goldcorp Inc.    
(2) The gold equivalent ounces reflected herein were calculated using
gold, silver and copper prices of US$1,341/oz, US$25.58/oz and
US$7,582/t (or $3.44/lb).  
Competent Person/Qualified Person  
Information from July 2012 NI43-101 Technical Report Feasibility
Study (FS) on Heap Leach of the Cerro del Gallo Gold/Silver Project
was prepared by Peter Hayward, Dip. of Metallurgy, Fellow AusIMM;
Timothy Carew, B.Sc (Hons) Geology, M.Sc. Mineral Production
Management, P.Geo; and Thomas Dyer, B.Sc Mine Engineering, P.E.,
independent consultants to Cerro and John Skeet, BAppSc, Fellow
AusIMM, the Company's Chief Operating Officer. The report is
available on SEDAR & Company's website. 
About Cerro Resources  
Cerro Resources is a precious and base metals exploration and
development company. The Company is currently focused on Mexico where
it is advancing the Cerro del Gallo gold/silver project in the
central state of Guanajuato, Mexico, actively exploring the Namiquipa
silver project in northern Mexico, and commencing exploration on the
Espiritu Santo gold/silver project in Jalisco. It also maintains an
active working focus on the Mt Isa, Queensland, region where it is
exploring the Mt Philp haematite project and it holds an interest in
the Kalman molybdenum, rhenium, and copper project. 
Additional information about the Company and its projects is
available on the Company's website at www.cerroresources.com and on
About Primero  
Primero Mining Corp. is a Canadian-based precious metals producer
that owns 100% of the San Dimas gold-silver mine in Mexico. Primero
is focused on delivering superior, sustainable value for all
stakeholders with low-risk exposure to precious metals. The Company
has intentions to become an intermediate producer by building a
portfolio of high quality, low cost precious metals assets in the
Additional information about Primero and its projects is available on
the Company's website at www.primeromining.com and on SEDAR.  
Completion of the transaction is subject to a number of conditions,
including TSX Venture Exchange acceptance and disinterested
Shareholder approval. The transaction cannot close until the required
shareholder and Court approval is obtained. There can be no assurance
that the transaction will be completed as proposed or at all. 
Investors are cautioned that, except as disclosed by the Company, any
information released or received with respect to the transaction may
not be accurate or complete and should not be relied upon. Trading in
the securities of Cerro Resources should be considered highly
The TSX Venture Exchange has in no way passed upon the merits of the
proposed transaction and has neither approved nor disapproved the
contents of this press release.   
Neither TSX Venture Exchange nor its Regulation Services Provider (as
that term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this release. 
Cerro Resources NL
Tony McDonald
Managing Director & CEO
+61 7 3221 7501
Cerro Resources NL
Greg Germon
General Manager Investor Relations - Australia
+61 2 9300 3341
Cerro Resources NL
Ms. Gerri Paxton
Manager Investor Relations - North America
Press spacebar to pause and continue. Press esc to stop.