CJO Cerro Resources Nl

(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
    project. 
    
--  Primero has an existing in-house management team with proven mine
    construction and operational expertise - potentially fast-tracking
    development. 
    
--  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
    opportunity. 
    
--  Creates a new purpose-specific vehicle to progress Cerro's existing
    world class suite of exploration assets through 80.01% ownership of
    "Spinco". 



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
    cost. 
    
--  Asset diversification reduces risk and volatility in cash flow and
    earnings. 
    
--  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 terms.  


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 Interests.


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 SEDAR.


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
Americas.


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 speculative.



FOR FURTHER INFORMATION PLEASE CONTACT: 
Cerro Resources NL
Tony McDonald
Managing Director & CEO
+61 7 3221 7501
admin@cerroresources.com


Cerro Resources NL
Greg Germon
General Manager Investor Relations - Australia
+61 2 9300 3341
greg@cerroresources.com


Cerro Resources NL
Ms. Gerri Paxton
Manager Investor Relations - North America
+1-514-544-2696
gpaxton@cerroresources.com
www.cerroresources.com

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