##### 





|STATISTICAL SUMMARY
|-------------------

2002
    
    
    2001
    
    
    2000
    
    
    1999
    
    
    1998MILLING OPERATIONSTonnes processed(thousands)Jerritt Canyon (Meridian Gold share)
    
    
    399
    
    
    
    400
    
    
    
    408
    
    
    
    438
    
    
    
    404El Peñón
    
    
    688
    
    
    
    715
    
    
    
    739
    
    
    
    165
    (1)
    
    
    Gold grade(grams per tonne milled)Jerritt Canyon
    
    
    8.5
    
    
    
    8.7
    
    
    
    8.1
    
    
    
    8.6
    
    
    
    8.7El Peñón
    
    
    15.5
    
    
    
    14.6
    
    
    
    13.0
    
    
    
    4.8
    (1)
    
    
    Gold recoveriesJerritt Canyon
    
    
    88
    %
    
    
    88
    %
    
    
    90
    %
    
    
    91
    %
    
    
    91
    %El Peñón
    
    
    95
    %
    
    
    94
    %
    
    
    94
    %
    
    
    94
    %
    
    
    LEACHING OPERATIONS (Beartrack)Tonnes mined(thousands)
    
    
    
    
    
    
    
    
    
    
    839
    
    
    
    4,671
    
    
    
    4,088Gold grade(cyanide soluble grams per tonne)
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    
    1.1
    
    
    
    0.8Gold recovery
    
    
    
    
    
    
    
    
    
    
    90
    %
    
    
    90
    %
    
    
    90
    %PRODUCTION (thousands of ounces)GoldJerritt Canyon (Meridian Gold share)
    
    
    100
    
    
    
    98
    
    
    
    95
    
    
    
    109
    
    
    
    105El Peñón
    
    
    328
    
    
    
    318
    
    
    
    289
    
    
    
    21
    (1)
    
    
    Beartrack(2)
    
    
    8
    
    
    
    19
    
    
    
    72
    
    
    
    133
    
    
    
    110SilverEl Peñón
    
    
    5,077
    
    
    
    4,752
    
    
    
    4,018
    
    
    
    214
    (1)
    
    
    109Total Gold
    
    
    436
    
    
    
    435
    
    
    
    456
    
    
    
    263
    
    
    
    215Total Silver
    
    
    5,077
    
    
    
    4,752
    
    
    
    4,018
    
    
    
    214
    
    
    
    109Cash Cost of Production(USD per gold ounce)Jerritt Canyon
    
    $
    257
    
    
    $
    218
    
    
    $
    217
    
    
    $
    191
    
    
    $
    187Beartrack(2)
    
    
    
    
    
    
    
    
    
    
    125
    
    
    
    140
    
    
    
    220El Peñón
    
    
    35
    
    
    
    43
    
    
    
    48
    
    
    
    
    
    
    
    Average
    
    
    87
    
    
    
    83
    
    
    
    95
    
    
    
    163
    
    
    
    204Total Cost of Production(USD per gold ounce)Jerritt Canyon
    
    
    331
    
    
    
    285
    
    
    
    262
    
    
    
    244
    
    
    
    259Beartrack(2)
    
    
    
    
    
    
    
    
    
    
    273
    
    
    
    284
    
    
    
    387El Peñón
    
    
    84
    
    
    
    94
    
    
    
    96
    
    
    
    
    
    
    
    Average
    
    
    141
    
    
    
    138
    
    
    
    157
    
    
    
    266
    
    
    
    324




|    |  | Notes                                                                                                                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  | The calculation of cash costs of production records silver sales as a
by-product, reducing operating costs.                                                                                                                         
|(1) |  | El Peñón: Figures do not represent commercial production, which commenced
on January 1, 2000. Operating costs for 1999 were capitalized as part of the
project.                                                                     
|(2) |  | Beartrack: The Beartrack operations ceased mining in April 2000, and
concluded economic recovery by September of 2000. All residual gold production
since September 2000 is recorded as a reduction of restoration and closure
cost.



|CAUTIONARY STATEMENT
|--------------------

Certain statements in this Annual Report constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995 and Canadian securities legislation. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the Company, or other
future events, including forecast production, earnings and cash flows, to be
materially different from any future results, performances or achievements or
other events expressly or implicitly predicted by such forward-looking
statements. Such risks, uncertainties and other factors include, but are not
limited to, factors associated with fluctuations in the market price of
precious metals, mining industry risks, recent operating losses, uncertainty of
title to properties, risk associated with foreign operations, environmental
risks and hazards, proposed legislation affecting the mining industry,
litigation, governmental regulation of the mining industry, properties without
known mineable reserves, uncertainty as to
calculations of reserves, mineral deposits and grades, requirement of
additional financing, uninsured risks, risk of hedging strategies, competition,
dependence on key management personnel, potential volatility of market price of
Common Shares, dilution and certain anti-takeover effects.

17



---



##### 





|MARKET FOR THE REGISTRANTS COMMON EQUITY
AND RELATED SHAREHOLDER MATTERS
|-------------------------------------------------------------------------

The principal public trading markets for Meridian Gold Common Shares are the
Toronto Stock Exchange and the New York Stock Exchange. The quarterly high and
low trading prices of Meridian Gold Common Shares as reported on such exchanges
for the years ended December 31, 2002 and 2001 are set forth in the table of
Supplementary Data.

The year-end 2002 and 2001 market price of Meridian Gold shares was $17.63 and
$10.33, respectively, on the New York Stock Exchange. At year-end 2002 and
2001, the shares closed on the Toronto Stock Exchange at CAD$27.74 and
CAD$16.35, respectively, per share.

Meridian Gold had 1,373 shareholders of
record as of December 31, 2002.



|SELECTED FINANCIAL DATA
|-----------------------

The following selected financial data, for the years 1998 through 2002, have
been derived from the consolidated financial statements of Meridian Gold Inc.

(in millions of USD, except share and per share data)
    
    2002
    
    
    2001
    
    
    2000
    
    
    1999
    
    
    1998SUMMARY OF OPERATIONSSales
    
    $
    133.6
    
    
    $
    115.4
    
    
    $
    128.3
    
    
    $
    71.2
    
    
    $
    65.7Costs and expensesCost of sales
    
    
    38.7
    
    
    
    35.2
    
    
    
    47.3
    
    
    
    53.0
    
    
    
    49.0Depreciation, depletion and amortization
    
    
    22.8
    
    
    
    22.5
    
    
    
    24.0
    
    
    
    18.9
    
    
    
    22.1Exploration costs
    
    
    10.7
    
    
    
    12.3
    
    
    
    12.3
    
    
    
    10.2
    
    
    
    13.1Selling, general and administrative expenses
    
    
    7.5
    
    
    
    7.3
    
    
    
    6.4
    
    
    
    5.0
    
    
    
    7.2Other operating expense (income)
    
    
    1.1
    
    
    
    0.2
    
    
    
    (1.2
    )
    
    
    (0.9
    )
    
    
    (3.6
    )Provision for impairment of mining properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19.8Total costs and expenses
    
    
    80.8
    
    
    
    77.5
    
    
    
    88.8
    
    
    
    86.2
    
    
    
    107.6Operating income (loss)
    
    
    52.8
    
    
    
    37.9
    
    
    
    39.5
    
    
    
    (15.0
    )
    
    
    (41.9
    )Interest income
    
    
    1.8
    
    
    
    1.8
    
    
    
    0.4
    
    
    
    1.7
    
    
    
    2.7Gain (loss) on sale of assets
    
    
    0.2
    
    
    
    1.9
    
    
    
    0.1
    
    
    
    (0.4
    )
    
    
    Income (loss) before income taxes
    
    
    54.8
    
    
    
    41.6
    
    
    
    40.0
    
    
    
    (13.7
    )
    
    
    (39.2
    )Income tax (benefit) expense
    
    
    13.3
    
    
    
    2.9
    
    
    
    (0.6
    )
    
    
    
    
    
    
    Net income (loss)
    
    $
    41.5
    
    
    $
    38.7
    
    
    $
    40.6
    
    
    $
    (13.7
    )
    
    $
    (39.2
    )Net income (loss) per Common Share  Basic
    
    $
    0.48
    
    
    $
    0.52
    
    
    $
    0.55
    
    
    $
    (0.19
    )
    
    $
    (0.53
    )Net income (loss) per Common Share  Diluted
    
    $
    0.47
    
    
    $
    0.51
    
    
    $
    0.54
    
    
    $
    (0.19
    )
    
    $
    (0.53
    )Weighted average Common Shares
Outstanding  Basic (thousands)
    
    
    86,748
    
    
    
    75,128
    
    
    
    74,245
    
    
    
    73,726
    
    
    
    73,609Weighted average Common Shares
Outstanding  Diluted (thousands)
    
    
    87,798
    
    
    
    76,122
    
    
    
    75,025
    
    
    
    73,726
    
    
    
    73,609TOTAL ASSETS
AT DECEMBER 31
    
    $
    703.4
    
    
    $
    217.5
    
    
    $
    170.5
    
    
    $
    141.5
    
    
    $
    110.1TOTAL LONG-TERM DEBT
(INCLUDING CURRENT
PORTION) AT DECEMBER 31
    
    $
    
    
    
    $
    
    
    
    $
    18.0
    
    
    $
    30.0
    
    
    $
    


18



---



##### 





|MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
|--------------------------------------------------------------------------------------



SUMMARY Sales Sales for 2002 of $133.6 million were 16% higher than
2001 due to increased net realized gold prices. The
average realized gold price was $315 per ounce for the
year, an improvement of $32 per ounce over the prior
year of $283 per ounce, reflecting the Companys ability
to capitalize on the rising gold market with its
unhedged sales position. Sales in 2002 included $1.9
million of deferred revenue recognized on the closing of
put options covering 67,651 ounces of gold during 2001;
2001 sales included $2.1 million recognized on the
closing of put options covering 73,500 ounces of gold;
2000 sales included $3.0 million recognized on the
closing of put options covering 59,000 ounces of gold.
Also included in sales for 2000 was approximately $2.3
million recognized from delivery of 88,441 ounces of
gold into long-term hedge contracts with Standard Bank,
as part of the Companys loan facility. Results of operations Operating margins remained strong year over year,
recording a 21% improvement to 40%, versus 33% in the
prior year, primarily as a result of higher recognized
sales prices. Total production costs of $141 per ounce
remained fairly stable, compared with the prior years
$138 per ounce, reflecting one of the lowest in the
industry. Cash costs of production of $87 per ounce
increased slightly from the prior years $83 per ounce
due to higher operating costs at Jerritt Canyon. At the
Companys wholly owned El Peñón mine, cash costs
decreased from $43 per ounce in 2001 to $35 per ounce as
a result of increased recovery at the plant and higher
feed grade, which was a result of decreased dilution
from underground mining. Exploration costs of $10.7
million were down from last years spending of $12.3
million as a result of cessation of exploration
activities at Jerritt Canyon. Net income and cash flow For 2002, net income increased 7% to $41.5 million
compared to $38.7 in the prior year, reflecting higher
realized sales prices due to higher gold prices and the
non-hedged position of the Company. Cash flow from
operating activities was slightly higher at $71.1
million versus $70.0 million for the prior year. Cash
flow remained strong resulting in an increase in cash
balances of $38.4 million, bringing the Companys cash
balance to $135.7 million, despite an investment of
approximately $38 million in capital expenditures
relating primarily to the Brancote Holdings Plc
acquisition (discussed under Significant Accounting
Policies).


DISCUSSION OF PROPERTIES El Penon Map CHILE El Peñón The El Peñón property is located near the port city of
Antofagasta in northern Chile. Gold was first discovered
on the property by the Companys geologists in 1993.
Portions of the current land position of about 400 square
kilometers are relatively unexplored, as most exploration
work has focused on the central core area of 40 square
kilometers. Currently, the property hosts mineral
reserves and mineral resources of 2.8 million ounces of
gold and 50 million ounces of silver(1). In 2002, El Peñón produced 328,000 ounces of gold, a 3%
improvement over the prior year. The mill processed
688,000 tonnes for the year, which is near its
2,000 tonnes-per-day design capacity, with mill feed
grades of 15.5 grams/tonne of gold and 253 grams/tonne of
silver. Grades were 6% higher than the prior year as a
result of improvements in dilution control, including
drill and blast design, and reduction in the size of
blasting. Actual recoveries of 95.4% for gold and 90.9% for silver
were slightly improved over the prior year. Specifically,
during the fourth quarter of the year, a fifth leach tank
was added, which allowed for an in increase in retention
time from 24 to 36 hours, and helped to improve gold
recovery in the fourth quarter to 96.4% and silver
recovery to 91.2%. Processing costs were reduced from
$13.99 per tonne in 2001 to $12.32 per tonne in 2002, as
a result of continuous optimization of the process
facility.




19



---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS CONTD



The underground and open-pit mines produced approximately
679,000 tonnes of ore (which includes 39,000 tonnes of
marginal ore from underground operation), and the plant
processed approximately 688,000 tonnes of ore. To provide the flexibility required in an underground
mine, the Company continues to maintain a stockpile of
ore in front of the mill. The Company continues to exert its focus
on delivering the highest quality tonnes to increase grades. Average mining
dilution also improved as a result of the implementation
of numerous practices including split blasting and cable
bolting to reduce vein overbreak. Specifically, the
original design at Quebrada Colorada was 1.0 meter
of vein overbreak, which was then reduced to 0.8 meter. The Company actually achieved a 0.6 meter overbreak. The contract mining company for this property,
Constructora Gardilcic, performed well during the year
and continued to meet the mining targets set by the
Company. During the year, 100% of the material was mined
by the bench-and-fill method. During the year,
approximately six kilometers of underground development
were completed, with five kilometers associated with
infrastructure for the underground mine, and one
kilometer associated with exploration development. For
2003, about five kilometers of underground development
and exploration will be completed with a significant
portion related to the continued development of the
Diablada, Vista Norte, and Quebrada Colorada zones. In-fill drilling successfully converted mineral
resources into reserves, which totaled 1.8 million gold
ounces at the end of the year, and completely replaced
the 328,000 ounces of gold mined during the year. The
increase was attributed to the further extension of
the Vista Norte and Quebrada Colorada veins. About $3.4 million was expensed at El Peñón during the
year on surface exploration, primarily at Diablada and Vista Norte. Post-mineral low-angle
faults, originally identified in the Diablada zone,
continue to the east and have also displaced the
mineralization at Vista Norte as much as 30 meters to
the east. The exploration program will incorporate this
information in its targeting to re-evaluate the present
base of mineralization in the Discovery Wash, Quebrada
Colorada and Playa areas. Surface drilling indicates that mineralization at the
Pampa Campamento, Doncella and Bermuda areas (Doncella
trend) are situated on the same north-striking
structural zone. Late in the year, drilling also
identified two new vein zones to the southeast of the
Martillo Flats resource area, which contain potentially
economic mineralization. These areas, at Martillo Flats
and the Doncella trend, will be the focus of drilling in
2003.


Elquel Map ARGENTINA Esquel During 2002, the Company completed the acquisition of
Brancote Holdings Plc (Brancote), owner of the Esquel
Gold Project. The contiguous properties that form the
Esquel Gold Project are located in the Sierra de Esquel,
10 kilometers northeast of the town of Esquel
(population: 30,000), in southern Argentina and comprise
an aggregate of 141,000 hectares of land, including 43,365 hectares
for the Esquel Corridor. With respect to the Esquel Gold Project and certain
other properties adjacent to the Esquel Gold Project,
the table below shows the percentage of the Companys
ownership interests and the relevant areas of each in
square kilometres. The Galadriel-Julia vein system,
which constitutes the Esquel Gold Project and which is
the current focus of development for the Company, is
located on the Cordon de Esquel property. The Company
owns its interest in this property indirectly through
Minera El Desquite (MED). There have
not been any development activities on the Leleque,
Nahuel Pan or Huemules properties and there are no
current plans for development on such properties, or for
the Company to acquire the minority interests in these
properties.  PROPERTY The Company Ownership
    
    Percentage Area
    
    
    (Square Km)Cordon de Esquel
    
    
    100
    %
    
    
    434Leleque
    
    
    60
    %
    
    
    444Nahuel Pan
    
    
    60
    %
    
    
    202Huemules
    
    
    60
    %
    
    
    330Total
    
    
    
    
    
    
    1,410




20



---



##### 





The rock formations on the Esquel Gold Project
properties consist mainly of sub-horizontal andesitic
volcanic rocks. The width of the veins typically ranges
from less than 1 meter to 12 meters, and the veins have
strike lengths of greater than 2,000 meters. Veins are
cut by steeply dipping faults that generally strike
northeast or west-northwest. Displacement along these
faults is generally less than 100 meters. In early 1998, Sunshine Mining and Refining Company
completed a 40-core hole (approximately 4,200 meters)
drilling program on 16 veins on the La Joya Del Sol
property over which MED acquired an option in October
1998, and which it subsequently acquired outright in
October 2000. This property now forms part of the Esquel
Gold Project area. MED carried out four exploratory core and reverse
circulation drilling and channel sample programs on the
Esquel Gold Project properties in 1999, 2000 and 2001
and is currently completing its fifth drilling and
sampling program on the properties. These programs have
focused on the deposits in the Galadriel, Galadriel Sur,
Julia and La Joya Del Sol areas of the properties. MEDs exploration program has advanced to the
pre-feasibility stage and, in May 2001, Pincock, Allen &
Holt, independent engineering consultants, were engaged
to prepare a pre-feasibility study for the Esquel Gold
Project. The pre-feasibility study was completed on October 31, 2001. MED has undertaken to mitigate, where possible, the
long-term environmental impacts of its exploration
operations. During the years 1999 through 2002, MEDs
expenditures for reclamation works have not been
material. The only reclamation works in connection with
the Esquel Gold Project carried out during this period
were the ongoing restoration of drilling pads and tracks
at Galadriel Sur and La Joya Del Sol by MED. The
expenditures incurred by MED in connection with these
works totaled US$50,000. There are no material
reclamation works currently planned by MED. The Company is currently in the permitting process stage
before it can begin construction, which should commence
in the second quarter of 2003.


Jerritt Canyon Map Nevada Jerritt Canyon The Jerritt Canyon mine, located 92 kilometers northwest
of Elko, Nevada, is 30% owned by the Company. AngloGold
(Jerritt Canyon) Corp. owns the remaining 70% of this joint venture. The
Companys geologists discovered gold at Jerritt Canyon
in 1972, which claims cover approximately 300 square
kilometers. Since 1981, Jerritt Canyon has been a
consistent, quality gold mine. It has been a solid
long-term asset for the Company. In 2002, Jerritt Canyon produced 100,000 ounces of gold
at a cash operating cost of $257 per ounce, essentially
level with the prior year. The roaster produced about
3,600 tons per day on average. As of December 31, 2002,
proven and probable mineral reserves declined to 174,000
ounces of gold(1), with the decrease approximating 2002
production. 2003 will see a limited exploration program
proximal to the known deposits at the three underground
mines known as Murray, SSX and MCE.  (1)
    
    The reserves and resources disclosed in this
discussion have been audited by Robin Young of Western
Services Engineering Inc. who is a qualified person as
defined in National Instrument 43-101 of the Canadian
Securities Administrators.




21



---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS CONTD



Rossi Map Nevada Rossi The Rossi property spans approximately 28 square
kilometers on the northern end of the Carlin Trend, the
most prolific gold belt in North America. The
mineralization at Rossi is sediment hosted and occurs in
the same structural and stratigraphic sequence as
economic mineralization throughout the Carlin Trend.
During 1998, the Company entered into a joint venture
with Barrick Gold Corporation (Barrick) on the Rossi
property, in which Barrick has retained a 60% interest
in the property by agreeing to spend $15 million by
December 31, 2003. All work on the Rossi property in 2002 was carried out
and funded by Barrick Gold Exploration Inc., under
Barricks joint-venture agreement with the Company.
Since the initiation of the joint venture, Barrick has
spent approximately $13 million, with a significant
program planned in 2003. As part of Barricks earn-in,
$5 million was spent in driving a production-size
decline to the existing mineralization. In 2002, Barrick entered into a lease agreement with
Bamco Exploration for their 12 Hope claims located on
the northern boundary of the Rossi claim block. These
claims were subsequently added to the Rossi JV, which
now includes 416 unpatented and 11 patented claims.
During 2002, Barrick drilled two deep exploration holes
on the property late in the year, totaling 9,213 feet
(2,808 meters), though no significant new mineralization
was encountered. For the year 2003, exploration plans
consist of substantial underground work, including
reserve delineation of the STORM Resource (the main host of the
deposit), and minor
surface drilling. In 2000, the STORM Resource was
estimated by the Company to contain 960,000 ounces of
gold with grades of 11.8 grams/tonne, based on surface
and underground drilling. This resource remains open in
several directions.


Beartrack Map Idaho Beartrack Beartrack, a 100 % owned open-pit heap leach operation,
is located approximately 11 miles west of Salmon, Idaho,
near the historic mining town of Leesburg. Beartrack had
produced approximately 100,000 ounces a year since 1994
at cash costs less than $200 per ounce. During the first
quarter of 2000, mining of all the economic tonnes was
completed at Beartrack. Residual leaching will continue
over the next several years. For 2002, Beartrack
produced 9,000 ounces of gold, which were taken against
the reclamation and closure accruals, as will all future
Beartrack production. Leaching should continue to
produce recoverable gold over the next year on a
declining basis.  LIQUIDITY AND CAPITAL RESOURCES Cash to meet the Companys operating needs, to finance
capital expenditures and to fund exploration activities,
was provided from operations and from existing cash
reserves. Cash flow from operating activities was
slightly higher than 2001, at $71.1 million, primarily
reflecting higher realized sales prices. At December 31,
2002, total cash was $135.7 million, including $13.9 million
of restricted cash,
versus $97.3 million as of the previous year-end. The Company has no gold hedging, and with the recent
rise in gold prices the Company has been able to fully
participate in the improving gold price. The Company
believes its cash flows are naturally hedged by having
one of the lowest cash cost mines in the world. Capital
expenditures increased significantly from $24.8 million
in 2001 to $37.5 million as a result of the Brancote
transaction. With the closing of the Brancote
transaction, the Company spent $24.2 million on the
Esquel project. At El Peñón, 2002




22



---



##### 





expenditures were $13.0 million, compared to $15.7
million in 2001. Expenditures in 2002 related to Jerritt
Canyon ceased, compared to $2.5 million in 2001. Expected cash requirements for 2003 include
approximately $50 million for planned capital
expenditures relating to construction of the Esquel
project, and additional underground development of the
El Peñón and Jerritt Canyon mines. Exploration spending
in 2003 is expected to be approximately $12 million. The
Company expects to fund all of these cash requirements
from cash flows from operations and existing cash
reserves. Should the Company decide to develop other exploration
and development properties, significant additional
capital may be required. The Company believes that these
capital requirements could be funded by existing cash
reserves and by borrowings from third parties, although
no assurance can be given that such borrowings will be
available at rates acceptable to the Company.  OUTLOOK El Peñón The Company remains optimistic about the potential of its
400-square-kilometer property position at El Peñón.
During 2002, exploration focused on further defining the
Vista Norte deposit, as well as on the replacement of
reserves and resources. The replacement ounces mainly
came from Vista Norte, as well as from Quebrada Colorada.
In 2003, the exploration focus will be to further define
Cerro Martillo, and to continue drilling at targets
proximal to the known deposits, like Doncella and Playa,
and drill-testing other exploration targets on the large
land block. For 2003, the Company expects El Peñón to
produce 320,000 ounces of gold at a $50 per ounce cash
cost. The Company expects to record a tax expense on the
earnings of the El Peñón operation at a 35% tax rate for
2003, and to begin paying cash taxes in the second half
of 2003. Esquel The Company expects to obtain the necessary permit
approvals, and to begin construction in 2003, with
production commencing 12 to 15 months after construction
begins. Jerritt Canyon For the first quarter of 2003, the Company expects
Jerritt Canyon to produce about 22,000 ounces of gold
at a cash operating cost of $275 per ounce.


Subsequent to year-end, the Company agreed to sell its
30% interest in the Jerritt Canyon Joint Venture in a
purchase and sale agreement with Queenstake Resources
Ltd. See note 5 in the notes to the consolidated
financial statements for details of this transaction. Significant Accounting Policies The Companys consolidated financial statements are
impacted by the accounting policies used, and the
estimates and assumptions made, by management during
their preparation. Significant accounting policies and
estimates that most impact the consolidated financial
statements are those that relate to the Companys
accounting for income taxes, amortization of development
costs and accrual of reclamation estimates. The Company recognizes deferred tax assets and
liabilities based on the differences between the
financial statement carrying amounts and the tax basis
of assets and liabilities. Management regularly reviews
the Companys deferred tax assets for recoverability and
establishes a valuation allowance based on historical
taxable income, projected taxable income and the
expected timing of the reversals of existing temporary
differences. During 2002, the Company fully recognized
the remaining deferred tax asset and deferred credit
acquired in the 2001 purchase of Pacific Rim Resources Ltd. and
its wholly owned subsidiaries, which included
Inversiones Mineras Del Inca S.A. Management believes
that sufficient uncertainty exists regarding the
realization of certain deferred tax assets and that a
valuation allowance is required. The change in valuation
allowance reflects managements assessment regarding the
future realization of U.S. and foreign deferred tax
assets and estimates of future earnings in these
jurisdictions as of December 31, 2002. The Company amortizes its development costs using the
units of production method based upon projected mineable
tons. These estimates are reviewed on a regular basis and
are adjusted to reflect current mining plans. Reclamation and shutdown costs to be incurred following
mine closures are estimated and accrued over the life of
each mine using the units of production method over the
estimated proven and probable recoverable reserves. The
Company has estimated total reclamation costs to be $41.3
million of which $40.9 million has been accrued. The
estimates are reviewed internally and externally on a
routine basis as to the accuracy of remaining costs to be
incurred. Estimates are adjusted as necessary and
reflected on a prospective basis. On July 3, 2002, the Company announced a wholly
unconditional share purchase offer for Brancote, a London
listed company on




23



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##### 



MANAGEMENTS DISCUSSION AND ANALYSIS CONTD



the Alternative Investment Market. In accordance with
the terms of the share purchase agreement, the Company
purchased all of the outstanding shares of Brancote in a
share-for-share exchange wherein each shareholder of
record of Brancote received 0.1886 Common Shares of the
Companys stock in exchange for each Common Share of
Brancote. The balance sheet and results from operations
have been consolidated effective July 3, 2002. See Note
3 in the notes to the consolidated financial statements
for a discussion of the allocation of the purchase
price. In the United States, there are several accounting
pronouncements that have been issued at December 31,
2002 by the Financial Accounting Standards Board but
whose implementation dates are subsequent to December
31, 2002. The Company has made a preliminary assessment
of the current and potential future impact of these
pronouncements and has determined that, individually and
in the aggregate, they are not expected to have a
significant effect on net income or shareholders equity
with the possible exception of the Statement of
Financial Accounting Standard No. 143 (SFAS 143),
Accounting for Asset Retirement Obligations, issued in
June 2001. SFAS 143 requires entities to record, as an addition to
property costs and a corresponding liability, the fair
value of liabilities for retirement obligations of
acquired assets. SFAS 143 is effective for fiscal years
beginning after June 15, 2002. The Company believes its
reclamation obligations will be subject to the
provisions of the statement. The Company will adopt
SFAS 143 effective January 1, 2003 for purposes of
disclosing the impact of the statement on net income and
shareholders equity under United States (U.S.)
Generally Accepted Accounting Principles. The Company is
still assessing the financial impact of adopting SFAS 143. Because of the late stages of production that
the properties to which the reclamation obligations
relate, the Company believes that any asset amount to be
recorded will be insignificant. Further, under its present accounting
policy, the Company believes that the reclamation
liability is virtually fully accrued at December 31,
2002. As a result, the impact of SFAS 143 would be to
reduce the recorded liability by the calculated discount
factor attributable to the period intervening between
December 31, 2002 and the periods that the liability
will be settled in cash. This reduction would be
reflected as the cumulative effect of a change in
accounting principle for U.S. reporting purposes and the
amount would be accreted, through operating expenses,
over the intervening period subject to annual
adjustments for changes in the estimates.


In December 2002, the Canadian Institute of Chartered
Accountants issued Handbook Section 3063 (Section
3063), Impairment or Disposal of Long-Lived Assets
and revised Section 3475 (Section 3475), Disposal of
Long-Lived Assets and Discontinued Operations. Section
3063 requires that an impairment loss be recognized when
the carrying amount of an asset to be held for use
exceeds the sum of the undiscounted cash flows expected
from its use and disposal; the impairment loss
recognized is the amount by which the carrying amount of
the asset exceeds its fair value. Section 3475 requires
that assets classified as held-for-sale be measured at
the lower of their carrying amounts or fair value, less
costs to sell. The Company intends to adopt these
standards as of January 1, 2003. The Company has not identified any other differences in
accounting that would have a material effect on net
income or shareholders equity in any of the periods
presented. For additional information on the Companys significant
accounting policies, see the notes to its accompanying
consolidated financial statements.




24



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##### 





|INDEPENDENT AUDITORS REPORT
|----------------------------

The Board of Directors and Shareholders,
Meridian Gold Inc.:

We have audited the accompanying consolidated balance sheets of Meridian Gold
Inc. and subsidiaries as of December 31, 2002 and 2001, and the related
consolidated statements of operations, cash flows, and changes in shareholders
equity for each of the years in the three-year period ended December 31, 2002
which have been prepared on the basis of accounting principles generally
accepted in Canada. These consolidated financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in Canada and the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Meridian Gold Inc.
and subsidiaries as of December 31, 2002 and 2001, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2002 in conformity with accounting principles generally
accepted in Canada.

(SIG KPMG LLP)

KPMG LLP
DENVER, COLORADO
JANUARY 31, 2003



|MANAGEMENT RESPONSIBILITY FOR FINANCIAL STATEMENTS
|--------------------------------------------------

The accompanying consolidated financial statements and all of the data included
in this annual report have been prepared by and are the responsibility of the
management of the Company. The consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in Canada
and reflect managements best estimates and judgements based on currently
available information. The Company has developed and maintains systems of
internal accounting controls in order to assure, on a reasonable and
cost-effective basis, the reliability of its financial information, and that
its assets are safeguarded from loss.

The Board of Directors is responsible for ensuring that management fulfills its
responsibilities for financial reporting and internal control. The Board
exercises its responsibilities through the Audit Committee of the Board which
meets with the external auditors to satisfy itself that the managements
responsibilities are properly discharged and to review the financial statements
before they are presented to the Board of Directors for approval.

The consolidated financial statements have been audited by KPMG LLP. Their
report outlines the scope of their examination and their opinion on the
consolidated financial statements.

/s/ Brian J. Kennedy
    
    /s/ Peter C. DoughertyBrian J. Kennedy
PRESIDENT & CHIEF EXECUTIVE OFFICER
JANUARY 27, 2003
    
    Peter C. Dougherty
VICE  PRESIDENT, FINANCE & CHIEF FINANCIAL OFFICER


25



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##### 





|CONSOLIDATED STATEMENTS OF OPERATIONS
|-------------------------------------

Years Ended December 31 (in thousands of USD, except per share data)
    
    2002
    
    
    2001
    
    
    2000Sales
    
    $
    133,595
    
    
    $
    115,436
    
    
    $
    128,276Costs and expensesCost of sales
    
    
    38,746
    
    
    
    35,134
    
    
    
    47,336Depreciation, depletion, and amortization
    
    
    22,785
    
    
    
    22,507
    
    
    
    24,028Exploration costs
    
    
    10,707
    
    
    
    12,299
    
    
    
    12,285Selling, general and administrative expenses
    
    
    7,507
    
    
    
    7,325
    
    
    
    6,400Other operating expense (income)
    
    
    1,086
    
    
    
    227
    
    
    
    (1,215
    )Total costs and expenses
    
    
    80,831
    
    
    
    77,492
    
    
    
    88,835Operating income
    
    
    52,764
    
    
    
    37,944
    
    
    
    39,441Interest income, net
    
    
    1,846
    
    
    
    1,808
    
    
    
    391Gain on sale of assets
    
    
    161
    
    
    
    1,863
    
    
    
    100Income before income taxes
    
    
    54,771
    
    
    
    41,615
    
    
    
    39,932Income tax (benefit) expense
    
    
    13,255
    
    
    
    2,890
    
    
    
    (668
    )Net income
    
    $
    41,516
    
    
    $
    38,725
    
    
    $
    40,600Income per Common Share  Basic
    
    $
    0.48
    
    
    $
    0.52
    
    
    $
    0.55Income per Common Share  Diluted
    
    $
    0.47
    
    
    $
    0.51
    
    
    $
    0.54


See notes to consolidated financial statements.

26



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##### 





|CONSOLIDATED BALANCE SHEETS
|---------------------------

December 31 (in thousands of USD)
    
    2002
    
    
    2001ASSETSCurrent assets:Cash and cash equivalents (note 1)
    
    $
    121,851
    
    
    $
    97,319Restricted cash
    
    
    13,854
    
    
    
    Trade and other receivables
    
    
    3,559
    
    
    
    1,685Inventories (note 2)
    
    
    5,906
    
    
    
    7,292Deferred tax asset (note 8)
    
    
    3,383
    
    
    
    14,895Other current assets
    
    
    1,619
    
    
    
    1,560Total current assets
    
    
    150,172
    
    
    
    122,751Property, plant and equipment, net (note 4)
    
    
    549,336
    
    
    
    93,475Deferred charges
    
    
    1,912
    
    
    
    Other assets (note 1)
    
    
    1,945
    
    
    
    1,295Total assets
    
    $
    703,365
    
    
    $
    217,521LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable, trade and other
    
    $
    7,284
    
    
    $
    5,311Accrued and other liabilities (note 6)
    
    
    14,856
    
    
    
    22,752Total current liabilities
    
    
    22,140
    
    
    
    28,063Deferred income taxes (note 8)
    
    
    159,131
    
    
    
    6,454Other long-term liabilities (note 7)
    
    
    28,876
    
    
    
    35,791Shareholders equity:Common Shares, no par value, authorized unlimited shares,98,985,974 and 75,853,183 shares issued and outstandingin 2002 and 2001, respectively (note 11)
    
    
    380,309
    
    
    
    76,829Additional paid-in capital
    
    
    3,658
    
    
    
    3,658Minority interest
    
    
    1,009
    
    
    
    Retained earnings
    
    
    108,242
    
    
    
    66,726Total shareholders equity
    
    
    493,218
    
    
    
    147,213Total liabilities and shareholders equity
    
    $
    703,365
    
    
    $
    217,521


See notes to consolidated financial statements.

Signed on behalf of the Board of Directors:(SIG D Robertson)
    
    (SIG B Kennedy)Dr. David S. Robertson
DIRECTOR
    
    Brian J. Kennedy
DIRECTOR


27



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##### 





|CONSOLIDATED STATEMENTS OF CASH FLOWS
|-------------------------------------

Years Ended December 31 (in thousands of USD)
    
    2002
    
    
    2001
    
    
    2000Cash flows from operating activities:Net income
    
    $
    41,516
    
    
    $
    38,725
    
    
    $
    40,600Adjustments to reconcile net incometo net cash provided by (used in) operating activities:Provision for depreciation, depletion and amortization
    
    
    22,785
    
    
    
    22,507
    
    
    
    24,028Gain on sale of assets, net
    
    
    (161
    )
    
    
    (1,863
    )
    
    
    (100
    )Provision for reclamation, net of costs incurred
    
    
    (2,506
    )
    
    
    1,596
    
    
    
    1,316Stock compensation expense
    
    
    1,697
    
    
    
    1,438
    
    
    
    771Provision for pension cost, net of contributions
    
    
    510
    
    
    
    276
    
    
    
    287Deferred taxes, net
    
    
    9,781
    
    
    
    859
    
    
    
    (859
    )(Increase) decrease in assets:Trade and other receivables
    
    
    (1,074
    )
    
    
    (263
    )
    
    
    3,676Inventories
    
    
    1,386
    
    
    
    (1,519
    )
    
    
    2,955Other current assets
    
    
    (121
    )
    
    
    (305
    )
    
    
    174Other assets
    
    
    (2,800
    )
    
    
    873
    
    
    
    1,073(Decrease) increase in liabilities:Accounts payable, trade and other
    
    
    1,973
    
    
    
    2,324
    
    
    
    (2,437
    )Accrued and other liabilities
    
    
    478
    
    
    
    1,116
    
    
    
    1,516Other long-term liabilities
    
    
    (2,385
    )
    
    
    4,300
    
    
    
    (1,468
    )Net cash provided by operating activities
    
    
    71,079
    
    
    
    70,064
    
    
    
    71,532Cash flows from investing activities:Capital spending
    
    
    (37,539
    )
    
    
    (24,783
    )
    
    
    (17,754
    )Proceeds from sale of assets, net
    
    
    
    
    
    
    1,978
    
    
    
    200Net cash used in investing activities
    
    
    (37,539
    )
    
    
    (22,805
    )
    
    
    (17,554
    )Cash flows from financing activities:Proceeds from exercise of stock options
    
    
    4,795
    
    
    
    4,847
    
    
    
    426Minority interest
    
    
    51
    
    
    
    
    
    
    
    -Repayments of long-term debt
    
    
    
    
    
    
    (18,000
    )
    
    
    (12,000
    )Deposit of restricted funds for collateral
    
    
    (13,854
    )
    
    
    
    
    
    
    Net cash used in financing activities
    
    
    (9,008
    )
    
    
    (13,153
    )
    
    
    (11,574
    )Increase in cash and cash equivalents
    
    
    24,532
    
    
    
    34,106
    
    
    
    42,404Cash and cash equivalents, beginning of year
    
    
    97,319
    
    
    
    63,213
    
    
    
    20,809Cash and cash equivalents, end of year
    
    $
    121,851
    
    
    $
    97,319
    
    
    $
    63,213Supplemental disclosure of cash flow information:Cash paid and (refunds received) for income taxes
    
    $
    1,700
    
    
    $
    
    
    
    $
    Cash paid for interest
    
    $
    
    
    
    $
    900
    
    
    $
    2,100Non-cash investing and financing activities:Common Stock issued in purchase acquisition
    
    $
    296,988
    
    
    $
    
    
    
    $
    


See notes to consolidated financial statements.

28



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##### 





|CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
|----------------------------------------------------------

(in thousands of USD,
except share data)
    
    Number of
Meridian Gold
Common
Shares
(thousands)
    
    
    Meridian
Gold
Common
Shares
    
    
    Additional
Paid-in
Capital
    
    
    Minority
Interest
    
    
    Retained
EarningsBalance December 31, 1999
    
    
    74,000
    
    
    $
    69,347
    
    
    $
    3,658
    
    
    $
    
    
    
    $
    (12,599
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,600Issuance of shares upon
exercise of stock options
    
    
    107
    
    
    
    426Issuance of restricted shares
    
    
    428
    
    
    
    771Balance December 31, 2000
    
    
    74,535
    
    
    
    70,544
    
    
    
    3,658
    
    
    
    
    
    
    
    28,001Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,725Issuance of shares upon
exercise of stock options
    
    
    1,107
    
    
    
    4,847Issuance of restricted shares
    
    
    211
    
    
    
    1,438Balance December 31, 2001
    
    
    75,853
    
    
    
    76,829
    
    
    
    3,658
    
    
    
    
    
    
    
    66,726Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    
    41,516Issuance of shares upon
exercise of stock options
    
    
    1,035
    
    
    
    4,795Issuance of 22,000,000 shares
in connection with the
     Brancote Holdings
PLC acquisition
    
    
    22,043
    
    
    
    296,988Issuance of restricted shares
    
    
    55
    
    
    
    1,697Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,009Balance December 31, 2002
    
    
    98,986
    
    
    $
    380,309
    
    
    $
    3,658
    
    
    $
    1,009
    
    
    $
    108,242


See notes to consolidated financial statements.

29



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##### 





|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31
|------------------------------------------------------------



|1.     PRINCIPAL ACCOUNTING POLICIES
|------------------------------------

Nature of Operations

Meridian Gold Inc. (Meridian) is engaged in the mining and exploration of
gold and other precious metals.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of
Meridian and all majority-owned subsidiaries (collectively referred to as the
Company) including, but not limited to, operations in North America, Chile,
and Argentina, exploration activity in the Americas, and offshore banking and
marketing activities in the Caribbean. The accounts of joint ventures in which
the Company holds an interest are consolidated on a pro rata basis. All
significant intercompany accounts are eliminated in consolidation.

These financial statements are presented in accordance with accounting
principles generally accepted in Canada. As described in note 14, these
principles differ in certain respects from principles and practices generally
accepted in the United States. The United States dollar (USD) is the
principal currency of the Companys business; accordingly, the accompanying
consolidated financial statements are presented in United States dollars.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles (GAAP) requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Revenue Recognition

Sales are recognized upon the transfer of title of gold and silver doré to
third parties.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes.
Under the asset and liability method of accounting for income taxes, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.

Forward Sales and Hedging

In order to reduce its exposure to decreasing prices for future silver
production, the Company has hedged portions of future silver production by
entering into forward sales contracts. The revenue generated from the contracts is recognized
as a by-product, reducing operating costs when the hedged product is sold.

Deferred Revenue

In order to reduce its exposure to decreasing prices and as a requirement of
the bank loan with Standard Bank, the Company hedged portions of future gold
production. All of these hedges have been closed and the revenue has been
deferred until the expiration date of the contracts at which time it will be
reflected in the financial statements. See note 12 for further discussion.

30



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##### 



Cash and Cash Equivalents

Meridian considers all highly liquid marketable securities with remaining
maturities at date of purchase of fewer than 91 days to be cash equivalents.
Cash equivalents consist primarily of eurodollar time deposits with major
commercial banks and totaled approximately $121.9 million and $97.3 million at
December 31, 2002 and 2001, respectively. At December 31, 2002, the Company had
$13.9 million classified as restricted cash. This represents funds on deposit
that have been pledged as backing for letters of credit issued for reclamation
bonding.

Inventories

Finished goods inventories are stated at the lower of the average cost or
market, and include labor, materials, other production costs and depreciation.
Inventory value is assigned to stockpiled material. The valuation of the
stockpiled material includes labor, materials and other production costs.

Property, Plant and Equipment

Property, plant and equipment, including development costs and capitalized
interest associated with the construction of certain capital assets, are
recorded at cost. Start-up costs associated with new properties, net of
revenues from pre-commercial production, are capitalized as part of the cost of
the projects. Depreciation, depletion and amortization for financial reporting
purposes is provided on a units of production basis based upon the expected
tonnes to be mined, or on the straight-line basis over the shorter of the
estimated lives of the assets or the estimated proven and probable recoverable
reserves. Gains and losses are reflected in income upon sale or retirement of
assets.

Mineral Exploration and Development Costs

Mineral exploration costs are expensed as incurred. Development costs
applicable to mineralized properties deemed capable of commercial production
are capitalized and then amortized using the units of production method based
upon projected mineable tonnes.

Reclamation

Reclamation and shutdown costs to be incurred following mine closures are
estimated based on current costs and accrued over the life of each mine using
the units of production method over the estimated proven and probable
recoverable reserves. Changes in cost estimates are recognized over the
remaining reserve life.

Income per Common Share

Basic income per Common Share is computed by dividing income available to
Common Stock shareholders by the weighted average number of Common Shares
outstanding during the period (86,747,643 shares in 2002, 75,127,587 shares in
2001, and 74,244,944 shares in 2000).

Fair Value of Financial Instruments

At December 31, 2002 the book value of the Companys financial instruments
approximates their fair value except as disclosed in this note.

Reclassifications

Certain amounts in the prior years financial statements have been reclassified
to conform to the current years presentation.



|2.     INVENTORIES
|------------------

Inventories (at cost) consist of the following:

(in thousands of USD)
    
    2002
    
    
    2001Stockpiled ore
    
    $
    3,492
    
    
    $
    4,430Materials and supplies
    
    
    2,414
    
    
    
    2,862Total
    
    $
    5,906
    
    
    $
    7,292


Stockpiled ore relates to mined ore stockpiled at the crusher at El Peñón.

31



---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTD



|3.     ACQUISITION
|------------------

On July 3, 2002, the Company completed a wholly unconditional share purchase
offer for Brancote Holdings Plc (Brancote), a London listed company on the
Alternative Investment Market. In accordance with the terms of the agreement,
the Company purchased all the outstanding shares of Brancote in a
share-for-share exchange wherein each shareholder of record of Brancote
received 0.1886 Common Shares of the Company in exchange for each Common Share
of Brancote. The balance sheet and results from operations have been
consolidated effective July 3, 2002. The allocation of the purchase price,
based on consideration paid, is summarized as follows:

(in millions of USD)Net assets acquired:Cash
    
    $
    0.4Receivables
    
    
    0.9Deferred tax asset
    
    
    5.9PP&E, net
    
    
    453.4Current liabilities
    
    
    (1.0
    )Deferred tax liability
    
    
    (148.5
    )Minority interest
    
    
    (1.0
    )Total consideration
    
    $
    310.1


The acquisition of Brancote has been accounted for under the purchase method of
accounting, and as such, the fair value of the consideration given by Meridian
was allocated to the assets and liabilities acquired based upon the fair values
of such assets and liabilities at the time of purchase. The total consideration
includes the value of the 22.0 million shares of Common Stock issued, which was
calculated using a 30-day average prior to the date of announcement (April 3,
2002), and was valued at $13.56 using the stock price on the day prior to the
date of announcement, plus total transaction costs.



|4.     PROPERTY, PLANT AND EQUIPMENT
|------------------------------------

Property, plant and equipment consists of the following:

(in thousands of USD)
    
    2002
    
    
    2001Land and land improvements
    
    $
    465,340
    
    
    $
    7,895Less accumulated depreciation
    
    
    (2,897
    )
    
    
    (2,138
    )462,443
    
    
    
    5,757Buildings
    
    
    12,727
    
    
    
    8,371Less accumulated depreciation
    
    
    (9,210
    )
    
    
    (3,874
    )3,517
    
    
    
    4,497Machinery and equipment
    
    
    121,682
    
    
    
    124,130Less accumulated depreciation
    
    
    (86,407
    )
    
    
    (80,929
    )35,275
    
    
    
    43,201Development costs
    
    
    151,791
    
    
    
    132,775Less accumulated depletion
    
    
    (103,690
    )
    
    
    (92,755
    )48,101
    
    
    
    40,020Net property, plant and equipment
    
    $
    549,336
    
    
    $
    93,475


32



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##### 



Allocated to the projects as follows:

(in thousands of USD)
    
    2002
    
    
    2001Jerritt Canyon mine
    
    $
    12,413
    
    
    $
    16,180Rossi project
    
    
    5,500
    
    
    
    5,500El Peñón mine
    
    
    68,504
    
    
    
    70,383Esquel project
    
    
    461,138
    
    
    
    Administrative and exploration assets
    
    
    1,781
    
    
    
    1,412Net property, plant and equipment
    
    $
    549,336
    
    
    $
    93,475




|5.     JOINT VENTURE
|--------------------

The Companys 30% interest in the Jerritt Canyon Joint Venture is reflected in
the consolidated financial statements on a pro rata basis. The Companys share
of the joint ventures assets, liabilities, revenues and expenses included in
the accompanying financial statements are as follows:

(in thousands of USD)
    
    2002
    
    
    2001
    
    
    2000Current assets
    
    $
    4,587
    
    
    $
    3,334
    
    
    $
    2,516Property, plant and equipment, net
    
    
    12,413
    
    
    
    16,180
    
    
    
    19,762Investments and other assets
    
    
    6
    
    
    
    6
    
    
    
    6Total assets
    
    
    17,006
    
    
    
    19,520
    
    
    
    22,284Current liabilities
    
    
    2,733
    
    
    
    2,955
    
    
    
    2,127Long-term liabilities
    
    
    13,296
    
    
    
    13,235
    
    
    
    13,124Total liabilities
    
    
    16,029
    
    
    
    16,190
    
    
    
    15,251Equity in Joint Venture
    
    $
    977
    
    
    $
    3,330
    
    
    $
    7,033Revenue
    
    $
    31,602
    
    
    $
    25,886
    
    
    $
    26,787ExpensesCost of sales
    
    
    26,463
    
    
    
    23,586
    
    
    
    24,599Depreciation, depletion and amortization
    
    
    6,861
    
    
    
    6,004
    
    
    
    3,725Reclamation and other
    
    
    631
    
    
    
    
    
    
    
    (2,358
    )Net operating income (loss)
    
    $
    (2,353
    )
    
    $
    (3,704
    )
    
    $
    821Cash provided by operating activities
    
    $
    4,886
    
    
    $
    3,254
    
    
    $
    4,023Cash used in investing activities
    
    
    (3,122
    )
    
    
    (2,522
    )
    
    
    (4,492
    )


Subsequent to year-end, the Companys subsidiary, Meridian Gold Jerritt Canyon
Corporation, and AngloGold (Jerritt Canyon) Corp., have entered into a purchase
and sale agreement with Queenstake Resources Ltd. (Queenstake) to sell their
combined 100% interest of the Jerritt Canyon Joint Venture, with an estimated
closing date of March 24, 2003.

Queenstake has agreed to pay $8 million upon closing, $6 million in equal
quarterly installments beginning June 2004 as well as production royalties
linked to gold price, with a sliding scale percentage feature ranging from zero
to four percent. Meridian will receive its 30% pro-rata share of the sales
price. Queenstake will assume all obligations of the joint venture, including
all current and future reclamation liabilities, which will be fully bonded and
insured.

As a result of Meridians corporate goals and a review of strategic
alternatives at Jerritt Canyon, the Company has decided that the property is no
longer a core asset. Meridians long-term strategy is to maintain its cost
structure within the lower quartile of the industry. Based on the Jerritt
Canyon Joint Ventures current plan, less than a two-year mine life was
expected. There will be no material effect on net income or shareholders
equity.

33



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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTD



|6.     ACCRUED AND OTHER LIABILITIES
|------------------------------------

Accrued and other liabilities consist of the following:

(in thousands of USD)
    
    2002
    
    
    2001Shutdown and reclamation accrual (note 7)
    
    $
    5,777
    
    
    $
    3,243Accrued payroll and bonus
    
    
    3,385
    
    
    
    3,756Deferred revenue (note 12)
    
    
    1,916
    
    
    
    1,943Other deferred credit (note 8)
    
    
    
    
    
    
    8,374Other accrued liabilities
    
    
    3,778
    
    
    
    5,436Total
    
    $
    14,856
    
    
    $
    22,752




|7.     OTHER LONG-TERM LIABILITIES
|----------------------------------

Other long-term liabilities consist of the following:

(in thousands of USD)
    
    2002
    
    
    2001Shutdown and reclamation accrual (note 6)
    
    $
    24,190
    
    
    $
    29,229Accrued pension cost (note 10)
    
    
    2,863
    
    
    
    2,653Deferred revenue (note 12)
    
    
    1,157
    
    
    
    3,073Other
    
    
    666
    
    
    
    836Total
    
    $
    28,876
    
    
    $
    35,791


Shutdown and reclamation accruals represent estimated costs at current prices
of earthwork, including detoxification and recontouring, revegetation, and
stabilization. The costs of heap-leach encapsulation and facility
decommissioning are also included in these accrued costs.

In determining the
estimated costs, the Company considers such factors as changes in laws and
regulations, the likelihood that additional permits will be required, and
requirements under existing operating permits. Such analyses are performed on
an ongoing basis.

Although the ultimate amount of reclamation obligations to be incurred is
uncertain, the Company had originally estimated these costs for all of its
properties to be approximately $41.3 million, of which it has accrued $40.9
million to date. The Company has spent approximately $10.9 million, and as of
December 31, 2002, accrued reclamation costs, including the current portion,
were $30.0 million for all properties. The provision for reclamation costs
charged to operations was $0.8 million, $0.8 million, and $3.8 million in 2002,
2001, and 2000, respectively. Actual reclamation expenditures were $3.3
million, $(0.8) million, and $2.5 million in 2002, 2001, and 2000,
respectively.

34



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##### 





|8.     INCOME TAXES
|-------------------

Meridian commenced operations in July, 1996 upon completion of a series of
transactions in which the Company was reincorporated in Canada and became the
successor to the business of FMC Gold (the Reincorporation). In 1995 and
prior to the Reincorporation, the Company was included in FMCs consolidated
federal income tax return. Under a tax-sharing agreement with FMC, the Company
paid to FMC amounts generally equal to the tax the Company would have been
required to pay had it filed a separate return, and FMC paid to the Company
amounts generally equal to any tax benefits the Company would have realized on
a separate return basis which were realized by FMC. During 2001, the Company
was notified by FMC that no additional tax was payable under the tax-sharing
agreement.

On October 26, 1998, the Company entered into foreign investment
contracts under Chilean Decree Law 600 (DL600), under which all prior
spending in Chile by the Company was consolidated. Under the provisions of
these DL600 contracts, the Company elected to have its earnings taxed at the
statutory rate of 35%.

On June 15, 2001, the Company acquired Pacific Rim Resources Ltd. and its
wholly owned subsidiaries, which included Inversiones Mineras Del Inca S.A.
(IMDI), for $5.2 million. The acquisition was accounted for under generally
accepted accounting principles as an acquisition of tax benefits. Accordingly,
the Company recorded a deferred tax asset in the amount of $24.8 million and a
deferred credit of $20.3 million included in other long-term liabilities and
will recognize such tax benefit upon realization. As of December 31, 2002, the
Company has fully recognized the tax benefits associated with the acquisition
of IMDI.

Income tax expense (benefit) included in the consolidated statement of
operations is as follows:

(in thousands of USD)
    
    2002
    
    
    2001
    
    
    2000Current income tax expense
    
    $
    1,724
    
    
    $
    184
    
    
    $
    152Deferred income tax expense (benefit)
    
    
    11,531
    
    
    
    2,706
    
    
    
    (820
    )Actual income tax expense (benefit)
    
    $
    13,255
    
    
    $
    2,890
    
    
    $
    (668
    )


The income tax provision (benefit) differs from that computed by applying the
United States applicable federal statutory rate of approximately 34% to income
before taxes as follows:

(in thousands of USD)
    
    2002
    
    
    2001
    
    
    2000Income tax expense calculated using statutory tax rate
    
    $
    18,597
    
    
    $
    14,149
    
    
    $
    13,577Increase (decrease) of valuation allowance for future U.S. income tax assets
    
    
    4,465
    
    
    
    5,472
    
    
    $
    (12,172
    )Utilization of acquired tax losses
    
    
    (9,519
    )
    
    
    (10,751
    )
    
    
    Realization of taxes provided under the FMC tax sharing agreement
    
    
    
    
    
    
    (2,607
    )
    
    
    Foreign earnings subject to tax at less than statutory rate
    
    
    (1,973
    )
    
    
    (2,521
    )
    
    
    (1,964
    )Losses incurred from foreign operations without tax benefit
    
    
    1,085
    
    
    
    1,455
    
    
    
    475Tax benefit of stock options not currently realizable
    
    
    (1,630
    )
    
    
    (1,657
    )
    
    
    Other
    
    
    2,230
    
    
    
    (650
    )
    
    
    (584
    )Actual tax provision (benefit)
    
    $
    13,255
    
    
    $
    2,890
    
    
    $
    (668
    )


35



---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTD

The significant components of the Companys future income tax assets and
liabilities at December 31, 2002, 2001 and 2000 are as follows:

(in thousands of USD)
    
    2002
    
    
    2001
    
    
    2000Current deferred income tax assets:Chile:Net operating loss carry forwards
    
    $
    2,759
    
    
    $
    14,895
    
    
    $
    859Other, net
    
    
    707
    
    
    
    
    
    
    
    U.S.:Reclamation reserves
    
    
    1,950
    
    
    
    
    
    
    
    Other, net
    
    
    520
    
    
    
    
    
    
    
    Other foreign:Other, net
    
    
    3
    
    
    
    
    
    
    
    Total current deferred income tax assets
    
    
    5,939
    
    
    
    14,895
    
    
    
    859Valuation allowance
    
    
    (2,473
    )
    
    
    
    
    
    
    Current deferred income tax assets, net of allowance
    
    
    3,466
    
    
    
    14,895
    
    
    
    859Current deferred income tax liabilities:Chile:Other, net
    
    
    (83
    )
    
    
    
    
    
    
    Total current deferred income tax liabilities
    
    
    (83
    )
    
    
    
    
    
    
    Net current deferred income tax asset
    
    $
    3,383
    
    
    $
    14,895
    
    
    $
    859Deferred income tax assets:Argentina:Property, plant and equipment
    
    $
    161
    
    
    $
    
    
    
    $
    Other, net
    
    
    5,869
    
    
    
    
    
    
    
    Chile:Property, plant and equipment
    
    
    
    
    
    
    3,789
    
    
    
    3,340Net operating loss carry forwards
    
    
    
    
    
    
    9,250
    
    
    
    12,705Reclamation reserves
    
    
    245
    
    
    
    163
    
    
    
    Other, net
    
    
    
    
    
    
    52
    
    
    
    125U.S.:Property, plant and equipment
    
    
    17,239
    
    
    
    18,177
    
    
    
    18,731Reclamation reserves
    
    
    7,980
    
    
    
    10,874
    
    
    
    10,421Net operating loss carry forwards
    
    
    19,223
    
    
    
    8,676
    
    
    
    6,601Other, net
    
    
    973
    
    
    
    1,717
    
    
    
    1,706Other foreign:Property, plant and equipment
    
    
    752
    
    
    
    550
    
    
    
    724Net operating loss carry forwards
    
    
    1,344
    
    
    
    1,865
    
    
    
    2,171Total deferred income tax assets
    
    
    53,786
    
    
    
    55,113
    
    
    
    56,524Valuation allowance
    
    
    (47,511
    )
    
    
    (41,862
    )
    
    
    (38,047
    )Deferred income tax assets, net of allowance
    
    
    6,275
    
    
    
    13,251
    
    
    
    18,477Deferred income tax liabilities:Argentina:Land and land improvements
    
    
    (148,518
    )
    
    
    
    
    
    
    Chile:Property, plant and equipment
    
    
    (15,592
    )
    
    
    (19,705
    )
    
    
    (15,467
    )Other, net
    
    
    
    
    
    
    
    
    
    
    (403
    )U.S.:Other, net
    
    
    
    
    
    
    
    
    
    
    (2,607
    )Other foreign:Other, net
    
    
    (1,470
    )
    
    
    
    
    
    
    Total deferred income tax liabilities
    
    
    (165,580
    )
    
    
    (19,705
    )
    
    
    (18,477
    )Net deferred income tax asset (liabilities)
    
    $
    (159,305
    )
    
    $
    (6,454
    )
    
    $
    


36



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##### 



At December 31, 2002, the Company and subsidiaries included in these
consolidated financial statements had available U.S. loss carry forwards of
$56.5 million, which expire in the years 2018 and 2021, Chilean loss carry
forwards of approximately $8.1 million, which may be carried forward
indefinitely, and Canadian net operating loss carry forwards of approximately
$5.4 million, which will expire between the years 2003 and 2009.

Management believes that sufficient uncertainty exists regarding the
realization of certain deferred tax assets and that a valuation allowance is
required. The change in valuation allowance reflects managements assessment
regarding the future realization of U.S and foreign deferred tax assets and
estimates of future earnings in these jurisdictions as of December 31, 2002.



|9.     GEOGRAPHIC SALES AND SALES TO MAJOR CUSTOMERS
|----------------------------------------------------

Sales (excluding hedging transactions) to unaffiliated customers by destination
of sale are as follows:

Years Ended December 31 (in thousands of USD)
    
    2002
    
    
    2001
    
    
    2000USA
    
    $
    
    
    
    $
    
    
    
    $
    17,930Western Europe
    
    
    133,627
    
    
    
    113,817
    
    
    
    106,308Total
    
    $
    133,627
    
    
    $
    113,817
    
    
    $
    124,238


The Companys gold and silver doré production is refined by European and United
States refiners. In 2002, 2001 and 2000, the Company shipped to one, two, and
four refiners, respectively, that represented 10% or more of consolidated
sales. The Company markets its metal to banks as well as refiners. The Company
believes that several other refiners would be willing to process and/or
purchase the Companys metal should any of the current refiners discontinue
operations.



|10.   EMPLOYEE PLANS
|--------------------

The Company has a defined benefit pension plan covering substantially all
salaried North American employees. Pension benefits are generally based on
years of service and average yearly earnings. The Companys funding policy is
to contribute the minimum amount required by applicable regulations. The
amortization period for unrecognized gains and losses is 12 years and is based
on the expected average remaining service life of eligible employees. Net
periodic pension expense is composed of the following:

Years Ended December 31 (in thousands of USD)
    
    2002
    
    
    2001
    
    
    2000Accrual for service cost
    
    $
    187
    
    
    $
    190
    
    
    $
    371Interest cost
    
    
    179
    
    
    
    169
    
    
    
    208Return on assets
    
    
    167
    
    
    
    124
    
    
    
    112Net amortization and deferral
    
    
    (319
    )
    
    
    (383
    )
    
    
    (375
    )Net periodic pension cost
    
    
    214
    
    
    
    100
    
    
    
    316


The following table represents the plans funded status and actuarial assumptions at December 31, 2002 and 2001:

Years Ended December 31 (in thousands of USD)
    
    2002
    
    
    2001Projected benefit obligation
    
    $
    2,895
    
    
    $
    2,678Market value of plan assets
    
    
    1,898
    
    
    
    2,094Projected benefit obligation in excess of (less than) plan assets
    
    
    997
    
    
    
    584Unrecognized net gain
    
    
    339
    
    
    
    558Accrued pension cost
    
    $
    1,336
    
    
    $
    1,142Actuarial assumptions:Weighted average discount rate
    
    
    6.50
    %
    
    
    7.50
    %Expected return on plan assets
    
    
    6.50
    %
    
    
    8.50
    %Weighted average rate of compensation increase
    
    
    5.00
    %
    
    
    7.00
    %


37



---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTD

The Company also has a non-qualified unfunded supplementary retirement plan
that provides North American employees with retirement benefits in excess of
qualified plan limits imposed by law. At December 31, 2002 and 2001, the
projected benefit obligation under this plan totaled approximately $1.1 million
and $1.8 million, respectively. Currently, the Company has accrued $1.5 million
as a long-term liability while in 2001 it had accrued
$1.3 million. The projected benefit obligation (PBO) is determined
using the same methods and assumptions as those used for the calculation of the
PBO for the qualified plan discussed above.



|11.   SHARE CAPITAL
|-------------------

The authorized share capital of the Company consists of an unlimited number of
Preferred Shares without par value and an unlimited number of Common Shares
without par value. Preferred Shares are issuable in series. The Board of
Directors is authorized to fix the designation, rights, privileges,
restrictions and conditions attaching to the shares of each series. The
Preferred Shares rank prior to the Common Shares with respect to dividends and
return of capital on dissolution. Except with respect to matters as to which
the holders of Preferred Shares as a class are entitled by law to vote, the
holders of Preferred Shares are not entitled to vote. As of December 31, 2002,
the Company had no issued/outstanding Preferred Shares.

During 1999, the Companys shareholders adopted the Meridian Gold Inc. 1999
Share Incentive Plan (the 1999 Plan), which replaced the Companys 1996 Share
Option Plan and which provides for the granting of equity-based or
equity-related awards to certain directors, officers and employees of the
Company. In 2002, the 1999 Plan was amended to add 3 million shares for
issuance. A maximum of 8,200,000 shares of Common Stock are reserved for
issuance under the 1999 Plan, as amended. Options are granted at exercise
prices equal to the fair market value of the Common Stock at date of grant, for
a period of ten years. The options vest over periods of one to three years.

At December 31, 2002, options to purchase 1,852,766 Common Shares with a
weighted average remaining life of 7.03 years were outstanding, as detailed in
the table below. The options outstanding and exercisable at December 31, 2002,
had a weighted average exercise price of $6.86 and $5.40, respectively.

Number of
    
    
    Option PriceCommon Shares
    
    
    USD per ShareOutstanding, December 31, 1999
    
    
    3,241,446
    
    
    
    2.2500
    
    
    
    
    
    6.6875Granted in 2000
    
    
    804,900
    
    
    
    5.3125
    
    
    
    
    
    5.9375Exercised in 2000
    
    
    (107,607
    )
        
    
    2.2500
    
    
    
    
    
    3.6500Surrendered and expired in 2000
    
    
    (256,104
    )
    
    
    2.2500
    
    
    
    
    
    4.6250Outstanding, December 31, 2000
    
    
    3,682,635
    
    
    
    2.2500
    
    
    
    
    
    6.6875Granted in 2001
    
    
    405,200
    
    
    
    8.2000
    
    
    
    
    
    9.8800Exercised in 2001
    
    
    (1,107,185
    )
    
    
    3.6500
    
    
    
    
    
    6.6875Surrendered and expired in 2001
    
    
    (220,762
    )
    
    
    3.6500
    
    
    
    
    
    6.6875Outstanding, December 31, 2001
    
    
    2,759,888
    
    
    
    2.2500
    
    
    
    
    
    9.8800Granted in 2002
    
    
    189,675
    
    
    
    15.5800
    
    
    
    
    
    17.0000Exercised in 2002
    
    
    (1,034,729
    )
    
    
    3.1870
    
    
    
    
    
    09.8800Surrendered and expired in 2002
    
    
    (62,068
    )
    
    
    5.9375
    
    
    
    
    
    17.0000Outstanding, December 31, 2002
    
    
    1,852,766
    
    
    
    2.2500
    
    
    
    
    
    17.0000Exercisable, December 31, 2002
    
    
    1,282,600
        
    
    
    2.2500
    
    
    
    
    
    17.0000


Under Canadian reporting guidance, the Company is required to begin disclosing
certain information related to stock options issued after January 1, 2002.

The guidance defines a fair value method of accounting for employee stock
options and similar equity instruments and permits an entity to choose to
recognize compensation expense by adopting the fair value method of accounting
or continue to measure compensation costs using the intrinsic value methods.
The Company accounts for stock options granted to employees and directors of
the Company under the intrinsic value method. Stock options granted to
non-employees under the Companys 1999 Plan are accounted for under the fair

38



---



##### 



value method. Had the Company reported compensation costs as determined by the
fair value method of accounting for option grants to employees and directors,
net income and net income per Common Share would have been the pro forma
amounts indicated in the following table:

Quarter Ended
    
    
    Fiscal Year Ended(in millions of USD except per share data)
    
    December 31, 2002
    
    
    December 31, 2002Net income  as reported
    
    $
    10.7
    
    
    $
    41.5Compensation expense  current period option grants
    
    
    (0.1
    )
    
    
    (0.2
    )Net income  pro forma
    
    
    10.6
    
    
    
    41.3Net income per Common Share  as reported  basic
    
    
    .11
    
    
    
    .48Net income per Common Share  as reported  diluted
    
    
    
    
    
    
    .47Net income per Common Share  pro forma  basic
    
    
    .11
    
    
    
    .48Net income per Common Share  pro forma  diluted
    
    
    
    
    
    
    .47


The fair value of stock options granted was calculated using the Black-Scholes
option-pricing model based on the following weighted average assumptions for
the quarter and fiscal year ended December 31, 2002:

Expected volatility
    
    
    59.5
    %Expected dividend yield
    
    
    0.0
    %Risk free interest rate, average
    
    
    2.3
    %Expected life of options granted
    
    
    5 years


Future pro forma compensation cost by fiscal year, assuming no additional
grants by the Company to employees and directors, is as follows:

Fiscal Year Ended December 31
    Pro Forma Compensation(in millions of USD)
    Expense2002
    
    $
    0.22003
    
    
    0.62004
    
    
    0.62005
    
    
    0.4


In 2002 and 2001, the Company awarded 84,000 and 210,600 Restricted Common
Shares, respectively, under the Plan. The average fair values of the shares at
the date of grant were $15.50 and $8.295, respectively. These shares vest
ratably over a three-year period. Compensation expense recognized in 2002 for
the vesting of these shares was $1.7 million.

In March 1999, the Company established a Shareholder Rights Plan (Plan),
which replaced the existing plan established in July 1996. The Plan has a term
of 10 years (subject to being reconfirmed by the Companys shareholders every
three years) and expires on July 30, 2009. In implementing the Plan, one Right
was distributed for each Common Share outstanding on July 30, 1999, as well as
each Common Share to be issued prior to the Separation Time. The Separation
Time is defined as the tenth trading day after the earlier of (i) the first
date of public announcement that a person or group other than certain exempt
persons (an Acquiring Person), together with affiliates or associates, has
acquired, or obtained the right to acquire, 20% or more of any class of voting
shares of the Company; or (ii) the date of commencement or announcement of a
Take-over Bid (as defined in the Shareholder Rights Plan Agreement). A
Take-over Bid means an offer to acquire voting shares of the Company (or
securities convertible into such shares) that, if successful, would result in
the person making such an offer (the Offeror) beneficially owning 20% or more
of any class of the voting shares of the Company.

The Shareholder Rights Plan Agreement provides that, until the Separation Time,
the Rights will be transferred with and only with the Common Shares. After the
Separation Time, separate Rights Certificates will be mailed to holders of
record of the Common Shares as of the Separation Time. After the Separation
Time and prior to the Expiration Time, the Rights are exercisable by the
holders. Each Right will entitle the holder to purchase one Common Share for
the Exercise Price (as defined in the Shareholder Rights Plan Agreement).

39



---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTD



|12.   HEDGING CONTRACTS
|-----------------------

To mitigate continued risks associated with changes in the market price of
gold, Meridian from time to time has entered into put and call option contracts
and forward sales agreements. Put options establish a minimum sales price for
the production covered by such contracts and permit a Right to purchase future
production at an established price level, in order to increase value at an
acceptable level of income. Forward sales contracts establish a selling price
for future production at the time they are entered into, thereby limiting the
risk of declining prices. As of December 31, 2002, the Company had no gold
hedges.

During 1999, the Company liquidated put options to sell 91,000 ounces at a
strike price of $400 per ounce. The proceeds from the liquidation, net of
related costs, were deferred and were recognized as revenue at the time the
hedged production was sold. These contracts were exercisable over three years,
from 1999 to 2001. Accordingly, the Company recognized income of $2.3 million
and $2.9 million during 2000 and 1999, respectively, and has recorded deferred
revenue of $5.0 million and $1.6 million as of December 31, 2001 and 2000.

Meridian entered into new put option contracts during 1999. These contracts
were for a total of 59,000 Au ounces, bore a strike price of $285 per ounce and
were exercisable at intervals through November 2001. During 2000, these put
options were liquidated and a loss of $0.6 million was recognized.

During 2000, the Company purchased call options covering 35,000 ounces at a
call price of $425. By purchasing the call options, the Company effectively had
a margin-free hedging facility associated with the Standard Bank Loan. The call
options expired over time from September 2000 to December 2001.

During 2001, upon the removal of the Companys long-term credit facility with
the Standard Bank syndicate, the Company was relieved of its requirement to
maintain its gold forward hedge program. The Company closed its long-term gold
forward contracts as of June 30, 2001. The termination of these gold forward
contracts generated $4.9 million in cash which was deferred and will be
reflected in income according to contract expiration dates, as follows:

Year
    Deferred Revenue Impact
    
    
    Residual Silver Ounces Hedged @ $5.342002
    
    $
    1,943,363
    
    
    
    1,800,0002003
    
    
    1,916,130
    
    
    
    2,000,0002004
    
    
    1,200,000
    
    
    
    2,000,000


In March of 2001, the Company closed its hedging obligation for 2004 under the
Standard Bank loan. A total of 93,770 ounces of gold were closed generating
$1.2 million that will be recognized in income upon expiration of these
contracts.



|13.   COMMITMENTS AND CONTINGENT LIABILITIES
|--------------------------------------------

The Company leases office and warehouse space in Reno, Santiago, and Esquel as
well as various office equipment. Total rent expense under all operating leases
amounted to $0.5 million, $0.5 million, and $1.5 million for 2002, 2001, and
2000, respectively. Minimum future rentals under non-cancelable leases
aggregated approximately $2.3 million as of December 31, 2002, and are
estimated to be payable at $0.5 million in 2003 and 2004, $0.4 million in each
year between 2005 through 2007, and $0.1 million thereafter.

The Company is exposed to certain other contingent liabilities, claims and
commitments incident to the ordinary course of business. Management believes
that the resolution of such matters will not materially affect the financial
position, results of operations or cash flows of the Company.



|14.   DIFFERENCES FROM UNITED STATES ACCOUNTING PRINCIPLES
|----------------------------------------------------------

The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada (Canadian GAAP), which
differ in certain respects from those principles and practices generally
accepted in the United States (U.S. GAAP). Except as noted below, none of
these differences have a material effect on the financial statements of the
Company.

The Company has not identified any other differences in accounting that would
have a material effect on net income or shareholders equity in any of the
periods presented.

40



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##### 



In the United States, there are several accounting pronouncements that have
been issued at December 31, 2002 by the Financial Accounting Standards Board
but whose implementation dates are subsequent to December 31, 2002. The Company
has made a preliminary assessment of the current and potential future impact of
these pronouncements and has determined that, individually and in the
aggregate, they are not expected to have a significant effect on net income or
shareholders equity, with the possible exception of the Statement of
Accounting Standard No. 143 (SFAS 143), Accounting for Asset Retirement
Obligations, issued in June 2001.

SFAS 143 requires entities to record, as an addition to property costs and a
corresponding liability, the fair value of liabilities for retirement
obligations of acquired assets. SFAS 143 is effective for fiscal years
beginning after June 15, 2002. The Company believes its reclamation obligations
will be subject to the provisions of SFAS 143.

Because of the late stages of production that the properties to which the
reclamation obligations relate, the Company believes that any asset amount to
be recorded will be insignificant. Further, under its present accounting
policy, the Company believes that the reclamation liability is virtually fully
accrued at December 31, 2002. As a result, the impact of the statement would be
to reduce the recorded liability by the calculated discount factor attributable
to the period intervening between December 31, 2002 and the periods that the
liability will be settled in cash. This reduction would be reflected as the
cumulative effect of a change in accounting principle for U.S. reporting
purposes and the amount would be accreted, through operating expenses, over the
intervening period subject to annual adjustments for changes in the estimates.

In December 2002, the Canadian Institute of Chartered Accountants issued
Handbook Section 3063, (Section 3063) Impairment or Disposal of Long-Lived
Assets and revised Section 3475 (Section 3475), Disposal of Long-Lived
Assets and Discontinued Operations. Section 3063 requires that an impairment
loss be recognized when the carrying amount of an asset to be held for use
exceeds the sum of the undiscounted cash flows expected from its use and
disposal; the impairment loss recognized is the amount by which the carrying
amount of the asset exceeds its fair value. Section 3475 requires that assets
classified as held-for-sale be measured at the lower of their carrying amounts
or fair value, less costs to sell. The Company intends to adopt these standards
as of January 1, 2003.

Under U.S. GAAP, the Company would have been required to expense the cost of
start-up activities at the El Peñón mine as incurred; these costs were
capitalized under Canadian GAAP. Broadly defined, start-up activities consist
of the operating activities of the facility prior to reaching commercial
production levels. Sales revenues and costs incurred during this time give rise
to differences under Canadian and United States GAAP. The differences that
would have resulted from the Company following U.S. GAAP in 2002 and 2001 with
regard to the El Peñón start-up are summarized below.

2002 GAAP
    
    
    2001 GAAP(in thousands of CAD and USD)
    
    Canadian
    
    
    U.S.
    
    
    Canadian
    
    
    U.S.Consolidated Statements of OperationsSales revenue
    
    $
    133,595
    
    
    $
    133,595
    
    
    $
    115,436
    
    
    $
    115,436Cost of sales
    
    
    38,746
    
    
    
    38,746
    
    
    
    35,134
    
    
    
    35,134Depreciation, depletion and amortization
    
    
    22,785
    
    
    
    22,167
    
    
    
    22,507
    
    
    
    21,889Operating income
    
    
    52,746
    
    
    
    53,382
    
    
    
    37,944
    
    
    
    38,562Interest income, net
    
    
    1,846
    
    
    
    1,846
    
    
    
    1,808
    
    
    
    1,808Net income
    
    
    41,567
    
    
    
    42,134
    
    
    
    38,725
    
    
    
    39,343Net income per Common Share  Basic
    
    $
    0.48
    
    
    $
    0.49
    
    
    $
    0.52
    
    
    $
    0.52Net income per Common Share  Diluted
    
    $
    0.47
    
    
    $
    0.48
    
    
    $
    0.51
    
    
    $
    0.52


2002 GAAP
    
    
    2001 GAAP(in thousands of CAD and USD)
    
    Canadian
    
    
    U.S.
    
    
    Canadian
    
    
    U.S.Consolidated Balance SheetProperty, plant and equipment, net
    
    $
    549,336
    
    
    $
    546,865
    
    
    $
    93,475
    
    
    $
    90,386Total assets
    
    
    703,365
    
    
    
    700,894
    
    
    
    217,521
    
    
    
    214,432Retained earnings
    
    
    108,242
    
    
    
    105,771
    
    
    
    66,726
    
    
    
    63,637Total shareholders equity
    
    
    493,218
    
    
    
    490,747
    
    
    
    147,213
    
    
    
    144,124Consolidated Statement of Cash FlowsCash from operations
    
    
    71,079
    
    
    
    71,079
    
    
    
    70,064
    
    
    
    70,064Capital spending
    
    
    37,539
    
    
    
    37,539
    
    
    
    24,783
    
    
    
    24,783


41



---



##### 





|SUPPLEMENTARY DATA
|------------------



|QUARTERLY RESULTS AND STOCK MARKET DATA
|---------------------------------------

2002
    
    
    2001(in millions of USD except share and per share data)
    
    4th Qtr.
    
    
    3rd Qtr.
    
    
    2nd Qtr.
    
    
    1st Qtr.
    
    
    4th Qtr.
    
    
    3rd Qtr.
    
    
    2nd Qtr.
    
    
    1st Qtr.Sales(1)
    
    $
    34.6
    
    
    $
    33.6
    
    
    $
    34.3
    
    
    $
    31.1
    
    
    $
    31.9
    
    
    $
    29.4
    
    
    $
    27.8
    
    
    $
    26.2Operating income(1)
    
    
    12.9
    
    
    
    12.1
    
    
    
    15.1
    
    
    
    12.7
    
    
    
    11.9
    
    
    
    9.7
    
    
    
    9.1
    
    
    
    7.2Gain on sale of assets(1)
    
    
    0.1
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    1.8Interest income(1)
    
    
    0.4
    
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.4
    
    
    
    0.5
    
    
    
    0.4
    
    
    
    0.7
    
    
    
    0.2Net income(1)
    
    
    10.7
    
    
    
    9.2
    
    
    
    11.3
    
    
    
    10.3
    
    
    
    12.3
    
    
    
    10.1
    
    
    
    10.0
    
    
    
    6.4Income per Common Share(1)
    
    
    0.11
    
    
    
    0.10
    
    
    
    0.15
    
    
    
    0.14
    
    
    
    0.16
    
    
    
    0.14
    
    
    
    0.14
    
    
    
    0.09Common Stock prices(2)TSX (CAD$)High
    
    $
    28.95
    
    
    $
    32.98
    
    
    $
    31.60
    
    
    $
    24.00
    
    
    $
    17.95
    
    
    $
    18.59
    
    
    $
    14.20
    
    
    $
    11.75Low
    
    $
    21.94
    
    
    $
    19.25
    
    
    $
    20.40
    
    
    $
    16.11
    
    
    $
    13.67
    
    
    $
    9.90
    
    
    $
    9.20
    
    
    $
    8.45NYSEHigh
    
    $
    18.30
    
    
    $
    20.88
    
    
    $
    20.64
    
    
    $
    14.78
    
    
    $
    11.25
    
    
    $
    12.00
    
    
    $
    9.43
    
    
    $
    7.75Low
    
    $
    14.05
    
    
    $
    11.90
    
    
    $
    12.90
    
    
    $
    10.10
    
    
    $
    8.60
    
    
    $
    6.54
    
    
    $
    5.75
    
    
    $
    5.50


|(1) |  | Quarterly figures may not sum to full-year amounts due to rounding.
|--- |  | -------------------------------------------------------------------

|(2) |  | Meridian Gold shares are traded on both the Toronto Stock Exchange (TSX)
and the New York Stock Exchange (NYSE).
|--- |  | --------------------------------------------------------------------------------------------------------------------

MERIDIAN GOLD INC. MINERAL RESERVES AND MINERAL RESOURCES

December 31, 2002
    
    
    December 31, 2001Grade
    
    
    Contained Ounces
    
    
    Grade
    
    
    Contained OuncesTonnes
    
    
    Gold
    
    
    Silver
    
    
    Gold
    
    
    Silver
    
    
    Tonnes
    
    
    Gold
    
    
    Silver
    
    
    Gold
    
    
    Silver(mils)
    
    
    (g/t)
    
    
    (g/t)
    
    
    (K oz)
    
    
    (K oz)
    
    
    (mils)
    
    
    (g/t)
    
    
    (g/t)
    
    
    (K oz)
    
    
    (K oz)El PeñónProven and probable
    
    
    5.1
    
    
    
    11.0
    
    
    
    176
    
    
    
    1,792
    
    
    
    28,782
    
    
    
    4.7
    
    
    
    11.8
    
    
    
    198
    
    
    
    1,770
    
    
    
    29,532Mineral resourcesMeasured and indicated
    
    
    3.0
    
    
    
    7.6
    
    
    
    143
    
    
    
    742
    
    
    
    13,962
    
    
    
    2.7
    
    
    
    6.7
    
    
    
    136
    
    
    
    595
    
    
    
    12,000Inferred
    
    
    0.9
    
    
    
    10.4
    
    
    
    241
    
    
    
    312
    
    
    
    7,263
    
    
    
    1.2
    
    
    
    11.3
    
    
    
    224
    
    
    
    446
    
    
    
    8,865Jerritt Canyon(30% share)Proven and probable
    
    
    0.7
    
    
    
    8.1
    
    
    
    
    
    
    
    174
    
    
    
    
    
    
    
    1.0
    
    
    
    8.9
    
    
    
    
    
    
    
    288
    
    
    
    Mineral resourcesMeasured and indicated
    
    
    1.3
    
    
    
    9.5
    
    
    
    
    
    
    
    389
    
    
    
    
    
    
    
    1.2
    
    
    
    8.6
    
    
    
    
    
    
    
    327
    
    
    
    Inferred
    
    
    1.1
    
    
    
    9.2
    
    
    
    
    
    
    
    310
    
    
    
    
    
    
    
    0.8
    
    
    
    9.1
    
    
    
    
    
    
    
    226
    
    
    
    EsquelProven and probable
    
    
    7.5
    
    
    
    9.7
    
    
    
    16
    
    
    
    2,315
    
    
    
    3,716
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aMineral resourcesMeasured and indicated
    
    
    3.0
    
    
    
    3.5
    
    
    
    7
    
    
    
    346
    
    
    
    687
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aInferred
    
    
    2.9
    
    
    
    4.7
    
    
    
    11
    
    
    
    434
    
    
    
    1,045
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aRossiProven and probable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mineral resourcesMeasured and indicated
    
    
    1.7
    
    
    
    11.6
    
    
    
    
    
    
    
    628
    
    
    
    
    
    
    
    1.7
    
    
    
    11.6
    
    
    
    
    
    
    
    628
    
    
    
    Inferred
    
    
    0.9
    
    
    
    12.0
    
    
    
    
    
    
    
    332
    
    
    
    
    
    
    
    0.9
    
    
    
    12.0
    
    
    
    
    
    
    
    332
    
    
    
    Total  Meridians ShareProven and probable
    
    
    13.3
    
    
    
    10.0
    
    
    
    76
    
    
    
    4,281
    
    
    
    32,498
    
    
    
    5.7
    
    
    
    11.2
    
    
    
    161
    
    
    
    2,058
    
    
    
    29,532Mineral resourcesMeasured and indicated
    
    
    9.0
    
    
    
    7.3
    
    
    
    51
    
    
    
    2,105
    
    
    
    14,649
    
    
    
    5.6
    
    
    
    8.6
    
    
    
    67
    
    
    
    1,550
    
    
    
    12,000Inferred
    
    
    5.8
    
    
    
    7.4
    
    
    
    45
    
    
    
    1,388
    
    
    
    8,308
    
    
    
    2.9
    
    
    
    10.8
    
    
    
    95
    
    
    
    1,004
    
    
    
    8,865Gold Price Assumption($/oz)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    325
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    300


42



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##### 





|DIRECTORS
|---------

(Directors and Officers)



Directors   (FROM LEFT TO RIGHT) Christopher R. Lattanzi(2) Mr. Lattanzi is a mining engineer and president of
Micon International Limited, mineral industry
consultants. He holds a B.Eng. (Mining) from the
University of Melbourne, and has nearly 40 years of
experience in the planning and supervision of mining
operations, and as a consultant in the mining industry. John A. Eckersley(1) Mr. Eckersley is a private investor and most recently
held the position of vice-president, secretary and
general counsel of Placer Dome Inc., from which he
retired in 1995 after 22 years of service. He holds a
B.Sc. (Geology) and LLB from the University of British
Columbia. Dr. David S. Robertson(1, 2) Chairman of the Board of Directors, Meridian Gold Inc. Dr. Robertson is currently a consultant in the mining
industry. His distinguished career in the mining
industry has spanned over 30 years. Dr. Robertson is
noted for his extensive knowledge and research on
reserve classification, mineral evaluation and economic
geology, and has acted as a consultant on several mining
projects. He has served as a director for several mining
companies, and as president of the Canadian Institute of
Mining, Metallurgy and Petroleum.


Brian J. Kennedy President and Chief Executive Officer, Meridian Gold Inc. Mr. Kennedy has been active in the gold industry since
1981. He guided Meridian Gold Inc. through a successful
transition from FMC controlled FMC Gold to the
independent, Canadian-based Meridian Gold Inc. Mr.
Kennedy holds a B.S. degree from the U.S. Naval Academy
and an M.B.A. from Harvard University. Carl L. Renzoni(1) Mr. Renzoni retired from BMO Nesbitt Burns, where he
had been employed since 1969 and most recently served as
a managing director. He brings over 30 years of
experience in the securities business specializing in
the mining industry. Mr. Renzoni holds an Honors B.Sc.
(Geology) degree from Queens University. Malcolm W. MacNaught(2) Mr. MacNaught is a private investor, who culminated a
highly successful 28-year career in 1996 with Fidelity
Investments where he managed the Fidelity Select
Precious Metals and Minerals fund and the Fidelity
Select American Gold Portfolio fund. He also acted as
manager of Fidelity Advisor Global Resources. Mr.
MacNaught received his B.A. (Economics) at Yale College
and his M.B.A. from Northeastern University in Boston,
Massachusetts.  (1)
    
    Member of the Audit Committee(2)
    
    Member of the Compensation Committee




43



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##### 





|SHAREHOLDER INFORMATION
|-----------------------



Corporate Offices 9670 Gateway Drive, Suite 200 Reno, NV 89521Telephone:
    
    (775) 850-3777 or (800) 557-4699Fax:
    
    (775) 850-3733
  Annual Meeting The Companys annual shareholder meeting will be held at
4 p.m. on Thursday, May 8, 2003 at the Toronto Stock
Exchange Conference Centre located on street level of
The Exchange Tower, 130 King Street West (NE corner of
King and York Streets), Toronto, Ontario, Canada.  Stock Exchange Listings The Companys Common Shares are listed and traded on the
Toronto Stock Exchange under the symbol MNG and on the
New York Stock Exchange under the symbol MDG. Auditors KPMG LLP
Denver, Colorado


Investor Relations For public and media inquiries, or copies of the
Companys annual information form, annual report or
quarterly reports, please contact Wayne M. Hubert at
(775) 850-3730 or (800) 572-4519, or visit the Companys
web site at www.meridiangold.com. The Companys filings
with the Ontario Securities Commission can be accessed
on SEDAR at www.sedar.com. The Companys filings with
the U.S. Securities and Exchange Commission can be
accessed at the SECs web site: www.sec.gov.  Transfer Agents and Registrars Computershare Trust Company of Canada Stock
Transfer Department 1800 McGill College Avenue
Montreal, QC H3A 3K9Telephone:
    
    (800) 332-0095 (Canada and U.S.) or
(514) 982-7000
 Harris Trust Company of New York 
Wall Street Plaza 
88 Pine Street 
New York, NY 10005Telephone:
    
    (800) 332-0095




METRIC CONVERSION TABLETo Convert
    
    To Imperial Measurement Units
    
    
    Multiply byTonnes
    
    Short tons
    
    
    1.10231Tonnes
    
    Long tons
    
    
    0.98422Tonnes
    
    Pounds
    
    
    2,204.62Tonnes
    
    Ounces (troy)
    
    
    32,150.7Grams
    
    Ounces (troy)
    
    
    0.03215Grams/tonne
    
    Ounces (troy)/short ton
    
    
    0.02917Hectares
    
    Acres
    
    
    2.47105Kilometers
    
    Miles
    
    
    0.62137Meters
    
    Feet
    
    
    3.28084


Note:

Ounces (ozs.) are troy ounces; pounds (lbs.) are avoirdupois.
One pound is 14.58333 ounces.
One tonne is 2,204.62262 pounds.
One short ton is 2,000 pounds.


44