**EXHIBIT
      99.3**






MANAGEMENT’S
      RESPONSIBILITY FOR FINANCIAL STATEMENTS








The
      accompanying consolidated financial statements and all
      of
      the data included in thisannual report have been prepared by and are the
      responsibility of the Board of Directors and management of the
      Company




The
      consolidated financial statements have been prepared in accordance with
      accounting principles generally accepted in Canada and, where appropriate,
      reflect management’s best estimates and judgments 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. The Audit Committee of the Board, comprised of three
      independent directors, periodically meets with management and with the
      independent auditors to review the scope and result of the annual audit 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 the Company’s independent
      auditors, KPMG LLP. The Auditors’ Report outlines the scope of their examination
      of and opinion on the consolidated financial statements.




Dowling sig
              Dougherty sig**EDWARD C. DOWLING**
              **PETER C. DOUGHERTY**President
                and Chief Executive Officer
              Vice-President,
                Finance, Chief Financial Officerand
                Corporate Secretary


February
      22, 2007






MANAGEMENT’S
      REPORT OF INTERNAL CONTROL OVER FINANCIAL REPORTING




It
      is management’s responsibility to establish and maintain internal control over
      financial reporting for the Company. Internal control over financial reporting
      is to provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external purposes.
      Internal control over financial reporting may not prevent or detect
      misstatements.




Our
      internal control over financial reporting include policies related to the
      maintenance of records that, in reasonable detail, accurately and fairly reflect
      the transactions and disposition of assets, provide reasonable assurance that
      transactions are properly recorded to permit preparation of financial statements
      in accordance with generally accepted accounting principles, provide reasonable
      assurance that receipts and expenditures are authorized by management and
      directors, and provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use or disposition of assets that could
      have a material effect on the financial statements.




Management,
      including the Chief Executive Officer and Chief Financial Officer, assessed
      the
      effectiveness of the Company’s internal control over financial reporting as of
      December 31, 2006 using the Committee of Sponsoring Organizations of the
      Treadway Commission (COSO) Internal Control - Integrated Framework. Management’s
      assessment included an evaluation of the design and testing of the operational
      effectiveness of the internal control over financial reporting. Management
      reviewed the results with the Audit Committee of the Board of
      Directors.




Based
      on this assessment, management determined that as of December 31, 2006 the
      Company had effective internal control over financial reporting. Management’s
      assessment of the effectiveness of the Company’s internal control over financial
      reporting has been audited by KPMG LLP, an independent registered public
      accounting firm, and they have issued an attestation report on management’s
      assessment.




Dowling sig
                Dougherty sig**EDWARD C. DOWLING**
                **PETER C. DOUGHERTY**President
                  and Chief Executive Officer
                Vice-President,
                  Finance, Chief Financial Officerand
                  Corporate Secretary





MERIDIAN
            GOLD INC.
            2006 ANNUAL REPORT  29


AUDITORS’
      REPORT






To
      the Shareholders of Meridian Gold Inc.




We
      have audited the consolidated balance sheets of Meridian Gold Inc. (“the
      Company”) as at December 31, 2006 and 2005 and the consolidated statements of
      operations, retained earnings (deficit) and cash flows for each of the years
      in
      the three-year period ended December 31, 2006. These financial statements are
      the responsibility of the Company’s management. Our responsibility is to express
      an opinion on these financial statements based on our audits.




We
      conducted our audits in accordance with Canadian generally accepted auditing
      standards. With respect to the consolidated financial statements for the year
      ended December 31, 2006, we also conducted our audit in accordance with the
      standards of the Public Company Accounting Oversight Board (United States).
      Those standards require that we plan and perform an audit to obtain reasonable
      assurance 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.




In
      our opinion, these consolidated financial statements present fairly, in all
      material respects, the financial position of the Company as at December 31,
      2006
      and 2005 and the results of its operations and its cash flows for each of the
      years in the three-year period ended December 31, 2006 in accordance with
      Canadian generally accepted accounting principles.




We
      also have audited, in accordance with the standards of the Public Company
      Accounting Oversight Board (United States), the effectiveness of the Company’s
      internal control over financial reporting as of December 31, 2006, based on
      the
      criteria established in Internal Control-Integrated Framework issued by the
      Committee of Sponsoring Organizations of the Treadway Commission (COSO), and
      our
      report dated February 22, 2007 expressed an unqualified opinion on management’s
      assessment of, and the effective operation of internal control over financial
      reporting.







Chartered
      Accountants




Vancouver,
      Canada


February
      22, 2007








COMMENTS
      BY AUDITORS FOR U.S. READERS ON CANADA-U.S. REPORTING DIFFERENCES








To
      the Board of Directors of Meridian Gold Inc.




In
      the United States, reporting standards for auditors require the addition of
      an
      explanatory paragraph (following the opinion paragraph) when there is a change
      in accounting principles that has a material effect on the comparability of
      the
      Company’s financial statements, such as the changes described in note 2 to the
      consolidated financial statements as at December 31, 2006 and 2005. Our report
      to the shareholders dated February 22, 2007 is expressed in accordance with
      Canadian reporting standards, which do not require a reference to such changes
      in accounting principles in the auditors’ report when the changes are properly
      accounted for and adequately disclosed in the financial statements.







Chartered
      Accountants




Vancouver,
      Canada


February
      22, 2007





MERIDIAN
              GOLD INC.
              2006 ANNUAL REPORT  30


REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To
      the Shareholders and Board of Directors of Meridian Gold Inc.




We
      have audited management’s assessment, included in the accompanying **Management’s
      Report on Internal Controls Over Financial Reporting** ,
      that Meridian Gold Inc. (“the Company”) maintained effective internal control
      over financial reporting as of December 31, 2006, based on the criteria
      established in Internal Control-Integrated Framework issued by the Committee
      of
      Sponsoring Organizations of the Treadway Commission (COSO). The Company’s
      management is responsible for maintaining effective internal control over
      financial reporting and for its assessment of the effectiveness of internal
      control over financial reporting. Our responsibility is to express an opinion
      on
      management’s assessment and an opinion on the effectiveness of the Company’s
      internal control over financial reporting based on our audit.




We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether effective
      internal control over financial reporting was maintained in all material
      respects. Our audit included obtaining an understanding of internal control
      over
      financial reporting, evaluating management’s assessment, testing and evaluating
      the design and operating effectiveness of internal control, and performing
      such
      other procedures as we considered necessary in the circumstances. We believe
      that our audit provides a reasonable basis for our opinion.




A
      company’s internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles. A company’s internal control over
      financial reporting includes those policies and procedures that (1) pertain
      to
      the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (3) provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use, or disposition of the company’s
      assets that could have a material effect on the financial
      statements.




Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.




In
      our opinion, management’s assessment that the Company maintained effective
      internal control over financial reporting as of December 31, 2006 is fairly
      stated, in all material respects, based on the criteria established in Internal
      Control-Integrated Framework issued by the Committee of Sponsoring Organizations
      of the Treadway Commission (COSO). Also, in our opinion, the Company maintained,
      in all material respects, effective internal control over financial reporting
      as
      of December 31, 2006, based on the criteria established in Internal
      Control-Integrated Framework issued by the Committee of Sponsoring Organizations
      of the Treadway Commission (COSO).




We
      also have conducted our audits on the consolidated financial statements in
      accordance with Canadian generally accepted auditing standards. With respect
      to
      the year ended December 31, 2006, we also have conducted our audit in accordance
      with the standards of the Public Company Accounting Oversight Board (United
      States). Our report dated February 22, 2007 expressed an unqualified opinion
      on
      those consolidated financial statements.







Chartered
      Accountants




Vancouver,
      Canada




February
      22, 2007







MERIDIAN
          GOLD INC.
          2006 ANNUAL REPORT  31


CONSOLIDATED
        BALANCE SHEETS December
        31, 2006 and 2005







(expressed
                in millions of USD)
            
            
            **2006**
            
            
            2005**Assets**Current
                assets:Cash
                and cash equivalents (note
                7)
            
            **$**
            **92.8**
            
            $
            58.3Short-term
                investments (note
                7)
            
            
            **84.0**
            
            
            209.3Restricted
                cash (note
                7)
            
            
            **13.8**
            
            
            13.9Trade
                and other receivables (note
                8)
            
            
            **6.2**
            
            
            1.2Inventory
                (note
                9)
            
            
            **7.0**
            
            
            7.1Future
                income taxes (note
                19)
            
            
            **0.5**
            
            
            0.3Other
                current assets (note
                10)
            
            
            **15.7**
            
            
            10.0Total
                current assets
            
            
            **220.0**
            
            
            300.1Mineral
                property, plant and equipment (notes
                11 and
                12)
            
            
            **276.1**
            
            
            89.6Other
                long-term assets (note
                13)
            
            
            **31.8**
            
            
            11.0Total
                assets
            
            **$**
            **527.9**
            
            $
            400.7**Liabilities
                and Shareholders’ Equity**Current
                liabilities:Accounts
                payable, trade and other
            
            **$**
            **20.1**
            
            $
            13.4Other
                current liabilities (note
                14)
            
            
            **25.4**
            
            
            21.3Total
                current liabilities
            
            
            **45.5**
            
            
            34.7Future
                income taxes (note
                19)
            
            
            **17.6**
            
            
            12.4Other
                long-term liabilities (note
                15)
            
            
            **103.4**
            
            
            67.5Total
                liabilities
            
            
            **166.5**
            
            
            114.6Non-controlling
                interest (note
                4)
            
            
            **15.3**
            
            
            -Shareholders’
                equity (note
                22)
            
            
            **346.1**
            
            
            286.1Total
                liabilities and shareholders’ equity
            
            **$**
            **527.9**
            
            $
            400.7




Commitments
      and contingencies (notes 16
      and
      21)




See
      accompanying notes to consolidated financial statements.






Approved
      on behalf of the Board


Kennedy
                  Dowling sig**BRIAN
                    J.
                    KENNEDY**
                  **EDWARD C.
                    DOWLING**Director
                  Director







MERIDIAN
          GOLD INC.
          2006 ANNUAL REPORT  32




CONSOLIDATED
      STATEMENTS
      OF OPERATIONS Years
      ended December 31, 2006, 2005, and 2004




(expressed
                in millions of USD, except per share data)
            
            
            **2006**
            
            
            2005
            
            
            2004Revenue
                (note
                6)
            
            **$**
            **240.0**
            
            $
            174.3
            
            $
            157.3Costs
                and expenses:Cost
                of sales before depreciation, depletion and amortization
            
            
            **76.1**
            
            
            54.4
            
            
            46.3Depreciation,
                depletion and amortization
            
            
            **28.1**
            
            
            15.7
            
            
            18.1Exploration
            
            
            **26.6**
            
            
            25.0
            
            
            19.5Selling,
                general and administrative
            
            
            **22.7**
            
            
            13.9
            
            
            10.4Impairment
                of mineral properties and other (notes
                12 and
                16)
            
            
            **4.6**
            
            
            548.7
            
            
            -**158.1**
            
            
            657.7
            
            
            94.3Earnings
                (loss) from operations
            
            
            **81.9**
            
            
            (483.4
            )
            
            63.0Interest
                income
            
            
            **12.2**
            
            
            6.9
            
            
            2.6Other
                income (expense)
            
            
            **0.1**
            
            
            0.1
            
            
            (2.0
            )Earnings
                (loss) before income taxes
            
            
            **94.2**
            
            
            (476.4
            )
            
            63.6Income
                tax expense (benefit) (note
                19)
            
            
            **45.6**
            
            
            (130.0
            )
            
            27.0Net
                earnings (loss)
            
            **$**
            **48.6**
            
            $
            (346.4
            )
            $
            36.6Earnings
                (loss) per share (note
                23):Basic
            
            **$**
            **0.48**
            
            $
            (3.47
            )
            $
            0.37Diluted
            
            
            **0.48**
            
            
            (3.47
            )
            
            0.37Weighted
                average shares outstanding (in 000’s):Basic
            
            
            **100,761**
            
            
            99,936
            
            
            99,259Diluted
            
            
            **101,162**
            
            
            99,936
            
            
            99,966




See
      accompanying notes to consolidated financial statements.










CONSOLIDATED
      STATEMENTS OF RETAINED EARNINGS (DEFICIT) Years
      ended December 31, 2006, 2005, and 2004







(expressed
                in millions of USD)
            
            
            **2006**
            
            
            2005
            
            
            2004Balance,
                beginning of year
            
            **$**
            **(166.4**
            **)**
            $
            180.0
            
            $
            143.4Net
                earnings (loss)
            
            
            **48.6**
            
            
            (346.4
            )
            
            36.6Balance,
                end of year
            
            **$**
            **(117.8**
            **)**
            $
            (166.4
            )
            $
            180.0




See
      accompanying notes to consolidated financial statements.







MERIDIAN
          GOLD INC.
          2006 ANNUAL REPORT  33


CONSOLIDATED
      STATEMENTS OF CASH FLOWS Years
      ended December 31, 2006, 2005, and 2004







(expressed
                in millions of USD)
            
            
            **2006**
            
            
            2005
            
            
            2004Cash
                flow from operating activities:Net
                earnings (loss)
            
            **$**
            **48.6**
            
            $
            (346.4
            )
            $
            36.6Non-cash
                items:Impairment
                of mineral properties and other
            
            
            **1.7**
            
            
            550.2
            
            
            -Depreciation,
                depletion and amortization
            
            
            **28.1**
            
            
            15.7
            
            
            18.1Gain
                on sale of assets, net
            
            
            **-**
            
            
            -
            
            
            (1.3
            )Accretion
                of asset retirement obligations
            
            
            **1.6**
            
            
            0.4
            
            
            0.4Stock-based
                compensation
            
            
            **4.7**
            
            
            3.4
            
            
            2.3Provision
                for pension cost
            
            
            **0.6**
            
            
            1.0
            
            
            0.5Future
                income taxes
            
            
            **8.7**
            
            
            (145.9
            )
            
            11.4Deferred
                revenue
            
            
            **-**
            
            
            -
            
            
            (1.2
            )Changes
                in non-cash working capital and other accounts:Trade
                and other receivables
            
            
            **(2.9**
            **)**
            
            1.1
            
            
            2.5Inventory
            
            
            **1.7**
            
            
            (1.7
            )
            
            1.4Other
                current assets
            
            
            **(5.3**
            **)**
            
            0.2
            
            
            3.0Other
                assets
            
            
            **(2.3**
            **)**
            
            (1.3
            )
            
            1.5Accounts
                payable, trade and other
            
            
            **2.9**
            
            
            5.3
            
            
            2.0Accrued
                and other liabilities
            
            
            **(0.1**
            **)**
            
            (3.5
            )
            
            (0.7
            )Other
                long-term liabilities
            
            
            **5.0**
            
            
            -
            
            
            1.1Asset
                retirement obligation expenditures
            
            
            **(4.2**
            **)**
            
            (4.4
            )
            
            (7.1
            )Pension
                contributions
            
            
            **(2.7**
            **)**
            
            (0.6
            )
            
            (0.6
            )**86.1**
            
            
            73.5
            
            
            69.9Cash
                flow from (used in) investing activities:Capital
                expenditures
            
            
            **(43.8**
            **)**
            
            (30.1
            )
            
            (17.7
            )Proceeds
                from sale of assets
            
            
            **-**
            
            
            1.7
            
            
            1.7Acquisitions
                (net of cash received of $0.7)
            
            
            **(118.9**
            **)**
            
            -
            
            
            -Short-term
                investments, net (note
                7)
            
            
            **125.3**
            
            
            (38.7
            )
            
            (49.2
            )Long-term
                investments, net (note
                7)
            
            
            **(18.9**
            **)**
            
            1.2
            
            
            (6.4
            )**(56.3**
            **)**
            
            (65.9
            )
            
            (71.6
            )Cash
                flow from (used in) financing activities:Repayment
                of loans payable
            
            
            **(2.1**
            **)**
            
            -
            
            
            -Proceeds
                from issuance of share capital
            
            
            **6.8**
            
            
            3.4
            
            
            2.0**4.7**
            
            
            3.4
            
            
            2.0Increase
                (decrease) in cash and cash equivalents
            
            
            **34.5**
            
            
            11.0
            
            
            0.3Cash
                and cash equivalents, beginning of year
            
            
            **58.3**
            
            
            47.3
            
            
            47.0Cash
                and cash equivalents, end of year
            
            **$**
            **92.8**
            
            $
            58.3
            
            $
            47.3




Supplementary
      disclosure of cash flow information (note 25).




See
      accompanying notes to consolidated financial statements.







MERIDIAN
          GOLD INC.
          2006 ANNUAL REPORT  34


NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTSYears
                ended December 31, 2006, 2005 and 2004(Tables
                expressed in millions of USD, except per share
                amounts)




**1.** **Nature
      of operations**




Meridian
      Gold Inc. (“Meridian” or the “Company”) is engaged in the exploration and mining
      of gold and other precious metals.




**2.** **Changes
      in accounting policies**




(a) Effective
      January 1, 2004, the Company changed the method of application of its
      stock-based compensation accounting policy so as to measure stock
      options granted to directors and employees at fair value and recognize the
      compensation expense over the vesting period, with a corresponding credit
      to additional paid-in capital, as required under the amendments to Canadian
      Institute of Chartered Accountants (“CICA”) Handbook Section 3870,
      *“* *Stock-based
      Compensation and Other Stock-based Payments* *”*.
      This change has been applied retroactively without restatement of prior periods. The
      effect of the change in the method of accounting for stock-based compensation
      has resulted in a decrease of $0.9 million in retained earnings and
      an increase of $0.9 million in additional paid-in capital as of January 1,
      2004.




(b) Commencing
      January 1, 2006, the Company began recognizing by-product metal sales as part
      of
      its revenue principally due to the increase in silver
      ounces mined and the significant increase in silver’s market price. The Company
      previously recognized silver sales as a by-product and reported its
      silver revenue as a credit to cost of sales. The Company has also changed its
      classification of refining cost from netting against revenue to including
      it in cost of sales. Commencing January 1, 2006 both of these changes were
      adopted on a retroactive basis and revenue and cost of sales before
      depreciation, depletion and amortization for 2005 and 2004 have been increased
      by $42.5 million and $30.2 million, respectively, from the previously
      reported. Revenue and cost of sales before depreciation, depletion and
      amortization have been restated for 2005 and 2004 with no impact on
      net earnings.




**3.** **Significant
      accounting policies**




**(a)** **Basis
      of presentation:**


These
      financial statements are presented in accordance with Canadian generally
      accepted accounting principles (“GAAP”) which, in the Company’s case,
      conform to U.S. GAAP on a measurement basis except as explained in note 26.
      The
      United States dollar (“USD”) is the principal currency of the Company’s
      business; accordingly, the consolidated financial statements and related notes
      are presented in USD.




**(b)** **Consolidation:**


The
      accompanying consolidated financial statements include the accounts of Meridian
      and all majority-owned subsidiaries. The accounts of joint ventures in which
      the
      Company holds an interest are consolidated on a proportionate consolidation
      basis. The Company’s 40% interest in the Rossi
      joint venture and its 50% interest in Agua Frias S.A., acquired through the
      purchase of Minera Florida, are accounted for on the proportionate consolidation
      method. The Company’s 56.7% interest in Agua De La Falda S.A. (“ADLF”), which is
      a variable interest entity, is consolidated and the
      non-controlling interest for the interest of the Company’s partner is recorded.
      All significant intercompany accounts are eliminated on consolidation.




**(c)** **Use
      of estimates:**


The
      preparation of financial statements requires management to make estimates and
      assumptions that affect the amounts reported in the consolidated financial
      statements and accompanying notes. Estimates are used in calculation of proven
      and probable reserves for the purposes of evaluating impairment
      of mineral properties, depreciation, depletion and amortization, costs
      associated with the reclamation and closing of mine properties (asset
      retirement obligations), allocation of the purchase price on business
      combinations, stock-based compensation and future income taxes, among others.
      Actual results could differ from those estimates.




**(d)** **Fair
      value of financial instruments:**


The
      carrying amounts of the Company’s financial instruments approximate their fair
      values except for marketable equity securities with a carrying value
      of less than $0.1 million and a quoted market value of $0.5 million at December
      31, 2006. The quoted market value of short-term and long-term
      investments is disclosed in note 7.




**(e)** **Cash,
      short-term investments and long-term investments:**


The
      Company considers marketable securities with remaining maturities at date of
      purchase of fewer than 91 days to be cash equivalents, securities with maturity
      dates greater than 90 days and less than one year to be short-term investments
      and securities with maturity dates greater than one year to
      be long-term investments. Auction rate securities, which are variable rate
      bonds
      that have interest rate resets at predetermined short-term intervals, usually
      7,
      28 or 35 days, are classified as short-term investments unless the effective
      maturity date exceeds 365 days in which case they are classified as
      long-term securities.




**(f
      ) Inventory:**


Materials
      and supplies are valued at the lower of average cost and replacement
      value.







MERIDIAN
          GOLD INC.
          2006 ANNUAL REPORT  35
 NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (continued)




Stockpiled
      ore is carried at average production cost per tonne using the last-in, first-out
      (“LIFO”) method, as that cost is lower than net realizable value
      after an allowance for additional processing costs and is generally consistent
      with how the Company withdraws material from the stockpile. The
      cost of producing stockpiled ore includes all direct costs of extracting the
      ore
      from the mine. Ore is extracted using mining equipment and, accordingly,
      charges for use of this equipment are included in the cost of stockpiled ore
      as
      part of the costs incurred. Amortized mine development costs are not included
      in
      the cost of stockpiled ore inventory or finished goods inventory. Costs
      associated with stockpiled ore are charged to cost of goods
      sold based on tonnes removed from inventory and processed through the
      mill.




Finished
      goods inventory is stated at the lower of average cost or net realizable
      value.




**(g)
      Mineral property, plant and equipment:**


Mineral
      property, plant and equipment, including acquisition and 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 is provided on the shorter of the units-of-production
      basis, based upon the expected tonnes of proven and probable reserves to be
      mined, or on the straight-line basis over the estimated lives of the assets.
      Depreciation, depletion and amortization of mine development assets amortized
      on
      a units-of-production basis is recorded when a unit (a tonne of ore) is
      extracted (“produced”) from the mine regardless
      of whether the ore is added to the stockpiled ore inventory or sent directly
      to
      the mill.




Gains
      and losses are reflected in earnings upon sale or retirement of
      assets.




**(h)
      Impairment of long-lived assets:**


The
      Company assesses the impairment of long-lived assets, which consist primarily
      of
      mineral property, plant and equipment, whenever events or changes in
      circumstances indicate that the carrying value of an asset may not be
      recoverable. An impairment loss is 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
      will be the amount by which the carrying amount of the asset exceeds its fair
      value.




At
      each reporting period, the Company reviews the carrying value of its mineral
      properties. These reviews include an analysis of the expected future cash flows
      to be generated by the project to determine if such cash flows exceed the
      project’s current carrying value. The determination of future cash flows is
      dependent on a number of factors, including future metal prices, the amount
      of
      reserves, the cost of bringing the project into production, production schedules,
      and estimates of production costs. Additionally, the reviews take into account
      factors such as political, social, legal and environmental regulations. These
      factors may change due to changing economic conditions or the accuracy of
      certain assumptions. The Company uses its best efforts to fully
      understand all of the aforementioned to make an informed decision based upon
      historical and current facts surrounding the projects.




**(i)
      Asset retirement obligations (“AROs”):**


AROs
      are legal obligations associated with the retirement of a long-lived asset
      that
      results from the acquisition, construction, development and/or normal operation
      of a long-lived asset. Reclamation obligations on the Company’s mineral
      properties are recorded as AROs. The fair value of a liability
      for an ARO, such as site closure and reclamation costs, is recognized in the
      period in which it is incurred if a reasonable estimate of fair value
      can be made.




The
      Company recognizes the fair value of a liability for an ARO in the period in
      which it incurs a legal obligation, if a reasonable estimate of fair value
      can
      be made, based on the discounted estimated future cash settlement of an ARO.
      The
      ARO is capitalized as part of the carrying amount of the
      associated long-lived asset and a liability is recorded and is depreciated
      over
      the life of the related asset. Any change for a closed mine is included as
      a
      charge or credit to other income. The liability is accreted, through operating
      expense, over a period ending when the liability is finally settled in cash,
      subject to annual adjustments for changes in estimates.




**(j)
      Stock-based compensation:**


The
      Company accounts for stock-based compensation for stock options granted after
      January 1, 2002 at fair value and recognizes the compensation expense
      over the vesting period, with a corresponding credit to additional paid-in
      capital. Restricted shares are measured at fair value and are recognized
      as compensation expense over the vesting period.




**(k)
      Employee future benefits:**


The
      Company has defined benefit pension plans for North American employees. The
      cost
      of the accrued benefit obligations for pensions and other post-retirement
      benefits earned by employees is actuarially determined using the projected
      benefit method prorated on service and management’s best estimate of expected
      plan investment performance, salary escalation, retirement ages and expected
      health care costs. For the purpose of calculating
      expected return on plan assets, those assets are valued at fair
      value.




The
      Company accrues payroll costs for employees whose governments require the
      payment of defined wages at the termination of their employment.


MERIDIAN
            GOLD INC.
            2006 ANNUAL REPORT  36
 NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  **(l)
      Translation of foreign currencies:**


Assets
      and liabilities of entities where the functional currency is not the U.S. dollar
      (Argentina) are translated into U.S. dollars at exchange rates in effect at
      the
      balance sheet date, with the resulting translation adjustments reported as
      a
      separate component of shareholders’ equity. Revenue and
      expenses are translated using the average exchange rate during the period.
      For
      entities where the U.S. dollar is the functional currency (U.S., Canada and
      Chile), gains and losses that arise from remeasuring monetary assets and
      liabilities denominated in other than U.S. dollars are
      recorded in earnings.




**(m)
      Revenue:**


Revenue
      is recognized when metal is delivered and title to the metal is transferred
      to
      third parties. Revenue from forward sales is recognized in revenue
      when production is delivered or the contracts expire.




**(n)
      Mineral exploration and development costs:**


Mineral
      exploration costs and costs incurred on properties being maintained but not
      advanced are expensed as incurred. Development costs applicable
      to mineralized properties deemed capable of commercial production, as evidenced
      by a positive economic analysis of the project, are capitalized
      and then amortized using the units-of-production method based upon projected
      mineable tonnes.




**(o)
      Income taxes:**


The
      Company uses the asset and liability method of accounting for income taxes.
      Under this method, future income 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.
      Future income tax assets and liabilities are measured using substantively
      enacted tax rates expected to apply to taxable income in the years in which
      the
      temporary differences are expected to be recovered or settled. The effect on
      future income tax assets and liabilities of a change in tax rates is recognized
      in earnings in the period that includes the date of substantive
      enactment. The amount of future income tax assets and liabilities is limited
      to
      the amount that is more likely than not to be realized.




**(p)
      Earnings per share:**


Basic
      earnings per share is computed by dividing earnings available to common
      shareholders by the weighted average number of common shares outstanding
      during the period. Diluted earnings per share is computed using the treasury
      stock method, taking into account dilutive potential common
      shares, primarily employee stock options and restricted common stock outstanding
      during the period.




**(q)
      Variable interest entities:**


Effective
      January 1, 2005, the Company adopted CICA Accounting Guideline 15, “ *Consolidation
      of Variable Interest Entities* ”
      (“AcG-15”). The guidance
      establishes when a company should consolidate a variable interest entity in
      its
      financial statements. AcG-15 provides the definition of a variable
      interest entity and requires a variable interest entity to be consolidated
      if a
      company is at risk of absorbing the majority of the variable interest
      entity’s expected losses, is entitled to receive a majority of the variable
      interest entity’s residual returns, or both. The adoption of AcG-15 did
      not result in any changes to the Company’s financial statements on
      adoption.




**(r)
      Derivative and hedging activities:**


The
      Company’s risk management policy includes mitigating the impact of risks for
      certain types of transactions to plan its business with greater certainty.
      The Company may use commodity price contracts or other contracts to manage
      exposure to changing prices. The Company’s use of risk management
      contracts is governed by the Board of Directors.




The
      realized and unrealized losses of the fair value of contracts that do not
      qualify for hedge accounting are charged as other income and the fair value
      of such contracts is recorded on the balance sheet.




**(s)
      Comparative figures:**


Certain
      reclassifications have been made to prior year amounts to conform to
      presentation adopted in the current year.




**4.
      Acquisitions**




**Minera
      Florida S.A.**


During
      2006, the Company acquired 100% of Minera Florida S.A. (“Minera Florida”) for
      $100.0 million cash. The Company acquired control of Minera
      Florida effective as of July 1, 2006 and has accordingly determined this to
      be
      the date of acquisition. The transaction completed on July 31, 2006 at which
      time the Company made a cash payment of $100.0 million from available cash
      reserves. The earnings of Minera Florida are included in
      the statement of operations commencing July 1, 2006. Imputed interest from
      July
      1 to July 31, 2006 of $0.4 million offsets the cash payment for a
      net purchase price $99.6 million. Minera Florida owns a producing gold mine
      in
      Alhue, Chile. The Company is required to pay for mineral rights principally
      based on tons mined.


MERIDIAN
            GOLD INC.
            2006 ANNUAL REPORT  37
 NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  The
      following table summarizes management’s estimates of fair value of the assets
      acquired and liabilities assumed at the date of acquisition.







As
                at July 1, 2006Current
                assets
            
            $
            4.4Mineral
                property, plant and equipment
            
            
            132.5Other
                long-term assets
            
            
            5.5Total
                assets acquired
            
            
            142.4Current
                liabilities
            
            
            (10.5
            )Long-term
                liabilities
            
            
            (32.3
            )Total
                liabilities assumed
            
            
            (42.8
            )Net
                assets acquired
            
            $
            99.6




For
      purposes of the consolidated financial statements, the purchase consideration
      has been allocated to the fair value of assets acquired and liabilities assumed,
      based upon management’s best estimates and taking into account all available
      information as of the time of acquisitions, as well as available information
      as of the time that these financial statements were prepared. An independent
      valuation of property, plant and equipment excluding construction-in-progress
      and mineral rights acquired was completed during August 2006. An independent
      review of the value assigned to the mineral rights
      based on the company’s internal model was completed as of the date of
      preparation of these financial statements. The fair value of the monetary assets
      was measured as being equal to their carrying value. Construction-in-process
      was
      valued as its carrying value. The fair value of mineral rights was
      determined based on a discounted cash flow model prepared by the Company. The
      model used management estimates on inputs including mineral
      reserves and resources, expected mining and production volume, mining and
      processing costs, recovery, metal prices, refining costs, royalties, taxes,
      discount rates as well as other factors.




The
      purchase price allocation for Minera Florida has not been finalized and may
      be
      adjusted in the future on completion of analysis of income tax
      balances.




**Agua
      De La Falda S.A.**


On
      September 22, 2006, the Company acquired 56.7% of ADLF for $20.0 million cash.
      The Company plans to prepare a feasibility study on the Jeronimo
      property owned by ADLF. The Company’s interest in ADLF is a variable interest
      entity for accounting purposes and the earnings of ADLF are
      included in the statement of operations from the date of
      acquisition.




The
      following table summarizes management’s estimate of fair value of the assets
      acquired and liabilities assumed at the date of acquisition.







As
                at September 22, 2006Current
                assets
            
            $
            0.1Mineral
                property, plant and equipment
            
            
            37.9Total
                assets acquired
            
            
            38.0Current
                liabilities
            
            
            (0.6
            )Long-term
                liabilities
            
            
            (2.1
            )Total
                liabilities assumed
            
            
            (2.7
            )Non-controlling
                interest
            
            
            (15.3
            )Net
                assets acquired
            
            $
            20.0




**5.
      Joint ventures**




The
      Company holds a 40% interest in a joint venture with Barrick Gold Corporation
      (“Barrick”) for the Rossi property in Nevada. During 2006 and

      2005 the Company expensed $0.1 million and nil, respectively, for operating
      activities. In 2006 and 2005, the Company’s share of capitalized development
      costs was $2.5 million and $1.6 million, respectively, which are considered
      investing activities. Assets of the joint venture included in these
      financial statements are as disclosed in note 11, and no material liabilities
      are recorded.


MERIDIAN
            GOLD INC.
            2006 ANNUAL REPORT  38
 NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  **6.
      Revenue**




Revenue
      is comprised of the following:




**2006**
            
            
            2005
            
            
            2004Gold
            
            **$**
            **161.3**
            
            $
            133.8
            
            $
            129.0Silver
            
            
            **74.7**
            
            
            40.5
            
            
            28.3Zinc
            
            
            **4.0**
            
            
            
            
            
            -**$**
            **240.0**
            
            $
            174.3
            
            $
            157.3




**7.** **Cash
      and investments**




Cash
      equivalents consist primarily of U.S. dollar term deposits with major commercial
      banks. Cash and cash equivalents totaled approximately $92.8
      million and $58.3 million at December 31, 2006 and 2005,
      respectively.




At
      December 31, 2006 and 2005, the Company had $84.0 million and $209.3 million
      in
      short-term investments, with a weighted average yield of 5.2%
      and 4.7%, respectively. The effective maturity dates of short-term investments
      held at December 31, 2006 were between January 2, 2007 and November
      9, 2007.




At
      December 31, 2006 and 2005, long-term investments were $24.1 million and $5.2
      million, with a weighted average yield of 5.6% and 4.9%, respectively.
      At December 31, 2006, the effective maturity dates of long-term investments
      were
      between January 18, 2008 and January 20, 2010. At
      December 31, 2006, the quoted market value of the Company’s short-term
      investments was $84.0 (2005 - $209.3) million and the quoted market
      value of the Company’s long-term investments was $24.1 million (2005 - $5.2
      million). The Company’s investments are comprised of principally
      AAA and AA rated securities which are typically rated by at least two credit
      agencies. The Company’s investments include securities such
      as Agency Bonds, Insured Asset Backed Securities, Corporate Bonds and Taxable
      Auction Rate Securities.




At
      December 31, 2006 and 2005, the Company had $13.8 million and $13.9 million,
      respectively, classified as restricted cash, which represents funds
      on deposit that have been pledged as backing for letters of credit subject
      to
      annual renewal issued for reclamation bonding.




**8.** **Trade
      and other receivables**




**2006**
            
            
            2005Trade
            
            **$**
            **1.7**
            
            $
            0.3Value
                added tax
            
            
            **4.5**
            
            
            0.9**$**
            **6.2**
            
            $
            1.2




**9.
      Inventory**




**2006**
            
            
            2005Materials
                and supplies
            
            **$**
            **3.9**
            
            $
            2.1Stockpiled
                ore
            
            
            **2.8**
            
            
            4*.*8Finished
                goods
            
            
            **0.3**
            
            
            0.2**$**
            **7.0**
            
            $
            7.1




**10.
      Other current assets**




**2006**
            
            
            2005Prepaid
                expenses
            
            **$**
            **1.4**
            
            $
            0.9Income
                tax recoverable
            
            
            **5.0**
            
            
            0.2Other
            
            
            **9.3**
            
            
            8.9**$**
            **15.7**
            
            $
            10.0




Other
      current assets include $8.1 million in 2006 and $8.5 million in 2005 for amounts
      expected to be recovered under an insurance policy related to
      the reclamation of Beartrack. See note 16 on Asset Retirement Obligations for
      further information.


MERIDIAN
            GOLD INC.
            2006 ANNUAL REPORT  39
 NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  **11.
      Mineral property, plant and equipment**




**2006**
            
            
            2005Mineral
                property acquisition and development costs
            
            **$**
            **833.5**
            
            $
            658.7Plant,
                buildings and equipment
            
            
            **107.7**
            
            
            68.6**941.2**
            
            
            727.3Accumulated
                depreciation, depletion, amortization and write-down
            
            
            **(665.1**
            **)**
            
            (637.7
            )**$**
            **276.1**
            
            $
            89.6




Mineral
      property, plant and equipment allocation by project:




**2006**
            
            
            2005**Accumulated****depreciation,**
            
            
            
            
            
            
            
            
            Accumulated**depletion,**
            
            
            
            
            
            
            
            
            depreciation**amortization**
            
            
            
            
            
            
            
            
            depletionand**Cost**
            
            
            **and
                write-down**
            
            
            **Total**
            
            
            Cost
            
            
            amortization
            
            
            TotalEl
                Peñón
            
            **$**
            **206.5**
            
            **$**
            **112.5**
            
            **$**
            **94.0**
            
            $
            170.6
            
            $
            93.7
            
            $
            76.9Minera
                Florida
            
            
            **136.5**
            
            
            **8.4**
            
            
            **128.1**
            
            
            -
            
            
            -
            
            
            -Agua
                de la Falda
            
            
            **37.9**
            
            
            -
            
            
            **37.9**
            
            
            -
            
            
            -
            
            
            -Rossi
            
            
            **11.4**
            
            
            -
            
            
            **11.4**
            
            
            8.9
            
            
            -
            
            
            8.9Esquel
            
            
            **544.0**
            
            
            **541.5**
            
            
            **2.5**
            
            
            544.0
            
            
            541.5
            
            
            2.5Other
            
            
            **4.9**
            
            
            **2.7**
            
            
            **2.2**
            
            
            3.8
            
            
            2.5
            
            
            1.3**$**
            **941.2**
            
            **$**
            **665.1**
            
            **$**
            **276.1**
            
            $
            727.3
            
            $
            637.7
            
            $
            89.6




Capital
      expenditures by project:




**2006**
            
            
            2005El
                Peñón
            
            **$**
            **36.1**
            
            $
            27.3Minera
                Florida
            
            
            **4.0**
            
            
            -Rossi
            
            
            **2.5**
            
            
            1.6Other
            
            
            **1.2**
            
            
            1.2**$**
            **43.8**
            
            $
            30.1




The
      El Peñón mine is located in the Atacama Desert in northern Chile, approximately
      160 kilometers southeast of Antofagasta, and began commercial
      production in January 2000. During 2005, Meridian Gold bought Gold Field Chile
      Limitada’s interest in the Angelina joint venture for $7.5
      million in cash. This adjacent property is now 100% owned by Meridian and
      extends the El Peñón district. Minera Florida is located near the town
      of Alhue, Chile, and is in commercial production. See note 4. Agua de la Falda
      properties are located 50 kilometers southeast of El Salvador in the
      Third Region of Northern Chile and encompass over 240 square kilometers. See
      note 4. The Rossi project is located 41.6 kilometers northwest of Carlin,
      Nevada, USA, and is expected to begin production during 2007. See note 5. The
      Esquel project is located in the Sierra de Esquel, 7
      kilometers northeast of the town of Esquel, Chubut, Argentina. See note
      12.


MERIDIAN
            GOLD INC.
            2006 ANNUAL REPORT  40
 NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  **12.
      Mineral property impairment**




At
      each reporting period, the Company reviews the carrying value of its mineral
      properties. These reviews include an analysis of the expected future cash
      flows to be generated by the project to determine if such cash flows exceed
      the
      project’s current carrying value. The determination of future cash flows
      is dependent on a number of factors, including future prices for gold, the
      amount of reserves, the cost of bringing the project into production, production
      schedules, and estimates of production costs. The reviews take into account
      factors such as political, social, legal and environmental regulations. These
      factors may change due to changing economic conditions or the accuracy of
      certain assumptions. In addition, CICA Accounting Guideline
      11, *“* *Enterprises
      in the Development Stage* *”*
      states, “... when there has been a delay in development activity that extends
      beyond three years, there
      is a presumption that a write-down of capitalized costs and deferred development
      and pre-operating costs is necessary. This presumption can be rebutted
      only by persuasive evidence to the contrary.” The Company uses its best efforts
      to fully understand all of the aforementioned to make an informed decision
      based
      upon historical and current facts surrounding the projects. Based on this
      review, management determined an impairment was
      necessary as of December 31, 2005 for the Company’s Esquel project in
      Argentina.




The
      Esquel project was acquired in 2002. The Company encountered local opposition
      from the citizens of Esquel who voted not to support the mine
      development in a non-binding referendum in March 2003. Shortly thereafter the
      provincial government passed a law that prohibited open-pit mining and the
      use
      of cyanide that became effective in 2003. Following the non-binding referendum,
      the Company has focused its efforts on addressing the concerns of the community
      and developing an underground mine plan. As Meridian Gold’s development
      activities on the Esquel project were interrupted for three years as at December
      31, 2005 and as the Company did not have persuasive evidence, such as issued
      permits, to
      maintain the capitalized cost associated with the Esquel project the Company,
      in
      compliance with accounting guidelines, wrote down the long-lived assets
      of the Esquel project to their estimated fair value which management determined
      to be the real estate value of the property for non-mine use. Based
      on market analysis, assisted by a third party, this value was $2.5 million.
      The
      impairment expense recorded in 2005 for the Esquel project was $542.8
      million and the income tax benefit was $163.9 million. The impairment charge
      was
      a non-cash transaction. The following table illustrates the
      values used in the write-down of the Esquel property.




Purchase
                price
            
            $
            310.0Spending
                on project
            
            
            6.1Future
                income tax liability(1)
            
            
            149.1Currency
                translation adjustment(2)
            
            
            77.6Total
                impairment
            
            
            542.8Future
                income tax benefit
            
            
            163.9Net
                impairment
            
            $
            378.9




Note:


(1) Future
      income tax liability recorded as part of the purchase of the project. (2) The
        currency translation adjustment is related to the balance sheet adjustments
        for
        the foreign exchange difference between the time of purchase and the time
        of the
        write-off.




In
      2006 the Governor of the Chubut province in Argentina ratified legislation
      which
      suspends all metal mining activity within specified areas of the province for
      the next three years. The areas included in the mining suspension include the
      Company’s Esquel project. Management believes the fair value of the project is
      its $2.5 million carrying value and that an additional impairment is not
      required. Management regularly reviews the status of the
      Esquel project and advises the Board of Directors of activities.




**13.
      Other long-term assets**




**2006**
            
            
            2005Long-term
                investments (note
                7)
            
            **$**
            **24.1**
            
            $
            5.2Deferred
                charges, net of amortization of $4.9 (2005 - $3.4)
            
            
            **1.7**
            
            
            2.4Other
            
            
            **6.0**
            
            
            3.4**$**
            **31.8**
            
            $
            11.0




Other
      long-term assets include $1.9 million in 2006 and $1.5 million in 2005 for
      amounts expected to be recovered under an insurance policy related to the
      reclamation of Beartrack in more than one year. See note 16 on Asset Retirement
      Obligations for further information.


MERIDIAN
            GOLD INC.
            2006 ANNUAL REPORT  41
 NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  **14.
      Other current liabilities**




**2006**
            
            
            2005Asset
                retirement obligations (notes
                15 and
                16)
            
            **$**
            **10.2**
            
            $
            13.3Accrued
                payroll and bonus
            
            
            **11.8**
            
            
            6.1Short-term
                capital leases (note
                18)
            
            
            **0.6**
            
            
            -Income
                tax payable, current
            
            
            **1.5**
            
            
            1.5Other
                accrued liabilities
            
            
            **1.3**
            
            
            0.4**$**
            **25.4**
            
            $
            21.3




**15.
      Other long-term liabilities**




**2006**
            
            
            2005Asset
                retirement obligations (notes
                14 and
                16)
            
            **$**
            **25.8**
            
            $
            12.0Accrued
                pension cost (note
                17)
            
            
            **3.0**
            
            
            2.8Accrued
                deferred compensation
            
            
            **1.9**
            
            
            1.5Accrued
                payroll
            
            
            **5.0**
            
            
            2.5Capital
                leases (note
                18)
            
            
            **0.6**
            
            
            -Income
                taxes payable
            
            
            **60.8**
            
            
            48.7Other
            
            
            **6.3**
            
            
            -**$**
            **103.4**
            
            $
            67.5




**16.
      Asset retirement obligations (“AROs”)**




The
      Company’s AROs are estimated costs for shutdown and reclamation of mineral
      properties and are comprised of earthwork (including detoxification),
      re-contouring, re-vegetation, stabilization, heap-leach encapsulation and
      facility decommissioning. In determining the estimated costs, the Company
      considers such factors as current and possible changes in laws and regulations,
      the likelihood that additional permits will be required,
      and requirements under existing operating permits. Such analyses involve third
      party consultants who provide guidance on requirements, estimations
      of costs and services.




During
      2006 the Company recorded asset retirement obligations of $11.6 million for
      its
      acquired mineral properties, Minera Florida and Agua de la
      Falda, increased its ARO liability by $2.6 million for its Royal Mountain King
      (“RMK”) property, and decreased its ARO liability by $1.0 million for its
      Beartrack property. During 2006 the Company spent $4.2 million on reclamation
      activities of which the monies were principally spent for its RMK
      and Beartrack properties.




During
      2005, the Company increased its ARO liability by $17.4 million for its Beartrack
      property and recorded the benefit to be received pursuant to an insurance policy
      that covers $10 million of reclamation activity on this property. As at December
      31, 2006 the insurance benefit is classified in Other Current Assets, $8.1
      million, and as Other Long-term Assets, $1.9 million. During 2005, the Company
      spent $4.3 million on reclamation activities
      of which the monies were principally spent for its RMK and Beartrack
      properties.




The
      continuity of the reclamation liabilities is as follows:




**2006**
            
            
            2005
            
            
            2004Balance,
                beginning of year
            
            **$**
            **25.3**
            
            $
            11.8
            
            $
            18.5Addition
                - acquisitions
            
            
            **11.6**
            
            
            -
            
            
            -Addition
                - change in estimate
            
            
            **1.6**
            
            
            17.4
            
            
            -Accretion
            
            
            **1.7**
            
            
            0.4
            
            
            0.4Expenditures
            
            
            **(4.2**
            **)**
            
            (4.3
            )
            
            (7.1
            )Balance,
                end of year
            
            **$**
            **36.0**
            
            $
            25.3
            
            $
            11.8








MERIDIAN
          GOLD INC.
          2006 ANNUAL REPORT  42
 NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


**17.
      Employee future benefits**




The
      Company has defined benefit pension plans covering substantially all of its
      North American employees. The defined pension benefits are based on
      years of service and average yearly earnings. The Company measures its accrued
      benefit obligations and the fair value of plan assets for accounting purposes
      as at December 31 of each year. Total cash amounts paid for employee future
      benefits in 2006, consisting of employer contributions to the defined
      benefit pension plans, were $2.7 million (2005 - $0.6 million).




In
      2006, Meridian Gold Company, a U.S. subsidiary of the Company, created the
      Post
      Retirement Medical Reimbursement Plan which reimburses the
      cost of Medi-gap insurance for the employee and her/his spouse after a vested
      employee of the plan reaches Medicare age until they reach the age of
      77. The maximum reimbursement per participant is $2,400 annually.




Information
      about the Company’s defined benefit plans, in aggregate, is as
      follows:




Pension
                benefit plans
            Other
                  benefit plans**2006**
            
            
            ****2005
            
            
            **2006**
            
            
            ****2005Accrued
                benefit obligation:Balance,
                beginning of year
            
            **$**
            **6.4**
            
            $
            5.5
            
            **$**
            -
            
            $
            -Current
                service cost
            
            
            **0.3**
            
            
            0.3
            
            
            **0.3**
            
            
            -Interest
                cost
            
            
            **0.4**
            
            
            0.4
            
            
            -
            
            
            -Benefits
                paid
            
            
            **(0.7**
            **)**
            
            (0.1
            )
            
            -
            
            
            -Actuarial
                losses (gains)
            
            
            **0.6**
            
            
            0.3
            
            
            -
            
            
            -Balance,
                end of year
            
            
            **7.0**
            
            
            6.4
            
            
            **0.3**
            
            
            -Plan
                assets:Fair
                value, beginning of year
            
            
            **3.2**
            
            
            2.7
            
            
            -
            
            
            -Actual
                return on plan assets
            
            
            **0.3**
            
            
            0.1
            
            
            -
            
            
            -Employer
                contributions
            
            
            **2.8**
            
            
            0.5
            
            
            -
            
            
            -Benefits
                paid
            
            
            **(0.7**
            **)**
            
            (0.1
            )
            
            -
            
            
            -Fair
                value, end of year
            
            
            **5.6**
            
            
            3.2
            
            
            -
            
            
            -Funded
                status - surplus (deficit)
            
            
            **(1.4**
            **)**
            
            (3.2
            )
            
            **(0.3**
            **)**
            
            -Unamortized
                net actuarial loss
            
            
            **0.9**
            
            
            0.3
            
            
            -
            
            
            -Adjustment
                for minimum liability
            
            
            **(0.3**
            **)**
            
            -
            
            
            -
            
            
            -Accrued
                benefit asset (liability)
            
            
            **(0.8**
            **)**
            
            (2.9
            )
            
            **(0.3**
            **)**
            
            -Valuation
                allowance
            
            
            -
            
            
            -
            
            
            -
            
            
            -Accrued
                benefit asset (liability), net of valuation allowance
            
            **$**
            **(0.8**
            **)**
            $
            (2.9
            )
            **$**
            **(0.3**
            **)**
            $
            -Recognized
                defined benefit costs
            
            **$**
            **0.7**
            
            $
            0.5
            
            **$**
            **0.3**
            
            $
            -




The
      Company’s consolidated balance sheet includes the accrued benefit asset in other
      assets in the amount of $1.9 million (2005 - none), and the accrued
      benefit liability in other liabilities in the amount of $2.7 million (2005
      -
      $2.9 million).




Included
      in the above accrued benefit obligation and fair value of plan assets at
      year-end are the following amounts in respect of benefit plans that are
      not fully funded:




Pension
                benefit plans
            Other
                benefit plans**2006**
            
            
            2005
            
            
            **2006**
            
            
            2005Accrued
                benefit obligation
            
            **$**
            **3.0**
            
            $
            2.4
            
            **$**
            **0.3**
            
            $
            -Fair
                value of plan assets
            
            
            -
            
            
            -
            
            
            -
            
            
            -Funded
                status - plan deficit
            
            **$**
            **3.0**
            
            $
            2.4
            
            **$**
            **0.3**
            
            $
            -


MERIDIAN
            GOLD INC.
            2006 ANNUAL REPORT  43
 NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  Pension
      benefit plan assets consist of:




Percentage
                of plan assets**2006**
            
            
            2005Asset
                category:Equity
                securities
            
            
            **42**
            **%**
            
            65
            %Debt
                securities
            
            
            **16**
            **%**
            
            27
            %Cash
            
            
            **42**
            **%**
            
            8
            %Total
            
            
            **100**
            **%**
            
            100
            %




Equity
      securities do not include any of the Company’s common shares as at December 31,
      2006 and 2005, respectively. The
      significant assumptions used are as follows (weighted-average):




Pension
                benefit plans
            Other
                benefit plans**2006**
            
            
            2005
            
            
            **2006**
            
            
            2005Accrued
                benefit obligation:Discount
                rate
            
            
            **6.5**
            **%**
            
            6.5
            %
            
            **5.25**
            **%**
            
            -Rate
                of compensation increase
            
            
            **5.0**
            **%**
            
            5.0
            %
            
            -
            
            
            -Benefit
                costs for the years:Discount
                rate
            
            
            **6.5**
            **%**
            
            6.5
            %
            
            **5.25**
            **%**
            
            -Expected
                long-term rate of return on plan assets
            
            
            **6.5**
            **%**
            
            6.5
            %
            
            -
            
            
            -Rate
                of compensation increase
            
            
            **5.0**
            **%**
            
            5.0
            %
            
            -
            
            
            -




The
      elements of the Company’s defined benefit plan costs recognized in the year are
      as follows:




Pension
                benefit plans
            Other
                benefit plans**2006**
            
            
            2005
            
            
            **2006**
            
            
            2005Current
                service cost
            
            **$**
            **0.3**
            
            $
            0.3
            
            **$**
            **0.3**
            
            $
            -Interest
                cost
            
            
            **0.4**
            
            
            0.4
            
            
            -
            
            
            -Actual
                return on plan assets
            
            
            **(0.3**
            **)**
            
            (0.1
            )
            
            -
            
            
            -Actuarial
                losses (gains)
            
            
            **0.7**
            
            
            0.3
            
            
            -
            
            
            -Elements
                of employee future benefits costs before adjustments
            
            
            **1.1**
            
            
            0.9
            
            
            **0.3**
            
            
            -Adjustments
                to recognize the long-term nature of employee future benefit
                costs:Difference
                between expected return and actual return on planassets
                for year
            
            
            -
            
            
            (0.1
            )
            
            -
            
            
            -Difference
                between recognized actuarial (gains) losses and actualactuarial
                (gains) losses on the accrued benefit obligation for the
                year
            
            
            **(0.4**
            **)**
            
            (0.3
            )
            
            -
            
            
            -Difference
                between amortization of prior service costs and actual planamendments
                for the year
            
            
            -
            
            
            -
            
            
            -
            
            
            -Recognized
                defined benefit costs
            
            **$**
            **0.7**
            
            $
            0.5
            
            **$**
            **0.3**
            
            $
            -




The
      Company expects to contribute $0.4 million to its pension plan in
      2007.




The
      benefits expected to be paid from the pension plan in each year 2007 to 2011
      are
      $1.7 million, $0.1 million, $0.2 million, $0.1 million and $0.1
      million, respectively. The aggregate benefits expected to be paid in the five
      years from 2012 to 2016 are $1.5 million. The expected benefits are based
      on the same assumptions used to measure the Company’s benefits obligation at
      December 31 and include estimated future employee service.


MERIDIAN
            GOLD INC.
            2006 ANNUAL REPORT  44
 NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  **18.
      Capital leases**




The
      Company has capital leases arising from its acquisition of Minera Florida.
      Leased assets included in property, plant and equipment as at December 31,
      2006
      had a net book value of $1.7 million. Amortization of items under capital lease
      from July 1, 2006 to December 31, 2006 was $0.3 million. Interest paid on
      capital leases from July 1, 2006 to December 31, 2006 was less than $0.1
      million.




Capital
      lease payments of Minera Florida are detailed as follows:




As
                at December 31, 2006 (in millions of USD)Year2007
            
            $
            0.62008
            
            
            0.52009
            
            
            0.1Subtotal
            
            
            1.2Interest
                at 7.5%
            
            
            (0.1
            )Total
            
            
            1.1Less
                current
            
            
            (0.6
            )Long-term
            
            $
            0.5




**19.
      Income taxes and future income taxes**




On
      October 26, 1998, the Company entered into foreign investment contracts under
      Chilean Decree Law 600 (“DL600”) for its wholly owned subsidiary
      Minera Meridian Limitada (“MML”), the owner of the El Peñón mine. During 2005,
      MML elected to be subject to a maximum 4% rate for the Chilean mining royalty
      tax and tax stabilization through 2017 at a 35% tax rate, in return for ceasing
      to use accelerated depreciation for tax purposes
      beginning in 2008.




During
      2006, the Company entered into a separate DL600 contract, related to Minera
      Florida Limitada, a wholly-owned subsidiary which owns the Minera
      Florida mine, which also provides for a 35% tax rate.




Income
      tax expense included in the consolidated statements of operations is as
      follows:




**2006**
            
            
            2005
            
            
            2004Current
            
            **$**
            **25.1**
            
            $
            15.1
            
            $
            15.7Future
            
            
            **20.5**
            
            
            (145.1
            )
            
            11.3**$**
            **45.6**
            
            $
            (130.0
            )
            $
            27.0




The
      income tax expense differs from that computed by applying the applicable
      Canadian federal and Ontario statutory rate to income before taxes as
      follows:




**2006**
            
            
            2005
            
            
            2004Applicable
                statutory rate
            
            
            **36.1**
            **%**
            
            36.1
            %
            
            36.1
            %Income
                tax expense (benefit) calculated using statutory tax rate
            
            **$**
            **34.0**
            
            $
            (172.0
            )
            $
            23.0Increase
                in valuation allowance
            
            
            **10.4**
            
            
            18.3
            
            
            *4.*9Foreign
                earnings subject to tax at other than statutory rate
            
            
            **(0.5**
            **)**
            
            5.3
            
            
            0.5Losses
                incurred from foreign operations without tax benefit and expired
                losses
            
            
            **2.1**
            
            
            19.2
            
            
            0.7Other
            
            
            **(0.4**
            **)**
            
            (0.8
            )
            
            (2.1
            )Income
                tax expense (benefit)
            
            **$**
            **45.6**
            
            $
            (130.0
            )
            $
            27.0








MERIDIAN
          GOLD INC.
          2006 ANNUAL REPORT  45
 NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


The
      significant components of the Company’s future income tax assets and liabilities
      at December 31, 2006 and 2005 are as follows:




Current
                future income tax assets:
            
            
            **2006**
            
            
            2005Chile:Other,
                net
            
            **$**
            **1.5**
            
            $
            0.7U.S.:Asset
                retirement obligations
            
            
            **3.6**
            
            
            4.6Other,
                net
            
            
            **1.1**
            
            
            0.5Total
                current future income tax assets
            
            
            **6.1**
            
            
            5.8Valuation
                allowance
            
            
            **(0.2**
            **)**
            
            (2.1
            )**$**
            **5.9**
            
            $
            3.7Current
                future income tax liabilities:Chile:Other,
                net
            
            **$**
            **(0.9**
            **)**
            $
            (0.5
            )U.S.:Other,
                net
            
            
            **(4.4**
            **)**
            
            (2.9
            )**$**
            **(5.3**
            **)**
            $
            (3.4
            )Net
                current future income tax asset
            
            **$**
            **0.6**
            
            $
            0.3







Long-term
                future income tax assets:
            
            
            **2006**
            
            
            2005Argentina:Net
                operating loss carryforwards
            
            **$**
            **4.2**
            
            $
            3.7Other,
                net
            
            
            **5.9**
            
            
            5.7Chile:Asset
                retirement obligations
            
            
            **3.9**
            
            
            0.4Net
                operating loss carryforwards
            
            
            **9.9**
            
            
            -Other
                liabilities
            
            
            **3.1**
            
            
            -U.S.:Mineral
                property, plant and equipment
            
            
            **9.2**
            
            
            9.7Asset
                retirement obligations
            
            
            **4.3**
            
            
            3.8Net
                operating loss carryforwards
            
            
            **43.4**
            
            
            37.9Other,
                net
            
            
            **0.4**
            
            
            0.5Canada
                and other foreign:Mineral
                property, plant and equipment
            
            
            **3.2**
            
            
            3.0Net
                operating loss carryforwards
            
            
            **12.0**
            
            
            5.9Total
                future income tax assets
            
            
            **99.4**
            
            
            70.7Valuation
                allowance
            
            
            **(82.6**
            **)**
            
            (70.3
            )**$**
            **16.8**
            
            $
            0.4Long-term
                future income tax liabilities:Chile:Mineral
                property, plant and equipment
            
            **$**
            **(34.4**
            **)**
            $
            (12.8
            )Net
                long-term future income tax liabilities
            
            **$**
            **(17.6**
            **)**
            $
            (12.4
            )




At
      December 31, 2006, the Company and subsidiaries included in these consolidated
      financial statements had available U.S. loss carryforwards of approximately
      $135.6 million, of which $12.0 million is related to stock option expense
      recognized for tax purposes only, which expire between the years
      2018 and 2026, Canadian net operating loss carryforwards of approximately $33.3
      million, which expire between the years 2007 and 2016 and Chile
      net operating loss carryforwards of approximately $28.2 million, which do not
      expire.




Management
      believes that sufficient uncertainty exists regarding the realization of certain
      future tax assets that a valuation allowance is required. The changes in
      valuation allowances reflect management’s assessment as of December 31, 2006
      regarding the future realization of U.S and foreign future tax
      assets.


MERIDIAN
            GOLD INC.
            2006 ANNUAL REPORT  46
 NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  **20.** **Forward
      contracts**




(a) Gold:


As
      at December 31, 2006 and 2005, the Company had no gold forward sales contracts,
      derivatives or hedges.




(b) Silver:


At
      December 31, 2003, the Company had remaining forward sales commitments for
      2,000,000 ounces of silver at an average price of $5.34 per ounce for delivery
      during 2004. In addition, at December 31, 2003, the Company had forward sales
      commitments for 2,200,000 ounces of silver for
      contracts entered into during 2003 at an average price of $5.05 per ounce for
      delivery during 2004. As at December 31, 2004, these silver contracts
      had been closed through delivery or other settlement. During 2004, the Company
      recorded a loss of $3.3 million related to these contracts.




During
      2005, the Company purchased European-style put option contracts for 250,000
      ounces of silver with a strike price of $7.00 and an expiration
      date of January 27, 2006. These puts guaranteed the Company the right to sell
      the specified silver ounces for no less than the strike price
      on the expiration date. The option loss of $62,000 on this option has been
      charged to operations in 2005.




During
      2006, the Company entered into a Master Purchase Contract (“MPC”) for the
      physical sale of silver produced from its Chilean mines. Under the
      MPC the Company agreed to sell in 2007 180,000 ounces of silver at a price
      of
      $13.12 per ounce and 90,000 ounces of silver at a minimum of $13.12
      per ounce; in each of 2008 and 2009 230,000 ounces of silver at a price of
      $13.13 per ounce and an additional 110,000 ounces at a minimum price
      of $13.13 per ounce. The contract had a fair value of $0.7 million at inception,
      which is being amortized over the term of the contract.




(c) 
      During 2006, the Company entered into a zinc forward sale contract for the
      sale
      of 1,450 tonnes in 2007, 1,800 tonnes in 2008 and 1,800 tonnes in
      2009 that is marked to market at each period end. During 2006, the Company
      recorded a loss of $2.2 million on this contract as other income
      on the mark to market as at December 31, 2006.




**21.** **Commitments
      and contingencies**




(a) Operating
      leases:


The
      Company has entered into operating leases for office premises and equipment
      that
      provide for minimum annual lease payments totaling $0.6
      million over the next three years.




(b) Operating
      commitments:


In
      January 2005, the Company had multi-year contracts for underground extraction
      services at the El Peñón mine which have a remaining commitment
      as at December 31, 2006 of $118.6 million and the Company has the option to
      cancel the contracts with certain penalties. The
      Company has a hauling service contract at the Alhue mine which has a remaining
      commitment of $2.6 million. The Company also has contractual obligations with
      companies that provide services and supplies. These contracts do not contain
      take-or-pay obligations or require minimum
      purchase quantities.




(c) Exploration
      commitments:


The
      Company has entered into option agreements which require the Company to incur
      exploration expenditures and make option payments by
      certain dates in order to earn an interest in other properties. These contracts
      can be cancelled by the Company. Periodically, the Company evaluates
      the prospects of each project to determine whether further investment is
      warranted.




(d) Legal
      claims:


The
      Company is exposed to certain other contingent liabilities or claims incident
      to
      the ordinary course of business. Although the outcome of these matters is not
      determinable at this time, the Company believes none of these claims will have
      a
      material adverse effect on the Company’s financial
      position or results of operations.




**22.** **Share
      capital**




(a) 
      Shareholders’ equity:




**2006**
            
            
            2005Share
                capital
            
            **$**
            **402.0**
            
            $
            390.8Additional
                paid-in capital
            
            
            **7.9**
            
            
            7.6Retained
                earnings (deficit)
            
            
            **(117.8**
            **)**
            
            (166.4
            )Cumulative
                translation adjustment
            
            
            **54.0**
            
            
            54.1Total
                shareholders’ equity
            
            **$**
            **346.1**
            
            $
            286.1








MERIDIAN
          GOLD INC.
          2006 ANNUAL REPORT  47
 NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(b) Authorized
      share capital:


The
      authorized share capital of the Company consists of an unlimited number of
      common shares without par value and an unlimited number of
      preferred 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, 2006, the Company had no issued or outstanding preferred
      shares.




(c) Issued
      and outstanding common shares:




Numberof
                shares(in
                000s)
            
            
            AmountBalance
                as at December 31, 2003
            
            
            99,194
            
            $
            382.7Issued
                under the terms of directors’ and employees’ stock options
            
            
            386
            
            
            2.0Issued
                (cancelled) restricted shares
            
            
            50
            
            
            1.1Balance
                as at December 31, 2004
            
            
            99,630
            
            
            385.8Issued
                under the terms of directors’ and employees’ stock options
            
            
            546
            
            
            3.9Issued
                (cancelled) restricted shares
            
            
            57
            
            
            1.1Balance
                as at December 31, 2005
            
            
            100,233
            
            
            390.8Issued
                under the terms of directors’ and employees’ stock options
            
            
            726
            
            
            8.6Issued
                (cancelled) restricted shares
            
            
            131
            
            
            2.7Balance
                as at December 31, 2006
            
            
            101,090
            
            $
            402.0




(d) Shareholder
      Rights Plan:


In
      March 1999, the Company established a Shareholder Rights Plan (the “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).




(e) Share
      Incentive Plan:


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. A maximum of 8,200,000 shares of common stock are
      reserved for issuance under the amended 1999 Plan.





MERIDIAN
          GOLD INC.
          2006 ANNUAL REPORT  48
 NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


Options
      are granted at exercise prices equal to the quoted market value of the common
      stock at date of grant. Options have 10-year terms and vest in equal amounts
      over one to three years. A summary of the stock option activity and stock
      options outstanding are presented in the
      tables below.




**2006**
            
            
            
            
            
            2005
            
            
            
            
            
            2004**Weighted**
            
            
            
            
            
            Weighted
            
            
            
            
            
            Weighted**Number**
            
            
            **average**
            
            
            Number
            
            
            average
            
            
            Number
            
            
            average**of
                options**
            
            
            **exercise
                price**
            
            
            of
                options
            
            
            exercise
                price
            
            
            of
                options
            
            
            exercise
                price**(in
                000s)**
            
            
            **(in
                USD**
            **)**
            
            (in
                000s
            )
            
            (in
                USD
            )
            
            (in
                000s
            )
            
            (in
                USD
            )Stock
                options outstanding, beginning of year
            
            
            **1,557**
            
            **$**
            **11.38**
            
            
            1,932
            
            $
            9.28
            
            
            1,889
            
            $
            7.57Granted
            
            
            **17**
            
            
            **25.62**
            
            
            273
            
            
            17.4-1
            
            
            454
            
            
            13.19Exercised
            
            
            **(726**
            **)**
            
            **9.41**
            
            
            (546
            )
            
            6.25
            
            
            (386
            )
            
            5.27Expired
                and/or canceled
            
            
            **(21**
            **)**
            
            **16.06**
            
            
            (102
            )
            
            15.85
            
            
            (25
            )
            
            12.92Stock
                options outstanding, end of year
            
            
            **827**
            
            **$**
            **13.29**
            
            
            1,557
            
            $
            11.38
            
            
            1,932
            
            $
            9.28Exercisable
                stock options
            
            
            **610**
            
            **$**
            **12.29**
            
            
            1,024
            
            $
            9.57
            
            
            1,285
            
            $
            7.28




Stock
      options outstanding as at December 31, 2006 are as follows:




Range
                of
            
            Weighted
                average
            Weighted
                averageexercise
                prices
            Shares
            remaining
                life
            exercise
                price(in
                USD)
            (in
                000s)
            (years)
            (in
                USD)$
                0.00 - $ 2.97
            10
            1.0
            $
                2.25$
                2.98 - $ 5.93
            26
            1.7
            4.06$
                5.94 - $ 8.90
            142
            3.3
            6.97$
                8.91 - $11.86
            72
            7.4
            10.95$11.87
                - $14.83
            245
            7.2
            12.87$14.83
                - $17.79
            144
            6.7
            16.33$17.80
                - $20.76
            171
            8.5
            18.36$20.77
                - $23.72
            -
            -
            -$23.73
                - $26.68
            10
            9.2
            24.74$26.69
                - $29.65
            7
            9.2
            26.79827
            6.5
            $
                13.29




The
      fair value of stock options granted has been calculated using the Black-Scholes
      option-pricing model based on the following assumptions:




**2006**
            
            
            2005
            
            
            2004Weighted
                average fair value per option
            
            **$**
            **12.56**
            
            $
            8.82
            
            $
            7.08Expected
                life of options (years)
            
            
            **5.0**
            
            
            5.0
            
            
            5.0Risk
                free interest rate
            
            
            **4.6**
            **%**
            
            3.5
            %
            
            3.5
            %Expected
                volatility
            
            
            **50.0**
            **%**
            
            56.3
            %
            
            59.3
            %Expected
                dividend yield
            
            
            -
            
            
            -
            
            
            -




In
      2006, 2005, and 2004, the Company awarded 144,804, 65,824, and 49,735 restricted
      shares, respectively, under the 1999 Plan. The average fair
      values of the shares at the date of grant were $24.49, $16.52, and $13.04,
      respectively. Restricted shares vest one-third per year over three years.
      Restricted shares issued to employees typically vest one-third per year over
      three years. During 2006 the Board granted 50,000 restricted shares
      to the new chief executive officer of which one-third immediately vested and
      one-third vest in each of the next two years. Restricted shares issued
      to non-executive directors vest immediately and remain restricted until the
      board member retires or ceases to be a member of the Board.





MERIDIAN
          GOLD INC.
          2006 ANNUAL REPORT  49
 NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


Total
      stock-based compensation for options and restricted shares in 2006, 2005 and
      2004 were $4.7 million, $3.4 million and $2.3 million.




During
      2006 and 2005, options to purchase 247,373 shares and 72,175 shares,
      respectively, were exercised that had a grant date after January 1, 2002,
      the date the Company adopted the fair value method of accounting for stock
      options granted. During 2006 and 2005, the Company transferred
      $1.8 million and $0.5 million, respectively, from additional paid-in capital
      to
      share capital for the amount previously recorded as additional
      paid-in capital for the fair value of this stock-based
      compensation.




**23.
      Earnings per share**




The
      following table presents the calculation of basic and diluted earnings per
      share:




**2006**
            
            
            2005
            
            
            2004Net
                earnings (loss)
            
            **$**
            **48.6**
            
            $
            (346.4
            )
            $
            36.6Basic
                weighted average shares outstanding (in 000’s)
            
            
            **100,761**
            
            
            99,936
            
            
            99,259Effect
                of dilutive potential common shares (in 000’s)
            
            
            **401**
            
            
            -
            
            
            707Diluted
                weighted average shares outstanding (in 000’s)
            
            
            **101,162**
            
            
            99,936
            
            
            99,966Basic
                earnings (loss) per share
            
            **$**
            **0.48**
            
            $
            (3.47
            )
            $
            0.37Diluted
                earnings (loss) per share
            
            **$**
            **0.48**
            
            $
            (3.47
            )
            $
            0.37Anti-dilutive
                shares excluded from the calculation (in 000’s)
            
            
            -
            
            
            1,557
            
            
            154




Dilutive
      potential common shares consist of employee stock options.




**24.
      Segment disclosure**




The
      Company’s segments are based on mineral properties as discussed in note 11. The
      accounting policies of all segments are consistent with those outlined
      in note 3 - Significant Accounting Policies.




Segmented
      information is reported below.




**2006**




**Minera**(in
                millions of USD)
            
            
            **El
                Peñón**
            
            
            **Florida**
            
            
            **Esquel**
            
            
            **All
                other**
            
            
            **Totals**Revenues
            
            **$**
            **210.5**
            
            **$**
            **29.2**
            
            **$**
            **-**
            
            **$**
            **0.3**
            
            **$**
            **240.0**Amortization
                of capital assets
            
            
            **19.4**
            
            
            **8.4**
            
            
            **0.1**
            
            
            **0.2**
            
            
            **28.1**Interest
                income
            
            
            **9.6**
            
            
            **-**
            
            
            **-**
            
            
            **2.6**
            
            
            **12.2**Income
                before
                taxes
            
            
            **122.9**
            
            
            **7.6**
            
            
            **(1.5**
            **)**
            
            **(34.8**
            **)**
            
            **94.2**Income
                tax
                expense
            
            **$**
            **43.0**
            
            **$**
            **2.6**
            
            **$**
            -
            
            **$**
            **-**
            
            **$**
            **45.6**




2005




Minera(in
                millions of USD)
            
            
            El
                Peñón
            
            
            Florida
            
            
            Esquel
            
            
            All
                other
            
            
            TotalsRevenues
            
            $
            174.3
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            174.3Amortization
                of capital assets
            
            
            15.2
            
            
            -
            
            
            0.2
            
            
            0.3
            
            
            15.7Interest
                income
            
            
            6.5
            
            
            -
            
            
            -
            
            
            0.4
            
            
            6.9Income
                before taxes
            
            
            99.0
            
            
            -
            
            
            (545.1
            )
            
            (30.3
            )
            
            (476.4
            )Income
                tax expense
            
            $
            34.7
            
            $
            -
            
            $
            (163.9
            )
            $
            (0.8
            )
            $
            (130.0
            )


MERIDIAN
            GOLD INC.
            2006 ANNUAL REPORT  50
 NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  The
      breakdown of exploration expenses by geographic region is as
      follows:




**2006**
            
            
            2005
            
            
            2004Chile
            
            **$**
            **15.2**
            
            $
            15.6
            
            $
            10.2Argentina
            
            
            **2.1**
            
            
            2.7
            
            
            4.0United
                States
            
            
            **3.3**
            
            
            2.5
            
            
            3.0Peru
            
            
            **1.5**
            
            
            1.0
            
            
            1.4Nicaragua
            
            
            **1.9**
            
            
            2.4
            
            
            -Mexico
            
            
            **1.9**
            
            
            0.7
            
            
            0.5Other
            
            
            **0.7**
            
            
            0.1
            
            
            0.4Total
                exploration expenses
            
            **$**
            **26.6**
            
            $
            25.0
            
            $
            19.5




Detail
      as to capital assets and capital expenditures by geographic areas is included
      in
      note 11.




**25.
      Supplementary disclosure of cash flow information**




**2006**
            
            
            2005
            
            
            2004Cash
                paid for income taxes
            
            **$**
            **4*****3.*****4**
            
            $
            19.8
            
            $
            14.9Cash
                paid for interest
            
            **$**
            -
            
            $
            -
            
            $
            -




**26.
      Reconciliation of Canadian and U.S. generally accepted accounting
      principles**




The
      differences to the consolidated statements of operations that would have
      resulted from the Company following U.S. GAAP in 2006, 2005, and 2004
      are summarized below:




**2006**
            
            
            2005
            
            
            2004Net
                earnings (loss) as reported in the financial statements (Canadian
                GAAP)
            
            **$**
            **48.6**
            
            $
            (346.4
            )
            $
            36.6Items
                increasing net earnings:Start-up
                cost amortization
            
            
            **0.6**
            
            
            0.6
            
            
            0.6Net
                earnings (loss) according to U.S. GAAP
            
            
            **49.2**
            
            
            (345.8
            )
            
            37.2Future
                employee benefits
            
            
            **(1.0**
            **)**
            
            -
            
            
            -Unrealized
                gain on available-for-sale securities
            
            
            **0.5**
            
            
            -
            
            
            -Foreign
                currency translation adjustments
            
            
            **(0.1**
            **)**
            
            (8.2
            )
            
            (4.1
            )Comprehensive
                income (loss)
            
            **$**
            **48.6**
            
            $
            (354.0
            )
            $
            33.1U.S.
                GAAP earnings (loss) per common shareBasic
            
            **$**
            **0.48**
            
            $
            (3.46
            )
            $
            0.37Diluted
            
            **$**
            **0.48**
            
            $
            (3.46
            )
            $
            0.37




See
      note 23 for weighted average number of common shares outstanding.


MERIDIAN
            GOLD INC.
            2006 ANNUAL REPORT  51
 NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  The
      differences to the consolidated balance sheets that would have resulted from
      the
      Company following U.S. GAAP in 2006 and 2005 are summarized
      below:




**2006**
            
            
            2005**Canadian**
            
            
            **U.S.**
            
            
            Canadian
            
            
            U.S.**GAAP**
            
            
            **GAAP**
            
            
            GAAP
            
            
            GAAPMineral
                property, plant and equipment, net
            
            **$**
            **276.1**
            
            **$**
            **276.1**
            
            $
            89.6
            
            $
            89.0Total
                assets
            
            
            **527.9**
            
            
            **528.0**
            
            
            400.7
            
            
            400.1Total
                liabilities
            
            
            **166.5**
            
            
            **167.1**
            
            
            114.6
            
            
            114.6Additional
                paid-in capital
            
            
            **7.9**
            
            
            **7.0**
            
            
            7.6
            
            
            6.7Retained
                earnings (deficit)
            
            
            **(117.8**
            **)**
            
            **(116.9**
            **)**
            
            (166.4
            )
            
            (166.1
            )Cumulative
                translation adjustment
            
            
            **54.0**
            
            
            **-**
            
            
            54.1
            
            
            -Accumulated
                other comprehensive income
            
            
            **-**
            
            
            **53.5**
            
            
            -
            
            
            54.1Total
                shareholders’ equity
            
            **$**
            **346.1**
            
            **$**
            **345.6**
            
            $
            286.1
            
            $
            285.5




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 measurement effect on the financial
      statements of the Company.




U.S.
      Statement of Financial Accounting Standards Statement No. 130, “ *Reporting
      Comprehensive Income* ”,
      requires that an enterprise classify items
      of other comprehensive income by their nature in a financial statement and
      display the accumulated balance of other comprehensive income separately from
      retained earnings and additional paid-in capital in the equity section of a
      statement of financial position. The equivalent Canadian standard, CICA Handbook
      Section 1530 “ *Comprehensive
      Income* ”,
      is not effective until the Company’s 2007 fiscal year.




Under
      Canadian GAAP start-up activities are capitalized and under U.S. GAAP start-up
      activities are expensed. Broadly defined, start-up activities consist of the
      operating activities of the facility prior to reaching commercial production
      levels. Expensing the cost of start-up activities in prior years would have resulted
      in an increase to net earnings of $0.6 million in each of 2006 and 2005 for
      U.S.
      GAAP purposes due to a reduction in amortization expense.




Effective
      January 1, 2004, the Company adopted the amended Canadian accounting standard
      for stock-based compensation which requires the use of the fair value method
      to
      calculate all stock-based compensation associated with granting stock options.
      For purposes of the reconciliation to U.S.
      GAAP, in fiscal 2004 the Company adopted SFAS 148 “ *Accounting
      for Stock-Based Compensation - Transition and Disclosure* ”.
      SFAS 148 is similar
      to the amended Canadian standards and the adoption of these standards does
      not
      result in a significant difference in the calculation of stock-based
      compensation expense between Canadian and U.S. GAAP. The transitional provisions
      under United States standards allow the effects of the fair value method to
      be
      accounted for under the modified prospective method, which requires the
      accounting for stock-based compensation expense subsequent
      to the date of adoption as if the fair value method was applied to all options
      granted since January 31, 1995. As a result, there was a $0.9
      million adjustment to retained earnings and additional paid-in capital under
      Canadian GAAP that would not be made under U.S. GAAP.




For
      U.S. GAAP purposes, under FAS 115, the Company’s marketable securities are
      classified as available-for-sale securities and reported at fair value, with
      unrealized gains and losses recognized in comprehensive income. The difference
      from Canadian accounting standards resulted in $0.5 million being
      recognized in other comprehensive income and as an increase in assets for the
      2006 year.




In
      September 2006, the FASB issued FAS 158 “ *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement
      Plans* ”
      which requires the recognition
      in the Company’s financial statements the funding status of a benefit plan and
      that the plan assets and benefit obligations be measured as of the date of
      the
      employer’s fiscal year-end statement of financial position. Under FAS 158 the
      Company is required to recognize unamortized actuarial
      gains and losses, prior service cost and remaining transitional amounts not
      recognized under Canadian GAAP, with the offset to comprehensive income.
      This difference in accounting standards resulted in $1.0 million being
      recognized as a charge in comprehensive income and a $0.4 decrease to total
      assets for an over-funded plan and $0.6 million increase to total liabilities
      for under-funded plans for U.S. GAAP purposes.




Under
      Canadian GAAP, the accounts of all incorporated and unincorporated joint
      ventures and partnerships are proportionately consolidated according to the
      Company’s ownership interest. Under U.S. GAAP, the equity method of accounting
      is applied in circumstances where a proportionately consolidated joint venture’s
      significant financial and operating policies are, by contractual arrangement,
      jointly controlled by all parties
      having an equity interest in the entity. United States regulations do not
      require, for the purposes of this reconciliation, adjustment to equity account
      for the joint ventures. The presentation of the Company’s joint venture does not
      require adjustments to the equity method. Refer also to note
      4 to the financial statements.


MERIDIAN
            GOLD INC.
            2006 ANNUAL REPORT  52
 NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  **Recent
      U.S. accounting pronouncements**




In
      May 2005, the FASB issued SFAS 154, “ *Accounting
      Changes and Error Corrections a replacement of APB Opinion No. 20 and FASB
      Statement No. 3* ”, which
      requires an entity to report a change in accounting principle through
      retrospective application of the new accounting principle to all prior periods,
      unless it is impracticable to do so. SFAS 154 becomes effective for fiscal
      years
      beginning after December 15, 2005 and the adoption of this policy
      has not had a material impact on our financial statements.




In
      September 2006, the FASB issued FAS 157 “ *Fair
      Value Measurement* ”,
      which defines fair value and establishes a framework for measuring fair value
      in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. It is effective for fiscal years beginning after November
      15, 2007.




In
      June 2006 the FASB issued FIN 48 “ *Accounting
      for Uncertainty in Income Taxes - an Interpretation of FASB Statement No.
      109* ”
      which clarifies the
      accounting for uncertainty in income taxes recognized in an enterprise’s
      financial statements in accordance with FASB Statement No. 109, “ *Accounting
      for Income Taxes* ”.
      This Interpretation prescribes a recognition threshold and measurement attribute
      for the financial statement recognition and measurement of a tax position taken
      or expected to be taken in a tax return and provides guidance on accounting
      and
      disclosure based
      on whether it is more likely than not that an uncertain tax position will be
      sustained on review by taxation authorities. FIN 48 is effective for
      fiscal years beginning after December 15, 2006.




The
      Company is currently evaluating the implications of the adoption of FAS 157
      and
      FIN 48.


MERIDIAN
            GOLD INC.
            2006 ANNUAL REPORT  53
 NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  MINERAL
      RESERVES AND RESOURCES








**Dec****ember
                31****,
                2006**
            
            
            December
                31,2005**Grade**
            
            
            **Co****ntained
                M****etal**
            
            
            
            
            
            
            
            
            Grade
            
            
            ContainedMetal**Tonnes**
            
            
            **Gold**
            
            
            **Silver**
            
            
            **Zinc**
            
            
            **Gold**
            
            
            **Silver**
            
            
            **Zinc**
            
            
            Tonnes
            
            
            Gold
            
            
            Silver
            
            
            Zinc
            
            
            Gold
            
            
            Silver
            
            
            Zinc**(mils)**
            
            
            **(g/t**
            **)**
            ****
            **(g/t**
            **)**
            ****
            **(%**
            **)**
            ****
            **(K
                oz**
            **)**
            ****
            **(K
                oz**
            **)**
            ****
            **(tonnes**
            **)**
            
            (mils
            )
            
            (g/t
            )
            
            (g/t
            )
            
            (%
            )
            
            (K
                oz
            )
            
            (K
                oz
            )
            
            (tonnes
            )EL
                PEÑÓNProven
                and probable reserves
            
            
            **9.3**
            
            
            **6.6**
            
            
            **275**
            
            
            **-**
            
            
            **1,967**
            
            
            **81,791**
            
            
            **-**
            
            
            8.4
            
            
            7.8
            
            
            283
            
            
            -
            
            
            2,109
            
            
            76,396
            
            
            -Mineral
                resourcesMeasured
                and indicated
            
            
            **3.6**
            
            
            **8.1**
            
            
            **208**
            
            
            **-**
            
            
            **935**
            
            
            **24,021**
            
            
            **-**
            
            
            2.7
            
            
            8.5
            
            
            222
            
            
            -
            
            
            741
            
            
            19,337
            
            
            -Inferred
            
            
            **2.5**
            
            
            **7.9**
            
            
            **263**
            
            
            **-**
            
            
            **626**
            
            
            **20,759**
            
            
            **-**
            
            
            2.3
            
            
            8.2
            
            
            380
            
            
            -
            
            
            595
            
            
            27,700
            
            
            -MINERA
                FLORIDAProven
                and probable reserves
            
            
            **2.2**
            
            
            **5.3**
            
            
            **27**
            
            
            **1.5**
            
            
            **369**
            
            
            **1,878**
            
            
            **31,252**
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Mineral
                resourcesMeasured
                and indicated
            
            
            **2.0**
            
            
            **4.6**
            
            
            **17**
            
            
            **1.2**
            
            
            **289**
            
            
            **1,080**
            
            
            **23,721**
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Inferred
            
            
            **2.9**
            
            
            **5.5**
            
            
            **30**
            
            
            **1.4**
            
            
            **504**
            
            
            **2,752**
            
            
            **39,348**
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -ROSSI
                (40% share)Proven
                and probable reserves
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Mineral
                resourcesMeasured
                and indicated
            
            
            **0.2**
            
            
            **15.4**
            
            
            **-**
            
            
            **-**
            
            
            **109**
            
            
            **-**
            
            
            **-**
            
            
            0.2
            
            
            15.4
            
            
            -
            
            
            -
            
            
            109
            
            
            -
            
            
            -Inferred
            
            
            **0.3**
            
            
            **12.9**
            
            
            **-**
            
            
            **-**
            
            
            **133**
            
            
            **-**
            
            
            **-**
            
            
            0.3
            
            
            12.9
            
            
            -
            
            
            -
            
            
            133
            
            
            -
            
            
            -ESQUEL
              Proven
                and probable reserves
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Mineral
                resourcesMeasured
                and indicated
            
            
            **4.7**
            
            
            **15**
            
            
            **23**
            
            
            **-**
            
            
            **2,286**
            
            
            **3,523**
            
            
            **-**
            
            
            4.7
            
            
            15.0
            
            
            23
            
            
            -
            
            
            2,286
            
            
            3,523
            
            
            -Inferred
            
            
            **0.9**
            
            
            **9.9**
            
            
            **21**
            
            
            **-**
            
            
            **274**
            
            
            **575**
            
            
            **-**
            
            
            0.9
            
            
            9.9
            
            
            21
            
            
            -
            
            
            274
            
            
            575
            
            
            -TOTAL-MERIDIAN’S
                SHAREProven
                and probable reserves
            
            
            **11.5**
            
            
            **6.3**
            
            
            **226**
            
            
            **1.5**
            
            
            **2,336**
            
            
            **83,669**
            
            
            **31,252**
            
            
            8.4
            
            
            7.8
            
            
            283
            
            
            -
            
            
            2,109
            
            
            76,396
            
            
            -Mineral
                resourcesMeasured
                and indicated
            
            
            **10.5**
            
            
            **10.7**
            
            
            **85**
            
            
            **1.2**
            
            
            **3,619**
            
            
            **28,624**
            
            
            **23,721**
            
            
            7.6
            
            
            12.8
            
            
            90
            
            
            -
            
            
            3,136
            
            
            22,860
            
            
            -Inferred
            
            
            **6.6**
            
            
            **7.2**
            
            
            **114**
            
            
            **1.4**
            
            
            **1,537**
            
            
            **24,086**
            
            
            **39,348**
            
            
            3.5
            
            
            8.9
            
            
            251
            
            
            -
            
            
            1,001
            
            
            28,275
            
            
            -







**2006**
            
            
            
            
            
            
            
            
            2005Metal
                Price Assumptions:
            
            
            **Au**
            
            
            **Ag**
            
            
            **Zn**
            
            
            Au
            
            
            Ag
            
            
            Zn**($/oz)**
            
            
            **($/oz**
            **)**
            
            **($/tonne**
            **)**
            
            ($/oz
            )
            
            ($/oz
            )
            
            ($/tonne
            )El
                Peñón
            
            
            **470**
            
            
            **7.50**
            
            
            -
            
            
            350
            
            
            6.00
            
            
            -Minera
                Florida
            
            
            **470**
            
            
            **7.50**
            
            
            **1,600**
            
            
            -
            
            
            -
            
            
            -Rossi
            
            
            -
            
            
            **-**
            
            
            **-**
            
            
            -
            
            
            -
            
            
            -Esquel
            
            
            -
            
            
            **-**
            
            
            **-**
            
            
            -
            
            
            -
            
            
            -




The
      December 31, 2006 models were prepared under the supervision of Greg Walker,
      P.Geo., an employee of Meridian Gold, and were audited by Dave Rennie, P.Eng., and
      Jim
      Pearson, P.Eng., of Scott Wilson Roscoe Postle Associates Inc. (“RPA”), all of
      whom are qualified persons as defined in National Instrument 43-101 of the Canadian
      Securities Administrators.




The
      June
      30, 2006 Minera Florida models were prepared under the supervision of Greg
      Walker, P.Geo., an employee of Meridian Gold, and were audited by Hrayr Agnerian,
      P.Geo., and Jim Pearson, P.Eng., of Scott Wilson Roscoe Postle Associates Inc.
      (“RPA”), all of whom are qualified persons as defined in National Instrument 43-101
      of the Canadian Securities Administrators.




The
      Rossi resources were prepared as of December 31, 2005 under the supervision
      of
      Robert Wheatley, P.Geo., an employee of Meridian Gold and a qualified person
      as defined
      in National Instrument 43-101 of the Canadian Securities Administrators. An
      independent resource and reserve audit of the Barrick Gold resource and reserve modeling
      will be conducted in 2007 and a NI 43-101 Technical Report will be
      issued.




The
      Esquel resource models were prepared as of December 31, 2005 under the
      supervision of Greg Walker, P.Geo., an employee of Meridian Gold and a qualified
      person as defined
      in National Instrument 43-101 of the Canadian Securities Administrators. The
      reserves were removed from the reserve and resource schedule because of
      continuing delays in permitting the project. Resources were restated at a 5.0
      g/t gold cutoff to reflect the probable change to an underground mining
      operation from a combination open pit and underground operation. The reported
      resources at a 5.0 g/t Au cutoff are taken from Tables 1.1 and 1.2 of the March
      2003 Technical Report. These resources may be affected
      by negotiations to address the community’s objections to project development.
      The change in reserve and resource reporting was approved by Robin Young,
      P.Geo., of
      Western Services Engineering Inc., as the independent Qualified Person as
      defined in National Instrument 43-101, who prepared the March 2003 Technical
      Report.






MERIDIAN
          GOLD INC.
          2006 ANNUAL REPORT  54





DIRECTORS







Horn
            
            Kennedy
            
            Dowling
            
            Graff**Robert
                A. Horn**(2)
              *Private
                Investor*
            
            **Brian
                J. Kennedy**
              *Chairman*
            
            **Edward
                C. Dowling**
              *President
                and*
              *Chief
                Executive Officer*
            
            **Richard
                P. Graff**(1*,3)
              *Private
                Investor*Mr.
              Horn previouslyserved
              as Vice President,Exploration
              for IncoLimited,
              FMC Gold Company and BP Canada.He
              has been on Meridian’sBoard
              since 2004 and serveson
              the Compensation Committee.
            
            Mr.
                Kennedy held the office of Vice Chairman, Presidentand
                Chief Executive Officerof
                the Corporation from June 1996 to December2006.
                He was Presidentof
                FMC Gold Company,a
                predecessor of theCorporation,
                from May1987
                through June 1996.
            
            Prior
                to joining Meridian,Mr.
                Dowling was theExecutive
                Director of Miningand
                Exploration for DeBeersfrom
                2004-2006. From 1997-2004 he was theExecutive
                Vice Presidentof
                Cleveland Cliffs. Mr. Dowling has extensive experience in the metals
                andmining
                industry since 1988.
            
            Mr.
                Graff is a retiredpartner
                fromPricewaterhouseCoopers
                LLPwhere
                he served as the auditleader
                in the United Statesfor
                the mining industry.Mr.
                Graff joined the Boardin
                2005 and is the Chairmanof
                the Audit Committeeand
                serves on the CorporateGovernance
                Committee.Renzoni
            
            Munera
            
            MacNaught
            
            Lattanzi**Carl
                L. Renzoni**(3*)
              *Private
                Investor*
            
            **Gerard
                E. Munera**(1,3)
              *Private
                Investor*
            
            **Malcolm
                W. MacNaught**(2*)
              *Private
                Investor*
            
            **Christopher
                R. Lattanzi**(1,2)
              *Lead
                Director, Mining Consultant*Mr.
                Renzoni retired fromBMO
                Nesbitt Burns in2001
                where he wasemployed
                since 1969 andmost
                recently served as aManaging
                Director. He hasbeen
                on Meridian’s Board since 2000 and serves as theChairman
                of the CorporateGovernance
                Committee.
            
            Mr.
                Munera previously served as President andChief
                Executive Officerof
                Minorco USA, and asSenior
                Vice Presidentof
                Corporate Planning and Development andMember
                of the ExecutiveCommittee
                of Rio Tinto.He
                joined Meridian’s Boardin
                2003 and serves on the Audit and CorporateGovernance
                Committees.
            
            Mr.
                MacNaught culminatedhis
                career with FidelityInvestments
                in 1996 where he managed the FidelitySelect
                Precious Metals andMinerals
                Fund and theFidelity
                Select AmericanGold
                Portfolio Fund. Mr. MacNaught joined the Board in 1997 and is the
                Chairman
                of the Compensation Committee.
            
            Mr.
                Lattanzi is a mining engineer, an independentmining
                consultant andformer
                President of MiconInternational
                Limited, mineral industry consultants. He has been a member of Meridian’s
                Board since 1999 and servesas
                the Lead Director of theBoard
                as well as a memberof
                the Compensation andAudit
                Committees.






Independent
                Directors of the Board may be contacted through the Lead Director
                of the
                Boardby
                writing to Christopher R. Lattanzi, Lead Director of the Board, Meridian
                Gold Inc., Suite 900,390
                Bay Street, Toronto, ON M5H 2Y2, Canada.
            
            **Notes**
              (1)  Member
                of the Audit Committee
              (2)  Member
                of the Compensation Committee(3) Member
                of the Corporate Governance Committee
              *
                Chair of the
                Committee





MERIDIAN
          GOLD INC.
          2006 ANNUAL REPORT  55


OFFICERS









Rohr
            
            Kennedy
            
            Dowling
            
            Smith
            
            Marud
            
            Dougherty**Darrin
                L. Rohr**
            
            **Brian
                J. Kennedy**
            
            **Edward
                C. Dowling**
            
            **Edgar
                A. Smith**
            
            **Darcy
                E. Marud**
            
            **Peter
                C. Dougherty***Vice
                President, Human Resources and Chief People Officer*
            
            *Chairman
                of the Board*
            
            *President
                and*
              *Chief
                Executive Officer*
            
            *Vice
                President, Operations*
            
            *Vice
                President, Exploration*
            
            *Vice
                President, Finance, Chief Financial Officer and Corporate
                Secretary*




SHAREHOLDER
      INFORMATION




**Corporate
                Offices**
              
              9670
                Gateway Drive, Suite 200Reno,
                NV 89521
              Tel:
                775.850.3777 or 800.557.4699 Fax: 775.850.3733
              
              **Annual
                Meeting**
              
              The
                Company’s annual shareholder meeting will be held at 4 p.m.on
                Tuesday, May 1, 2007 at the Fairmont Royal York Hotel inthe
                British Columbia Room, on the Main Mezzanine Level,located
                at 100 Front Street West, Toronto, Ontario, Canada.
              
              **Market
                for the Registrant’s Common Equity and****Related
                Shareholder Matters**
              
              The
                public trading markets for Meridian common shares are theToronto
                Stock Exchange under the symbol “MNG” and theNew
                York Stock Exchange under the symbol “MDG”.
              
              **Auditors**
              
              KPMG
                LLP
              Vancouver,
                British Columbia, Canada
            
            **Investor
                Relations**
              
              For
                public and media inquiries, or copies of the Company’sAnnual
                Information Form (AIF) or annual or quarterly reports,please
                contact Investor Relations (800) 572-4519, or visit theCompany’s
                web site atwww.meridiangold.com.
                The Company’sfilings
                with the Canadian securities regulatory authorities can be accessed
                on
                SEDAR atwww.sedar.comand its filings with theU.S.
                Securities and Exchange Commission can be accessed onEDGAR
                atwww.sec.gov.
              
              **NYSE
                Corporate Governance Rules Disclosure**
              
              Under
                the New York Stock Exchange’s corporate governancerules
                codified as Section 303A a foreign private issuer, such asMeridian
                Gold, must disclose any significant ways in whichtheir
                corporate governance practices differ from those followedby
                domestic companies under the NYSE listing standards.We
                have completed a review of our governance practices andhave
                concluded our practices do not differ in any significantway
                from the NYSE listing standards.
              
              **Transfer
                Agents and Registrars**
              
              Computershare
                Investor Services Inc.1500
                University Street, Suite 700Montreal,
                QC H3A 3S8
              Tel:
                800.564.6253 (from within North America) 514.982.7800 (from outside
                North America)







MERIDIAN
          GOLD INC.
          2006 ANNUAL REPORT  56







QUARTERLY
      HIGH AND LOW STOCK PRICE







**FY2006**
            FY2005****
            ****
            **1st
                Qtr**
            ****
            ****
            **2nd
                Qtr**
            ****
            ****
            **3rd
                Qtr**
            ****
            ****
            **4th
                Qtr**
            
            
            1st
                Qtr
            
            
            2nd
                Qtr
            
            
            3rd
                Qtr
            
            
            4th
                QtrCommon
                share prices:Toronto
                Stock Exchange (CDN$)High
            
            **$**
            **36.46**
            ****
            **$**
            **42.30**
            ****
            **$**
            **36.75**
            ****
            **$**
            **35.49**
            
            $
            26.03
            
            $
            23.07
            
            $
            26.68
            
            $
            26.44Low
            
            **$**
            **25.64**
            ****
            **$**
            **28.77**
            ****
            **$**
            **25.90**
            ****
            **$**
            **25.07**
            
            $
            19.22
            
            $
            17.92
            
            $
            20.60
            
            $
            21.44Close
            
            **$**
            **34.50**
            ****
            **$**
            **35.22**
            ****
            **$**
            **27.70**
            ****
            **$**
            **32.43**
            
            $
            20.40
            
            $
            22.00
            
            $
            25.35
            
            $
            25.48New
                York Stock Exchange (USD)High
            
            **$**
            **31.68**
            ****
            **$**
            **38.31**
            ****
            **$**
            **32.86**
            ****
            **$**
            **31.08**
            
            $
            21.15
            
            $
            18.67
            
            $
            22.70
            
            $
            22.50Low
            
            **$**
            **22.04**
            ****
            **$**
            **25.86**
            ****
            **$**
            **23.17**
            ****
            **$**
            **22.12**
            
            $
            15.88
            
            $
            14.11
            
            $
            16.80
            
            $
            18.25Close
            
            **$**
            **29.65**
            ****
            **$**
            **31.68**
            ****
            **$**
            **24.86**
            ****
            **$**
            **27.79**
            
            $
            16.84
            
            $
            18.00
            
            $
            21.91
            
            $
            21.87








METRIC
      CONVERSION TABLE





To
                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





Notes


Ounces
      (oz.) 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.