**EXHIBIT
      99.2**






**STATISTICAL
      SUMMARY**







For
                the years ended December 31
            
            
            **2006**
            
            
            2005
            
            
            2004**Operations
                Data****El
                Peñón**Tonnes
                processed (000’s)
            
            
            **935**
            
            
            880
            
            
            837Gold
                grade (grams per tonne milled)
            
            
            **8.0**
            
            
            11.1
            
            
            12.2Gold
                recoveries
            
            
            **95**
            **%**
            
            96
            %
            
            97
            %**Minera
                Florida**Tonnes
                processed (000’s)
            
            
            **216**
            
            
            -
            
            
            -Gold
                grade (grams per tonne milled)
            
            
            **6.8**
            
            
            -
            
            
            -Gold
                recoveries
            
            
            **81**
            **%**
            
            -
            
            
            -**Production
                Data****(in 000’s of ounces for Gold and Silver/Tonnes for
                Zinc)****Gold**El
                Peñón
            
            
            **230**
            
            
            304
            
            
            314Minera
                Florida
            
            
            **38**
            
            
            -
            
            
            -Beartrack(1)
            
            
            **-**
            
            
            -
            
            
            1Total
                Gold
            
            
            **268**
            
            
            304
            
            
            315**Silver**
            
            
            
            
            
            -El
                Peñón
            
            
            **6,429**
            
            
            5,538
            
            
            4,812Minera
                Florida
            
            
            **135**
            
            
            
            
            
            -Total
                Silver
            
            
            **6,564**
            
            
            5,538
            
            
            4,812**Zinc**Minera
                Florida
            
            
            **1,921**
            
            
            -
            
            
            -**Cash
                Cost of Production (USD per gold ounce by-product
                method)**El
                Peñón
            
            **$**
            **(50**
            **)**
            $
            38
            
            $
            50Minera
                Florida
            
            
            **144**
            
            
            -
            
            
            -Weighted
                Average
            
            
            **(22**
            **)**
            
            38
            
            
            50**Total
                Cost of Production (USD per gold ounce)**El
                Peñón
            
            **$**
            **35**
            
            $
            88
            
            $
            105Minera
                Florida
            
            
            **364**
            
            
            -
            
            
            -Weighted
                Average
            
            
            **81**
            
            
            88
            
            
            105




Notes:


Cash
      cost of production includes all direct mining and processing expenses less
      silver credits which are treated as a by-product. Total cost of production
      comprises the cash cost of production plus depreciation, depletion and
      amortization, which includes amortization of asset retirement costs. Cash cost
      and Total
      cost of production are non-GAAP measurements (see non-GAAP Measures section
      of
      the MD&A for an explanation and reconciliation of this
      information).


(1)  Beartrack
      operations ceased mining in April 2000 and concluded economic recovery by
      September 2000. All residual gold production at Beartrack has been
      accounted for as part of reclamation and closing costs.




MERIDIAN
          GOLD INC.
          2006 ANNUAL REPORT  17
 MANAGEMENT’S
            DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
            OPERATIONS




**Cautionary
      Statement**




*Certain
      statements in this MD&A constitute “forward-looking statements” within the
      meaning of the U.S. Private Securities Litigation Reform Act of 1995 and
      Canadian securities legislation. Such forward-looking statements involve known
      and unknown risks, uncertainties and other factors which* *may
      cause the actual results, performance or achievements of the Company, or other
      future events, including forecast production, earnings and cash flows,* *to
      be materially different from any future results, performance or achievements
      or
      other events expressly or implicitly predicted by such forward-looking
      statements. Such risks, uncertainties and other factors include those set forth
      in the Company’s Annual Information Form and other periodic
      filings.*




**Introduction**




This
      Management’s Discussion and Analysis (“MD&A”) is dated on February 22, 2007
      and provides a detailed analysis of the Company’s financial
      condition and results of operations for the year 2006 compared with the previous
      year. The MD&A should be read in conjunction with the consolidated financial
      statements as at December 31, 2006 and 2005, and for each of the years in the
      three-year period ended December 31, 2006
      and related notes. The Company prepares its consolidated financial statements
      in
      accordance with Canadian generally accepted accounting principles
      (“GAAP”) and reports in United States (“U.S.”) dollars (“USD”). Reference should
      be made to note 26 of the financial statements for a
      reconciliation between Canadian GAAP and U.S. GAAP. All dollar amounts in this
      MD&A are in millions of USD unless otherwise specified. Management’s
      Discussion and Analysis for the fourth quarter of 2006 are incorporated by
      reference into and form part of this MD&A.




The
      Company’s filings with the securities regulatory authorities in Canada,
      including the fourth quarter of 2006 MD&A, are available at www.sedar.com ,
      and its filings with the U.S. Securities and Exchange Commission are available
      at www.sec.gov through EDGAR.




**Overview**




Meridian
      Gold Inc. (“Meridian” or the “Company”) is a mid-tier gold producer with mining
      operations in Chile, development projects in Nevada and Chile, and exploration
      projects throughout the Americas.




**Discussion
      of Properties**




**El
      Peñón**


The
      El
      Peñón property is located 165 kilometers to the south-east of the port city of
      Antofagasta in northern Chile. Gold was first discovered on the property by
      the
      Company’s geologists in 1993. Portions of the current land position of about 720
      square kilometers are relatively unexplored, as most exploration work prior
      to
      2005 focused on the central core area of 40 square kilometers. During 2006,
      along with the core area, an additional 10 square kilometers surrounding the
      Fortuna vein system was explored. Expansion during 2006 focused on the Fortuna,
      Providencia, Dorada, Angosta and Al Este structures.




In
      2006, El Peñón continued to deliver low-cost, profitable results. The mine
      produced 230,145 ounces of gold and 6.4 million ounces of silver at a cash
      cost
      of negative ($50) per gold ounce using silver as a by-product credit compared
      to
      303,509 ounces of gold and 5.5 million ounces of silver at a cash cost of $38
      per gold ounce during 2005. Total production costs including depreciation,
      depletion and amortization were $35 per gold ounce, 61% lower than the $88
      per
      gold ounce in 2005. Cash cost and total production cost per ounce are non-GAAP
      measurements (see the non-GAAP Measures section of the MD&A for the
      explanation and reconciliation of these measures).




The
      mill processed 935,105 tonnes of ore in 2006, an increase of 6% over the
      previous year’s 880,228 tonnes. The increase was achieved primarily through
      process and efficiency improvements in the milling and crushing circuits. The
      Company processed an average of 8.0 grams per tonne of gold and 231 grams per
      tonne of silver in 2006. The Company’s recovery of gold was 95%; which is
      slightly lower than the prior year’s gold recovery of 96%. The underground mines
      produced 860,609 tonnes of ore in 2006 compared to 913,608 tonnes of ore from
      the underground and open pit mines in 2005. The Company continues to maintain
      a
      stockpile of ore in front of the mill to provide operating flexibility and
      provide ore to the mill as the mine expansions ramp up to the 2,800 tonnes
      per
      day level.




The
      underground material is mined by the bench-and-fill method. During 2006,
      approximately 8 kilometers of underground development was completed. For 2007,
      roughly the same amount of underground development is expected to be completed
      with a significant portion related to the development of the Providencia,
      Fortuna and Al Este zones.




The
      underground contract mining company, Constructora Gardilcic S.A. (“Gardilcic”),
      continued being a strategic partner to Meridian in meeting mining targets.
      In
      January 2005, the Company entered into a five year agreement with Gardilcic
      to
      continue to provide underground mining services. During 2006, the Company
      entered into a five year contract with a second underground mining contract
      company, Proyecta S.A., to provide services for the Fortuna mine.


MERIDIAN
            GOLD INC.
            2006 ANNUAL REPORT  18
 MANAGEMENT’S
              DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
              (continued)


At
      the end of 2006, mineral reserves at El Peñón totaled 2.0 million gold ounces
      and 81.8 million silver ounces, compared with 2.1 million ounces of gold and
      76.4 million ounces of silver at year-end of 2005. During 2006, 0.2 million
      gold
      ounces and 6.5 million ounces of silver were processed. Mineral resources in
      the
      measured and indicated category increased 0.2 million ounces of gold and 4.9
      million ounces of silver
      to 0.9 million ounces of gold and 24,021 million ounces of silver at the
      year-end of 2006. Mineral resources in the inferred category increased 31,000
      ounces of gold and decreased by 6.9 million ounces of silver to 0.6 million
      ounces of gold and 20,759 million ounces of silver
      at the year-end of 2006. The reserves and resources of El Peñón were prepared
      under the supervision of Greg Walker, an employee of Meridian,
      and have been audited by David W. Rennie, of Scott Wilson Roscoe Postle
      Associates Inc. who are qualified persons as defined in National
      Instrument 43-101 of the Canadian Securities Administrators.




About
      $4.2 million was expensed at El Peñón during the year on surface exploration,
      primarily at the Dorada, Fortuna, Providencia and Al
      Este structures. These vein zones will continue to provide exploration potential
      in the future as the Company accesses the Providencia vein
      zone from underground locations and continues to further develop the Fortuna
      and
      Dorada veins, concurrent with the mining from the
      existing infrastructure in the Quebrada Colorada, Quebrado Orito and Cerro
      Martillo veins.




The
      Company remains focused on developing the full potential of its property
      position at El Peñón. In 2007, surface exploration will be focused
      on further defining the Fortuna, Providencia, Al Este, Angosta and Martillo
      Flats structures as well as continued drilling on targets extending
      to the east of known structures. For 2007, the Company expects El Peñón to
      produce approximately 230,000 ounces of gold.




**Minera
      Florida**


On
      July
      1, 2006 the Company announced its decision to exercise its purchase option
      to
      acquire a 100% interest in Minera Florida S.A. for $100.0 million. As of July
      1,
      2006, production and production costs from the Minera Florida operations were
      realized by Meridian’s 100% owned subsidiary in Chile. The transition of the
      Minera Florida personnel and operation into Meridian was successfully completed
      during the third quarter of 2006. Data presented below is for the six-month
      period only and no comparative information is expressed.




The
      Minera Florida project mine and plant are located on approximately 120 square
      kilometers of land SSW of Santiago, in the historic Alhue mining district of
      Chile. Historically, the mine has produced approximately 70,000 ounces of gold
      annually at a cash operating cost of about $200 per ounce using accompanying
      silver and zinc as by-product credits. The Company released a National
      Instrument 43-101 compliant technical report on February 13, 2007. The report
      was based on June 30, 2006 information on mineral reserves at Minera Florida
      of
      0.4 million gold ounces and 1.9 million silver ounces. The technical report
      was
      prepared by Hrayr Agnerian and James L. Pearson, of Scott
      Wilson Roscoe Postle Associates Inc., who are qualified persons as defined
      in
      National Instrument 43-101.




The
      following table summarizes the estimated 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




During
      the period of July 1 through December 31 of 2006, Minera Florida produced 37,968
      ounces of gold and 135,463 ounces of silver at a cash cost of $144 per gold
      ounce. Total production costs including depreciation, depletion and amortization
      were $364 per gold ounce. Cash cost and total production cost per ounce are
      non-GAAP measurements (see the non-GAAP Measures section of the MD&A for the explanation
      and reconciliation of these measures).




The
      mill processed 215,842 tonnes of ore during the second half of 2006, at an
      average of 6.8 grams per tonne of gold, 27 grams per tonne of
      silver and 1.5% zinc. The Company’s recovery for gold was 81%, for silver was
      72% and for zinc was 65%. The underground mines produced
      212,217 tonnes of ore during the last six months of 2006.


MERIDIAN
                GOLD INC.
                2006 ANNUAL REPORT  19
 MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                  (continued)
  The
      current principal method of extraction is sub-level stoping. Development efforts
      are being directed at the Peumo and Berta vein structures,
      as these will become important production zones for 2007. The mill has a three
      stage crushing, grinding, flotation and leaching circuit
      to produce a doré bar followed with a production of a zinc
      concentrate.




During
      2006, the Company drilled nearly 40,000 meters. An aggressive infill and
      exploration drilling campaign is planned for 2007 on the 12,500
      hectares of leased mining claims within the Minera Florida claim
      block.




**Agua
      de la Falda**


On
      September 22, 2006, the Company initiated a strategic partnership and announced
      the acquisition of a 56.7% controlling interest in Agua de la Falda (“ADLF”),
      which includes the Jeronimo Deposit from the Corporacion Nacional del Cobre
      de
      Chile (“CODELCO”) for $20.0 million. ADLF’s properties, located 50 kilometers
      southeast of El Salvador in the Third Region of Northern Chile, encompass over
      240 km2 and include the El Hueso, Coya and Agua de la Falda mines
      that produced over 660,000 gold ounces for Homestake Mining Company between
      1988
      and 2002. The Jeronimo Deposit is the downdip extension of the ADLF deposit.
      Exploration and development work completed by previous owners, Homestake and
      Barrick, included at least 150 diamond drill holes that have delineated the
      manto that hosts the Jeronimo Deposit. A 3D geologic model completed with this
      drilling indicates potential for 12 to 18 million tonnes of mineralization
      with
      average grades of between 5 and 7 grams per tonne gold. The potential mineral
      body is largely unoxidized and will require further metallurgical testing to
      determine the most economic processing techniques to recover the gold in a
      production environment. There is an existing scoping study on the property
      and,
      as part of the agreement, Meridian will be required to prepare the feasibility
      study of the Jeronimo Deposit. A full scoping study will be underway during
      the
      first quarter of 2007. Meridian is currently completing an infill exploration
      program on behalf of the Joint Venture. As part of the program a NI 43-101
      resource estimate will be completed.




**Esquel**


In
      2002,
      the Company completed the acquisition of Brancote Holdings Plc (“Brancote”), the
      owner of the Esquel Gold Project. The contiguous properties that form the Esquel
      Gold Project are located in the Sierra de Esquel mountain range, about 7
      kilometers northeast of the town of Esquel (population: 30,000), in southern
      Argentina and comprise an aggregate of 141,000 hectares of land, including
      43,365 hectares for the Esquel corridor. The Galadriel-Julia vein system, which
      constitutes the Esquel Gold Project and which is the current focus of
      development for the Company, is located on the Cordon de Esquel property. The
      Company owns its 100% interest in this property through Minera El Desquite
      (“MED”). During 2005, the Company sold its portion (60%) of three properties
      held in a joint-venture agreement which were acquired in the Brancote
      transaction that were deemed non-essential to the core property. These
      properties were sold to Patagonia Gold S.A., the former joint-venture
      partner.




During
      2003, Meridian paused its development efforts following a non-binding referendum
      wherein the majority of the citizens of the town
      of Esquel voted not to support the development of an open pit mine. Meridian
      has
      focused its efforts on identifying and addressing the community’s concerns.
      Activities have culminated in the development of a new underground mining plan
      and a re-engineered processing facility
      addressing the local concerns, which include social, environmental and technical
      aspects of the project. During 2006, the provincial government banned all
      metal-mining related activity for a three-year period. This ban does not impact
      the land titles which the Company holds. Meridian remains confident in the
      long-term economic, environmental and technical aspects of the Esquel project.
      The Company is committed to building trust with the community of Esquel,
      government of the province, and Argentina, through Meridian’s demonstrated history
      and current practice of responsible mining.




In
      2005, as development activities on the Esquel project had been interrupted
      and
      the delay in development activities reached three years, based
      on applicable accounting guidelines, there was a presumption that a write-down
      of capitalized costs, deferred development and pre-operating
      costs was necessary. Since the timing of the approval process for the project
      could not be reasonably determined at that time,
      Meridian did not have persuasive evidence that a write-down should not be taken.
      Therefore, under applicable accounting guidelines, Meridian wrote-down the
      long-lived assets to their estimated fair value. The carrying value of the
      Esquel mineral properties was written down
      by approximately $542.8 million to $2.5 million, the estimated fair market
      commercial real-estate value of the land, comparable to similar
      land with non-mining uses in this region.




Based
      on the above mentioned write-down, where applicable, financial information
      presented in the following sections relating to 2005 will be
      presented to reflect both final results including the impairment, and
      pre-impairment amounts for comparative purposes.




The
      following tables and explanations describe the values used in the write-down
      of
      the Esquel property. All numbers are shown rounded to the
      nearest million. The $542.8 million write-down associated with the Esquel
      property is reflected in table 1:


MERIDIAN
            GOLD INC.
            2006 ANNUAL REPORT  20
 MANAGEMENT’S
              DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
              (continued)


TABLE
                1(USD
                millions)Purchase
                price
            
            $
            310.0Spending
                on project
            
            
            6.1Future
                tax liability(1)
            
            
            149.1Currency
                translation adjustment(2)
            
            
            77.6Esquel
                asset impairment
            
            
            542.8Income
                tax benefit
            
            
            163.9Net
                impairment
            
            $
            378.9




Note:


(1) The
      future tax liability is related to the future tax expense acquired 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.




**Rossi**


The
      Rossi
      property spans approximately 28 square kilometers on the northern end of the
      Carlin Trend located in northeast Nevada. The mineralization at Rossi is
      sediment-hosted and occurs in the same structural and stratigraphic sequence
      as
      economic mineralization throughout the Carlin Trend. Three main areas were
      discovered on the property from surface drilling which are the 49er, End, and
      Discovery Zones.




During
      1998, the Company entered into a joint venture with Barrick Gold Corporation
      (“Barrick”) on the Rossi property. Barrick earned a 60%
      interest in the property in 2003 by completing its required earn-in spending
      of
      $15.0 million on the property. The Company retained a
      40% ownership in the joint venture.




All
      exploration and development work on the Rossi property in 2006 was carried
      out
      by Barrick and funded on a proportional basis under the
      joint venture agreement. In 2006, Meridian’s share of the joint venture
      development cost expenses were $2.5 million.




During
      2006, exploration drilling, development work and sample testing of the ore
      continued. All of the federal and state permitting is in place for production.
      The Company approved the operating budget and plan presented by Barrick and
      expects production to start during the second
      quarter of 2007.




**Beartrack**


Beartrack,
      a 100% owned open-pit heap leach operation, is located approximately 11 miles
      west of Salmon, Idaho. Mining of all the economic ore was completed in 2000.
      During 2005, the Company spent $2.0 million for reclamation activities and
      recovered $0.1 million for gold sales from residual leaching. As part of the
      review process of the property in 2006, it was determined that the long-term
      expenditures for the closure of the property were less than the liability
      booked, resulting in a reduction of the ARO liability of $1.0
      million.




**Results
      of
      Operations**




Selected
      Annual Financial Information


(as
      at
      and for the year ended December 31) (in
        millions of USD, except per share data)


**2006**
            
            
            2005
            
            
            2004Revenue
            
            **$**
            **240.0**
            
            $
            174.3
            
            $
            157.3Pre-impairment
                earnings(1)
            
            
            **n/a**
            
            $
            39.9
            
            
            n/aNet
                earnings(1)
            
            **$**
            **48.6**
            
            $
            (346.4
            )
            $
            36.6Basic
                earnings per share
            
            **$**
            **0.48**
            
            $
            (3.47
            )
            $
            0.37Diluted
                earnings per share
            
            **$**
            **0.48**
            
            $
            (3.44
            )
            $
            0.37Total
                assets
            
            **$**
            **527.9**
            
            $
            400.7
            
            $
            892.1Total
                long-term liabilities
            
            **$**
            **121.0**
            
            $
            79.9
            
            $
            230.6




(1)  Net
      earnings include the write-down of the Esquel property for $542.8 million offset
      by $163.9 million in future tax elimination resulting in a net impairment of $378.9
      million. The impairment for the Esquel property results in a loss of $346.4
      million and loss per share of $3.47 and $3.44 on basic and diluted basis
      respectively.




MERIDIAN
                      GOLD INC.
                      2006 ANNUAL REPORT  21
 MANAGEMENT’S
                        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
                        OF OPERATIONS
                        (continued)
 Summary
      of Quarterly Results




**FY2006**
            
            
            FY2005(In
                millions of USD except per share data)
            
            
            **4th
                Qtr**
            
            
            **3rd
                Qtr**
            
            
            **2nd
                Qtr**
            
            
            **1st
                Qtr**
            
            
            4th
                Qtr
            
            
            3rd
                Qtr
            
            
            2nd
                Qtr
            
            
            1st
                QtrRevenue
            
            **$**
            **65.0**
            
            **$**
            **62.2**
            
            **$**
            **57.3**
            
            **$**
            **55.5**
            
            $
            49.3
            
            $
            42.2
            
            $
            40.9
            
            $
            41.9Pre-impairment
                earnings (loss)(1)
            
            
            **6.5**
            
            
            **5.7**
            
            
            **18.8**
            
            
            **17.6**
            
            
            12.3
            
            
            9.0
            
            
            9.1
            
            
            9.8Net
                earnings (loss)
            
            
            **6.5**
            
            
            **5.7**
            
            
            **18.8**
            
            
            **17.6**
            
            
            (374.3
            )
            
            9.0
            
            
            9.1
            
            
            9.8Basic
                earnings per share Pre-Imp.(1)(2)
            
            **$**
            **0.06**
            
            **$**
            **0.06**
            
            **$**
            **0.19**
            
            **$**
            **0.18**
            
            $
            0.12
            
            $
            0.09
            
            $
            0.09
            
            $
            0.10Diluted
                earnings per share Pre-Imp.(1)
            
            
            **0.06**
            
            
            **0.06**
            
            
            **0.19**
            
            
            **0.18**
            
            
            0.12
            
            
            0.09
            
            
            0.09
            
            
            0.10Basic
                earnings per share(1)(2)
            
            **$**
            **0.06**
            
            **$**
            **0.06**
            
            **$**
            **0.19**
            
            **$**
            **0.18**
            
            $
            (3.73
            )
            $
            0.09
            
            $
            0.09
            
            $
            0.10Diluted
                earnings per share(1)
            
            
            **0.06**
            
            
            **0.06**
            
            
            **0.19**
            
            
            **0.18**
            
            
            (3.71
            )
            
            0.09
            
            
            0.09
            
            
            0.10




(1)Net earnings is equal to Income including write-down of the Esquel
      property for a net $337.9 million (see Esquel section of MD&A). Q4 2005
      results including theimpairment write-down are Net loss of ($374.3)
      million and basic and diluted loss per share of ($3.73) and ($3.71)
      respectively.


(2) Quarterly
      amounts do not sum to full year amounts due to rounding.




Net
      income for the year ended December 31, 2006 was $48.6 million ($0.48 per share)
      compared to net earnings before the impairment for the year ended December
      31,
      2005 of $39.9 million ($0.40 per share). The net loss for 2005 including the
      Esquel write-down was ($346.4)
      million ($3.47 per share). This increase, pre-impairment, of $9.3 million or
      $0.09 per share is the result of higher realized gold and silver
      prices, increased silver production and is offset by lower gold ounces produced
      and higher costs resulting from operations due to higher tonnes
      processed and higher reagent costs along with higher exploration and selling,
      general and administrative spending.




Total
      revenue of $240.0 million for the year ended December 31, 2006 increased $65.7
      million over the same period in 2005 of $174.3 million. Gold
      revenues increased 21% from $133.8 million in 2005 to $161.3 million for 2006.
      The higher realized gold price versus the previous year
      ($603 per ounce realized versus $447 per ounce), was offset by a 11% decrease
      in
      gold ounces sold (267,800 ounces versus 299,300 ounces). The decrease in gold
      ounces produced and sold was due to a 28% decrease in the gold grade processed
      at El Peñón. The silver revenues increased 84%
      from $40.5 million to $74.7 million due to higher realized silver prices versus
      the same period for the previous year ($11.46 per ounce realized versus $7.40
      per ounce) in addition to a 19% increase in silver ounces sold (6.52 million
      ounces versus 5.47 million ounces). The increase in silver production is due
      to
      an increased proportion of ore coming from higher silver grade sections of
      the
      mines, mainly Dorada and
      Cerro Martillo, and higher throughput at El Peñón along with the additional
      ounces from Minera Florida.




Over
      the past three years, the Company has used various companies to purchase and
      refine its gold and silver produced. In 2005 and 2006, the
      El Peñón metal was sold through Standard Bank of London and Auramet Trading, New
      York and refined by Johnson Matthey refinery in Canada
      and Argor Heraeus refinery in Switzerland. For the six months ended December
      31,
      2006, after the acquisition of the Minera Florida property, the Company sold
      and
      refined its gold and silver to Johnson Matthey in Canada and ENAMI, a Chilean
      national refinery. Zinc
      was sold through Ocean Partners.




Cost
      of sales in 2006 was $76.1 million compared to cost of sales in 2005 of $54.4
      million. A portion of this increase in cost of sales is due to the new costs
      related to the Minera Florida production equaling $11.0 million. The remaining
      increase is primarily related to higher tonnes mined at El
      Peñón from the underground mine and higher throughput in the mill, along with
      the associated increase in reagent and materials usage costs.




Depreciation,
      depletion and amortization increased $12.4 million to $28.1 million, reflecting
      the additional $8.4 million charges from the Minera
      Florida mine, along with increased depletion resulting from the higher tonnes
      driven by the units of production method, along with production
      occurring in higher capital cost areas of the mine at El Peñón.




Exploration
      expense for 2006 of $26.6 million was $1.6 million more than exploration expense
      in the same period of 2005 of $25.0 million, primarily
      due to higher exploration spending in Chile at El Peñón and Minera Florida, and
      in Mexico at the Mercedes project.




Selling,
      General and Administrative and other expenses for the full year 2006 were $22.7
      million versus $13.9 for the full year of 2005. The
      increase is due, in part, to $6.7 million in expenses related to the incentive
      payment, restricted and option share awards and pension costs
      associated with the CEO succession process.




Other
      expenses for the full year 2006 of $4.6 million include $1.6 million in expenses
      related to increases in the ARO liability and $2.2 million for
      a mark to market adjustment loss related to the forward sales contracts for
      zinc. During the fourth quarter 2006, the Company entered into
      zinc forward sale contracts for 5,050 tonnes for delivery in 2007, 2008 and
      2009. Both of these losses were non-cash, financial losses.


MERIDIAN
              GOLD INC.
              2006 ANNUAL REPORT  22
 MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                (continued)


Income
      tax expense for the full year of 2006 was $45.6 million or an effective rate
      of
      48% compared to $33.9 million before impairment or an effective tax rate of
      46%
      for the full year 2005. The increase in the effective tax rate is due to
      increased spending in tax jurisdictions with no
      offsetting tax benefit. The Company paid $43.4 million in cash taxes during
      2006.




Based
      on the information presented above and due to the mentioned write-down of the
      Esquel property in 2005, all financial information presented
      for 2005 in this document will be presented to reflect both results prior to
      the
      accounting for impairment and including the impairment
      where applicable. In some instances, the effect of the impairment may be located
      in the notes to the tables.




The
      $550.2 million write-down, as shown in the “Impairment of Mining Property and
      Other” line below (table 2), consists of $542.8 million from
      the Esquel property and $7.4 million related to the addition to the Asset
      Retirement Obligation (“ARO”) liability associated with future
      reclamation costs for the Beartrack property, which ceased operations in 2000.
      The impaired amounts are offset by the $163.9 million elimination
      of the future tax liability that was booked in association with the Esquel
      property, as shown in income tax in the impairment column. The following tables
      demonstrate a pro forma income statement with the effect of the impairment
      on
      net income shown. All
      numbers are shown rounded to the nearest million.




TABLE
      2




Pre-Impairment
            
            
            
            
            
            GAAPFor
                the twelve months ended December 31, 2005
            
            
            (non-GAAP
            )
            
            Impairment
            
            
            ReportedRevenue
            
            $
            174.3
            
            
            
            
            $
            174.3Cost
                of sales
            
            
            (54.4
            )
            
            
            
            
            (54.4
            )Depreciation,
                depletion and amortization
            
            
            (15.7
            )
            
            
            
            
            (15.7
            )Exploration
            
            
            (25.0
            )
            
            
            
            
            (25.0
            )Selling,
                general and administration
            
            
            (13.9
            )
            
            
            
            
            (13.9
            )Impairment
                of mining property and other
            
            
            1.5
            
            
            (550.2
            )
            
            (548.7
            )Total
                cost and expense
            
            $
            (107.5
            )
            $
            (550.2
            )
            $
            (657.7
            )Earnings
                before the following
            
            $
            66.8
            
            $
            (550.2
            )
            $
            (483.4
            )Interest
                income
            
            
            6.9
            
            
            
            
            
            6.9Gain
                (loss) on sale of assets
            
            
            0.1
            
            
            
            
            
            0.1Earnings
                (loss) before taxes
            
            $
            73.8
            
            $
            (550.2
            )
            $
            (476.4
            )Income
                tax benefit (expense)
            
            
            (33.9
            )
            
            163.9
            
            
            130.0Net
                earnings (loss)
            
            $
            39.9
            
            $
            (386.3
            )
            $
            (346.4
            )




**Liquidity
      and Capital Resources**




Cash
      balances including restricted cash, short-term and long-term investments were
      $214.7 million as of December 31, 2006 compared to $281.5
      million at December 31, 2005. The decrease is due to the purchase of Minera
      Florida S.A for $100.0 million and the purchase of Agua
      de la Falda S.A. for $20.0 million. The decrease cash balance was partially
      offset by cash generated by operations. Working capital decreased
      to $175.9 million at December 31, 2006 from $265.4 million at December 31,
      2005,
      mainly due to the cash outflows as explained
      above.




Cash
      to meet the Company’s operating needs, to finance capital expenditures and to
      fund exploration activities during 2006 was provided from
      operations and from existing cash reserves. Cash provided by operating
      activities increased to $86.1 million in 2006, versus $73.5 million in
      2005. In 2007, the Company expects its current cash and short-term investments
      and cash generated from operations to be sufficient to fund
      its exploration and capital requirements.




Anticipated
      cash requirements for 2007 include approximately $35.0 million for planned
      capital expenditures at El Peñón (which includes approximately
      $27.0 million in mine development, as the mine continues with the project of
      expanding its mining production rate from 2,000 to 2,800 tonnes per day) as
      well
      as developing accesses and infrastructure for the Providencia sector structure,
      development of the Fortuna
      project, and the access to the Al Este vein structure. Planned capital
      expenditures for Minera Florida are $15.0 million, related to mine
      development and plant capital. An additional estimated $9.0 million will be
      required to fund capital expenditures at other Meridian projects
      and locations. The Company expects to fund these capital projects using the
      existing cash balances.




Exploration
      is at the heart of Meridian’s growth strategy and will continue to be an
      important focus throughout the year. Meridian plans to spend
      approximately $26.0 million in 2007 to fund exploration activity.


MERIDIAN
              GOLD INC.
              2006 ANNUAL REPORT  23
 MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                (continued)
 Meridian
      has sufficient working capital to meet its needs for the next twelve months.
      Should we decide to develop other exploration and development properties,
      additional capital may be required. We believe that these capital requirements
      may be funded by existing cash reserves, by borrowing from third parties or
      by
      raising equity. No assurance can be given that such borrowings or capital will
      be available at terms and conditions acceptable to Meridian, if at
      all.




**Contractual
      Commitments and Contingent Liabilities**




Less
                than
            
            
            
            
            
            
            
            
            More
                than(in
                millions of USD)
            
            
            Total
            
            
            1
                Year
            
            
            2-3
                Years
            
            
            4-5
                Years
            
            
            5
                YearsOperating
                leases
            
            $
            0.6
            
            $
            0.5
            
            $
            0.1
            
            $
            -
            
            $
            -Capital
                leases
            
            $
            1.2
            
            $
            0.6
            
            $
            0.6Extraction
                services obligations(1)
            
            
            121.1
            
            
            38.0
            
            
            77.1
            
            
            6.0
            
            
            -Other
                contracted services
            
            
            8.9
            
            
            3.8
            
            
            5.1
            
            
            -
            
            
            -Asset
                retirement obligations(3)
            
            
            36.0
            
            
            10.4
            
            
            7.0
            
            
            1.5
            
            
            17.1Pension
                cost obligations(2)
            
            
            10.1
            
            
            3.5
            
            
            1.0
            
            
            1.0
            
            
            *4.*6Total
            
            $
            177.9
            
            $
            56.8
            
            $
            90.9
            
            $
            8.5
            
            $
            21.7




(1)  In
        January 2005, the Company entered into a 5 year contract for underground
        extraction services at El Peñón. The remaining estimated value based on
        forecasted production rates totals $100.7 million over the remaining contract
        life of 3 years. The contract may be cancelled early, invoking a penalty
        clause.
        The maximum penalty is approximately $9.4 million decreasing monthly over
        the
        remaining life of the contract. Furthermore, in July of 2006, the Company
        entered into a 5 year contract for underground extraction services for the
        Fortuna mine. The remaining estimated value based on the forecasted production
        rates totals $20.4 million over the remaining contract life of 4.5 years.
        The
        contract may be cancelled early, invoking a penalty clause. The maximum penalty
        is approximately $5.9 million decreasing monthly over the remaining life
        of the
        contract.
 (2)  The
        timing and amount of additional funding is dependent upon future return on
        plans
        assets, discount rates and other actuarial assumptions. The 2006 amount of
        minimal funding for the defined benefits plan at December 31, 2005 is less
        than
        $0.1 million. $0.7 million of the amount related to years 1-5 is related
        to the
        benefits due resulting from the death of former Executive Vice-President
        Ed
        Colt, who passed away in November of 2005.
 (3)  Asset
        retirement obligations are projected spending and do not represent actual
        money
        committed or owed by the Company.




**Critical
      Accounting Policies**




The
      Company’s consolidated financial statements are impacted by the accounting
      policies used and the estimates and assumptions made by management during their
      preparation. Critical accounting policies and estimates that most impact the
      consolidated financial statements are those that relate to the Company’s
      accounting for mineral properties, reclamation obligations and income taxes,
      which include reserve estimates, impairments and reclamation
      estimates.




**Critical
      Accounting Estimates**


**Amortization
      of Mineral Property, Plant and Equipment**


The
      Company amortizes mineral properties and other assets using the unit of
      production method, which is based on projected mineable tons. Therefore, mineral
      reserves may affect amortization of mineral property, plant and equipment costs.
      Mineral reserves are affected by the price of gold, production costs and other
      factors. These estimates are reviewed on a regular basis and are adjusted to
      reflect current mining plans. The estimated useful life of an asset is limited
      by the remaining life of the ore body to which the asset relates.




**Impairment
      of Assets**


The
      Company reviews the carrying value of its properties when events or changes
      in
      circumstances indicate that the related carrying amounts may not be recoverable.
      The 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. For non-producing properties, the reviews are
      based on whether factors that may indicate the need for a write-down are present
      at each location. Additionally, the reviews use factors such as political,
      social, legal and environmental regulations. These factors are subject to
      changing economic conditions, regulations and the accuracy of
      assumptions.




**Asset
      Retirement Obligation Estimates**


Asset
      retirement obligation costs to be incurred following mine closure are estimated
      and recorded as an asset retirement obligation with the obligation
      added to the carrying amount of the long-lived asset. The estimates are reviewed
      on a routine basis as to the accuracy of remaining costs to be incurred and
      are
      adjusted as necessary. Any change to an estimate is reflected in the
      consolidated financial statements on a prospective basis.


MERIDIAN
              GOLD INC.
              2006 ANNUAL REPORT  24
 MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                (continued)


**Valuation
      of Future Income Taxes**


The
      Company recognizes future tax assets and liabilities based on the differences
      between the financial statement carrying amounts and the tax basis of assets
      and
      liabilities. Management regularly reviews the Company’s future tax assets for
      recoverability and establishes a valuation allowance based on historical taxable
      income, projected taxable income and the expected timing of the reversals of
      existing temporary differences. During 2002, the Company fully recognized the
      remaining future tax asset and future credit acquired in the 2001 purchase
      of
      Pacific Rim Resources Ltd. and its wholly owned subsidiaries, which included
      Inversiones Mineras Del Inca S.A. “IMDI”. Management believes that sufficient
      uncertainty exists regarding the realization of certain future tax assets and
      that a valuation allowance is required. The change in valuation allowance
      reflects management’s assessment regarding the future realization of Canadian
      and foreign future tax assets and estimates of future earnings in these
      jurisdictions as of December 31, 2004.




**Changes
      in Accounting Policies**


**Silver
      Revenue and Refining Costs**


Commencing
      January 1, 2006, the Company recognizes silver sales as part of its revenue
      due
      to the increase in silver ounces mined and the significant increase in the
      price
      of silver. The Company previously recognized silver sales as a by-product and
      reported its silver revenue with 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 the three months and twelve months ended December 31,
      2005
      have been increased by $13.7 million ($13.1 million silver revenue, $0.6 million
      refining expenses) and $42.5 million ($40.5 million silver revenue, $2.0 million
      refining expenses), respectively, from the amounts previously
      reported.




**Asset
      Retirement Obligations**


Effective
      January 1, 2004, Meridian adopted the CICA’s new Handbook Section 3110,
“ *Asset
      Retirement Obligations* ”
      (“HB 3110”) which applies to legal obligations associated with the retirement of
      a long-lived asset that results from the acquisition, construction, development
      and/or the normal operation of a long-lived asset. Meridian believes its mineral
      properties and reclamation obligations are subject to the provisions of HB
      3110.




Under
      HB 3110, the Company is required to recognize the fair value of a liability
      for
      an asset retirement obligation in the period in which it incurs a legal
      obligation, if a reasonable estimate of fair value can be made. HB 3110 requires
      the estimated future cash settlement of an asset retirement obligation to be
      discounted in arriving at the liability reported in the current period. Upon
      initial recognition of the liability, the asset retirement obligation is
      capitalized as part of the carrying amount of the associated long-lived asset
      and a liability is recorded. This asset retirement cost will be depreciated
      over
      the life of the related asset using the unit-of-production method. 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.




Meridian
      has retroactively applied this change in accounting policy and restated the
      prior years consolidated financial statements. The effect of this change is
      detailed in note 16 to the consolidated financial statements.




**Stock-Based
      Compensation**


Effective
      January 1, 2002, Meridian elected to use the settlement method of accounting
      for
      stock options granted to directors and employees, and disclose the pro forma
      effect of accounting for these awards under the fair value method. Under the
      settlement method, no compensation expense was recognized in the Company’s
      consolidated statements of operations for options granted during each of the
      years ended December 31, 2002 and 2003 because the exercise price of employee
      stock options was the market price on the day granted. Effective January 1,
      2004, Meridian changed the method of application of its stock-based compensation
      accounting policy 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.




Prior
      to January 1, 2002, no compensation expense was recorded for the Company’s stock
      option plans when the options were granted. Any consideration paid by employees
      or directors on exercise of stock options was credited to share
      capital.




This
      change in accounting for stock-based compensation has been applied retroactively
      without restatement of prior periods, with the cumulative effect of this change
      of $0.9 million being reported separately in the consolidated statements of
      retained earnings as an adjustment to opening retained earnings at January
      1,
      2004. The effect of this change is disclosed in note 13 to the consolidated
      financial statements.




**Impairment
      of Long-Lived Assets**


Effective
      January 1, 2004, the Company adopted the Canadian Institute of Chartered
      Accountants Handbook Section 3063, “ *Impairment
      of* *Long-Lived
      Assets* ”
      (“HB 3063”). HB 3063 requires the Company to assess 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.


MERIDIAN
              GOLD INC.
              2006 ANNUAL REPORT  25
 MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                (continued)
 In
      determining whether or not the Company has an impairment, an analysis is
      undertaken 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. Additionally, the analysis must 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
      which
      could result in the future recognition of an asset impairment.




Should
      a change in economic assumptions occur, causing the estimate of future cash
      flows to fall below the carrying value of the Company’s assets, the Company will
      first write down the net deferred tax liability associated with the assets
      rendering no impact to the consolidated statements of operations. Following
      this, should additional impairment be required, the Company will further write
      down the assets to the consolidated statement of operations under the heading
      of
      impairment of mining properties.




**Recent
      Accounting Pronouncements**


The
      following recent Canadian accounting pronouncements from the CICA Handbook
      are
      effective for our fiscal year beginning on January 1, 2007:




-
      Section 1506, “ *Accounting
      Change* ”:
      Criteria for changing accounting policies and the accounting treatment and
      disclosure of changes in accounting
      policies, accounting estimates and correction of errors


-
      Section 1530, “ *Comprehensive
      Income* ”:
      Standards for reporting and display of comprehensive income - Section 3051,
      “ *Investments* ”:
      Standards for accounting for investments subject to significant influence and
      for measuring and disclosing certain
      other non-financial instrument investments


- Section
      3855, “ *Financial
      Instruments - Recognition and Measurement* ”:
      Standards for recognizing and measuring financial assets, financial liabilities
      and non-financial derivatives


- Section
      3861, “ *Financial
      Instruments - Disclosure and Presentation* ”:
      standards for presentation of financial instruments and non-financial derivatives,
      and identifies the information that should be disclosed about them


- Section
      3865, “ *Hedges* ”:
      Section establishes standards for when and how optional hedge accounting may
      be
      applied. Hedge accounting is to ensure
      that counterbalancing gains, losses, revenues and expenses (including the
      effects of counterbalancing changes in cash flows) are recognized in
      net income in the same period or periods. Hedge accounting is applied only
      when
      gains, losses, revenues and expenses on a hedging item would
      otherwise be recognized in net income in a different period than gains, losses,
      revenues and expenses on the hedged item, and


- EIC
      160 “ *Stripping
      Costs Incurred in the Production Phase of a Mining Operation* ”
      establishes that stripping costs should be accounted for according
      to the benefit received by the entity and that capitalized stripping costs
      should be amortized in a rational and systematic manner
      over the reserves that directly benefit from the specific stripping
      activity.




**Outstanding
      Share Data**




As
      of December 31, 2006 101,090,400 (December 31, 2005 - 100,233,173) common shares
      were outstanding and 827,497 stock options were outstanding issued to directors
      and employees with exercise prices ranging between USD2.25 and USD26.79 per
      share, of which 609,870 were exercisable with expiry dates between January
      2007
      and March 2016.




**Non-GAAP
      Measures**


Meridian
      has provided measures of “net cash cost per gold ounce”, “total net cost per
      gold ounce”, “cash cost per gold equivalent ounce” and “total cost per gold
      equivalent ounce”, which are included in this document. Net cash cost per gold
      ounce is determined according to the Gold Institute Standard and consists of
      site costs for all mining (except deferred mining and deferred stripping costs),
      processing, administration, resource taxes and royalties (the Chilean royalty
      tax is not included as it is considered an income tax), net of silver and/or
      zinc by-product credits, but does not include capital, exploration,
      depreciation, reclamation and financing costs. Total net cash cost per gold
      ounce is total net cash costs divided by gold ounces produced. Total net cost
      consists of “total net cash cost” plus depreciation, depletion, amortization and
      reclamation expenses. Total net costs per gold ounce are total net costs divided
      by gold ounces produced. Cash costs are equivalent to net cash cost adding
      back
      the silver by-product credit. Cash cost per gold equivalent ounce is total
      cash
      cost divided by the total of the gold ounces plus silver ounces converted to
      an
      equivalent amount of gold as determined by the ratio of the gold price per
      ounce
      divided by the silver price per ounce. Total cost consists of “total cash cost”
plus depreciation, depletion, amortization and reclamation expenses. Total
      cost
      per gold equivalent ounce is “total cost” divided by the gold equivalent ounces
      produced.




The
      Company believes that in addition to conventional measures, prepared in
      accordance with Canadian generally accepted accounting principles (“GAAP”),
      stakeholders use this information to evaluate the Company’s performance and its
      ability to generate cash flow. These non-GAAP performance measures do not have
      any standardized meaning prescribed by GAAP and, therefore, may not be
      comparable to


MERIDIAN
              GOLD INC.
              2006 ANNUAL REPORT  26
 MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                (continued)


similar
      measures presented by other companies. Accordingly, they are intended to provide
      additional information and should not be considered in isolation or as a
      substitute for measures of performance prepared in accordance with GAAP. The
      calculation for these non-GAAP measures is explained below.







**Twelve
                months ended Dec 31, 2006**
            Twelve
                months ended Dec 31, 2005Non-GAAP
                Reconciliation
            
            
            **Minera
                Florida**
            
            
            **El
                Peñón**
            
            
            **Consolidated**
            
            
            Minera
                Florida
            
            
            El
                Peñón
            
            
            Consolidated**By-product
                method of calculating cost per ounce**Cost
                of sales (before depreciation, depletion and amortization)
            
            
            
            
            
            
            
            **$**
            **76.1**
            
            $
            -
            
            
            
            
            $
            54.4Less
                reclamation
            
            
            
            
            
            
            
            **$**
            **(1.3**
            **)**
            
            
            
            
            
            
            $
            (0.4
            )Net
                cost of sales (before depreciation, depletion and
                amortization)
            
            **$**
            **11.0**
            
            **$**
            **63.8**
            
            **$**
            **74.8**
            
            
            
            
            $
            54.0
            
            $
            54.0Silver
                revenues
            
            
            **(1.6**
            **)**
            
            **(73.1**
            **)**
            
            **(74.7**
            **)**
            
            -
            
            
            (40.8
            )
            
            (40.8
            )Zinc
                revenues
            
            
            **(3.9**
            **)**
            
            **-**
            
            
            **(3.9**
            **)**
            
            -
            
            
            -
            
            
            0.0Other
            
            
            **(0.1**
            **)**
            
            **(2.1**
            **)**
            
            **(2.2**
            **)**
            
            -
            
            
            (1.6
            )
            
            (1.6
            )Total
                net cash costs
            
            
            **5.4**
            
            
            **(11.4**
            **)**
            
            **(6.0**
            **)**
            
            -
            
            
            11.6
            
            
            11.6Gold
                production in ounces from active properties
            
            
            **37,968**
            
            
            **230,145**
            
            
            **268,113**
            
            
            -
            
            
            303,509
            
            
            303,509Total
                net cash costs per gold ounce
            
            **$**
            **144**
            
            
            **($
                50**
            **)**
            
            **($
                22**
            **)**
            $
            -
            
            $
            38
            
            $
            38Total
                net cash costs
            
            
            **5.4**
            
            
            **(11.4**
            **)**
            
            **(6.0**
            **)**
            
            -
            
            
            11.6
            
            
            11.6Depreciation,
                depletion and amortization from operations
            
            
            **8.4**
            
            
            **19.4**
            
            
            **27.8**
            
            
            
            
            
            15.2
            
            
            15.2Total
                net cost
            
            **$**
            **13.8**
            
            **$**
            **8.0**
            
            **$**
            **21.8**
            
            $
            -
            
            $
            26.8
            
            $
            26.8Gold
                production in ounces from active properties
            
            
            **37,968**
            
            
            **230,145**
            
            
            **268,113**
            
            
            -
            
            
            303,509
            
            
            303,509Total
                net cost per gold ounce
            
            **$**
            **364**
            
            **$**
            **35**
            
            **$**
            **81**
            
            $
            -
            
            $
            88
            
            $
            88**Gold
                  equivalent ounce method of calculating cost per ounce (zinc as
                  by-product)**Gold
                production in ounces from active properties
            
            
            **37,968**
            
            
            **230,145**
            
            
            **268,113**
            
            
            -
            
            
            303,509
            
            
            303,509Silver
                ounce conversion factor:
            
            
            **52.3**
            
            
            **52.3**
            
            
            **52.3**
            
            
            -
            
            
            60.8
            
            
            60.8Gold
                price (avg. London PM fix)
            
            **$**
            **603**
            
            **$**
            **603**
            
            **$**
            **603**
            
            $
            -
            
            $
            445
            
            $
            445Silver
                price (avg. London fix)
            
            **$**
            **11.54**
            
            **$**
            **11.54**
            
            **$**
            **11.54**
            
            $
            -
            
            $
            7.31
            
            $
            7.31Silver
                ounces from active properties
            
            
            **135,463**
            
            
            **6,428,913**
            
            
            **6,564,376**
            
            
            -
            
            
            5,537,784
            
            
            5,537,784Converted
                silver ounces (ounces/factor)
            
            
            **2,590**
            
            
            **122,940**
            
            
            **125,531**
            
            
            -
            
            
            91,022
            
            
            91,022Gold
                equivalent ounces
            
            
            **40,558**
            
            
            **353,085**
            
            
            **393,644**
            
            
            -
            
            
            394,531
            
            
            394,531Cost
                of sales
            
            **$**
            **11.0**
            
            **$**
            **63.8**
            
            **$**
            **74.8**
            
            $
            -
            
            $
            54.0
            
            $
            54.0Zinc
                revenues
            
            **$**
            **(3.9**
            **)**
            **$**
            **-**
            
            **$**
            **(3.9**
            **)**
            $
            -
            
            $
            -
            
            $
            0.0Other
            
            
            **(0.1**
            **)**
            
            **(2.1**
            **)**
            
            **(2.2**
            **)**
            
            -
            
            
            (1.6
            )
            
            (1.6
            )Total
                cash cost
            
            
            **7.0**
            
            
            **61.7**
            
            
            **68.7**
            
            
            -
            
            
            52.4
            
            
            52.4Total
                cash cost per gold equivalent ounce (zinc as by-product
                credit)
            
            **$**
            **174**
            
            **$**
            **175**
            
            **$**
            **175**
            
            $
            -
            
            $
            133
            
            $
            133Total
                cash cost
            
            **$**
            **7.0**
            
            **$**
            **61.7**
            
            **$**
            **68.7**
            
            $
            -
            
            $
            52.4
            
            $
            52.4Depreciation,
                depletion and amortization from operations
            
            
            **8.4**
            
            
            **19.4**
            
            
            **27.8**
            
            
            -
            
            
            15.2
            
            
            15.2Total
                cost
            
            
            **15.4**
            
            
            **81.1**
            
            
            **96.5**
            
            
            -
            
            
            67.6
            
            
            67.6Total
                cost per gold equivalent ounce (zinc as by-product credit)
            
            **$**
            **380**
            
            **$**
            **230**
            
            **$**
            **245**
            
            $
            -
            
            $
            171
            
            $
            171




**Qualified
      Statement**


*All
      drill samples sent for assay at El Peñón are subject to rigorous Quality
      Assurance and a Quality Control Program that conforms to NI 43-101 standards.
      Duplicate reverse circulation drill samples are collected at 2 or 1 meter
      intervals, depending on type of drill target. One sample is sent for assay,
      and
      the duplicate is stored on site for verification and/or metallurgical purposes.
      Round Robin verified blind standards are inserted into the* *sample
      stream along with barren, duplicate and unmineralized samples that test sample
      preparation procedures, accuracy and precision of results and* *check
      for sample contamination at the lab. All core or diamond drill samples are
      mechanically split with one half of the sample stored on site and
      the*


MERIDIAN
              GOLD INC.
              2006 ANNUAL REPORT  27
  MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                (continued)
 *second
      half sent for assay utilizing the QA/QC procedures. ACME Laboratories (“ACME”)
      operates an on site sample preparation lab that is closely* *monitored
      by the El Peñón QA/QC Management. Sample pulps produced on site are sent to ACME
      in Santiago, Chile for analysis. All samples are* *assayed
      using standard Fire/AA procedures (AuAA22, AgAA45). Gold results greater than
      5
      ppm* are re-analyzed using a gravimetric finish*** *(Au-GRA22).
      Silver results greater than 100 ppm are re-analyzed using a complete acid
      digestion (Ag-AA62) with silver assays greater than 300 ppm* *being
      re-analyzed using a gravimetric finish** (Ag-GRA22). Any assay results that
      are
      not deemed statistically acceptable are not entered into the
      database.*




**parts
      per million*


***results
      reported in grams/tonne*




**Additional
      Information**




Additional
      information relating to Meridian, including the Company’s Annual Information
      Form, can be found on SEDAR at www.sedar.com or on EDGAR at www.sec.gov .




MERIDIAN
      GOLD INC. Supplemental Data




**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 includes policies related to the
      maintenance of records that is 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
      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. Projection of any evaluation of effectiveness to future periods
      is
      subject to the risk that controls may become inadequate because of changes
      in
      conditions or deterioration of compliance to the policies.




**Directors**




Effective
      January 1, 2007, Brian J. Kennedy retired from serving as the President and
      CEO
      of Meridian Gold Inc. Also
      effective this date, Mr. Kennedy will serve as Chairman of the Board of
      Directors. Christopher R. Lattanzi will fill the position of Lead Director
      on
      the Board of Directors. In addition, as of January 1, 2007, Edward C. Dowling
      will assume the role of President and Chief Executive Officer of Meridian Gold
      Inc. The Board composition is as follows:




Edward
                C. Dowling,*President
                and Chief Executive Officer*
              Richard
                P. Graff(1*,3),*Consultant*
              Robert
                A. Horn(2),*Private
                Investor*
              Brian
                J. Kennedy,*Chairman*
              Christopher
                R. Lattanzi(1,2),*Lead
                Director, Mining Consultant*
              Malcolm
                W. MacNaught(2*),*Private
                Investor*
              Gerard
                E. Munera(1,3), *Private Investor* Carl L.
                Renzoni(3*), *Private Investor*
            
            **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  28