<PAGE>
 
                                     UNITED STATES
                           SECURITIES AND EXCHANGE COMMISSION

                                 WASHINGTON D.C. 20549

                                       FORM 20-F

(Mark One)

-----     REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
          SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

                                       OR

  X       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
-----     EXCHANGE ACT OF 1934 (FEE REQUIRED)

          For the fiscal year ended December 31, 1996
                                    -----------------
                                      OR
-----     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

          For the transition period from _________________ to _________________

Commission file number _________________________________________________________

                              Meridian Gold Inc.
--------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

                                    Canada
--------------------------------------------------------------------------------
                (Jurisdiction of incorporation or organization)

                      5011 Meadowood Way, Reno, NV 89502
--------------------------------------------------------------------------------
                   (address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

       Title of each class                           Name of each exchange on
       -------------------                           ------------------------
                                                           which registered
                                                           ----------------
   Common Shares, no par value                        New York Stock Exchange,
                                                       Toronto Stock Exchange
-----------------------------------               ------------------------------

Securities registered or to be registered pursuant to Section 12(g) of the Act:

                                      N/A
--------------------------------------------------------------------------------
                               (Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:

                                     None
--------------------------------------------------------------------------------
                               (Title of Class)

Indicate the number of outstanding shares of each of the Company's classes of
capital or common stock as of the close of the period covered by the annual
report:

   As of December 31, 1996, the Registrant had outstanding 73,597,495 Common
                  Shares and 10,000 Series 1 Preferred Shares
--------------------------------------------------------------------------------
<PAGE>
 
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                             Yes   X         No
                                 -----          -----         


Indicate by check mark which financial statement item the registrant has elected
to follow.

                             Item 17   X     Item 18
                                     -----           -----         

                                       2
<PAGE>
 
                               TABLE OF CONTENTS
                               -----------------

Glossary.......................................................................4
Cautionary Statement...........................................................5

                                    PART I

Item 1.        Description of Business.........................................6
Item 2.        Description of Property........................................17
Item 3.        Legal Proceedings..............................................25
Item 4.        Control of Registrant..........................................27
Item 5.        Nature of Trading Market.......................................27
Item 6.        Exchange Controls and Other Limitations Affecting Security 
               Holders........................................................28
Item 7.        Taxation.......................................................29
Item 8.        Selected Financial Data........................................34
Item 9.        Management's Discussion and Analysis of Financial Condition
               and Results of Operations......................................35
Item 10.       Directors and Officers of the Registrant.......................38
Item 11.       Compensation of Directors and Officers.........................39
Item 12.       Options to Purchase Securities From Registrant or Subsidiaries.41
Item 13.       Interest of Management in Certain Transactions.................43

                                    PART II

Item 14.       Description of Securities to be Registered.....................43

                                   PART III

Item 15.       Defaults Upon Senior Securities................................43
Item 16.       Changes in Securities and Changes in Security for Registered
               Securities.....................................................43

                                    PART IV

Item 17.       Financial Statements...........................................44
Item 18        Financial Statements...........................................44
Item 19.       Financial Statements and Exhibits..............................44
Signatures     ...............................................................

                                       3
<PAGE>
 
        Except as otherwise indicated, all dollar amounts in this Annual Report
are expressed in United States dollars.

        The information set forth in this Annual Report is as of December 31,
1996 unless an earlier or later date is indicated.

        Except as otherwise indicated, the financial information set forth in
this Annual Report is presented in accordance with Canadian generally accepted
accounting principles ("Canadian GAAP"). Differences between Canadian GAAP and
United States generally accepted accounting principles ("U.S. GAAP"), as
applicable to the Company, are set forth in Note 14 of the Notes to the
Consolidated Financial Statements of the Company. See "Item 17. Financial
Statements."

                                   GLOSSARY

        The following mining terms have the following meanings in this Annual
Report on Form 20-F (the "Annual Report"):

"carbon adsorption"...A process used to extract dissolved gold and
                      silver from solvents in leaching. Soluble complexes of
                      gold and silver physically adhere to activated carbon
                      particles without chemical reaction.

"cash cost of
production" ..........Includes site costs for all mining (except deferred mining
                      and deferred stripping costs), processing, administration
                      and resource taxes, but does not include capital,
                      exploration, depreciation and financing costs. Total cash
                      costs are divided by payable gold ounces and equivalent
                      gold ounces of by-product silver produced to arrive at net
                      cash cost of production per ounce.

"deposit".............A mineralized body which has been physically delineated by
                      sufficient drilling, trenching, and/or underground work,
                      and found to contain a sufficient average grade of metal
                      or metals to warrant further exploration and/or
                      development expenditures; such a deposit does not qualify
                      as a commercially mineable ore body or as containing ore
                      reserves, until final technical and economic factors have
                      been resolved.

"development".........The preparation of a known commercially mineable deposit
                      for mining.

"dore"................Unrefined metal bars consisting mainly of gold, with small
                      amounts of silver and other metal impurities which will be
                      further refined by contracted refineries.

"exploration".........The search for mineral deposits (reserves) which are not
                      in development or production.

"facies"..............Part of a rock body as differentiated from other parts by
                      appearance or composition.

"heap leaching" ......A process of extracting gold by placing broken ore on
                      sloping, impermeable pads and applying dilute cyanide
                      solution that dissolves 

                                       4
<PAGE>
 
                      a portion of the contained gold, which is then recovered
                      in a carbon column or Merrill-Crowe circuit.

"leach pad" ..........A large impermeable foundation or pad used as a base for
                      ore during heap leaching. The pad prevents the leach
                      solution from escaping from out of the circuit.

"mill" ...............A plant where ore is ground, usually to fine powder, and
                      the metals are extracted by physical and/or chemical
                      processes.

"mineralization"......Mineral-bearing rock; the minerals may have been either a
                      part of the original rock unit or injected at a later
                      time.

"opt".................Ounces per ton of ore.

"ore".................A metal or mineral bearing rock or a combination of these
                      of sufficient value as to quality and quantity to enable
                      it to be mined at a profit.

"ounces"..............Troy ounces.

"probable reserves"...Reserves for which quantity and grade and/or quality are
                      computed from information similar to that used for proven
                      reserves, but the sites for inspection, sampling and
                      measurement are further apart or are otherwise less
                      adequately spaced. The degree of assurance, although lower
                      than that for proven reserves, is high enough to assume
                      continuity between points of observation.

"production"..........The exploitation of a mineral deposit or reserve.

"proven reserves".....Reserves for which (a) quantity is computed from
                      dimensions revealed in outcrops, trenches, workings or
                      drill holes, and (b) the sites for inspection, sampling
                      and measurement are spaced so closely and the geological
                      character is so well defined that the size, shape, depth
                      and mineral content of reserves are well-established.

"reserve".............That part of a mineral deposit which could be economically
                      extracted or produced at the time of the reserve
                      determination.

"stripping ratio".....The ratio of tonnage of waste material removed to allow
                      the mining of one ton of ore in an open pit.

                             CAUTIONARY STATEMENT

        Certain statements in this Annual Report constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. 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, to be materially
different from any future results, performances or achievements or other events
expressly or impliedly predicted by such forward-looking statements. Such risks,
uncertainties and other factors are set forth in "Item 1. Description of
Business - Risk Factors" and elsewhere in this Annual Report, and include, but
are not limited to, factors associated with fluctuations in the market price of
precious metals, mining industry risks, recent operating losses, uncertainty of
title to properties, risk associated with foreign 

                                       5
<PAGE>
 
operations, environmental risks and hazards, proposed legislation affecting the
mining industry, litigation, governmental regulation of the mining industry,
volatility, properties without known mineable revenues, uncertainty as to
calculations of ore reserves, mineral deposits and ore grades, requirement of
additional financing, uninsured risks, risk of hedging strategies, competition,
dependence on key management personnel, potential volatility of market price of
common shares, dilution and certain anti-takeover effects.

                                    PART I

ITEM 1. DESCRIPTION OF BUSINESS.

ORGANIZATION

        Meridian Gold Inc. ("Meridian" or the "Company") is a Canadian precious
metals mining and exploration Company that was incorporated in February 1996
under the Canada Business Corporations Act, and whose business is more
specifically described under the heading "- Business of the Company" below. As
used in this Annual Report, "Meridian" or the "Company" includes, unless the
context otherwise requires, the Company's direct and indirect subsidiaries.

        Meridian's predecessor, FMC Gold Company ("FMC Gold"), was formed as a
Delaware corporation in 1987 through a combination of FMC Corporation's North
American Precious Metals interests. In June 1987, FMC Gold issued 7.5 million
shares of common stock to the public and FMC Corporation held the remaining
shares. In May 1990, FMC Gold issued 8.0 million shares of common stock to
acquire Meridian Gold Company. FMC Corporation held the remaining 58.8 million
shares of common stock, or 80% of the outstanding shares of FMC Gold, at that
time. Meridian was incorporated in Canada in February 1996, and, upon completion
of a reincorporation in July 1996, Meridian became the successor to the business
of FMC Gold. In connection with this reincorporation, FMC Gold shareholders
received one share of Meridian common stock ("Common Shares") and a $0.02 per
share return of capital, totaling approximately $1.5 million, in exchange for
each share of FMC Gold common stock. Additionally, FMC Corporation sold its 80%
interest in Meridian through a public offering in Canada of Meridian's Common
Shares in July 1996. Concurrent with FMC Corporation selling its interest in
Meridian, FMC Corporation made a capital contribution to Meridian totaling
approximately $3.7 million. The FMC Gold shares were subsequently canceled.

        The Company's registered office is located at 1090 West Georgia St.,
Vancouver, British Columbia VGE 3V7, and the executive office is located at 5011
Meadowood Way, Reno, Nevada 89502.

                                       6
<PAGE>
 
ORGANIZATIONAL CHART

        The organizational structure of the Company and its subsidiaries,
including Meridian Gold Company (formerly FMC Gold), is as set forth below:

                             --------------------------
                                Meridian Gold Inc.
                                     (Canada)
                             --------------------------

                             --------------------------
                             Meridian Gold Canada Inc.
                                     (Canada)
                             --------------------------

                             --------------------------
                               Meridian Gold Company
                                    (Delaware)
                             --------------------------

          ------------------------- ------------------------- ---------------
          100%                      100%                      100%           90%
---------------------      -------------------     -------------------
  Meridian Jerritt              Meridian             Meridian Rossi
    Canyon Corp.             Beartrack Co.          Corp. (Delaware)
     (Delaware)                (Montana)
---------------------      -------------------     -------------------

 30% interest in            100% interest             100% interest     10%
 Jerritt Canyon              in Beartrack                in Rossi
      mine                       mine

                                                                 ---------------
                                                                 Minera Meridian
                                                                  Ltda. (Chile)
                                                                 ---------------

                                                                  100% interest
                                                                   in El Penon
                                                                   and certain
                                                                   early-stage
                                                                   exploration
                                                                   properties

BUSINESS OF THE COMPANY

        The Company and its predecessor organization, FMC Gold, have been
engaged in the mining and exploration of gold and other precious metals since
1981. Meridian's principal revenue producing properties are its Beartrack Mine
(100% ownership) located near Salmon, Idaho, and the Jerritt Canyon mine (30%
ownership) located near Elko, Nevada. The Company also has advanced stage
exploration programs underway in Chile (the El Penon property) and in Nevada
(the Rossi property), and several early stage exploration programs located in
Chile, Idaho and Nevada.

        The Company and its predecessors have produced over 3.4 million ounces
of gold from five mine sites since 1981. Since 1986, the Company has
continuously produced at least 150,000 ounces of gold annually from mining
operations either directly or through joint ventures. In 1996, the Company
produced 202,000 ounces of gold from the Beartrack and Jerritt Canyon mines.

                                       7
<PAGE>
 
        As of December 31, 1996, Meridian had total proven and probable reserves
of approximately 1.4 million ounces of gold, consisting of 848,000 ounces at
Beartrack and 571,000 ounces at Jerritt Canyon.

        The Company's strategy is to expand its proven and probable reserves as
well as its mining and processing operations by (i) developing existing
producing properties and pursuing advanced stage exploration properties, (ii)
discovering new properties through its exploration program and (iii) making
selective acquisitions. The Company and its predecessors have spent a total of
approximately $61.4 million on exploration activities in the last five years,
approximately $3.7 million of which has been capitalized. The Company's
predecessor established exploration offices in Santiago, Chile in 1993, which
resulted in the discovery of gold at El Penon, and has also established a small
business development group in Vancouver, British Columbia to identify
acquisition opportunities and develop strategic alliances with junior mining
companies to expand the Company's gold reserves and production. As of December
31, 1996, the Company had $85.6 million of working capital, of which $82.6
million consisted of cash and cash equivalents. The Company believes these
financial resources will enable it to pursue its growth strategy.

RESERVES, PRODUCTION AND EXPLORATION

        RESERVES

        The Company's internal estimates of proven and probable reserves as of
December 31, 1996 and December 31, 1995 are as follows:

            GOLD ORE RESERVES (PROVEN AND PROBABLE) (1)                   
                                                                          
                          December 31, 1996                December 31, 1995  
                      ------------------------    ------------------------------
                      Ore Tons Grade  Gold (3)    Ore Tons     Grade    Gold (3)
                      -------- -----  --------    --------     -----    --------
                         (2)   (opt)    (oz)         (2)       (opt)       (oz)
                                                                              
                                      (in thousands, except grades)           
                                                                              
Beartrack (4)          25,600    0.033     848       22,792    0.034        784
                                                                              
Jerritt Canyon (30%)    2,800    0.204     571        3,402    0.188        638
                                          -----                          ------
Total                                     1,419                           1,422

----------

    (1) Reserves estimates for December 31, 1996 and 1995 were based on assumed
        prices of $400 per ounce of gold. Meridian's ore reserves are relatively
        insensitive to a moderate change in gold price.

    (2) Based on optimized mine plans, which incorporate as necessary the
        impacts of dilution and access for Meridian's operations.

    (3) Contained ounces exceed recoverable ounces due to metal losses
        experienced during the extraction process. Precious metal recoveries are
        dependent on the process used, grade of ore and metallurgy. Estimated
        recoveries are as follows: Jerritt Canyon mill ore - 90%; Beartrack heap
        leach ore - 67%. These estimated recoveries have not been reflected in
        the table above.

    (4) At December 31, 1996, the Beartrack mine had approximately 9.1 million
        tons containing 77,000 ounces of gold on the heap leach pad. These
        ounces have not been included in Beartrack's ore reserves.

                                       8
<PAGE>
 
        PRODUCTION

        Production data for the Company for the years ended December 31, 1996
and December 31, 1995 are as follows:

                                    PRODUCTION DATA

                                                        Year Ended December 31
                                                        -----------------------
                                                             1996         1995
                                                             ----         ----
                                                              (in thousands)

     Ore Processed (thousands of tons)
       Beartrack ...................................         4,375        3,901
       Jerritt Canyon (30%) ........................           800          884

     Ore Grade (ounces per ton)
       Beartrack ...................................         0.026        0.034
       Jerritt Canyon (30%) ........................         0.131        0.129

     Recoveries
       Beartrack ...................................           90%          90%
       Jerritt Canyon (30%) ........................           88%          86%

     Gold Production (thousands of ounces)
       Beartrack ...................................           109           49
       Jerritt Canyon (30%) ........................            93           98

     Cash Cost of Production ($ per gold equivalent
     ounce)                                                   
       Beartrack ...................................          $190         $166
       Jerritt Canyon (30%) ........................          $297         $250 

        EXPLORATION

        The following table presents the Company's historical exploration
expenditures for the years ended December 31, 1996 and December 31, 1995. The
amounts stated for Jerritt Canyon represent the Company's 30% interest in the
Jerritt Canyon Joint Venture.

                                EXPLORATION EXPENDITURES

                                                         Year Ended December 31
                                                         ----------------------
                                                             1996         1995
                                                             ----         ----

                                                                (in thousands)
      Beartrack........................................       $1,305     $   39
      Jerritt Canyon...................................        1,571        635
      Rossi............................................        1,969      1,459
      Other U.S. exploration...........................        1,502      1,782
      El Penon (1).....................................        5,795      4,567
      Other foreign exploration........................        1,215      2,344
                                                               -----      -----

    Total..............................................      $13,357    $10,826


----------

(1)     Does not include capitalized exploration costs at El Penon of
        approximately $0.8 million in 1995.

REFINING AND MARKETING

        Substantially all of the Company's products are sold to and refined by
two European refiners. The Company believes that, because of the availability of
several alternative refiners, each able to supply all of such services needed by
the Company, no adverse effect would result should the Company lose the services
of any of its current refiners.

                                       9
<PAGE>
 
HEDGING POLICY

        Prior to initiation of production at Beartrack, the Company purchased
options to sell approximately one-third of the expected Beartrack gold
production at a fixed price of $400 per ounce through the year 2001. The options
were originally purchased for $4.0 million and the cost is recognized in the
period in which the revenues related to the hedged production are recorded. The
options expire according to the following schedule:

                OUNCES OF GOLD SUBJECT TO           EXPIRATION DATE
                         OPTIONS
               -----------------------------   --------------------------
                          33,000                   December 29, 1997
                          33,000                   December 29, 1998
                          32,000                   December 29, 1999
                          32,000                   December 27, 2000
                          27,000                   December 27, 2001
                         -------
                         157,000
                         =======

        The Company does not presently intend to engage in further hedging
transactions with respect to its production of precious minerals, but may decide
to do so in the future.

RISK FACTORS

        The following is a brief discussion of those distinctive or special
characteristics of Meridian's operations and industry which may have a material
impact on, or constitute risk factors in respect of, Meridian's future financial
performance:

        FLUCTUATIONS IN THE MARKET PRICE OF PRECIOUS METALS

        The profitability of the Company's operations will be directly related
to the market price of gold and other precious metals. The prices of gold and
other precious metals have fluctuated widely, particularly in recent years, and
are affected by numerous factors beyond the Company's control, including
expectations of inflation, the relative exchange rate of the U.S. dollar,
speculative activities, global and regional demand and production, political and
economic conditions and production costs in major producing regions. The Company
is unable to predict the aggregate effect of these factors, all of which are
beyond the Company's control. If, as a result of a decline in the price of gold
or other precious metals, the Company's marginal revenues were to fall below and
remain below the marginal costs of production at any particular mine for any
significant period, the Company may experience losses at that mine and may
determine that it is not economically feasible to continue commercial production
at that mine.

        MINING INDUSTRY RISKS

        The exploration for and development of mineral deposits involves a high
degree of risk which even a combination of careful evaluation, experience and
knowledge may not eliminate. Few properties which are explored are ultimately
developed into producing mines. Major expenses may be required to locate and
establish ore reserves, to develop metallurgical processes and to construct
mining and processing facilities at a particular site. It is impossible to
ensure that the exploration programs planned by the Company will result in a
profitable commercial mining operation. Whether a mineral deposit will be
commercially viable depends on a number of factors, including, the particular
attributes of the deposit, such as size, grade and proximity to infrastructure,
precious metal prices which are highly 

                                       10
<PAGE>
 
cyclical, and government regulations, including regulations relating to prices,
taxes, royalties, land tenure, land use, importing and exporting of minerals and
environmental protection. Unusual or unexpected formations, formation pressures,
fires, power outages, labor disruptions, flooding, explosions, cave-ins, land
slides and the inability to obtain suitable or adequate machinery, equipment or
labor are other risks involved in the operation of mines and the conduct of
exploration programs.

        RECENT OPERATING LOSSES

        The Company has incurred net operating losses of $20.8 million and $9.8
million for the years ended December 31, 1996 and 1995, respectively. There can
be no assurances that the Company will achieve net operating profits in the
future.

        UNCERTAINTY OF TITLE TO PROPERTIES

        The validity of unpatented mining claims on U.S. public lands, which
constitute a large portion of the property holdings in which the Company has an
interest, is sometimes uncertain and may be contested. Due to the extensive
requirements and associated expense required to obtain and maintain mining
rights on U.S. public lands, the Company's property interests are subject to
various uncertainties which are common to the industry, with the attendant risk
that some titles, particularly on undeveloped properties, may be defective.
However, the Company is not currently aware of any existing title uncertainties
which would be material to the Company's overall operations or financial
condition with respect to the Company's operating properties or any other
property it currently has targeted for development. As a result of the potential
uncertainty of title to mining and exploration properties and the large number
of properties which are ultimately abandoned, expenditures with respect to any
particular property to establish the Company's rights therein are directly
related to the level of current interest in such property and the extent and
results of previous expenditures. The Company's level of interest in any
particular mining claim, and related title expenditures, will in turn vary
depending upon whether and the extent to which exploratory drilling and other
exploration activities have been or will be conducted, the results of such
drilling and other indices of mineralization at such claim as indicated through
other geological, geophysical, geostatistical and related procedures.
Expenditures to establish the Company's rights will generally not be significant
until such time as extensive drilling is planned, and such expenditures often
continue even after proven or probable reserves have been established.

        The mining code of Chile provides for transfer of titled mineral rights
to a claimant, domestic or foreign, upon completion of a specified process. In
Chile, the law permits corporations to hold title to their mining concessions in
their names. However, under Chilean mining law, the beneficiary of a mining
exploration concession is required to take legal measures to transform its
mining exploration concession into a mining exploitation concession, in
accordance with the mining code. If such measures are not taken by the Company,
or if the annual fees for mining concessions are not paid each year, the Company
can lose its title over its mining concessions, which could have a material
adverse effect on the Company's business, financial condition and results of
operations.

        In Chile, the Company maintains title in its name to its properties and
believes that it has completed the requisite title processes. Although the
Company believes it has taken reasonable measures to ensure proper title to its
mining concessions in Chile, there is no guarantee that title to any of its
mining concessions could not be challenged by a third party, which may have
valid claims underlying portions of the Company's interests.

                                       11
<PAGE>
 
        RISK ASSOCIATED WITH FOREIGN OPERATIONS

        The Company currently has exploration projects and investments in Chile.
These projects and investments, as well as any other projects or investments
made or undertaken in the future in other developing nations, are subject to the
risks normally associated with conducting business in such countries, including
labor disputes and uncertain political and economic environments, as well as
risks of war and civil disturbances or other risks which may limit or disrupt
the projects, restrict the movement of funds or result in the deprivation of
contract rights or the taking of property by nationalization or expropriation
without fair compensation laws or policies of particular countries, foreign
taxation, limitations on ownership and on repatriation of earnings, and foreign
exchange controls and currency fluctuations. Although the Company has not
experienced any significant problem in its Chilean operations arising from such
risks, there can be no assurance that such problems will not arise in the
future. Foreign investments may also be adversely affected by changes in
Canadian laws and regulations relating to foreign trade, investment and
taxation.

        ENVIRONMENTAL RISKS AND HAZARDS

        All phases of the Company's operations are subject to environmental
regulation in the various jurisdictions in which it operates. Environmental
legislation is evolving in a manner which may require stricter standards and
enforcement, increased fines and penalties for non-compliance, more stringent
environmental assessments of proposed projects and a heightened degree of
responsibility for companies and their officers, directors and employees. There
is no assurance that existing or future environmental regulation will not
materially adversely affect the Company's business, financial condition and
results of operations. Environmental hazards may exist on the properties on
which the Company holds interests which are unknown to the Company at present
and which have been caused by previous or existing owners or operators of the
properties.

        Government approvals and permits are currently, or may in the future be,
required in connection with the Company's operations. To the extent such
approvals are required and not obtained, the Company may be curtailed or
prohibited from proceeding with planned exploration or development of
properties.

        Failure to comply with applicable laws, regulations and permitting
requirements may result in enforcement actions thereunder, including orders
issued by regulatory or judicial authorities causing operations to cease or be
curtailed, and may include corrective measures requiring capital expenditures,
installation of additional equipment, or remedial actions. Parties engaged in
mining operations, including the Company, may be required to compensate those
suffering loss or damage by reason or the mining activities and may have civil
or criminal fines or penalties imposed for violations of applicable laws or
regulations.

        Amendments to current laws, regulations and permits governing operations
and activities of mining companies, or more stringent implementation thereof,
could have a material adverse impact on the Company and cause increases in
exploration expenses, capital expenditures or production costs or reduction in
levels of production at producing properties or require abandonment or delays in
development of new mining properties.

        PROPOSED LEGISLATION AFFECTING THE MINING INDUSTRY

        During the past several years, the United States Congress considered a
number of proposed amendments to the General Mining Law. In 1992, a holding fee
of $100 per claim was imposed upon unpatented mining claims located on federal
lands. Beginning in October 1994, a moratorium on processing of new patent
applications was approved. In addition, a

                                       12
<PAGE>
 
variety of legislation is now pending before the United States Congress to amend
further the General Mining Law. The proposed legislation would, among other
things, change the current patenting procedures, limit the rights obtained in a
patent, impose royalties on unpatented claims, and enact new reclamation,
environmental controls and restoration requirements. The royalty proposals range
from a 2% royalty on "net profits" from mining claims to an 8% royalty on
modified gross income/net smelter returns. The extent of any such changes that
may be enacted is not presently known, and the potential impact on the Company
as a result of future congressional action is difficult to predict. If enacted,
the proposed legislation could adversely affect the economics of development of
operating mines on the federal unpatented mining claims held by the Company. A
majority of the Company's proven and probable ore reserves in the U.S. are
located on unpatented U.S. federal lands. The Company's financial performance
could therefore be materially and adversely affected by passage of all or
pertinent parts of the proposed legislation.

        LITIGATION

        The operations of the Company's Beartrack mine may be adversely affected
by the results of litigation initiated by the Pacific Rivers Council and the
Wilderness Society and by the Sierra Club Legal Defense Fund, Inc. The Company
believes that neither of these actions, relating to the Endangered Species Act
and other environmental matters, will ultimately affect mining operations at
Beartrack in any manner that would be materially adverse to the Company.
However, there can be no assurance that the outcome of these actions will not
materially adversely affect the Company's business, financial condition and
results of operations. See "Item 3. Legal Proceedings."

        GOVERNMENTAL REGULATION OF THE MINING INDUSTRY

        The exploration activities of the Company are subject to various laws
governing prospecting, development, production, taxes, labor standards and
occupational health, mine safety, toxic substances and other matters. Mining and
exploration activities are also subject to various laws and regulations relating
to the protection of the environment. Although the Company believes that its
exploration activities are currently carried out in accordance with all
applicable rules and regulations, no assurance can be given that new rules and
regulations will not be enacted or that existing rules and regulations will not
be applied in a manner which could limit or curtail production or development.
Amendments to current laws and regulations governing the operations and
activities of the Company or more stringent implementation thereof could have a
material adverse effect on the Company's business, financial condition and
results of operations.

        PROPERTIES WITHOUT KNOWN MINEABLE RESERVES

        Certain of the Company's properties are in the exploration stage and it
has not yet been determined whether these properties contain ore reserves that
are economically recoverable. The activities of the Company will continue to be
directed towards the search, evaluation and development of mineral deposits.
There is no assurance that the expenditures of the Company will result in
discoveries of commercial ore bodies. Furthermore, there can be no assurance
that the Company's estimates of future exploration expenditures will prove
accurate, and actual expenditures may be significantly higher than currently
anticipated.

        UNCERTAINTY AS TO CALCULATIONS OF ORE RESERVES, MINERAL DEPOSITS AND ORE
GRADES

        There is a significant degree of uncertainty attributable to the
calculation of ore reserves, mineral deposits and corresponding ore grades. The
Company has calculated its proven and probable reserves internally. Until the
ore is actually mined and processed, ore 

                                       13
<PAGE>
 
reserves, mineral deposits and ore grade must be considered as estimates only.
Consequently, there can be no assurance that any ore reserve, mineral deposits
or ore grade information contained in this Annual Report will prove accurate. In
addition, the quantity of ore reserves and mineral deposits may vary depending
on mineral prices and other factors. Any material change in reserves, ore grades
or stripping ratios may affect the economic viability of the Company's projects.
Furthermore, reserve and mineral deposit information should not be interpreted
as any assurance of mine life or of the potential profitability of existing or
future projects.

        REQUIREMENT OF ADDITIONAL FINANCING

        The development of the Company's properties will require substantial
additional financing. There can be no assurance that additional capital or other
types of financing will be available when needed or that, if available, the
terms of such financing will be favorable to the Company.

        UNINSURED RISKS

        The Company carries insurance to protect against certain risks in such
amounts as it considers adequate. Risks not insured against in each case include
environmental pollution, earthquake damage, mine floodings or other hazards
against which mining exploration corporations cannot insure or against which the
Company may elect not to insure because of high premium costs or other reasons.
Failure to have insurance coverage for any one or more of such risks or hazards
could have a material adverse effect on the Company's business, financial
condition and results of operations.

        RISK OF HEDGING STRATEGIES

        In order to mitigate some of the risks associated with fluctuating gold
prices, the Company has in the past, has presently, and may in the future use
various price hedging strategies, such as selling future contracts for gold, or
using call and put options, to lock in delivery prices for its gold production.
The Company continually evaluates the potential short- and long-term benefits of
engaging in such price hedging strategies based upon the then current market
conditions. No assurance can be given, however, that the use of price hedging
strategies will always benefit the Company. There is a possibility that the
Company could lock in forward deliveries at prices lower than the market price
at the time of delivery. In addition, the Company could fail to produce enough
gold to satisfy its forward delivery obligations, causing the Company to
purchase gold in the spot market at higher prices to fulfill its delivery
obligations. As of December 31, 1996, the Company had options to sell
approximately 157,000 ounces of its gold production from Beartrack at a fixed
gold price of $400 per ounce through the year 2001. See "Item 1. Description of
Business - Hedging Policy."

        COMPETITION

        Because mines have limited lives based on proven ore reserves, the
Company is continually seeking to replace and expand its reserves. The Company
competes with other mining companies in connection with the search for and
acquisition of properties producing or capable of producing gold and other
precious metals. Existing or future competition in the mining industry could
materially adversely affect the Company's prospects for mineral exploration and
success in the future.

                                       14
<PAGE>
 
        DEPENDENCE UPON KEY MANAGEMENT PERSONNEL

        The Company is dependent upon a number of key management personnel. The
loss of the services of one or more of such personnel could have a material
adverse effect on the Company. The Company's ability to manage its exploration
and development activities, and hence its success, will depend in large part on
the efforts of these individuals. The Company faces intense competition for
qualified personnel, and there can be no assurance that the Company will be able
to attract and retain such personnel.

        POTENTIAL VOLATILITY OF MARKET PRICE OF COMMON SHARES

        Both the Canadian and U.S. stock markets have from time to time
experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. These broad market fluctuations
may adversely affect the market price of the Common Shares. In addition, the
market price of the Common Shares may be highly volatile. Factors such as the
price of gold and precious metals, announcements by competitors, changes in
stock market analyst recommendations regarding the Company, and general market
conditions affecting other exploration and mining companies may have a
significant effect on the market price of the Common Shares. Moreover, it is
likely that during future quarterly periods, the Company's results and
exploration activities may fluctuate significantly or may fail to meet the
expectations of stock market analysts and investors and, in such event, the
market price of the Common Shares could be materially adversely affected. In the
past, securities class action litigation has often been initiated following
periods of volatility in the market price of a company's securities. Such
litigation, if brought against the Company, could result in substantial costs
and a diversion of management's attention and resources, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.

        DILUTION

        The Company's Certificate and Articles of Amalgamation, as amended,
provide that the Company has an unlimited number of authorized Common Shares and
Preference Shares that may be issued. Under applicable Canadian law, shareholder
approval is not generally required for the Company to issue shares of either
class of capital stock. Moreover, the Company has various commitments that could
require the issuance of a substantial number of additional Common Shares as
follows: exercise of stock options outstanding as of December 31, 1996 under the
Meridian Gold Inc. 1996 Stock Option Plan (1,679,950 shares at December 31,
1996); and issuance of Common Shares pursuant to a Shareholders Rights Plan,
which is triggered by a "Take-over Bid" meeting certain criteria. See "Item 12.
Options to Purchase Security From Registrant or Subsidiaries."

        CERTAIN ANTI-TAKEOVER EFFECTS

        The Shareholders Rights Plan established by the Company in 1996 may have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of the Company,
which may otherwise result in holders of the Common Shares receiving a premium
over the existing market price for their shares in a change of control
transaction. See "Item 12. Options to Purchase Securities from Registrant or
Subsidiaries."

PROPERTY INTERESTS IN THE UNITED STATES

        Mineral interests in the United States are owned by U.S. federal and
state governments and private parties. In order for the Company to explore or
develop a 

                                       15
<PAGE>
 
prospective mineral property that is owned by a private party or by a state, it
must enter into a property or mineral rights acquisition agreement. The Company
may also acquire rights to explore for and produce minerals on U.S. federally-
owned lands. This acquisition is accomplished through the location of unpatented
mining claims upon unappropriated U.S. federal land pursuant to procedures
established principally by the General Mining Law of 1872, as amended (the
"General Mining Law") and the Federal Land Policy and Management Act of 1976 (or
the acquisition of previously located mining claims from a private party as
described above). These laws and regulations generally provide that a citizen of
the United States (including a U.S. corporation) may acquire a possessory right
to develop and mine valuable mineral deposits discovered upon unappropriated
U.S. federal lands, provided that such lands have not been withdrawn from
mineral location (which would include, for example, lands included in national
parks and military reservations and lands designated as part of the National
Wilderness Preservation System). This right can be freely transferred and is
protected against appropriation by the government without just compensation.
Also, the claim locator acquires the right to obtain a patent (or deed)
conveying fee title to his claim from the U.S. federal government upon
compliance with certain additional procedures.

        The majority of the Beartrack proven and probable ore reserves are
located on patented mining claims owned by the Company. The remaining reserves
are located on unpatented mining claims owned or leased by the Company.
Substantially all of the Jerritt Canyon proven and probable ore reserves are
located on unpatented mining claims owned or leased by the Jerritt Canyon Joint
Venture. The Jerritt Canyon mill is located on land owned by the joint venture.
Substantially all of the Rossi gold exploration operations are being conducted
on unpatented mining claims owned by the Company.

PROPERTY INTEREST IN CHILE

        In Chile, mineral rights are granted by ordinary courts of justice in
the form of mining concessions. Any person, whether a Chilean national or a
foreigner, may apply for the granting of mining concessions subject to
compliance with the requirements provided for in Chilean law. The holder of a
mining concession is protected by the ownership right on such concession. The
right over the concession, which is independent from the ownership right on the
surface land, is transferable and may be subject to mortgage. The mining
concession entitles its holder to dispose of all mineral resources contained
within its boundaries.

        Mining concessions are of two types:

               (i) An Exploration Concession, whereby the holder is legally
        entitled to explore for mineral substances in a certain area for a
        period of two years, at the expiration of which the concession may be
        extended for an additional two year period if the area covered by the
        concession is reduced by half and provided the applicable annual tax is
        paid.

               (ii) An Exploitation Concession, whereby the holder is legally
        entitled to exploit mineral substances contained therein for an
        indefinite period of time subject to payment of the annual tax.

        The holder of an Exploration Concession has the exclusive right to
initiate the procedure to obtain an Exploitation Concession within the
boundaries and during the time period of the Exploration Concession. The holder
of each type of mining concession is entitled by law to impose easements on the
surface land in order to facilitate mining exploration or exploitation
activities. Any compensation to be paid to the owner of the surface land for the
easement is to be determined by mutual agreement or, failing such 

                                       16
<PAGE>
 
agreement, by the court. The acquisition of mineral interests in Chile is
normally initiated either through the filing of an application to the courts to
obtain the granting of new mining concessions or by acquiring existing mining
concessions.

        The legal procedure to obtain the granting of a new mining concession is
regulated in detail in the Chilean Mining Code. A special characteristic of this
judicial procedure is that the applicant is required to be active and to
expedite the proceeding in order to comply with deadlines established in the
Chilean Mining Code for the performance of certain tasks to be fulfilled in
order to obtain the grant of the concession. The judge has an active role, and
the proceeding may transform into a contentious one in certain cases (i.e.,
third party opposition to the survey petition).

        The acquisition of mineral interests from parties which already have
registered mining concessions is also considered to be a normal vehicle to
initiate mining activities in Chile. The execution of an option or promise
purchase contract regarding existing mining concessions may enable an interested
party to develop exploration or exploitation mining work in a given area already
legally protected. Chilean law also provides flexibility to the interested party
in acquiring a mining concession to enter into different contractual
arrangements (i.e., deferred installment payments or undertaking to carry out
exploration activities as payment of the purchase price), contemplating the
option to purchase or abandon the mining concession.

EMPLOYEES

        As of December 31, 1996, the Company had a total of approximately 184
employees, with approximately 155 employees working on site at the Beartrack
property. At the Jerritt Canyon property located near Elko, Nevada, there are
approximately 622 employees, all of which are employees of the Jerritt Canyon
Joint Venture, not of the Company. None of the employees are covered by a
collective bargaining agreement. The Company believes that its relationship with
its employees is good.

ITEM 2. DESCRIPTION OF PROPERTY.
        -----------------------

        Included herein are certain forward-looking statements that involve
various risks, uncertainties and other factors. See "Cautionary Statement" on
Page 5 of this Annual Report.

        Meridian has two principal producing properties, Beartrack (100%
ownership) located near Salmon, Idaho, and Jerritt Canyon (30% ownership)
located near Elko, Nevada. In addition, the Company has advanced stage
exploration programs underway in Chile (at El Penon) and in Nevada (at Rossi),
and early stage exploration programs underway in Chile, Idaho and Nevada.

BEARTRACK

        HISTORY, LOCATION, SIZE AND ACCESS

        The 100 percent-owned Beartrack mine is an open pit operation with a
heap leach facility located approximately 11 miles west of Salmon, Idaho, near
the historic mining town of Leesburg. The Beartrack property comprises
approximately 27 square miles of patented and unpatented mining claims. The
Company owns the mineral rights to approximately 85 percent of the present
proven and probable reserves at Beartrack by its ownership of patented mining
claims. The remaining reserves are being mined from unpatented mining claims
which the Company owns or leases, a portion of which is subject to a 3 percent
net smelter 

                                       17
<PAGE>
 
return on production. Access from Salmon, Idaho to the Beartrack property is by
34 miles of county and U.S. Forest Service gravel roads.

        GEOLOGY

        The Beartrack mine is located on the Panther Creek fault. Gold
mineralization is closely associated with the Panther Creek fault.
North-northeast lateral displacement along this fault of up to 2,000 feet
created a shear zone in arkosic sandstone of the Yellowjacket Formation and
porphyritic quartz monzonite, making it ideal for hosting mineralization.
Deformation and shearing along the fault reaches widths up to 600 feet. Gold
mineralization has been found intermittently for a distance of about 16,500 feet
along the Panther Creek fault shear zone. Several stages of silification,
brecciation and gold mineralization have occurred to create the ore deposits at
Beartrack. The gold mineralization occurs in a network of stockwork veins and
veinlets created by the shearing. The primary associated waste minerals are
silica, iron sulfides, pyrite, arsenopyrite and sericite.

        MINING

        The open pit mining operation at Beartrack commenced in August 1994 and
includes two pits, designated the North and South pits, and one waste rock dump.
Ore and waste rock are removed in horizontal lifts or benches 25 feet in height
with pit slopes ranging from 35 to 50 degrees. Mining operations within the pits
include drilling, blasting, loading and hauling. Drill holes are assayed to
determine whether the material will be treated as waste or ore. Ore and waste
rock are moved by 85-ton diesel haul trucks to the process area and waste rock
disposal areas, respectively. The waste rock dump has been constructed with a 40
million-ton capacity. Mine production is based on delivering approximately 4.5
million tons of ore per year to the process facility. The average stripping
ratio over the life of the mine is expected to be 1.2:1. No underground mining
is currently conducted at Beartrack.

        HEAP LEACH FACILITY

        The ore is processed in a cyanide heap leach facility. The heap leach
pad is constructed in four phases. Phases one and two have been constructed.
Each heap leach phase area is one continuous plastic lined pad surface
constructed on a prepared compacted clay foundation protected by a three foot
layer of 3/4 inch crushed ore. Each phase of the pad has a network of solution
collection pipes placed on top of the liner to collect the pregnant gold
solution from individual heap cells. Once the pad has been prepared for loading,
ore is dumped into place. Diluted sodium cyanide solution is applied on the heap
surface. One pond is used for normal operating conditions and a larger overflow
pond has been constructed to provide additional solution storage under unusual
circumstances, such as during periods of unusually large drawdowns. These ponds
are designed to provide sufficient storage capacity for all phases of heap
operations.

        Pregnant solution is pumped from the pregnant solution pond through a
series of carbon adsorption tanks where contained values of gold and silver
adsorb on activated carbon. The loaded carbon is stripped and precious metals
recovered, melted and cast as dore. The dore bars are sold to an off-site
refinery for final production of gold and silver.

        RECENT OPERATIONS

        As of December 31, 1996, Beartrack contained approximately 25.6 million
tons of ore containing 848,000 ounces of proven and probable gold reserves,
compared to 22.8 million tons of ore containing proven and probable gold
reserves of 784,000 ounces as of December 31, 1995. Gold production in 1996 at
Beartrack was 109,000 ounces, an increase 

                                       18
<PAGE>
 
of 60,000 ounces over 1995, primarily as a result of the first full year of
production. Cash costs were as expected at $190 per ounce, almost $24 per ounce
higher than 1995, due mainly to the lower grade material mined in the North Pit.

        The average grade of the ore mined was 0.026 ounces per ton, which was
an expected 24 percent lower than 1995, as a result of processing the lower
grade North Pit ores. These lower grades were anticipated by the geologic block
model developed in the feasibility study.

        The $1.3 million drilling program in 1996 was the first exploration on
the project since 1992. This program resulted in finding more reserves than were
depleted in 1996 on the property. The reserves were expanded 8% at both the
North and South Pits.

        During 1996, the Company constructed a $1 million water treatment
facility to remove sediments from site run-off and purify the water before
discharging it into Napias Creek.

JERRITT CANYON

        HISTORY, LOCATION, SIZE AND ACCESS

        The Jerritt Canyon mine, consisting of a number of underground and open
pit mines, is located 57 miles northwest of Elko, Nevada. The Company's
joint-venture partner, Independence Mining Company, Inc., a wholly-owned
subsidiary of Minorco (U.S.A.) Inc. ("IMC"), operates the mine. Since the
discovery of Jerritt Canyon by Meridian geologists in 1972, the mine has
produced over 4.5 million ounces of gold.

        Development and mining activities take place at Jerritt Canyon on
various orebodies within the 120-square-mile claim block, which includes both
private and public lands. Property interests at Jerritt Canyon include owned or
leased unpatented claims and surface rights. Approximately 12.8 percent of the
Jerritt Canyon proven and probable reserves are subject to a net smelter return
royalty averaging 2.9 percent. The main access to the property is by a paved
state highway from Elko.

        JOINT VENTURE AGREEMENT

        Pursuant to the joint venture agreement governing the Jerritt Canyon
Joint Venture, IMC acts as manager of the project and conducts all mining and
processing, exploration, drilling and related operations. However, as a 30%
participant, the Company is actively involved in budgeting, production and
exploration planning, through which it has gained valuable experience. Each
participant has the right to take in kind or dispose of its individual interest
in all ore and minerals extracted from the Jerritt Canyon properties. Joint
venture costs are allocated to each participant in proportion to its interest.
The Company also pays to IMC a management fee of 2.5% of the Company's share of
the joint venture's gross revenues.

        Although IMC has the authority to make most decisions with respect to
daily operations of Jerritt Canyon, approval of the Company is required for the
annual operating budget and exploration program, as well as any major capital
expenditures.

        Pursuant to the joint venture agreement, a transfer of the interest of
either joint venture participant in the joint venture to any non-affiliate is
subject to a good faith right of first negotiations with the other for the sale
to the other party of such interest. Unless otherwise terminated by mutual
agreement, dissolution or insolvency, the joint venture agreement for Jerritt
Canyon will remain in effect for fifty years and for such longer periods as
exploration, development or production by the joint venture continues.

                                       19
<PAGE>
 
        GEOLOGY

        Gold at Jerritt Canyon occurs in typical sediment-hosted type deposits
with many similarities to other Nevada sediment-hosted deposits, such as those
on the Carlin Trend and in the Crescent Valley area. Characteristics at Jerritt
Canyon which conform to the sediment-hosted gold model include:

 . Element association                 Gold, Arsenic, Antimony, Mercury, Barium
 . Gold ore grades                     0.05 to more than 1.00 opt
 . Alteration type                     Silification, argillization,
                                       carbonization, decalcification,
                                       dolomitization

 . Host rocks                          Paleozoic carbonates and siltstones
 . Vertical extent of mineralization   Over 3,000 feet as measured
                                       from different locations at Jerritt
                                       Canyon

        Major tectonic events have significantly contributed to building a
favourable geologic setting for the formation of major gold deposits. Roberts
Mountains thrusting placed western siliceous rocks over the favourable eastern
facies host rocks, providing an essentially impervious capping which probably
forced the ore solutions to disseminate into favourable beds and structures,
forming the major gold deposits being mined today. North-south compression
created west-northwest, east-northeast, northeast and north striking faults
which became ore channelways during the tertiary gold mineralization event.
Periodic mountain building events after the initial orogenies, continued to
impact the Jerritt Canyon area opening the faults, brecciating and folding the
strata, and in general creating a highly favourable condition for the depositing
of major disseminated gold deposits. The favourable gold host rocks at Jerritt
Canyon are carbonaceous dolomitic siltstones and micritic limestone of the
Roberts Mountains and Hanson Creek Unit III sedimentary formations. Units I and
II of the Hanson Creek Formation locally host significant gold deposition.
Strata in the Pogonip Group appear similar to ore hosting units in the Hanson
Creek Formation. The primary ore controls are high angle west-northwest,
east-northeast, and north-to-northeast faults. The west-northwest faults are the
strongest structures and usually cross the entire Independence Range. Permeable
siltstones, limestones and cherts in the Roberts Mountains and Hanson Creek
Formation provided lateral hosting and dispersion and dissemination of the
Jerritt Canyon gold ore fluids.

        MINING

        Mining at Jerritt Canyon commenced in 1981 and is conducted from both
open pit and underground sources. The selection of mining method depends upon
numerous factors, such as the depth of the deposit, the grade and quantity of
gold in the deposit, the ore-type of the deposit, and the economics of mining
and processing compared to the expected gold price during the orebody's life.

        Current open pit mines include Saval Canyon and Burns Basin. The DASH
open pit mine is in development and prestripping began in mid-1996. Open pit
mining is conducted in ore zones ranging from relatively shallow to
approximately 800 feet in depth. Underground ore production began in 1994 and is
currently conducted in the Murray and West Generator mines. Two deposits, SSX
and Papillion, are under exploration and development for underground mining.

        Open pit mining is conducted on orebodies which have relatively shallow
ore deposits. These orebodies provide the quantity and grades of ore which
provide the 

                                       20
<PAGE>
 
economic incentive for development and extraction. This ore source tends to be
of relatively low grade gold mineralization with lower total mining costs.

        The open pit mining process begins with breaking the in-place rock at
the mine site. Blast holes are approximately 24 feet deep, 5 1/2 or 6 1/2 inches
in diameter, and are drilled on a 12 to 16 foot square pattern. The holes are
filled with explosives, which are detonated. The rock chips from these holes are
analyzed by the assay lab to assign boundaries to various mined rock
classifications. Following blasting, broken material is classified into four
categories (waste rock, sub-ore and two ore types) based on such factors as the
refractory nature of the ore and its grade. Waste rock is transported to waste
dumps, sub-ore grade material (which is mineralized but uneconomic at present
gold prices) is stockpiled, and the two types of ore are separately transported
to stockpiles designated for each of the two mills.

        Over the past few years, underground mining has grown to be a major
source of ore. Today, the mill receives ore from two distinct underground
sources, the Murray and the West Generator mines. Established ore reserves for
the future of Jerritt Canyon are largely from underground sources where the
costs of development and extraction are greater than in traditional open pit
methods on a per ton of ore basis, which is mitigated somewhat by the higher ore
grades of the underground sources. The Company expects the shift to underground
resources to continue unless new open pittable ore reserves are discovered and
developed.

        Underground mines at Jerritt Canyon are accessed by declines. The Murray
mine is accessed by two declines and the West Generator mine is accessed by a
single decline. Ore mining includes cut and fill methods, either slot and fill
or underhand drift and fill. Drifting and mining are conducted in either 15 by
15 foot or 12 by 12 foot openings. An engineered cemented backfill material is
used for ground support. The basic mine layouts comprise a main access decline,
at 12.5% gradient, suitable for truck haulage. At various elevations,
exploration drifts are cut along the axes of the deposit to implement
delineation drilling. Mining stopes are primarily transverse to the strike of
the deposit and mining begins at the centre of the ore zone. Primary stopes are
then mined to the ore extremities, followed by the secondary and the tertiary
stopes. The physical ore zone features include varying thickness, undulating
waste-ore contacts, assay walls, irregular continuity, and variable tonnage per
foot of strike length.

        MILLING

        Ore is hauled from the open pit mines, underground mines and sub grade
stockpiles and stockpiled at the mill for processing. The haul distance ranges
from 3 to 15 miles depending on the mine source.

        At the Jerritt Canyon mill, there are two distinct extraction facilities
which process two categories of ore, the wet grinding chlorination circuit and
the dry grinding roasting circuit, each of which is independent of the other.
Each circuit has an annual average capacity of approximately 4,000 tons per day.
With changing ore characteristics, only the dry milling circuit is currently in
operation.

        The less refractory, less carbonaceous ore is sent to the wet grinding
chlorination circuit to oxidize sulfur and carbon contained in the ore prior to
being leached in a conventional sodium cyanide carbon-in-leach ("CIL") circuit.
The ore-water mixture, or slurry, is treated by injecting chlorine gas into the
slurry to oxidize the refractory components. The tanks in which this process
takes place are operated in a vacuum to control any unreacted chlorine gas,
which is converted to bleach in a scrubbing system. The slurry, 

                                       21
<PAGE>
 
after oxidation, is neutralized and treated with cyanide for gold dissolution
and recovery by adsorption on carbon in CIL tanks.

        The more refractory ore, which contains higher amounts of sulfur and
carbon, is processed in the dry grinding roasting circuit. This ore is crushed
and dried, and then finely ground and mixed with coal. This mixture is
introduced into the tops of two fluid-bed roasters. The ore is heated and
contacted with oxygen rich gases that oxidize the sulfide and carbon compounds.
The gases produced in the roasting process pass through a scrubbing system to
control emissions. The roasted ore goes to a quench tank to cool and then to a
thickener to increase the density of slurry before entering the CIL tanks.
Sodium cyanide is then used to dissolve the gold from the ore slurry and the
gold is absorbed onto activated carbon.

        Gold from both CIL circuits is removed from the carbon using a carbon
stripping process which involves the use of hydrochloric acid, sodium hydroxide
and sodium cyanide. Gold metal is recovered from the stripping solution using
the Merrill-Crowe process, which utilizes zinc powder to precipitate the gold.
The gold precipitate is reacted with nitric acid to remove the excess zinc,
retorted to collect the minor quantity of contained mercury in the precipitate,
melted, and then cast into dore bars which are ultimately sold to outside
refineries for further processing into gold products.

        Tailings from the milling process are deposited in a clay-lined
impoundment pond.

        RECENT OPERATIONS

        In 1996, Meridian's 30 percent share of gold production was 93,000
ounces, 5 percent lower than 1995 due primarily to the lower-grade stockpiles
being processed through the wet mill.

        The wet mill was shut down in February 1997. Mining activities in 1996
were focused at the Murray and West Generator underground mines and at the Dash,
Burns Basin, and Saval Steer open pit mines.

        Cash costs of production in 1996 increased 19 percent over the prior
year to $297 per ounce, mainly as a result of lower production and the inclement
weather in the first half of the year. By the fourth quarter of 1996, however,
cash costs had declined to $259 per ounce.

        As of December 31, 1996, Meridian Gold's share of reserves was
approximately 2.8 million tons of ore containing 571,000 ounces, slightly less
than the 3.4 million tons of ore containing 638,000 ounces as of December 31,
1995. Approximately 61 percent of the current reserve is contained in
underground orebodies, with more than 64 percent of the total in underground
reserves at the Murray (New Deep) orebody.

        There were two significant discoveries in 1996 - the Coulee resource and
the Burns Basin extension. The Coulee discovery is a geologic resource and has
not yet been classified as a proven and probable reserve. Permitting and
delineation drilling is underway at Coulee.

EL PENON

        The El Penon property in Chile currently contains geologic resources of
gold and silver that have not yet been classified as a proven and probable
reserve. The resource is the result of a grass-roots discovery made by Meridian
geologists during the initial stages of opening a new exploration office in
Chile in 1993.

                                       22
<PAGE>
 
        The El Penon property is located in an area of low, rolling hills in
northern Chile, approximately 100 miles southeast of Antofagasta. Access is by a
25 mile long gravel road that connects the property with the Pan-American
Highway. The property is comprised of approximately 230 square miles of
contiguous mineral concessions situated in the Atacama Desert at an elevation of
5,900 feet. The El Penon project is situated on concessions either owned by the
Company outright or leased from a private Chilean company, Sociedad Minera
Soledad and an individual who is its main shareholder. In each case, to protect
its interest, the Company has filed two layers of concessions overlying the base
ownership concession. The Company has entered into option contracts to purchase
the concessions owned by the private Chilean company. In addition, the Company
has granted a net smelter return to the private Chilean company on production
from the leased property. The royalty is on a sliding scale, depending on the
price of gold, ranging from 1% to 3%. No royalty is payable on land claimed by
the Company, where approximately 75% of the mineralization currently known is
located.

        Initial exploration, including geochemical and geophysical surveys,
geologic mapping, trenching and drilling, identified 13 target areas exhibiting
gold mineralization or geophysical anomalies. In six areas, known as Quebrada
Orito, Cerro Amatista, Cerro Martillo, Discovery Wash, El Valle and Tres Tontos,
significant intercepts of gold were encountered in drilling. The Company defines
a significant intercept to be one where gold mineralization of 0.20 ounces of
gold per ton over a continuous intercept of at least 13 feet (4 meters) is
encountered.

        The resource at El Penon is part of a volcanic-hosted epithermal deposit
containing gold and substantial silver with virtually no base metals or
contaminants. The gold and silver occur in quartz vein zones and hydrothermal
breccias in several major deposits that extend along strike for at least 17,000
feet (3.25 miles). In all of the zones, the mineralization varies from
approximately 13 to 100 feet wide and extends to a depth of at least 800 feet.
Preliminary metallurgical results indicated high gold (88-93%) and silver
(85-92%) recoveries from grinding and cyanide leaching.

        Exploration drilling in 1996 continued from early June until
mid-December. Multiple rigs drilled 266 additional reverse circulation and core
holes totaling 150,860 feet. The initial drilling concentrated on more fully
defining the Quebrada Orito deposit to advance this portion of the property to
feasibility stage.

        Additional drilling along strike and to the north of the Quebrada Orito
deposit identified the Orito Norte zone. South of Quebrada Orito, a major new
extension was encountered with 30 holes over a strike length of at least 3,280
feet. This zone contains a significant new resource in a high-grade, steeply
dipping body similar to Quebrada Orito. Both of these new zones of
mineralization are still open at depth and along strike and represent major
extensions to the Quebrada Orito deposit.

        Drilling at Cerro Martillo also continued to expand this deposit and
refine a parallel zone to the east, and is also still open at depth and along
strike.

        The 1996 drilling successfully expanded all of the known mineralization
and discovered a major new extension, Orito Sur. The mineralization is still
open along strike and at depth in most areas. Meridian Gold expects that both
underground and open pit mining will take place at several of the gold zones
identified on the El Penon property.

        Additional work at El Penon included the initiation of a decline into
the Quebrada Orito deposit in October 1996. This decline will enable bulk
samples, detailed underground 

                                       23
<PAGE>
 
sampling and drilling, and mining costs to be determined for the deposit. This
work will be completed in the third quarter of 1997.

        A prefeasibility study being performed by the engineering firm of
Kvaerner Davy is in progress and the Company expects it to be completed in the
fourth quarter of 1997. This work will be combined with the underground data
acquired from the decline, as well as continued surface drilling, to produce a
final feasibility study by the end of 1997. This study is expected to result in
the conversion of a significant portion of the resource into a reserve category,
which will support a construction decision. The goal for El Penon is to commence
construction in early 1998 and initiate gold and silver production by mid 1999.

        In 1996, the exploration drilling was focused on further defining the
known mineralized areas. The extensive property position hosts an abundance of
undrilled geological and geophysical targets. Meridian plans to explore and
develop new resources at El Penon as quickly as possible in 1997 and beyond.

        Since the initial discovery of this property in 1993, Meridian has
drilled 577 holes on the property and has spent approximately $13 million in
exploration. Meridian continues to be encouraged by the rapid expansion and
development potential of the project.

ROSSI

        The Rossi property is geographically situated between the Antelope and
Boulder Creek drainages in the low rolling hills of the Sheep Creek Range, 26
miles northwest of Carlin, Nevada. Access to the property is by all-season
gravel roads either through Boulder Valley or the Newmont Gold Company/Barrick
Gold Corporation owned mining areas. The property is approximately 3.5 and 5
miles northwest of the Meikle (Barrick Gold Corporation) and Post/Betze (Barrick
Gold Corporation/Newmont Gold Company) deposits respectively, and immediately
adjacent to the currently operating Dee gold mine (Rayrock Yellowknife
Resources, Inc.). The land position encompasses 10.7 square miles of unpatented
mining claims as well as patented mining claims on U.S. federally owned ground.
The Company has rights to 100% of the precious metal bearing ores on the Rossi
property.

        Gold mineralization on the Rossi property is primarily hosted in the
Devonian Popovich Formation (Lower Rodeo Creek equivalent), which is also the
host at Meikle, Post/Betze, Gold Quarry, Deep Star, Dee and Bootstrap deposits.
The formation consists of limestone and limey mudstone with horizons of fossil
hash with are especially susceptible to mineralization. The Lower Popovich and
Upper Bootstrap commonly displays decalcification, dissolution and collapse
brecciation features in the mineralized areas. Mineralization and alteration
consist of intense silification, quartz veining, argillization and
decalcification. Gold is genetically related to arsenian pyrite which rims older
non-mineralized pyrite and is accompanied by anomalous silver, antimony and
mercury. The spatial distribution of gold is controlled by a complex
relationship between the intersection of northwest oriented Carlin Trend with
other north-south and northeast structures and the presence of permissive
Popovich host rocks. As is commonly the case in most of the deposits in the
northern portion of the Carlin Trend, the presence of intrusive filled
structures are also important keys to mineralization at Rossi. The orientation
of the structures suggests the influence of a wrench fault system; however, the
complete structural picture is undoubtedly much more complex.

        The most promising area drilled to date referred to as the "Resource
Area," is located in the southern portion of the Company's claim block.

                                       24
<PAGE>
 
        At the Resource Area, additional deep holes extended the known
high-grade mineralization 600 feet along strike to the northwest. This deep high
grade mineralization occurs in 33 of 49 holes in an area 1,200 by 1,400 feet.
There are 54 intercepts that average 0.437 opt gold over an average thickness of
20.4 feet. The mineralization occurs at depths starting at 700 feet and
continuing to at least 2,100 feet.

        At the Dunphy Road target, three holes tested the northern extensions of
the mineralized Bootstrap and Post-Betze faults onto the Rossi property. Several
holes encountered strong alteration, favorable lithologies, and structural
preparation, as well as wide intervals of low-grade gold mineralization (up to
140 feet of 0.033 ounces per ton). Only a small portion of this target has been
explored by drilling, but with this confirmation of mineralization, additional
drilling is planned for 1997.

        All underground mining activities to date elsewhere on the Carlin Trend
have encountered higher grades and more tons than have been delineated from
surface drilling. Meridian will complete a follow-up drill program in 1997.
After completion of this work, the Resource Area will be evaluated for an
underground exploration program to better explore and define this high-grade
gold. The surface drilling has consistently encountered the mineralization, but
more detailed definition is still needed.

        After completion of 1997 exploration drilling, a full resource update
will be completed, and the feasibility of an underground investigation of the
geologic resource will be determined. To date, the known Resource Area has
continued to provide consistent, high-grade mineralization. The decision to
explore the Resource Area from underground will be made in the third quarter of
1997.

ITEM 3. LEGAL PROCEEDINGS.
        -----------------

        During the third quarter of 1994, the Pacific Rivers Council and the
Wilderness Society (collectively the "PRC"), in a lawsuit filed in the Federal
District Court in Idaho (Pacific Rivers Council v. Thomas), sought an injunction
against all ongoing and future forest activities including mining, which may
affect endangered salmon, within various national forests in Idaho including the
Salmon National Forest in which the Beartrack property is located. In that
lawsuit, the PRC sought to require the U.S. Forest Service to consult under the
Endangered Species Act (the "Act") with the National Marine Fisheries Service
("NMFS") regarding existing land resource management plans for the subject
forests and their potential impacts on endangered Snake River salmon. The
government defendants and the plaintiffs have subsequently negotiated a
stipulated dismissal of most of the lawsuit. Under the terms of the stipulation,
the parties dismissed from this litigation all projects which have undergone
site-specific consultation. The Company's Beartrack mine was identified by the
government defendants as a project for which consultation has been completed.
The Court issued an Order on Pending Claims on December 20, 1995 regarding the
remaining specified projects (not including the Beartrack mine) which have not
yet completed consultation. Under the terms of that Order, the Court has
retained jurisdiction in this lawsuit for further proceedings regarding those
projects. The Beartrack mine is not subject to or a part of the Court's Order.

        In October 1994, the Sierra Club Legal Defense Fund, Inc. ("Sierra"), on
behalf of certain other organizations, filed a lawsuit in Federal District Court
for the Western District of Washington at Seattle against NMFS and other federal
agencies for violation of the Act, alleging the NMFS' biological opinion failed
to satisfy the requirements of the Act. Sierra, the federal agencies and the
Company, as intervener, each filed a motion for summary judgment. In November
1995, the Court ordered the federal agencies to reinitiate consultation under
Section 7 of the Act on the potential environmental impacts of the 

                                       25
<PAGE>
 
Beartrack mine project on listed salmon or the designated critical habitat for
salmon. The plaintiffs did not seek, and the Court did not impose, any
injunction or other restriction on the operation of the Beartrack mine pending
completion of such consultation. On November 17, 1995, the court closed the case
but retained jurisdiction to resolve any disputes that may arise concerning the
reinitiated consultation schedule or to resolve issues once the renewed
consultation is completed.

        The Forest Service has submitted a revised biological assessment to
NMFS, the first step in the reinitiated consultation. Under Section 7(d) of the
Act, the Forest Service may require Meridian to cease an activity associated
with mine operations if that activity could preclude the development of
reasonable and prudent alternatives to the project pending the completion of the
reinitiated consultation. On July 3, 1996, the Forest Service completed its
Section 7(d) determination for the Beartrack mine operations and determined
that, for the following 12 months from that date, all ongoing and planned
significant activities at the mine could continue pending the reinitiated
consultation, with exception of: (1) proposed reconstruction of the leach pad
Run of the Mine Road, and (2) proposed use of the soil stockpile area associated
with development of Phase III of the heap leach pad. The Forest Service
recognized that these latter two activities may be authorized upon further
review by the Forest Service prior to completion of the reinitiated
consultation.

        Under the Act's regulations, consultation must be completed within 135
days of the date consultation is initiated. An extension of 60 days can be
imposed by the agencies. Under the relevant statutory and regulatory
authorities, the results of a consultation can range from no impact on the
activities under review on the one hand to modest to significant impacts on the
other. In an extreme situation, a consultation could result in the cessation of
activities altogether, a potential result the Company believes to be remote in
the case of the Beartrack mine, which has been in operation and production since
mid-1995. The Company believes that the ongoing operation of the Beartrack mine
will not jeopardize listed salmon or adversely modify or destroy designated
critical habitat, and that upon completion of consultation, the mine will be
permitted to continue operation.

        On February 16, 1996, the Company settled a dispute with a subcontractor
on the Beartrack project. The subcontractor made claims against the prime
contractor alleging overruns for work performed which exceeded the original
estimated costs for the project by approximately $8 million. These claims were
disputed by the prime contractor. Arbitration of the subcontractor's claims
against the prime contractor was concluded, and the Company agreed to pay a
settlement of $3.1 million as part of the overall arbitrated settlement. The
settlement was charged to property, plant and equipment and depreciated over the
remaining life of the Beartrack property.

        The Company sought and obtained from the U.S. Army Corps of Engineers
(the "Corps") a permit authorizing dredging and filling of wetlands in
connection with construction of the Beartrack mine under Section 404 of the
Clean Water Act. That permit was set to expire on October 11, 1994. On June 16,
1994, the Company sought an extension of the permit under applicable
regulations. Under those regulations, the filing of a request for extension
operates to extend the permit until the agency acts upon the request for
extension. As of the date of this report, the Corps has not taken action upon
the Company's request.

        The Company has certain other contingent liabilities resulting from
litigation, claims and commitments incident to the ordinary course of business.
Management believes that the probable resolution of such contingencies will not
materially affect the financial position or results of operations of the
Company.

                                       26
<PAGE>
 
ITEM 4.  CONTROL OF REGISTRANT.
         ---------------------

        To the knowledge of the Company, Meridian is not directly or indirectly
owned or controlled by another corporation or by any foreign government, and the
Company is not aware of any arrangements which may at a subsequent date result
in a change in control of the Company. To the knowledge of the Company, as of
December 31, 1996, no person or entity owned of record, or beneficially,
directly or indirectly, more than 10% of the outstanding Common Shares.

        As of December 31, 1996, the director and executive officers of the
Company, as a group (10 persons, excluding Jay A. Nutt) beneficially owned,
directly or indirectly, 22,700 Common Shares, representing less than 1% of the
total number of outstanding Common Shares of the Company.

ITEM 5.  NATURE OF TRADING MARKET.
         ------------------------

        The Common Shares of the Company have been listed and posted for trading
on the Toronto Stock Exchange (the "TSE") since July 31, 1996 (TSE Symbol: MNG)
and on the New York Stock Exchange (the "NYSE") since July 31, 1996 (NYSE
symbol: MDG). The Company's predecessor, FMC Gold, was also traded on the NYSE.
The following tables set forth the high and low closing sales prices for the
Common Shares on the TSE (in Canadian dollars) and on the NYSE (in U.S. dollars)
during the periods indicated:

                                          TSE

                                 (In Canadian Dollars)

          ------------------ ---------- ----------- --------------------
                               HIGH        LOW            VOLUME

          ------------------ ---------- ----------- --------------------
          1996
          ------------------ ---------- ----------- --------------------
             Third Quarter        6.75        5.45              112,000
          ------------------ ---------- ----------- --------------------
             Fourth Quarter       6.10        5.40               59,000
          ------------------ ---------- ----------- --------------------
          1997
          ------------------ ---------- ----------- --------------------
             First Quarter        7.35           5               41,000
          ------------------ ---------- ----------- --------------------
             April                6.50           6               19,420
          ------------------ ---------- ----------- --------------------

                                          NYSE
                                   (In U.S. Dollars)

          ------------------ ---------- ---------- ---------------------
                               HIGH        LOW            VOLUME

          ------------------ ---------- ---------- ---------------------
          1996
          ------------------ ---------- ---------- ---------------------
             Third Quarter       4 5/8          4                72,000
          ------------------ ---------- ---------- ---------------------
             Fourth Quarter      4 1/2          4                11,000
          ------------------ ---------- ---------- ---------------------
          1997
          ------------------ ---------- ---------- ---------------------
             First Quarter       5 1/4      3 5/8                31,000
          ------------------ ---------- ---------- ---------------------
             April               4 3/4      4 1/4                37,550
          ------------------ ---------- ---------- ---------------------


        The closing price of the Common Shares on the TSE on April 30, 1997 was
Canadian $6.50, and on the NYSE was U.S. $4 3/4. As of April 30, 1997, there
were 73,601,495 Common Shares of Meridian issued and outstanding. Based on the
records of Meridian's registrar and transfer agent, The Trust Company of Bank of
Montreal, as of April 30, 1997, there were 373 registered holders of Meridian's
Common Shares resident in the United 

                                       27
<PAGE>
 
States, holding 16,277,478 Common Shares. This number represents approximately
22% of the total issued and outstanding Common Shares of Meridian on such date.

ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
        ------------------------------------------------------------------
CAPITAL

        There are no governmental laws, decrees or regulations in Canada, other
than withholding taxes, restricting the remittance of interest, dividends or
other payments to non-resident holders of shares of the Company. See information
under "Item 7. Taxation" for a discussion of the Canadian withholding tax
applicable to such payments.

CHANGE OF CONTROL

        The acquisition of control of the Company, a Canadian business, by
non-Canadians may be subject to the provisions of the Investment Canada Act
(Canada).

        Under the Investment Canada Act (Canada), the acquisition by a
non-Canadian of control of a Canadian business which exceeds certain size
thresholds is reviewable and subject to approval by the Minister of the Industry
(the "Minister"). Such approval is to be granted where the Minister is satisfied
that the acquisition is likely to be of net benefit to Canada. The Investment
Canada Act (Canada) contains certain rules for determining whether a corporation
or other entity or individual is a Canadian or a non-Canadian. In addition, the
applicable transaction size thresholds are significantly higher if the acquiror
is a "WTO investor," which is defined in the Investment Canada Act (Canada) to
mean an entity controlled by nationals of, or individuals who are nationals of,
World Trade Organization member states.

        The Investment Canada Act (Canada) sets out a number of rules and
presumptions relating to when control is or is not acquired:

        (a)    The acquisition of less than one-third of the outstanding voting
               shares of the Company would be deemed not to constitute the
               acquisition of control of the Company;

        (b)    The acquisition of more than one-third, but less than a majority,
               of the voting shares of the Company would be presumed (subject to
               rebuttal) to constitute the acquisition of control of the
               Company. The presumption may be rebutted by showing that control
               in fact of the Company is not, or would not be, exercised as a
               result of such acquisition of voting shares;

        (c)    The acquisition of a majority of the voting interests of the
               Company would be deemed to constitute an acquisition of control
               of the Company; and

        (d)    The acquisition of all or substantially all of the assets of the
               Company would be deemed to constitute an acquisition of control
               of the Company.

        Where an investment is reviewable, the non-Canadian making the
investment must file an application in the prescribed form with Industry Canada.
Except in limited circumstances, the Investment Canada Act (Canada) prohibits
reviewable direct investments from being implemented prior to approval being
obtained pursuant to the statutorily prescribed review procedure.

                                       28
<PAGE>
 
        The Investment Canada Act (Canada) also provides that if an acquisition
is made in contravention of it, a court may make an order providing for certain
civil penalties, including requiring the non-Canadian acquiror to divest the
shares of the Company. The Investment Canada Act (Canada) also contains certain
criminal penalties in respect of the provision of false information.

ITEM 7.  TAXATION.
         --------

CERTAIN CANADIAN FEDERAL INCOME TAX CONSEQUENCES

        The Company believes that the following is a summary of the principal
Canadian federal income tax considerations generally applicable to holders of
Common Shares who, for purposes of the Income Tax Act (Canada) (the "Canadian
Tax Act"): (i) will hold Common Shares as capital property; (ii) deal at arm's
length with the Company; (iii) do not and will not have a fixed base or
permanent establishment in Canada; (iv) are not and will not be resident or
deemed to be resident in Canada at any time while they hold Common Shares; (v)
do not use or hold, and are not deemed to use or hold Common Shares in
connection with carrying on a business in Canada; and (vi) in the case of a
non-resident of Canada who carries on an insurance business in Canada and
elsewhere, the Common Shares are not "designated insurance property" pursuant to
the amendments to the Canadian Tax Act and Regulations publicly announced by the
Minister of Finance prior to the date hereof (the "Proposed Amendments") and are
not effectively connected with an insurance business carried on in Canada at any
time (a "non-resident holder"). This summary does not apply to a non-resident
holder with respect to whom the Company is a foreign affiliate within the
meaning of the Canadian Tax Act.

        Certain recent amendments to the Canadian Tax Act (the "mark-to-market
rules") relating to financial institutions (including certain financial
institutions, registered securities dealers and corporations controlled by one
or more of the foregoing) will deem such financial institutions not to hold
their Common Shares as capital property for purposes of the Canadian Tax Act.
Shareholders that are financial institutions should consult their own tax
advisors to determine the tax consequences to them of the application of the
mark-to-market rules.

        This summary is based on the current provisions of the Canadian Tax Act,
the Regulations thereunder, the current provisions of the Canada-United States
Income Tax Convention, 1980 (the "Tax Treaty"), and the current published
administrative practices of Revenue Canada, Customs, Excise and Taxation
("Revenue Canada"). This summary takes into account the Proposed Amendments and
assumes that all the Proposed Amendments will be enacted in their present form.
However, no assurances can be given that the Proposed Amendments will be enacted
in the form proposed, or at all.

        Except for the foregoing, this summary does not take into account or
anticipate any changes in law, whether by legislative, administrative or
judicial decision or action, nor does it take into account provincial,
territorial or foreign income tax legislation or considerations, which may
differ from the Canadian federal income tax considerations described herein.

        This summary is of a general nature only and is not intended to be, nor
should it be construed to be, legal, business or tax advice to any particular
holder of Common Shares.

        DIVIDENDS

        Dividends paid or credited to a non-resident holder on the Common Shares
will be subject to a non-resident withholding tax under the Canadian Tax Act at
the rate of 25%, although such rate may be reduced under the provisions of an
applicable income tax treaty. 

                                       29
<PAGE>
 
For example, under the Tax Treaty, the rate is generally reduced to 15% in
respect of dividends paid to a person who is the beneficial owner and who is
resident in the United States for purposes of the Tax Treaty (and who owns less
than 10% of the Company's voting stock). Under the Tax Treaty, dividends paid to
certain religious, scientific, charitable and other tax exempt organizations and
certain pension organizations that are resident in, and exempt from tax in, the
United States are exempt from Canadian withholding tax. Provided that certain
administrative procedures are observed by the holder, the Company will not be
required to withhold tax on dividend payments to such organizations.

        DISPOSITION OF COMPANY COMMON SHARES

        A non-resident holder will not be subject to tax under the Canadian Tax
Act on any capital gain realized on a disposition or deemed disposition of
Common Shares provided such shares are not "taxable Canadian property" to such
holder at the time of disposition. Generally, the Common Shares will not be
taxable Canadian property to a non-resident holder described above, provided
that such shares are listed on a prescribed stock exchange (which currently
includes the TSE and the NYSE), and the holder, persons with whom such holder
does not deal at arm's length, or the holder and such persons, has not owned (or
had under option) 25% or more of the issued shares of any class or series of the
capital stock of the Company at any time within five years preceding the date in
question.

        Even if the Common Shares are taxable Canadian property to a
non-resident holder, the Tax Treaty will generally exempt such a holder who is
resident in the United States for purposes of the Tax Treaty from tax in respect
of the disposition provided the value of the Common Shares is not derived
principally from real property situated in Canada. The Company is of the view
that the value of the Common Shares is not currently derived principally from
real property situated in Canada.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

        The Company believes that the following general summary accurately
describes all material United States Federal income tax consequences under
current law which are generally applicable to a U.S. Holder (as defined below)
of Common Shares. This discussion does not address all potentially relevant
United States Federal income tax matters and it does not address consequences
peculiar to persons subject to special provisions of United States Federal
income tax law, such as those described below as excluded from the definition of
a U.S. Holder. In addition, this discussion does not cover any state, local or
foreign tax consequences. (See "Certain Canadian Federal Income Tax
Consequences" above).

        The following discussion is based upon the sections of the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, published
Internal Revenue Service ("IRS") rulings, published administrative positions of
the IRS and court decisions that are currently applicable, any or all of which
could be materially and adversely changed, possibly on a retroactive basis, at
any time. In addition, this discussion does not consider the potential effects,
both adverse and beneficial, of any proposed legislation. The following
discussion is for general information only and it is not intended to be, nor
should it be construed to be, legal or tax advice to any holder or prospective
holder of Common Shares and no opinion or representation with respect to the
United States Federal income tax consequences to any such holder or prospective
holders is made. Accordingly, holders and prospective holders of Common Shares
should consult their own tax advisors about the Federal, state, local, and
foreign tax consequences of purchasing, owning and disposing of Common Shares,
Purchase Warrants and Common Shares issuable upon exercise of the Purchase
Warrants.

                                       30
<PAGE>
 
        U.S. HOLDERS

        As used herein, a "U.S. Holder" includes a holder of Common Shares who
is a citizen or resident of the United States, a corporation created or
organized in or under the laws of the United States or of any political
subdivision thereof, any entity which is taxable as a corporation for U.S. tax
purposes and which is organized under the laws of the United States or any
political subdivision thereof, and any other person or entity whose ownership of
Common Shares is effectively connected with the conduct of a trade or business
in the United States. A U.S. Holder does not include persons subject to special
provisions of United States Federal income tax law, such as tax-exempt
organizations, qualified retirement plans, financial institutions, insurance
companies, real estate investment trusts, regulated investment companies,
broker-dealers, nonresident alien individuals or foreign corporations whose
ownership of Common Shares is not effectively connected with the conduct of a
trade or business in the United States and shareholders who acquired their stock
through the exercise of employee stock options or otherwise as compensation.
This discussion is limited to U.S. Holders who hold their Common Shares as
capital assets.

        DISTRIBUTIONS ON COMMON SHARES

        U.S. Holders receiving dividend distributions (including constructive
dividends) with respect to Common Shares are required to include in their gross
income for United States Federal income tax purposes, the gross amount of such
distributions to the extent that the Company has current or accumulated earnings
and profits, without reduction for any Canadian income tax withheld from such
distributions. Such Canadian tax withheld may be credited, subject to certain
limitations, against the U.S. Holder's United States Federal income tax
liability or, alternatively, may be deducted in computing the U.S. Holder's
United States Federal taxable income by those who itemize deductions. (See more
detailed discussion under the heading "Foreign Tax Credit" below). To the extent
that such distributions exceed current or accumulated earnings and profits of
the Company, they will be treated first as a tax free return of capital up to
the U.S. Holder's adjusted basis in the Common Shares and thereafter as gain
from the sale or exchange of the Common Shares. Preferential tax rates for net
capital gains are applicable to a U.S. Holder which is an individual, estate or
trust. There are currently no preferential tax rates for long-term capital gains
for a U.S. Holder which is a corporation or is an entity taxable as a
corporation.

        Dividends paid on the Common Shares will not generally be eligible for
the dividends received deduction provided to corporations receiving dividends
from certain United States corporations or foreign corporations doing business
in the United States.

        FOREIGN TAX CREDIT

        A U.S. Holder who pays (or has withheld from distributions) Canadian
income tax with respect to the ownership of Common Shares may be entitled, at
the option of the U.S. Holder, to either a deduction or a tax credit for such
foreign tax paid or withheld. Generally, it will be more advantageous to claim a
credit because a credit reduces United States Federal income taxes on a
dollar-for-dollar basis, while a deduction merely reduces the taxpayer's income
subject to tax. This election is made on a year-by-year basis and applies to all
foreign taxes paid by (or withheld from amounts paid to) the U.S. Holder during
that year. There are significant and complex limitations which apply to the
credit, among which is the general limitation that the credit cannot exceed the
proportionate share of the U.S. Holder's United States income tax liability that
the U.S. Holder's foreign source income bears to his or her worldwide taxable
income. In the determination of the application of this limitation, the various
items of income and deduction must be classified into foreign and domestic
sources. Complex rules govern this classification process. There are further
limitations on the foreign 

                                       31
<PAGE>
 
tax credit for certain types of income such as "passive income", "high
withholding tax interest", "financial services income", and certain other
classifications of income. The availability of the foreign tax credit and the
application of the limitations on the credit are fact specific and holders and
prospective holders of Common Shares should consult their own tax advisors
regarding their individual circumstances.

        DISPOSITION OF COMMON SHARES

        A U.S. Holder will recognize a gain or loss upon the sale of Common
Shares equal to the difference, if any, between (i) the amount of cash plus the
fair market value of any property received, and (ii) and shareholder's tax basis
in the Common Shares. This gain or loss will be a capital gain or loss if the
Common Shares are a capital asset in the hands of the U.S. Holder, and will be a
short-term or long-term capital gain or loss depending upon the holding period
of the U.S. Holder. Gains and losses are netted and combined according to
special rules in arriving at the overall capital gain or loss for a particular
tax year. Deductions for net capital losses are subject to significant
limitations. For U.S. Holders who are individuals, any unused portion of such
net capital loss may be carried over to be used in later tax years until such
net capital loss is thereby exhausted. For U.S. Holders that are corporations
(other than corporations subject to Subchapter S of the Code), an unused net
capital loss may be carried back three years from the loss year and carried
forward five years from the loss year to be offset against capital gains until
such net capital loss is thereby exhausted.

        CURRENCY EXCHANGE GAINS OR LOSSES

        U.S. Holders generally are required to calculate their taxable incomes
in United States dollars. Accordingly, a U.S. Holder who purchases Common Shares
with Canadian dollars will be required to determine the tax basis of such shares
in United States dollars based on the exchange rate prevailing on the settlement
date of the purchase (and may be required to recognize the unrealized gain or
loss, if any, in the Canadian currency surrendered in the purchase transaction).
Similarly, a U.S. Holder receiving dividends or sales proceeds from Common
Shares in Canadian dollars will be required to compute the dividend income or
the amount realized on the sale, as the case may be, in United States dollars
based on the exchange rate prevailing at the time of receipt, in the case of
dividends, and on the settlement date, in the case of sales, on an established
securities exchange. Any gain or loss recognized on a disposition of Canadian
currency in connection with the described transactions generally will be treated
as an ordinary gain or loss.

        OTHER CONSIDERATIONS

        In the following circumstances, the above sections of this discussion
may not describe the United States Federal income tax consequences resulting
from the holding and disposition of Common Shares:

        FOREIGN PERSONAL HOLDING COMPANY

        If at any time during a taxable year more than 50% of the total combined
voting power or the total value of the Company's outstanding shares is owned,
directly or indirectly, by five or fewer individuals who are citizens or
residents of the United States and 60% or more of the Company's gross income for
such year was derived from certain passive sources (e.g., from dividends
received from its subsidiaries), the Company would be treated as a "foreign
personal holding company." In that event, U.S. Holders that hold Common Shares
would be required to include in gross income for such year their allocable
portions of such passive income to the extent the Company does not actually
distribute such income.

                                       32
<PAGE>
 
        FOREIGN INVESTMENT COMPANY

        If 50% or more of the combined voting power or total value of the
Company's outstanding shares are held, directly or indirectly, by citizens or
residents of the United States, United States domestic partnerships or
corporations, or estates or trusts other than foreign estates or trusts (as
defined by the Code Section 7701(a)(31)) and the Company is found to be engaged
primarily in the business of investing, reinvesting, or trading in securities,
commodities, or any interest therein, it is possible that the Company might be
treated as a "foreign investment company" as defined in Section 1246 of the
Code, causing all or part of any gain realized by a U.S. Holder selling or
exchanging Common Shares to be treated as ordinary income rather than a capital
gain. These rules should not apply because the Company's activities do not
consist primarily of investing, reinvesting or trading in securities or
commodities.

        PASSIVE FOREIGN INVESTMENT COMPANY

        As a foreign corporation with U.S. Holders, the Company could
potentially be treated as a passive foreign investment company ("PFIC"), as
defined in Section 1296 of the Code, depending upon the percentage of the
Company's income which is passive, or the percentage of the Company's assets
which is producing passive income. U.S. Holders who receive certain dividends
on, or who dispose of, shares of a PFIC are subject to an additional tax and to
an interest charge based on the value of deferral of tax on undistributed
earnings of the PFIC for the period during which the shares of the PFIC are
owned, in addition to treatment of any gain realized on the disposition of
shares of the PFIC as ordinary income rather than a capital gain. However, if
the U.S. Holder makes a timely election to treat a PFIC as a qualified electing
fund ("QEF") with respect to such shareholder's interest therein, the
above-described rules generally will not apply. Instead, the electing U.S.
Holder would include annually in his gross income his pro rata share of the
PFIC's ordinary earnings and net capital gain regardless of whether such income
or gain was actually distributed. A U.S. Holder of a QEF can, however, elect to
defer the payment of United States Federal income tax on such income inclusions.
Special rules apply to U.S. Holders who own their interests in a PFIC through
intermediate entities or persons. Once a foreign corporation is classified as a
PFIC, it is generally always classified as a PFIC, even if subsequent events
would otherwise change the corporation's status as a PFIC.

        In determining whether a foreign corporation has the requisite
proportion of passive income or assets, a look-through rule is applied to the
foreign corporation's 25% or more owned subsidiaries (both direct and indirect),
under which a proportionate share of the assets of such subsidiaries are treated
as owned by the foreign parent corporation. Under this look through rule, the
Company would be treated as owning all of the assets of its direct and indirect
subsidiaries. Where the Company is treated as owning all of the assets of its
direct and indirect subsidiaries, it is unlikely that the Company would be
treated as a PFIC.

        However, the PFIC rules are exceedingly complex, and each U.S. Holder is
encouraged and expected to consult his or her own tax advisor regarding the
effect of the Company's potential PFIC status on the U.S. Holder.

        CONTROLLED FOREIGN CORPORATION

        If more than 50% of the voting power of all classes of stock or the
total value of the stock of the Company is owned, directly or indirectly, by
citizens or residents of the United States, United States domestic partnerships
and corporations, or estates or trusts other than foreign estates or trusts,
each of whom owns 10% or more of the total combined voting power of all classes
of stock of the Company ("United States shareholder"), the Company could be

                                       33
<PAGE>
 
treated as a "controlled foreign corporation" under Subpart F of the Code. This
classification would effect many complex results including the required
inclusion by such United States shareholders in income of their pro rata shares
of "Subpart F income" (as specially defined by the Code) of the Company. In
addition, under Section 1248 of the Code, any gain from the sale or exchange of
stock by a U.S. Holder of Common Shares who is or was a United States
shareholder at any time during the five year period ending with the sale or
exchange is treated as ordinary dividend income to the extent of earnings and
profits of the Company attributable to the stock sold or exchanged. Because of
the complexity of these rules, and because it is not clear that these rules
would apply to the U.S. Holders of Common Shares (these rules apply only to
owners of 10% of the Company's shares), a more detailed review of these rules is
outside of the scope of this discussion.

        The foregoing summary is a general discussion of the United States
Federal income tax considerations to U.S. Holders of Common Shares under current
law. It does not discuss all the tax consequences that may be relevant to
particular holders in light of their circumstances or to holders subject to
special rules, such as tax-exempt organizations, qualified retirement plans,
financial institutions, insurance companies, real estate investment trusts,
regulated investment companies, broker-dealers, nonresident alien individuals or
foreign corporations whose ownership of Common Shares is not effectively
connected with the conduct of a trade or business in the United States,
shareholders who acquired their stock through the exercise of employee stock
options or otherwise as compensation, and any other non-U.S. Holders. In
addition, U.S. Holders may be subject to state, local or foreign tax
consequences. This discussion is not intended to be, nor should it be construed
to be, legal or tax advice to any holder or prospective holder of Common Shares
and no opinion or representation with respect to the United States Federal
income tax consequences to any such holder or prospective holder is made.
Holders and prospective holders should therefore consult their own tax advisors
with respect to their particular circumstances. This discussion is limited to
U.S. Holders who hold their Common Shares as capital assets.

ITEM 8.  SELECTED FINANCIAL DATA.
         -----------------------

        The following selected financial data, for the years 1992 through 1996,
have been derived from the Company's (and its predecessor, FMC Gold's)
consolidated financial statements, including the consolidated balance sheets at
December 31, 1996 and 1995 and the related consolidated statements of
operations, statements of cash flows, and statements of changes in stockholder's
equity for each of the three years ended December 31, 1996, and the notes
thereto, appearing elsewhere herein.

<TABLE> 
<CAPTION> 
                                                       Year Ended December 31,
                                               ----------------------------------------
                                               1996     1995     1994    1993     1992
                                               ----     ----     ----    ----     ----
                                               (in millions, except per share data)

Summary of Earnings
<S>                                          <C>      <C>      <C>    <C>      <C>  
Sales                                         $76.2    $57.4    $63.4  $118.9   $150.0
Costs and expenses
  Cost of sales                                56.2     30.1     38.8    78.6     94.4
  Depreciation, depletion, and amortization    21.0     21.2     15.3    18.5     25.8
  Exploration costs                            13.4     10.8     10.9    14.2     12.1
  Selling, general and administrative expenses  6.4      5.1      6.5     6.9      7.5
  Write-downs and other charges                   -        -        -    60.6        -
Total costs and expenses                       97.0     67.2     71.5   178.8    139.8
-------------------------------------------- ------- -------- -------- ------- --------
Operating income (loss)                      (20.8)    (9.8)    (8.1)  (59.9)     10.2
Interest income                                 4.9      5.9      8.7     8.3      6.0
</TABLE> 

                                       34
<PAGE>
 
<TABLE> 

<S>                                          <C>      <C>      <C>    <C>      <C>  
Gain on sale of assets                            -      1.7        -       -        -
-------------------------------------------- ------- -------- -------- ------- --------
Income (loss) before income taxes            (15.9)    (2.2)      0.6  (51.6)     16.2
Provision (benefit) for income taxes              -    (4.5)    (2.1)     2.2      1.8
-------------------------------------------- ------- -------- -------- ------- --------
Net income (loss)                            $(15.9)  $  2.3   $  2.7  $(53.8)   $14.4
-------------------------------------------- ------- -------- -------- ------- --------
Earnings (loss) per common share             $(0.22)   $0.03    $0.04  $(0.73)   $0.20
-------------------------------------------- ------- -------- -------- ------- --------
Number of common shares used in earnings

    per share  computations (thousands)      73,563   73,484   73,484  73,484   73,484
-------------------------------------------- ------- -------- -------- ------- --------
Total Assets at December 31                  $214.6   $225.2   $235.1  $238.6   $291.9
-------------------------------------------- ------- -------- -------- ------- --------
Total Dividends                              $  1.5   $  3.7   $  3.7  $  3.7   $  3.7
-------------------------------------------- ------- -------- -------- ------- --------
</TABLE> 

See "Item 1. Description of Business" for additional information about the
Company's 1996 reorganization.

ITEM 9.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         -----------------------------------------------------------------------
         OF OPERATIONS.
         -------------

        Reference is made to the Consolidated Financial Statements of the
Company which form part of this Annual Report and on which the following
discussion is based. The Consolidated Financial Statements, furnished pursuant
to Item 17, are presented in accordance with Canadian GAAP which, in the case of
the Company, do not differ materially from U.S. GAAP except for certain
different disclosures required under U.S. GAAP as outlined in Note 14 of the
Notes to the Consolidated Financial Statements.

        The Consolidated Financial Statements include the operations of the
Company, as well as Meridian Gold Canada Inc., Meridian Gold Company, Meridian
Rossi Corp., Meridian Jerritt Canyon Corporation, Meridian Beartrack Company and
Minera Meridian Ltda., the Company's direct and indirect subsidiaries.

        Included herein are certain forward-looking statements that involve
various risks, uncertainties and other factors. See "Cautionary Statement" on
page 5 of this Annual Report.

RESULTS OF OPERATIONS

        1996 COMPARED WITH 1995

        Sales increased to $76.2 million from $57.4 million in 1995 reflecting a
full year's production from the Beartrack mine, which started production in July
1995, partly offset by a slight decrease in production from the Company's 30
percent interest in the Jerritt Canyon mine. Gold production of 202,000 ounces
increased 34 percent from 1995 levels, reflecting a 60,000 ounce increase at the
Beartrack mine during its first full year of production, offset in part by a
5,000 ounce reduction at Jerritt Canyon. The lower production at Jerritt Canyon
was a result of processing the remaining low grade stockpiles through the wet
mill.

        The average realized price of gold increased to $392 per ounce from $389
in 1995, reflecting higher market prices during the first half of 1996 and the
benefit of hedging positions on Beartrack gold production.

        Cost of sales increased to $56.2 million in 1996 from $30.1 million in
1995 due to the full year of production at Beartrack, higher mining costs at
Jerritt Canyon, and an additional charge of $5.6 million for a change in
engineering estimates associated with the Royal Mountain King mine which was
shut down in July 1994. Average cash costs of 

                                       35
<PAGE>
 
production increased to $239 per gold equivalent ounce from $221 per gold
equivalent ounce in 1995. Beartrack cash costs increased to $190 per gold
equivalent ounce from $166 in 1995 due to processing the expected lower grade
ores from the North Pit. Jerritt Canyon cash costs per gold equivalent ounce of
$297 were $47 per ounce higher than 1995 due to lower production and inclement
weather in the first half of the year.

        Exploration spending of $13.4 million in 1996 increased from the $10.8
million investment made in 1995, reflecting the Company's commitment to bring
advanced stage opportunities closer to a production decision. Spending continues
to be focused on the El Penon project in northern Chile and the Rossi project on
the Carlin Trend in Nevada. Additional exploration spending was also committed
to increasing reserves around the Beartrack and Jerritt Canyon operations.
Selling, general and administrative expenses increased to $6.4 million in 1996
from $5.1 million in 1995, primarily due to a reserve of $2.0 million against a
note receivable from Arimetco Inc. related to the November 1995 purchase of
Paradise Peak. Arimetco Inc. filed for Chapter 11 bankruptcy in January 1997.

        Net loss was $15.9 million in 1996 compared with net income of $2.3
million in 1995. The Company did not recognize a tax benefit for 1996. The 1995
income resulted from $4.5 million of tax benefits associated with the
utilization of net operating loss carrybacks which were made available through
the previously existing tax sharing agreement with FMC Corporation.

        1995 COMPARED WITH 1994

        Sales decreased to $57.4 million from $63.4 million in 1994, reflecting
the winding down of residual heap leach production at Paradise Peak and the July
1994 shutdown of Royal Mountain King, offset by the start-up of the Beartrack
mine in July 1995 and slightly higher precious metals prices. Gold production
declined 7 percent and silver production declined 82 percent. At Jerritt Canyon,
the Company's 30 percent share of gold production was even with 1994 production
of 98,000 ounces as higher mill ore grades offset slightly lower throughput and
recoveries. At Paradise Peak, gold production declined to 4,000 ounces in 1995
due to residual heap leaching operation. The Royal Mountain King mine was shut
down in July 1994, producing 26,000 ounces of gold prior to closing. Partly
offsetting the lost production at Paradise Peak and Royal Mountain King was the
start up of the Beartrack mine, where gold production reached 49,000 ounces in
1995. Silver production in 1995 continued to decline to 27,000 ounces compared
with 154,000 ounces in 1994, as the Paradise Peak heap leach operation came to a
close.

        The average realized price of gold increased to $389 per ounce from $384
in 1994, reflecting higher market prices and the benefit of hedging positions on
gold production from Beartrack.

        On November 30, 1995, the Company sold the stock of FMC Paradise Peak
Company to Arimetco, Inc. for $2.0 million in cash, a $2.0 million unsecured
promissory note and the assumption by Arimetco of all reclamation liabilities.
The Company recorded a pre-tax gain on the transaction of $6.2 million, of which
$1.7 million resulted from the sale of assets and $4.5 million represented the
reversal of the accrued reclamation liability through cost of sales.

        Cost of sales decreased to $30.1 million in 1995 from $38.8 million in
1994 due to lower cash mining and milling costs at Jerritt Canyon, the 1994
shutdown of Royal Mountain King and the reversal of the accrued reclamation
costs at Paradise Peak. Partly offsetting these reductions was the incremental
production cost at Beartrack. Average cash costs of production decreased to $221
per gold equivalent ounce from $246 in 1994, reflecting the 

                                       36
<PAGE>
 
addition of lower-cost production from Beartrack. Jerritt Canyon cash costs per
gold equivalent ounce decreased to $250 from $283 due to lower mining and
milling costs per ton. Beartrack cash costs per gold equivalent ounce were $166.
Cash costs at Paradise Peak increased to $155 per gold equivalent ounce in 1995
from $124 in 1994 as costs were spread over significantly fewer ounces of
production.

        Exploration spending of $10.8 million in 1995 was essentially unchanged
from $10.9 million in 1994. Spending was primarily focused on the El Penon
project in northern Chile and the Rossi project on the Carlin Trend in Nevada.
Selling, general and administrative expenses decreased to $5.1 million in 1995
from $6.5 million in 1994 due to lower allocated costs from FMC Corporation, and
continued cost reduction efforts. Costs allocated from FMC Corporation are
determined as a percentage of the Company's revenues relative to FMC Corporation
consolidated revenue, multiplied by FMC Corporation corporate overhead. Interest
income decreased to $5.9 million in 1995 from $8.7 million in 1994 due to lower
cash balances on loans to FMC Corporation as well as lower interest rates.

        Net income was $2.3 million in 1995 compared with net income of $2.7
million in 1994. The Company recognized tax benefits of $4.5 million in 1995 and
$2.1 million in 1994 associated with the utilization of net operating loss
carrybacks. The tax benefits were made available through the Company's tax
sharing agreement with FMC Corporation. Earnings per share were $0.03 for 1995,
slightly lower than 1994.

TAXES

        As a result of the merger and reincorporation in July 1996, the Company
has established new tax bases in all of the Company's assets.

LIQUIDITY AND CAPITAL RESOURCES

        Cash to meet the Company's operating needs, finance capital expenditures
and fund exploration activities was provided from operations and existing cash
reserves. At December 31, 1996, cash and cash equivalents totaled $82.6 million,
primarily in the form of short-term Euro-deposits which have varying maturities
and are payable on demand.

        Capital expenditures decreased to $13.9 million in 1996 from $36.9
million in 1995. Capital expenditures in 1996 related to Beartrack were $4.7
million versus $25.1 million in 1995, as mine development was completed. $9.0
million of mine development and equipment additions were made at Jerritt Canyon
in 1996.

        Expected cash requirements for 1997 include approximately $20 million
for planned capital expenditures, primarily associated with mine development at
Jerritt Canyon and heap leach pad expansion at Beartrack. Exploration spending
for 1997 is expected to approximate $20 million. The Company expects to fund
these requirements from cash flow from operations and existing cash and cash
equivalents.

        Should mine development at any of the Company's existing exploration
properties prove beneficial, significant cash requirements may be necessary. The
Company believes that any unexpected cash requirements could be funded by
existing cash reserves or borrowings from third parties.

OUTLOOK

        Annual production is estimated to be approximately 200,000 ounces in
1997 based upon continued operation of the Beartrack and Jerritt Canyon mines.
Beartrack should again 

                                       37
<PAGE>
 
produce a higher proportion of the total production. Beartrack cash costs are
expected to increase slightly in 1997 due to higher processing costs and
slightly lower grades, while Jerritt Canyon cash costs are expected to decline
due to lower mining costs. Exploration at both operations as well as the
Company's advanced-stage opportunities in Chile and Nevada continue to be
successful in delineating mineralization and are particularly encouraging.

ITEM 10.       DIRECTORS AND OFFICERS OF REGISTRANT.

        The following table provides the names of the directors and executive
officers of the Company as of December 31, 1996, the offices held by them, and
their terms of office. Directors are elected for one year terms and until their
successors have been duly elected, and officers serve at the pleasure of the
Board of Directors.

       NAME AND RESIDENCE         POSITION WITH COMPANY       DIRECTOR OR
       ------------------         ---------------------       -----------
                                                              OFFICER SINCE
                                                              -------------

       Michael J. Callahan (1)    Director                          1996
       Winnetka, Illinois

       John A. Eckersley (1)      Director                          1996
       West Vancouver, BC

       Brian J. Kennedy (1)       Director, President and           1996
       Reno, Nevada               Chief Executive Officer

       Dr. David S. Robertson     Director, Chairman of the         1996
       (1)                        Board
       North York, Ontario

       John C. White (1)          Director                          1996
       Oakville, Ontario

       Christopher D.S. Bates     Vice-President,                   1996
       Vancouver, BC              Business Development

       Donald L. Beckwith         Vice-President,                   1996
       Reno, Nevada               Operations

       Edward H. Colt             Vice-President,                   1996
       Reno, Nevada               Finance and
                                  Chief Financial Officer

       Richard C. Lorson          Vice-President,                   1996
       Reno, Nevada               Exploration

       Jay A. Nutt (2)            Controller                        1996
       Reno, Nevada

       Robert T. Stuart           Corporate Secretary               1996
       Toronto, Ontario


----------
(1)  Member of Audit Committee
(2)  Resigned from the Company on January 31, 1997

                                       38
<PAGE>
 
ITEM 11.       COMPENSATION OF DIRECTORS AND OFFICERS.
               --------------------------------------

        During the fiscal year ended December 31, 1996, the Company and its
subsidiaries paid a total of $957,144 in cash compensation to its directors and
executive officers (10 people, excluding Jay A. Nutt). That amount does not take
into account stock options granted to or exercised by such individuals and other
non-cash compensation, as more fully described below.

        Pursuant to applicable Canadian securities legislation, the Company is
required to disclose to shareholders compensation paid to its executive
officers. The following reflects certain information regarding executive officer
compensation that has been disclosed to shareholders of the Company under
applicable Canadian law.

SUMMARY COMPENSATION TABLE

        The Company's Chief Executive Officer and each of the four most
highly-compensated officers who was serving as an executive officer on December
31, 1996 (the "Named Executive Officers"), each of whom was employed with the
Company's predecessor prior to beginning service with the Company, were all
appointed to their respective positions with the Company during or after July
1996. Accordingly, the following table and notes summarize the compensation of
the Named Executive Officers for the fiscal year ended December 31, 1996.

<TABLE> 
                                                          LONG-TERM
                                                          ---------
                             ANNUAL COMPENSATION(1)     COMPENSATION
                          ----------------------------  ------------
NAME AND TITLE              SALARY   BONUS(2)  OTHER(3) OPTION GRANTS  ALL OTHER (1)
                            ------   -----     -----    -------------  ---------
 <S>                      <C>      <C>          <C>          <C>         <C>  
Brian J. Kennedy (4) (5)   170,278    105,000    2,675        250,000     250,000
President and Chief
Executive Officer

Donald L. Beckwith (5)     128,394     48,769   22,342        113,300     105,000
Vice-President,
Operations

Edward H. Colt (6)         125,000      3,125        -        113,300      65,000
Vice-President, Finance
and Chief Financial
Officer

Christopher D.S. Bates     150,000     25,875        -        105,000           -
Vice-President,
Business Development

Richard C. Lorson,         108,215     30,012      500        113,300           -
Vice President,
Exploration
</TABLE>

----------
(1) All figures, other than numbers of options granted, are expressed in U.S.
    dollars, except for those relating to Mr. Bates, which are expressed in
    Canadian dollars. Salaries for Messrs. Colt, Bates and Lorson have been
    annualized to reflect as if each served in his current capacity for the full
    year.

(2) Bonuses paid reflect, among other factors, the number of months of service
    of the Named Executive Officer in 1996, as follows: Mr. Kennedy and Mr.
    Beckwith, 12 months; Mr. Lorson, 9 months; Mr. Bates, 6 months and Mr. Colt,
    one month.

(3) Consists of matching payments pursuant to a 401(k) Thrift Plan established
    by a subsidiary of the Company, and, in the case of Mr. Beckwith only,
    certain payments relating to unused vacation entitlements. 

                                       39
<PAGE>
 
    Excludes any prerequisites and other personal benefits not greater than the
    lesser of Cdn. $50,000 and 10% of the Named Executive Officer's total annual
    salary and bonus.

(4) On July 31, 1996, Mr. Kennedy was issued 10,000 non-voting Preferred Shares,
    Series 1 of the Company, with a face amount of U.S. $100,000, which amount
    is included under "All Other" compensation.

(5) "All Other" compensation includes, in the case of Messrs. Kennedy and
    Beckwith, certain incentive payments made in 1996 by the former parent of
    FMC Gold Company, the Company's predecessor.

(6) "All Other" compensation for Mr. Colt consists of certain payments in
    connection with his hiring.

LONG-TERM INCENTIVE PLAN

        There were no awards or payouts to the Named Executive Officers during
the fiscal year ended December 31, 1996 under any arrangements of the Company
which would constitute a long-term incentive plan.

GRANTS OF OPTIONS

        The following table provides information concerning the grants of
options under the Company's 1996 Stock Option Plan to the Named Executive
Officers during the fiscal year ended December 31, 1996.

                    OPTIONS     % OF   EXERCISE      VALUE AT        EXPIRATION
                    -------     ----   --------      --------        ----------
NAME                GRANTED     TOTAL  PRICE(1)    GRANT DATE(2)        DATE
----                -------     -----  -----       ----------           ----
                                      
Brian J. Kennedy       250,000    15.0      3.65           3.65    July 31, 2006
Donald L. Beckwith     113,300     6.8      3.65           3.65    July 31, 2006
Edward H. Colt         113,300     6.8      4.50           4.50    Nov. 18, 2006
Christopher D.S.       105,000     6.3      5.00           5.00    July 31, 2006
Bates                                 
Richard C. Lorson      113,300     6.8      3.65           3.65    July 31, 2006


------------       
(1) Exercise prices are expressed in U.S. dollars, except for those relating to
    Mr. Bates, which are expressed in Canadian dollars. All exercise prices are
    the closing price of the Common Shares of the Company on either the TSE or
    NYSE on the trading day prior to the grant date.

(2) This figure is the closing price of the Common Shares of the Company on
    either the TSE or NYSE on the grant date, or, for options granted on July
    31, 1996, the initial public offering price (U.S. $3.65/Cdn. $5.00).

OPTIONS EXERCISES AND YEAR-END OPTION VALUES

        The following table provides information concerning (i) options
exercised by any Named Executive Officer during the fiscal year ended December
31, 1996; and (ii) the number and value at December 31, 1996 of unexercised
options held by the Named Executive Officers. In the table, "exercisable"
options are those for which the vesting period or conditions, if any, have been
met, and "in-the-money" options are those where the exercise price was less than
the market price of the Common Shares of the Company at December 31, 1996.

<TABLE> 
<CAPTION> 
                                                                             VALUE OF UNEXERCISED
                       OPTIONS EXERCISED         UNEXERCISED OPTIONS       IN-THE-MONEY OPTIONS(1)
                     ----------------------    ------------------------    -------------------------
                     SECURITIES  AGGREGATE                     NOT                         NOT
                     ----------  ---------                     ---                         ---
NAME                  ACQUIRED   VALUE(1)      EXERCISABLE  EXERCISABLE    EXERCISABLE EXERCISABLE
----                  --------   -----         -----------  -----------    ----------- -----------
<S>                   <C>        <C>           <C>          <C>            <C>         <C> 
Brian J. Kennedy              -          -         109,800     250,000              -       118,750
</TABLE> 

                                       40
<PAGE>
 
<TABLE> 

<S>                   <C>        <C>           <C>          <C>            <C>         <C> 
Donald L. Beckwith       38,600     86,850          29,000     113,300              -        53,818
Edward H. Colt                -          -               -     113,300              -             -
Christopher D.S.              -          -               -     105,000              -        49,875
Bates
Richard C. Lorson         6,000     14,250             600     113,300              -        53,813
</TABLE> 

----------
(1)      All figures relating to "value" are expressed in U.S. dollars.

PENSION PLANS

        The Named Executive Officers are covered by a defined benefit pension
plan of Meridian Gold Company, the Company's principal operating subsidiary. The
following table provides information concerning the total annual retirement
benefit payable under these arrangements at retirement (normally at age 65).

                               YEARS OF SERVICE(1)
                  --------------------------------------------------------------
FINAL EARNINGS        10            15           20            25           30
--------------      ------        ------       ------        ------       ----

100,000             13,535        20,302       27,070        33,837       40,604
150,000             21,035        31,552       42,070        52,587       63,104
200,000             28,536        42,804       57,072        71,340       85,608
250,000             36,035        54,052       72,070        90,087      108,104

----------
(1)      All figures are expressed in U.S. dollars.

        Compensation covered by this plan includes only the remuneration
appearing in the "Salary" and "Bonus" columns in the Summary Compensation Table.
Benefits are not subject to any deduction for social security or other offset
amounts. The Named Executive Officers have the following number of years of
service credited: Mr. Kennedy - 23, Mr. Bates - 1, Mr. Beckwith - 16, Mr. Colt -
1, and Mr. Lorson - 15. Credited years of service, in the case of Messrs.
Kennedy, Beckwith and Lorson, include service with FMC Gold, the Company's
predecessor.

EMPLOYMENT CONTRACTS

        Each of the Named Executive Officers has entered into an employment
contract with the Company or Meridian Gold Company. Each of these contracts has
a term of five years, with an automatic renewal for five years. Compensation is
comprised of base salary, bonus and stock options, generally at the discretion
of the Board of Directors of the Company, together with certain benefits. The
employment contracts also provide for certain payments to the employee upon
certain defined events of termination of employment (including termination or a
change in responsibility after a change of control of the Company). These
payments range from 18 months to 24 months of the employee's regular monthly
compensation.

ITEM 12        OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES.
               --------------------------------------------------------------

        In 1989, the stockholders of FMC Gold approved the FMC Gold Company 1988
Long-term Incentive Compensation Plan, which authorized the Board of Directors
to grant awards, payable in the form of cash and non-qualified stock options, to
key employees if certain specific performance objectives were met over a
four-year period ended December 31, 1991.

        The stock options granted in 1988 bear an exercise price ranging from
$9.625 to $11.25, the fair market value at the date of grant, and expire May 6,
1998. During 1992, 

                                       41
<PAGE>
 
additional options for 223,000 shares of common stock were granted at an
exercise price of $4.25 which was fair market value at date of grant with an
expiration date of April 2007.

        In the 1996 reincorporation merger, each outstanding option to purchase
shares of FMC Gold common stock was converted by FMC Gold and the Company into
an option to purchase an equal number of Company Common Shares.

        On June 7, 1996, the Company's Board of Directors adopted the Meridian
Gold Inc. 1996 Stock Option Plan (the "Plan"), which provides for the granting
of options to purchase Common Shares (the "Option Shares") to certain directors,
officers and employees of the Company (the "Participants"). The aggregate number
of Option Shares which may be reserved for issuance under this Plan shall not
exceed 3,750,000. On July 23, 1996, the Stockholders of FMC Gold approved the
adoption of the Plan. The purpose of the Plan is to develop the interest and
incentive of eligible employees, officers and directors of the Company in its
growth and development by giving such Participants an opportunity to purchase
Common Shares on a favorable basis, thereby advancing the interests of the
Company, enhancing the value of the Common Shares for the benefit of all
shareholders and increasing the ability of the Company to attract and retain
skilled and motivated individuals in the service of the Company. The Option
Shares granted during 1996 were granted at exercise prices ranging from $3.65 to
$4.50 which was fair market value at date of grant, and with expiration dates in
2006.

        At December 31, 1996 options to purchase 1,679,950 Common Shares were
outstanding with terms up to ten years from the date of grant at an exercise
price equal to the market price prevailing at the time of the grants, as
detailed in the following table:

                                              NUMBER OF       OPTION PRICE
                                          COMMON SHARES        $ PER SHARE
---------------------------------     ------------------     --------------
Outstanding December 31, 1993                   396,300       4.250-10.625
Granted in 1994                                       - 
Exercised or surrendered, 1994                        - 
---------------------------------     ------------------     --------------
Outstanding, December 31, 1994                  396,300       4.250-10.625
Granted in 1995                                       - 
Exercised or surrendered, 1995                   65,500       4.250-10.625
---------------------------------     ------------------     --------------
Outstanding, December 31, 1995                  330,800       4.250-10.625
Granted in 1996                               1,544,150        3.650-4.500
Exercised or surrendered, 1996                  195,000       3.650-10.625
---------------------------------     ------------------     --------------
Outstanding, December 31, 1996                1,679,950       3.650-10.625
---------------------------------     ------------------     --------------
Exercisable, December 31, 1996                  176,100       4.250-10.625
---------------------------------     ------------------     --------------

        As of December 31, 1996, the directors and officers of the Company, as a
group (10 persons, excluding Jay A. Nutt), held options to purchase an aggregate
of 874,300 Common Shares.

        In 1996, the Company established a Shareholder Rights Plan. The Plan has
a term of three years and expires on July 31, 1999. In implementing the Plan,
one Right was distributed for each common share outstanding on July 31, 1996, as
well as each common share to be issued prior to the Separation Time. The
"Separation Time" is defined as the eighth 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).

                                       42
<PAGE>
 
        A "Take-over Bid" means an offer to acquire voting shares of the Company
(or securities convertible into such shares) which, 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 (including any such shares
held by the Offeror prior to the offer). A "Permitted Bid" and a "Competing
Permitted Bid" are Take-over Bids that are made by means of an offering circular
and (i) are made to all shareholders; (ii) are open for a period of not less
than 60 days; and (iii) contain certain withdrawal rights and extension terms.

        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).

        Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder.

ITEM 13.        INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.
                ----------------------------------------------

        None of the directors or officers of the Company, nor any associate or
affiliate of any such person, has or had any direct or indirect material
interest, since January 1, 1996, in respect of any matter that has materially
affected or will materially affect the Company or any of its subsidiaries.

        None of the directors or officers of the Company, nor any associate or
affiliate of any such person, has been indebted to the Company or any of its
subsidiaries at any time since January 1, 1996, other than amounts owing for
purchases subject to usual trade terms, for ordinary travel and expense advances
and for other transactions in the ordinary course of business.

                                        PART II

ITEM 14.       SECURITIES TO BE REGISTERED.
               ---------------------------

        None.

                                        PART III

ITEM 15.       DEFAULTS UPON SENIOR SECURITIES.
               -------------------------------

        None.

ITEM 16.       CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
               ------------------------------------------------------------
               SECURITIES.
               ----------
        None.

                                       43
<PAGE>
 
                                        PART IV

ITEM 17.       FINANCIAL STATEMENTS.
               --------------------

        See Consolidated Financial Statements and Exhibits listed in Item 19
hereof and filed as part of this Annual Report. The financial statements of the
Company have been prepared on the basis of Canadian GAAP. A reconciliation to
U.S. GAAP appears in Note 14 thereto.

ITEM 18.       FINANCIAL STATEMENTS.
               --------------------

        Not applicable.

ITEM 19.       FINANCIAL STATEMENTS AND EXHIBITS.
               ---------------------------------

FINANCIAL STATEMENTS

        Consolidated balance sheets of the Company as at December 31, 1996 and
December 31, 1995, and consolidated statements of operations, cash flows and
changes in shareholders' equity for the years ended December 31, 1996, 1995 and
1994, together with the Auditor's report thereon and notes thereto.

EXHIBITS

        The following exhibits are filed as part of this Annual Report:

2.1*    Form of certificate representing Common Shares of the Company (filed
        with the Company's Registration Statement on Form 8-B (No. 001-12003))

2.2*    Form of certificate representing Instalment Receipts of the Company
        (filed with the Company's Registration Statement on Form 8-B (No. 001-
        12003))

2.3*    Articles of Amalgamation, as amended (filed with the Company's
        Registration Statement on Form S-4 (No. 333-9171))

2.4     By-laws, as amended

2.5     Executive Employment Agreement dated July 1, 1996 between the Company
        and Christopher D.S. Bates

2.6     Executive Employment Agreement dated July 31, 1996 between the Company
        and Donald L. Beckwith

2.7     Executive Employment Agreement dated December 1, 1996 between the
        Company and Edward H. Colt

2.8     Executive Employment Agreement dated July 31, 1996 between the Company
        and Brian J. Kennedy

2.9     Executive Employment Agreement dated July 31, 1996 between the Company
        and Richard C. Lorson

                                       44
<PAGE>
 
2.10*   Meridian Gold Inc. 1996 Stock Option Plan (filed with the Company's
        Registration Statement on Form S-4 (No. 333-9171))

2.11*   Shareholder Rights Plan (filed with the Company's Registration Statement
        on Form 8-B (No. 001-12003))

2.12*   Instalment Receipt Agreement (filed with the Company's Registration
        Statement on Form 8-B (No. 001-12003))

2.11*   Joint Venture Agreement between Freeport Exploration Company and FMC
        Corporation (filed with FMC Gold Company's Registration Statement on
        Form S-1 (No. 33-14429))

----------
*       Incorporated by reference pursuant to Rule 12b-32 under the Securities
        and Exchange Act of 1934, as amended

                                       45
<PAGE>
 
AUDITORS' REPORT

THE BOARD OF DIRECTORS AND STOCKHOLDERS,
MERIDIAN GOLD INC.:

We have audited the accompanying consolidated balance sheets of Meridian Gold
Inc. and subsidiaries (formerly FMC Gold Company) as of December 31, 1996 and
1995, and the related consolidated statements of operations, cash flows, and
changes in stockholders' equity for each of the years in the three-year period
ended December 31, 1996 which, as described in Note 1, have been prepared on the
basis of accounting principles generally accepted in Canada. These consolidated
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Meridian Gold Inc.
and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three year period
ended December 31, 1996 in conformity with accounting principles generally
accepted in Canada.

/s/KPMG Peat Marwick LLP
-----------------------------
KPMG Peat Marwick LLP
February 18, 1997


MANAGEMENT RESPONSIBILITY FOR FINANCIAL STATEMENTS

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

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

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

/s/ BRIAN J. KENNEDY                      /s/ EDWARD H. COLT
-----------------------------------       -------------------------------
BRIAN J. KENNEDY                          EDWARD H. COLT
President & Chief Executive Officer       Vice President, Finance & Chief 
                                          Financial Officer

February 18, 1997
<PAGE>
 
MERIDIAN GOLD INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
December 31

<TABLE> 
<CAPTION> 
          (in thousands, except per share data)
------------------------------------------------------------------------------------------------------------
                                                                   1996       1995       1994
------------------------------------------------------------------------------------------------------------
<S>                                                             <C>        <C>        <C> 
          Sales                                                 $76,230    $57,438    $63,369

          Costs and expenses
           Cost of sales                                         56,216     30,065     38,846
           Depreciation, depletion, and amortization             21,068     21,253     15,275
           Exploration costs                                     13,357     10,826     10,938
           Selling, general and administrative expenses           6,397      5,070      6,466
------------------------------------------------------------------------------------------------------------
          Total costs and expenses                               97,038     67,214     71,525
          Operating loss                                        (20,808)    (9,776)    (8,156)
          Interest Income                                         4,953      5,857      8,717
          Gain on sale of assets                                      -      1,680          -
------------------------------------------------------------------------------------------------------------
          Income (loss) before income taxes                     (15,855)    (2,239)       561
(note 8)  Provision (benefit) for income taxes                        -     (4,512)    (2,117)
------------------------------------------------------------------------------------------------------------
          Net income (loss)                                    $(15,855)   $ 2,273    $ 2,678
------------------------------------------------------------------------------------------------------------
(note 1)  Earnings (loss) per common share                     $  (0.22)   $  0.03    $  0.04
------------------------------------------------------------------------------------------------------------
</TABLE> 
          See notes to consolidated financial statements.
<PAGE>
 
MERIDIAN GOLD INC.

CONSOLIDATED BALANCE SHEETS
December 31
<TABLE> 
<CAPTION> 
          (in thousands)
------------------------------------------------------------------------------------------------------------
                                                                                1996          1995

------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>           <C> 
           ASSETS
           CURRENT ASSETS:
(note 1)   Cash and cash equivalents                                       $  82,570     $      -
(notes 1  
 and 13)   Loans and amounts due from FMC Corporation                              -       80,826
           Trade receivables, net of allowances of $0 in 1996 and 
           $300 in 1995                                                        1,768        4,859
(note 3)   Inventories                                                        16,763       14,792
           Other current assets, net of allowances of $2,000 in 1996 
           and $0 in 1995                                                      2,717        4,096
------------------------------------------------------------------------------------------------------------
           Total current assets                                              103,818      104,573
(note 4)   Property, plant and equipment, net                                106,634      113,992
(notes 1 
 and 12)   Other assets                                                        4,115        6,612
------------------------------------------------------------------------------------------------------------
           Total assets                                                     $214,567     $225,177
------------------------------------------------------------------------------------------------------------

           LIABILITIES AND SHAREHOLDERS' EQUITY
           CURRENT LIABILITIES:
(note 1)   Outstanding checks in excess of bank balances                     $     -     $  1,651
           Accounts payable, trade and other                                   7,549        7,108
(note 6)   Accrued and other liabilities                                      10,709        7,309
(note 13)  Amounts due to FMC Corporation                                          -        2,275
------------------------------------------------------------------------------------------------------------
           Total current liabilities                                          18,258       18,343
------------------------------------------------------------------------------------------------------------
(note 7)   Other long-term liabilities                                        14,597       12,113
(note 12)  Commitments and contingent liabilities

(note 1)   SHAREHOLDERS' EQUITY:
           Preferred stock, $1.00 par value, authorized
                100,000 shares, none issued or outstanding in 1995                 -            -
           Series 1 preferred shares, no par value, authorized
                unlimited shares, 10,000 issued and outstanding in 1996          100            -
           Common stock, $0.01 par value, authorized 150,000,000
                shares; issued and outstanding; 73,484,395 shares in 1995          -          735
           Common shares, no par value, authorized unlimited shares
                73,597,495 issued and outstanding in 1996                     68,432            -
           Capital in excess of par value                                      3,658       68,609
           Retained earnings                                                 109,522      125,377
------------------------------------------------------------------------------------------------------------
           Total shareholders' equity                                        181,712      194,721
------------------------------------------------------------------------------------------------------------
           Total liabilities and shareholders' equity                       $214,567     $225,177
------------------------------------------------------------------------------------------------------------
</TABLE> 
           See notes to consolidated financial statements.

           Signed on behalf of the Board of Directors:

           Dr. David S. Robertson         Brian J. Kennedy
           Director                       Director
<PAGE>
 
MERIDIAN GOLD INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31
<TABLE> 
<CAPTION> 
          (in thousands)
------------------------------------------------------------------------------------------------------------
                                                                        1996          1995       1994
------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>          <C>        <C> 
          Cash flow from operating activities:
          Net income (loss)                                          $(15,855)    $  2,273   $  2,678
------------------------------------------------------------------------------------------------------------
          ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET 
           CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:

          Provision for depreciation, depletion and amortization      21,068       21,253     15,275
          Gain on sale of asset                                            -       (1,680)         -
          Provision for allowance on doubtful accounts                 1,700            -        300
          Issuance of preferred stock                                    100            -          -

          (INCREASE) DECREASE IN ASSETS:
          Trade receivables                                            3,391       (3,363)       731
          Inventories                                                 (1,971)      (9,171)    (1,845)
          Other current assets                                          (621)      (2,538)      (322)
          Other assets                                                 2,497            -     (4,015)
          (DECREASE) INCREASE IN LIABILITIES:

          Accounts payable, trade and other                              441       (4,002)     2,904
          Accrued and other liabilities                                3,400       (1,716)    (2,910)
          Amounts due to FMC Corporation                              (2,275)       1,681       (475)
          Other long-term liabilities                                  2,484       (4,185)      (940)
------------------------------------------------------------------------------------------------------------
          Net cash provided by (used in) operating activities         14,359       (1,448)    11,381
------------------------------------------------------------------------------------------------------------

          CASH FLOWS FROM INVESTING ACTIVITIES
          Capital spending                                           (13,882)     (36,943)   (56,188)
          Disposal of property, plant and equipment                      172        4,645        251
          Increase in other assets                                         -        4,645        251
------------------------------------------------------------------------------------------------------------
          Net cash used in investing activities                      (13,710)     (34,089)   (56,105)
------------------------------------------------------------------------------------------------------------

          CASH FLOWS FROM FINANCING ACTIVITIES:

          Dividends paid                                                   -       (3,674)    (3,674)
(note 1)  Return of capital in connection with the reincorporation     1,472)           -          -
          Proceeds from sale of common stock                             560            -          -
(note 1)  Capital contribution related to the reincorporation          3,658            -          -
------------------------------------------------------------------------------------------------------------
          Net cash provided by financing activities                    2,746       (3,674)    (3,674)
------------------------------------------------------------------------------------------------------------

          Increase (decrease) in cash and cash equivalents             3,395      (39,211)   (48,398)
          Cash and cash equivalents, beginning of year                79,175      118,386    166,784
------------------------------------------------------------------------------------------------------------
          Cash and cash equivalents, end of year                     $82,570      $79,175   $118,386
------------------------------------------------------------------------------------------------------------

          Supplemental disclosure of cash flow information:

          Cash paid and (refunds received) for income taxes during 
           1996, 1995, and 1994 were $(1,454), $(2,857), and $895, 
           respectively.
</TABLE> 
          See notes to consolidated financial statements
<PAGE>
 
MERIDIAN GOLD INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
Year ended December 31
<TABLE> 
<CAPTION> 
--------------------------------------------------------------------------------------------------------------------------------
                                                     Number of  Number of                                 
                                          Number of  Meridian   Meridian   Number of  Meridian    Neridian
                                          FMC Gold     Gold       Gold     FMC Gold     Gold        Gold   Capital in  
                                           Common     Common   Preferred    Common     Common    Preferred  excess of  Retained
(in thousands)                             Shares     Shares     Shares     Shares     Shares      Shares   par value  Earnings
--------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>         <C>       <C>         <C>        <C>        <C>       <C>         <C> 
          BALANCE DECEMBER 31, 1993        73,484                          $   735    $     -    $     -    $ 68,609   $127,774
          Net Income                                                                                                      2,678
          Cash dividend ($0.05 per share)                                                                                (3,674)
--------------------------------------------------------------------------------------------------------------------------------
          BALANCE DECEMBER 31, 1994        73,484                             735                            68,609     126,778
          Net Income                                                                                                      2,273
          Cash dividend ($0.05 per share)                                                                                (3,674)
--------------------------------------------------------------------------------------------------------------------------------
          BALANCE DECEMBER 31, 1995        73,484                             735                            68,609     125,377
          Issuance of shares upon
           Exercise of stock options          113                               1                               559
(note 1)  Reincorporation                 (73,597)    73,597                 (736)     69,904               (69,168)
          Net Loss                                                                                                     (15,855)
(note 1)  Return of capital in connection
           with the reincorporation                                                   (1,472)
(note 1)  Capital contribution related to
           the reincorporation                                                                                3,658
          Preferred shares issued                                    10                              100

--------------------------------------------------------------------------------------------------------------------------------
          BALANCE DECEMBER 31, 1996             -     73,597         10    $     -    $68,432    $   100    $ 3,658    $109,522
--------------------------------------------------------------------------------------------------------------------------------
</TABLE> 
     See notes to consolidated financial statements.
<PAGE>
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31

note 1       PRINCIPAL ACCOUNTING POLICIES
--------------------------------------------------------------------------------

      NATURE OF OPERATIONS

      Meridian Gold Inc. ("Meridian") is an exploration focused gold producer.

      USE OF ESTIMATES

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

      Actual results could differ from those estimates.

      BASIS OF PRESENTATION

      The accompanying consolidated financial statements include the accounts of
      Meridian and its predecessor, FMC Gold Company ("FMC Gold"), and all
      majority-owned subsidiaries (collectively referred to as "the company").
      The accounts of joint ventures in which the company holds an interest are
      consolidated on a pro rata basis. All significant intercompany accounts
      are eliminated in consolidation.

      Meridian, a corporation organized under the laws of Canada, commenced
      operations in July, 1996 upon completion of a series of transactions
      whereby the company became the successor to the business of FMC Gold as
      the result of a reincorporation from a Delaware company into a Canadian
      company. As part of this reincorporation, FMC Gold shareholders received
      one share of Meridian common stock and a $0.02 per share return of
      capital, totaling approximately $1.5 million, in exchange for each common
      share held in FMC Gold. Accordingly, the accompanying statement of
      stockholders' equity has been adjusted to give effect to the
      Reincorporation. Additionally, FMC Corporation ("FMC") sold its 80 percent
      interest in Meridian through a public offering of Meridian's common stock
      on the Toronto Stock Exchange. Concurrent with FMC selling their interest
      in Meridian, FMC made a capital contribution to Meridian totaling
      approximately $3.7 million. FMC Gold shares were subsequently canceled.

      As a result of the Reincorporation as a Canadian company, the company
      adopted GAAP recognized in Canada. Accordingly, the company's 1994
      financial statements have been restated to conform with Canadian GAAP (the
      adjustments from United States GAAP ("USGAAP") to Canadian GAAP were not
      material in 1995 (see Note 14)). The accompanying consolidated financial
      statements are presented in U.S. dollars.

      REVENUE RECOGNITION

      Revenue is generally recognized upon shipment of gold and silver dore to
      third parties.

      CASH AND CASH EQUIVALENTS

      Meridian considers all highly liquid marketable securities with original
      maturities of 90 days or less and loans and amounts due from FMC less
      outstanding checks in excess of bank balances, to be cash equivalents.
      Marketable securities consist of Euro-time deposits with major commercial
      banks and total approximately $81.8 million at December 31, 1996. The book
      value of the marketable securities approximates fair value.

      Prior loans due from FMC consisted of three notes, with varying
      maturities, due upon demand. Terms and conditions of these loans were
      covered by the management services agreement between the company and FMC
      (Note 13).

      As a result of the company's prior participation in FMC's centralized cash
      management system, the company reported a liability at December 31, 1995
      for outstanding checks in excess of bank balances due to the timing of
      cash transfers from FMC.

      INVENTORIES

      Inventories are stated at the lower of the average cost or market, and
      include labor, materials, other production costs and depreciation. No
      inventory value is assigned to stockpiled ore, except for certain
      stockpiled in-process leach-pad ore where cost includes labor, materials
      and other production costs.

      PROPERTY, PLANT AND EQUIPMENT

      Property, plant and equipment, including development costs and capitalized
      interest associated with the construction of certain capital assets, is
      recorded at cost. Depreciation and amortization for financial reporting
      purposes is provided principally on the straight-line basis over the
      shorter of the estimated lives of the assets or the estimated proven and
      probable recoverable reserves. Certain assets are depreciated on a units
      of production basis, with depreciation rates established according to
      estimated producible units at the time the assets are placed in service.
      Gains and losses are reflected in income upon sale or retirement of
      assets.
<PAGE>
 
      Maintenance and repairs are charged to expense in the year incurred.
      Expenditures that extend the useful life of property, plant and equipment
      or increase its productivity are capitalized.

      MINERAL EXPLORATION AND DEVELOPMENT COSTS

      Mineral exploration and preliminary development costs are expensed as
      incurred. Development costs applicable to mineralized properties deemed
      capable of commercial production are capitalized and then amortized over
      units of production.

      RECLAMATION

      Reclamation and shutdown costs to be incurred when mining operations are
      closed are estimated and accrued over the life of the mine.

      INCOME TAXES

      The company accounts for income taxes using the deferred method. Under
      this method, deferred income taxes are recognized for income and expense
      items that are reported in different years for income tax and financial
      reporting purposes using the tax rates applicable for the year of the
      calculation. Under the deferred method, deferred taxes are not adjusted
      for subsequent changes in the tax rates.

      See note 14 for a reconciliation from the company's accounting method of
      Canadian GAAP to US GAAP.

      FORWARD SALES AND HEDGING

      In order to minimize exposure to decreasing prices for portions of its
      gold production, the company has hedged portions of future gold production
      by entering into put option contracts. Costs associated with the purchase
      of open put options included in other assets were $2.5 million as of
      December 31, 1996 and $3.4 million as of December 31, 1995. These costs
      are deferred and recognized in the period the revenues related to the
      hedged production were recorded.

      EARNINGS (LOSS) PER COMMON SHARE

      Earnings (loss) per common share have been computed based on the weighted
      average number of shares of common stock outstanding during the year
      (73,563,087 shares in 1996, and 73,484,395 shares in 1995 and 1994).

      FAIR VALUE OF FINANCIAL INSTRUMENTS

      At December 31, 1996, the book value of the company's financial
      instruments approximates fair value except as disclosed in Note 12.

      RECLASSIFICATION

      Certain amounts in 1995 and 1994 have been reclassified to conform with
      the 1996 presentation.


note 2  ACQUISITIONS AND DIVESTITURES
--------------------------------------------------------------------------------

      On November 30, 1995, the company's 100 percent interest in Paradise Peak
      Corporation was sold to Arimetco Inc. for $4 million in the form of cash
      and a note receivable, resulting in a $1.7 million gain on the sale of the
      assets and the reversal of $4.5 million of accrued reclamation liability
      through cost of sales. In January 1997, Arimetco Inc. declared bankruptcy
      under Chapter 11. The company has reserved $2.0 million for a promissory
      note that was due in November 1996.

      In June 1994, the company agreed to purchase the remaining 14 percent
      interest in the Beartrack joint venture from Minex for $6.0 million,
      bringing the company's ownership in the property to 100 percent. Two
      installments of $1.5 million each were made to Minex in June 1994 and 1995
      respectively. Another $1.0 million payment was made in June 1996, with the
      balance owed to Minex to be paid in a $1.0 million installment in 1997,
      and $0.5 million installments in 1998 and 1999.


note 3  INVENTORIES
--------------------------------------------------------------------------------

      Inventories (at cost) consist of the following:
--------------------------------------------------------------------------------
      (in thousands)                                    1996        1995
--------------------------------------------------------------------------------
      Gold and silver                                 $ 1,863     $   638
      Leach-pad ore                                    12,750      11,368
      Materials and supplies                            2,150       2,786
--------------------------------------------------------------------------------
      Total                                           $16,763     $14,792
--------------------------------------------------------------------------------
<PAGE>
 
      Gold and silver inventories are in the form of dore, which is suitable for
      delivery to precious metal treatment facilities. These inventories are
      generally sold to and further processed by these facilities into forms
      suitable for end uses.

      The value of heap leach pad ore increased to approximately $12.8 million
      at December 31, 1996, from approximately $11.4 million at December 31,
      1995. The increase represents the cost of loading ore on the heap leach
      pads at the Beartrack mine, and includes labor, materials and other
      production costs. At December 31, 1996, there were approximately 9.1
      million tons of ore under leach containing approximately 77,000 ounces of
      gold.


note 4  PROPERTY, PLANT AND EQUIPMENT
--------------------------------------------------------------------------------
      Property, plant and equipment consists of the following:
      --------------------------------------------------------------------------
      (in thousands)                                          1996        1995
      Land and land improvements                           $26,370     $ 2,689
       less accumulated depreciation                        (3,374)       (511)
      --------------------------------------------------------------------------
                                                            22,996       2,178
      --------------------------------------------------------------------------
      Buildings                                             12,754       2,341
      less accumulated depreciation                         (4,090)     (1,491)
      --------------------------------------------------------------------------
                                                             8,664         850
      --------------------------------------------------------------------------
      Machinery and equipment                              119,900      84,416
         less accumulated depreciation                     (75,016)    (67,758)
      --------------------------------------------------------------------------
                                                            44,884      16,658
      --------------------------------------------------------------------------
      Development costs                                     72,270      63,187
         less accumulated depletion                        (48,490)    (42,397)
      --------------------------------------------------------------------------
                                                            23,780      20,790
      --------------------------------------------------------------------------
      Construction in progress                               6,310      73,516
      --------------------------------------------------------------------------
      Net property, plant and equipment                   $106,634    $113,992
      --------------------------------------------------------------------------
                                                       
      Allocated to the projects as follows:            
      --------------------------------------------------------------------------
      (in thousands)                                          1996        1995
      --------------------------------------------------------------------------
      Beartrack mine                                       $60,627     $66,495
      Jerritt Canyon mine                                   38,889      40,384
      Rossi project                                          5,500       5,500
      Royal Mountain King mine                                 449         449
      El Penon exploration                                     355         358
      Administrative offices                                   814         806
      --------------------------------------------------------------------------
      Net property, plant and equipment                   $106,634    $113,992
      --------------------------------------------------------------------------
<PAGE>
 
<TABLE> 
<CAPTION> 
note 5  JOINT VENTURES
-------------------------------------------------------------------------------------------
      The results of the company's 30% interest in Jerritt Canyon are
      consolidated in the financial statements on a proportional basis and the
      company's share of the joint venture is reflected as follows:
-------------------------------------------------------------------------------------------
      (in thousands)                                       1996       1995        1994
-------------------------------------------------------------------------------------------
<S>                                                     <C>       <C>           <C> 
      Current assets                                    $ 2,832   $  5,126
      Property, plant and equipment, net                 38,889     40,384
      Investments and other assets                          649      2,467
-------------------------------------------------------------------------------------------
      Total assets                                      $42,370   $ 47,977
-------------------------------------------------------------------------------------------
      Current liabilities                               $ 3,171   $  4,356
      Long-term liabilities                               4,565      2,907
      Other                                                 315         -
      Total liabilities                                 $ 8,051   $  7,263
      Revenue                                           $35,781   $ 37,622     $37,511
      Expenses                                     
         Cost of sales                                   27,524     24,605      27,677
         Depreciation, depletion and amortization        10,316     16,498      14,968
         Other                                            3,225        896        (508)
      Net (loss)                                        $(5,284)  $ (4,377)   $ (4,626)
      Cash provided by operating activities             $ 9,932   $  9,307    $ 10,786
      Cash used in investing activities                 $(8,821)  $(10,093)   $(14,876)
                                                   

note 6  ACCRUED AND OTHER LIABILITIES         
-------------------------------------------------------------------------------------------
      Accrued and other liabilities comprise the following:
-------------------------------------------------------------------------------------------
      (in thousands)                                                  1996        1995
-------------------------------------------------------------------------------------------
      Shutdown and reclamation accrual (notes 1 and 7)             $ 4,615     $ 1,256
      Notes payable (note 2)                                         2,500       1,000
      Accrued bonus and payroll                                      1,228         979
      Other                                                          2,366       4,074
-------------------------------------------------------------------------------------------
      Total                                                        $10,709     $ 7,309
-------------------------------------------------------------------------------------------
      Included in notes payable were short-term borrowings incurred during the
      Reincorporation (see Note 1), in the form of a note amounting to $1.5
      million. This note bore interest at 8.75% and was paid in full in January
      1997.


note 7       OTHER LONG-TERM LIABILITIES
-------------------------------------------------------------------------------------------
      Other long-term liabilities comprise the following:
-------------------------------------------------------------------------------------------
      (in thousands)                                                  1996        1995
-------------------------------------------------------------------------------------------
      Shutdown and reclamation accrual (notes 1 and 6)             $11,707     $ 7,843
      Notes payable and other (note 2)                               2,890       4,270
-------------------------------------------------------------------------------------------
                                                                   $14,597     $12,113
-------------------------------------------------------------------------------------------
</TABLE> 

      Shutdown and reclamation accruals represent estimated costs of earthwork
      such as detoxification and recontouring, revegetation, and stabilization.
      Also included are heap-leach encapsulation and facility decommissioning
      costs.

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

      Late in the fourth quarter of 1996, a new closure estimate to complete
      reclamation of the Royal Mountain King mine was developed by an outside
      engineering firm. Based on the new estimate, the reclamation liability
      increased $5.6 million, reflecting increasingly stringent environmental
      regulations, changing project conditions, and higher physical works costs.
      The Royal Mountain King Mine was shutdown in July 1994.
<PAGE>
 
      Although the ultimate amount of reclamation obligations to be incurred is
      uncertain, Meridian has estimated these costs to be $32 million, and at
      December 31, 1996, accrued reclamation costs including those identified in
      Note 6-Accrued and Other Liabilities were $16.3 million for all
      properties. The amounts of reclamation costs charged to earnings were $8.9
      million in 1996, $1.9 million in 1995 and $0.9 million in 1994.
      Reclamation spending at each of these facilities is expected to continue
      in 1997 and beyond.


note 8  INCOME TAXES
--------------------------------------------------------------------------------
      Under terms of the reincorporation as described in Note 1, Meridian and
      FMC jointly agreed to elect to treat the disposition of Meridian shares as
      an asset sale under Section 338 (h) (10) of the United States Internal
      Revenue Code of 1986. Tax bases in Meridian's assets were adjusted to fair
      market value for tax purposes only and accordingly the Company's net
      operating loss and alternative minimum tax credit carryforwards remained
      with FMC.

      On March 31, 1994, FMC increased its ownership interest in the company to
      80 percent. Thereafter, the company was included in FMC's consolidated
      federal income tax return until the company was divested by FMC on July
      31, 1996. Under the tax-sharing agreement, the company paid to FMC amounts
      generally equal to the tax the company would have been required to pay had
      it filed a separate return, and FMC paid to the company amounts generally
      equal to any tax benefits the company would have realized through
      carryover on a separate return basis. For state tax purposes, the company
      was included in FMC's combined returns. The tax-sharing agreement for
      periods beginning after April 1, 1994 provided that the company was liable
      for the incremental impact the company had on FMC's state tax liability in
      states where FMC filed combined returns. In addition, in the states where
      the company filed separate state tax returns, the company was responsible
      for the tax due thereunder. On July 31, 1996 the company received a $1.7
      million settlement under the tax sharing agreement, in conjunction with
      FMC's disposition of Meridian, which amount was reflected as a recovery of
      taxes in the financial statements for the year ended December 31,1995.

      The provision (benefit) for income taxes is presented below. The tax
      provision for 1996 is zero and the tax benefit for 1995 was $4.5 million,
      which resulted from tax benefits realized under the tax sharing agreement
      with FMC.

<TABLE> 
<CAPTION> 
------------------------------------------------------------------------------------------------------------
      Year ended December 31
------------------------------------------------------------------------------------------------------------
                                                                                      restated,
                                                                                      see Note 1
      (in thousands)                                                1996          1995          1994
------------------------------------------------------------------------------------------------------------
<S>                                                               <C>       <C>             <C> 
      CURRENT:

      Federal                                                         -     $  (4,512)      $(2,117)
      State                                                           -             -             -
------------------------------------------------------------------------------------------------------------
      Total current                                                   -        (4,512)       (2,117)
      Deferred                                                        -             -             -
------------------------------------------------------------------------------------------------------------
      Total provision (benefit)                                       -     $ (4,512)       $(2,117)
------------------------------------------------------------------------------------------------------------

<CAPTION> 
      The effective income tax provision (benefit) differs from that computed by applying the United States
      applicable federal statutory rate of approximately 34 percent to income before taxes for the following 
      reasons:
------------------------------------------------------------------------------------------------------------
      Year ended December 31
------------------------------------------------------------------------------------------------------------
                                                                                          restated,
                                                                                         see Note 1
      (in thousands)                                                1996        1995           1994
------------------------------------------------------------------------------------------------------------
<S>                                                             <C>         <C>             <C> 
      Total provision (benefit)                                       -     $ (4,512)       $(2,117)

      Income tax provision (benefit) calculated using 
       statutory tax rates                                      $(5,391)    $   (784)       $   197
      Foreign sales corporation income                                -         (844)          (769)
      Excess percentage depletion                                     -       (1,716)        (1,217)
      Loss from disposition of foreign entity available for 
       tax in excess of book                                          -       (1,324)             -
      Recognition of net operating loss carryover not 
       previously tax benefited                                       -       (1,707)          (743)
      Loss from U.S. operations not tax benefited                 3,250            -              -
      Loss from foreign subsidiaries not tax benefited            2,121        1,844            398
      Other                                                          20           19             17
------------------------------------------------------------------------------------------------------------
      Actual tax provision (benefit)                            $     -      $(4,512)       $(2,117)
------------------------------------------------------------------------------------------------------------
</TABLE> 
<PAGE>
 
note 9  GEOGRAPHIC SALES AND SALES TO MAJOR CUSTOMERS
--------------------------------------------------------------------------------
      Sales to unaffiliated customers by destination of sale are as follows:
<TABLE> 
<CAPTION> 
      Year ended December 31
------------------------------------------------------------------------------------------------------------
<S>                                                             <C>           <C>         <C> 
      (in thousands)                                               1996          1995       1994
      ------------------------------------------------------------------------------------------------------
      Canada                                                    $     -       $ 1,109     $25,240
      Western Europe                                             75,724        55,643      37,555
      ------------------------------------------------------------------------------------------------------
      Total                                                     $75,724      $ 56,752     $62,795
      ------------------------------------------------------------------------------------------------------
</TABLE> 

      The company's products may be purchased and refined by several Canadian,
      European and United States refiners. Sales to two refiners in 1996 and
      1995, and three refiners in 1994, each represented 10 percent or more of
      consolidated sales. Specifically, sales to these companies amounted $75.7
      million in 1996, $56.8 million in 1995, and $62.8 million in 1994. The
      company believes that because there are several alternative refiners, each
      capable of refining the company's products, no adverse effect would result
      should any of the current refiners discontinue buying the company's
      products.


note 10      EMPLOYEE PLANS
--------------------------------------------------------------------------------

      Prior to July 31, 1996, all company employees were covered by FMC's
      retirement plan, post retirement health care and life insurance benefit
      program and were included in the costs paid under the management services
      agreement as discussed in Note 13.

      The company has a defined benefit pension plan covering substantially all
      salaried employees. Pension benefits are generally based on years of
      service and final average yearly earnings. The plan was spun off from the
      FMC Corporation pension plan, with $1.5 million being transferred January
      1, 1997. The company funding policy is to contribute the minimum amount
      required by applicable regulations. The following table represents the
      plan's funded status at December 31, 1996, including assets transferred
      January 1, 1997:

<TABLE> 
<CAPTION> 
      ------------------------------------------------------------------------------------------------------
      (in thousands)                                                                    1996
      ------------------------------------------------------------------------------------------------------
<S>                                                                               <C> 
      Projected Benefit Obligation                                                $   (1,130)
      Market Value of Plan Assets                                                      1,480
      ------------------------------------------------------------------------------------------------------
      Excess of assets over projected benefit                                            350
        obligation
      Unrecognized transition obligation                                                   -
      Unrecognized prior service cost                                                   (350)
      Unrecognized net (gain)/loss                                                         -
      ------------------------------------------------------------------------------------------------------
      Accrued pension cost                                                                 -
      ------------------------------------------------------------------------------------------------------
      Actuarial assumptions:
      Weighted average discount rate                                                    8.00%
      Weighted average rate of compensation increase                                    5.00%

      No contribution was required for 1996. The most recent actuarial valuation
      was performed as part of FMC's January, 1996 actuarial valuation. The
      above amounts were calculated as part of the reincorporation transferring
      assets from the FMC plan to the company plan.
------------------------------------------------------------------------------------------------------------
</TABLE> 

note 11      SHARE CAPITAL
--------------------------------------------------------------------------------
      In 1989, the stockholders of FMC Gold Company approved the FMC Gold
      Company 1988 Long-term Incentive Compensation Plan, which authorized the
      Board of Directors of the company (the Board) to grant awards, payable in
      the form of cash and non-qualified stock options, to key employees of the
      company if certain specific performance objectives were met over a
      four-year period ended December 31, 1991. The stock options granted in
      1988 bear an exercise price ranging from $9.625 to $11.25, the fair market
      value at the date of grant, and expire May 6, 1998. During 1992,
      additional options for 223,000 shares of common stock were granted at an
      exercise price of $4.25 which was fair market value at date of grant with
      an expiration date of April 2007.
<PAGE>
 
      On June 7, 1996, the Board adopted the Meridian Gold Inc. 1996 Stock
      Option Plan (the "Plan"), which provides for the granting of options to
      purchase the company's common shares (the "Option Shares") to certain
      directors, officers and employees of the company (the "Participants"). The
      aggregate number of Option Shares which may be reserved for issuance under
      this Plan shall not exceed 3,750,000. On July 23, 1996, the shareholders
      of FMC Gold Company approved the adoption of the Plan. The purpose of the
      Plan is to develop the interest and incentive of eligible employees,
      officers and directors of the company in its growth and development by
      giving such Participants an opportunity to purchase the company's common
      shares on a favorable basis, thereby advancing the interests of the
      company, enhancing the value of the common shares for the benefit of all
      shareholders and increasing the ability of the company to attract and
      retain skilled and motivated individuals in the service of the company.
      The Option Shares granted during 1996 were granted at exercise prices
      ranging from $3.65 to $4.50 which was fair market value at date of grant,
      and with expiration dates in 2006.

      At December 31, 1996 options to purchase 1,663,950 common shares were
      outstanding with terms up to ten years from the date of grant at an
      exercise price equal to the market price prevailing at the time of the
      grants, as detailed in the following table:

<TABLE> 
<CAPTION> 
                                                              NUMBER OF          OPTION PRICE
                                                          COMMON SHARES           $ PER SHARE
<S>                                                       <C>                    <C> 
      Outstanding, December 31, 1993                            396,300          4.250-10.625
      Granted in 1994                                                 -
      EXERCISED OR SURRENDERED, 1994                                  -
      Outstanding, December 31, 1994                            396,300          4.250-10.625
      Granted in 1995                                                 -
      EXERCISED OR SURRENDERED, 1995                             65,500          4.250-10.625
      Outstanding, December 31, 1995                            330,800          4.250-10.625
      Granted in 1996                                         1,491,650           3.650-4.500
      EXERCISED OR SURRENDERED, 1996                            158,500          3.650-10.625
------------------------------------------------------------------------------------------------------------
      Outstanding, December 31, 1996                          1,663,950          3.650-10.625
------------------------------------------------------------------------------------------------------------
      EXERCISABLE, DECEMBER 31, 1996                            176,100          4.250-10.625
------------------------------------------------------------------------------------------------------------
</TABLE> 

In July 1996, the company established a Shareholder Rights Plan. The Plan has a
term of three years and expires on July 31, 1999. In implementing the Plan, one
Right was distributed for each common share outstanding on July 31, 1996, as
well as each common share to be issued prior to the Separation Time. The
"Separation Time" is defined as the eighth 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) which, 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 (including any such shares held
by the Offeror prior to the offer). A "Permitted Bid" and a "Competing Permitted
Bid" are Take-over Bids that are made by means of an offering circular and (i)
are made to all shareholders; (ii) are open for a period of not less than 60
days; and (iii) contain certain withdrawal rights and extension terms.

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).

Until a Right is exercised, the holder thereof, as such, will have no rights as
a shareholder.
<PAGE>
 
note 12      COMMITMENTS AND CONTINGENT LIABILITIES
--------------------------------------------------------------------------------

      During the second quarter of 1994, the company entered into certain
      forward contracts and purchased put options in connection with gold
      production from the Beartrack property. The forward contracts were for
      23,800 ounces of gold, deliverable between April 1995 and April 1996 and
      have subsequently been closed out. The put options were originally
      purchased for $4 million and provide the company the right to sell gold at
      an agreed-upon price. At December 31, 1996, the carrying value of the
      remaining options (at cost) was $2.5 million. The market values as
      determined by the holders of the options, as of December 31, 1996 and
      1995, were approximately $3.3 million and $2.8 million, respectively. The
      cost of the options is recognized concurrently with the revenues related
      to the hedged production.

      The options are recorded at cost in other assets and are amortized in
      accordance with utilization. The options carry a strike price of $400 per
      ounce. The value of these options varies with changes in market prices of
      the commodity and management continually evaluates the desirability of
      exercise in relation to current market prices. The options expire
      according to the following schedule:

                         Options       Expiration
                         (ounces)      Date
                         ------------------------
                         33,000        12/27/97
                         33,000        12/27/98
                         32,000        12/27/99
                         32,000        12/27/00
                         27,000        12/27/01
                         ----------------------

      The company's mining operations and exploration activities are subject to
      various federal, state and local laws, and regulations governing
      protection of the environment. These laws are continually changing and, as
      a general matter, are becoming more restrictive. The company believes that
      its operations are in material compliance with all applicable laws and
      regulations, and has no reason to believe that compliance problems exist
      at operations in which it holds a joint-venture interest. To comply with
      these federal, state, foreign and local laws, the company has made, and in
      the future will be required to make, capital and operating expenditures on
      environmental projects. However, the company currently has no
      environmental projects that will require substantial and extraordinary
      expenditures. In the opinion of management, expenditures for environmental
      projects were not substantial in 1996, nor are they expected to be
      substantial in 1997.

      The company leases office and warehouse space in Reno, Vancouver, and
      Santiago, as well as various types of equipment (primarily mobile mining
      equipment at the Beartrack mine). Total rent expense under all leases
      amounted to $2.1 million, $1.1 million and $0.5 million for 1996, 1995 and
      1994 respectively. Minimum future rentals under noncancellable leases
      aggregated approximately $9.5 million as of December 31, 1996, and are
      estimated to be payable $2.0 million in 1997, $2.0 million in 1998, $1.8
      million in 1999, $1.7 million in 2000, $1.7 million in 2001, and $0.3
      million thereafter.

      During the third quarter of 1994, the Pacific Rivers Council and the
      Wilderness Society (collectively the "PRC"), in a lawsuit filed in Federal
      District Court in Idaho (Pacific Rivers Council v. Thomas), sought an
      injunction against all ongoing and future forest activities including
      mining, which may affect endangered salmon, within various national
      forests in Idaho including the Salmon National Forest in which the
      Beartrack property is located. In that lawsuit, the PRC sought to require
      the U.S. Forest Service to consult under the Endangered Species Act (the
      "Act") with the National Marine Fisheries Service ("NMFS") regarding
      existing land resource management plans for the subject forests and their
      potential impacts on endangered Snake River salmon. The government
      defendants and the plaintiffs have subsequently negotiated a stipulated
      dismissal of most of the lawsuit. Under the terms of the stipulation, the
      parties dismissed from this litigation all projects which have undergone
      site-specific consultation. The company's Beartrack mine was identified by
      the government defendants as a project for which consultation has been
      completed. The Court issued an Order on Pending Claims on December 20,
      1995 regarding the remaining specified projects (not including the
      Beartrack mine) which have not yet completed consultation. Under the terms
      of that Order, the Court has retained jurisdiction in this lawsuit for
      further proceedings regarding those projects. The Beartrack mine is not
      subject to or a part of the Court's order.

      In October 1994, the Sierra Club Legal Defense Fund, Inc. ("Sierra"), on
      behalf of certain other organizations, filed a lawsuit in Federal District
      Court for the Western District of Washington at Seattle against NMFS and
      other federal agencies for violation of the Act, alleging the NMFS'
      biological opinion failed to satisfy the requirements of the Act. Sierra,
      the federal agencies and the company, as intervener, each filed a motion
      for summary judgment. In November 1995, the Court ordered the federal
      agencies to reinitiate consultation under Section 7 of the Act on the
      potential environmental impacts of the Beartrack mine project on
      endangered salmon or the designated critical habitat for salmon. The
      plaintiffs did not seek, and the Court did not impose, any injunction or
      other restriction on the operation of the Beartrack mine pending
      completion of such consultation. On November 17, 1995, the court closed
      the case but retained jurisdiction to resolve any disputes that may arise
      concerning the reinitiated consultation schedule or to resolve issues once
      the renewed consultation is completed. The Forest Service has yet to
      formally reinitiate consultation by submitting a revised biological
      assessment to NMFS, although the Forest Service is revising that
      assessment. Under Section 7(d) of the Act, the Forest Service may require
      Meridian to 
<PAGE>
 
      cease an activity associated with mine operations if that activity could
      preclude the development of reasonable and prudent alternatives to the
      project pending the completion of the reinitiated consultation. On July 3,
      1996, the Forest Service completed its Section 7(d) determination for the
      Beartrack mine operations and determined that, for the following 12 months
      from that date, all ongoing and planned significant activities at the mine
      could continue pending the reinitiated consultation, with exception of:
      (1) proposed reconstruction of the leach pad Run of the Mine Road, and (2)
      proposed use of the soil stockpile area associated with development of
      Phase III of the heap leach pad. The Forest Service recognized that these
      latter two activities may be authorized upon further review by the Forest
      Service prior to completion of the reinitiated consultation. Under the
      Act's regulations, consultation must be completed within 135 days of the
      date consultation is initiated. An extension of 60 days can be imposed by
      the agencies. Under the relevant statutory and regulatory authorities, the
      results of a consultation can range from no impact on the activities under
      review on the one hand to modest to significant impacts on the other. In
      an extreme situation, a consultation could result in the cessation of
      activities altogether, a potential result the company believes to be
      remote in the case of Beartrack mine, which has been in operation and
      production since mid-1995. The company believes that the ongoing operation
      of the Beartrack mine will not jeopardize endangered salmon or adversely
      modify or destroy designated critical habitat, and that upon completion of
      consultation, the mine will be permitted to continue operation.

      On February 16, 1996, the company settled a dispute with a subcontractor
      on the Beartrack project. The subcontractor made claims against the prime
      contractor alleging overruns for work performed which exceeded the
      original estimated costs for the project by approximately $8 million.
      These claims were disputed by the prime contractor. Arbitration of the
      subcontractor's claims against the prime contractor was concluded, and the
      company agreed to pay a settlement of $3.1 million as part of the overall
      arbitrated settlement. The settlement was charged to property, plant and
      equipment and depreciated over the remaining life of the Beartrack
      property. The company sought and obtained from the U.S. Army Corps of
      Engineers (the "Corps") a permit authorizing dredging and filling of
      wetlands in connection with construction of the Beartrack mine under
      Section 404 of the Clean Water Act. That permit was set to expire on
      October 11, 1994. On June 16, 1994, the company sought an extension of the
      permit under applicable regulations. Under those regulations, the filing
      of a request for extension operates to extend the permit until the agency
      acts upon the request for extension. As of the date of this report, the
      Corps has not taken action upon the company's request. The company has
      certain other contingent liabilities resulting from litigation, claims and
      commitments incident to the ordinary course of business. Management
      believes that the probable resolution of such contingencies will not
      materially affect the financial position or results of operations of the
      company.


note 13      RELATED PARTY TRANSACTIONS
--------------------------------------------------------------------------------

      Prior to July 31, 1996, 80 percent of the outstanding common stock of FMC
      Gold Company was held by FMC.

      Certain agreements existed in the past between FMC Gold Company and FMC
      concerning income taxes (Note 8) and management services.

      Under the management services agreement, the company was charged at FMC's
      direct and indirect cost, including allocated overhead, for certain
      general, administrative and other services provided by FMC. Overhead
      allocations of $0.8 million, $1.0 million and $1.6 million in 1996, 1995
      and 1994, respectively, were based generally on the level of company sales
      to aggregate FMC sales. The company's management believes that all
      determinations with respect to direct and indirect costs, including
      allocated overhead, were made in a reasonable and consistent manner.

      In addition, the agreement stated that either the company or FMC could
      borrow up to $50 million from the other on a short-term basis. Borrowings
      exceeding $50 million were made upon the review and approval of the
      lending company. All such borrowings were payable on a demand basis and
      carried interest at a floating rate equal to FMC's current weighted
      average rate on its borrowings under its credit facilities, or its
      investing rate, for the relevant period. The company's management believed
      that any demand by Meridian Gold for repayment of FMC's borrowings under
      the management services agreement was legally enforceable. On July 31,
      1996, FMC repaid its total borrowings, plus accrued interest, to the
      company, totaling $79.1 million. Total interest received on loans to FMC
      through July 31, 1996 was $3.1 million.
<PAGE>
 
      At July 31, 1996, FMC paid an amount of $3.658 million to Meridian Gold in
      conjunction with the reincorporation. This amount was treated as a capital
      contribution and was agreed to by FMC and the company.

      The following schedule summarizes the activity of indebtedness to and from
      FMC in 1996, 1995 and 1994.

<TABLE> 
<CAPTION> 
------------------------------------------------------------------------------------------------------------
      (in thousands)                                      Loan due from FMC   Amounts due from (to) FMC
------------------------------------------------------------------------------------------------------------
<S>                                                             <C>                  <C> 
      BALANCE DECEMBER 31, 1993                                $167,326              $ (1,069)
      Increase in amounts loaned                                 50,000
      Interest charges                                                                  8,677
      Payments made by FMC for Meridian Gold                                          (11,888)
      Charges from FMC for services and materials                                      (4,468)
      Payments made by Meridian Gold                                                   16,793
      Payments received by Meridian Gold                        (97,000)               (8,639)
      BALANCE DECEMBER 31, 1994                                 120,326                  (594)
      Increase in amounts loaned                                 51,500
      Interest charges                                                                  5,737
      Payments made by FMC for Meridian Gold                                          (18,480)
      Charges from FMC for services and materials                                      (1,808)
      Payments made by Meridian Gold                                                   19,040
      Payments received by Meridian Gold                        (91,000)               (6,170)
      BALANCE DECEMBER 31, 1995                                  80,826                (2,275)
      Increase in amounts loaned                                 39,500
      Interest charges                                                                  3,107
      Payments made by FMC for Meridian Gold                                           (5,801)
      Charges from FMC for services and materials                                      (1,176)
      Payments made by Meridian Gold                                                    9,868
      Payments received by Meridian Gold                       (120,326)               (3,723)
------------------------------------------------------------------------------------------------------------
      BALANCE DECEMBER 31, 1996                                 $     0               $     0
------------------------------------------------------------------------------------------------------------
</TABLE> 

      FMC continues to be obligated under a $75 million issue of exchangeable
      senior subordinated debentures of FMC in Europe. The debentures bear
      interest at 6 3/4 percent and are exchangeable at $15 1/8 per share,
      subject to change as defined in the 1996 offering circular, into Meridian
      Gold Inc. common stock. In conjunction with the reincorporation, FMC was
      granted a right, exercisable during the period beginning January 31, 1998
      and ending April 30,1998, to purchase at the then fair market value an
      option from the company to buy up to an aggregate of $75,000,000 of the
      company's common shares until January 16, 2000 at an exercise price of
      $15.125 per share. Such option may only be exercised by FMC to satisfy
      certain obligations of FMC to provide common shares to the holders of
      FMC's 6 3/4% Exchangeable Debentures due 2005 in exchange for such
      debentures.

      The company continues to purchase liquid sodium cyanide from the Alkali
      Chemicals Division of FMC. Such purchases amounted to $0.8 million, $1.0
      million and $1.9 million in 1996, 1995 and 1994, respectively. The
      purchases from FMC were transacted on terms no less favorable to the
      company than those which the company believes could have been obtained
      from an unaffiliated third party.

      Michael Callahan, Chief Financial Officer of FMC Corporation, is a
      Director of the company.

      In connection with the services rendered by Brian J. Kennedy during the
      Reincorporation, the company issued to Mr. Kennedy 10,000 preferred
      shares.
<PAGE>
 
note 14  RECONCILIATION OF UNITED STATES AND CANADIAN GENERALLY ACCEPTED 
         ACCOUNTING PRINCIPLES
--------------------------------------------------------------------------------

      The consolidated financial statements have been prepared in accordance
      with GAAP in Canada which differ in certain material respects from those
      principles and practices that the company would have followed had its
      consolidated financial statements been prepared in accordance with
      accounting principles and practices generally accepted in the US. Under US
      GAAP, income taxes are accounted for under the asset and liability method.
      Under the asset and liability method, deferred taxes are recognized for
      the future tax consequences attributable to tax assets and liabilities
      measured using enacted tax rates expected to apply to taxable income in
      the years in which those temporary differences are expected to be
      recovered or settled. The effect on deferred tax assets and liabilities of
      a change in tax rates is included in earnings in the period that includes
      the enactment date.

      Under US GAAP significant components of the company's deferred tax assets
      and liabilities are as follows:

<TABLE> 
<CAPTION> 
------------------------------------------------------------------------------------------------------------
      (in thousands)                                                         1996        1995
------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>       <C> 
      Inventory                                                             $1,068    $     -
      Alternative minimum tax ("AMT") carryforwards                              -      9,522
      Reclamation reserves                                                   2,186      1,734
      Capitalized exploration costs                                              -      3,034
      Property, plant and equipment                                         17,006        394
      Other reserves                                                             -      2,150
      Loss carryforwards                                                       923     11,854
      Accrued pension and other post retirement benefits                         -        823
      Other                                                                      -        382
------------------------------------------------------------------------------------------------------------
      Deferred tax assets                                                  21,183      29.893
      Valuation allowances                                                (19,339)    (29,103)
------------------------------------------------------------------------------------------------------------
      Deferred tax assets, net of allowances                                1,844         790

      Capitalized development costs                                             -        (546)
      Property, plant and equipment                                        (1,844)          -
      Other                                                                     -        (244)

------------------------------------------------------------------------------------------------------------
      Deferred tax liabilities                                             (1,844)       (790)
------------------------------------------------------------------------------------------------------------
      Net deferred tax assets                                           $       -     $    -
------------------------------------------------------------------------------------------------------------
</TABLE> 

      The decrease in deferred tax assets of $8.7 million includes the
      forfeiture of $13.0 million in deferred tax assets due to the company's
      election to step up tax basis in assets. A valuation allowance of $10.7
      million had been established for the forfeited deferred tax assets in
      prior years. The valuation allowance for deferred tax assets as of
      December 31, 1996 and 1995 is $19.4 million and $29.1 million,
      respectively. The valuation reserve decreased $9.7 million due to the
      $10.7 million reversal associated with the tax asset forfeiture and a $1.0
      million provision for the current year net operating loss carryforward.

      At December 31, 1996, the company had a net operating loss carryforward of
      approximately $2.7 million which will expire in 2011.

      The application of US GAAP would have the following effect on net earnings
      as reported:

      Year ended December 31

<TABLE> 
<CAPTION> 
------------------------------------------------------------------------------------------------------------
      (in thousands, except per share data)                                1996           1995       1994
------------------------------------------------------------------------------------------------------------
<S>                                                   <C> 
      Net income (loss) as reported in accordance with Canadian GAAP    $(15,855)      $ 2,273     $ 2,678
      Application of asset and liability of accounting for income taxes        -             -      (2,527)
------------------------------------------------------------------------------------------------------------
      Net income (loss) in accordance with U.S. GAAP                    $(15,855)      $ 2,273        $151
------------------------------------------------------------------------------------------------------------
      Net income (loss) per share in accordance with U.S. GAAP          $  (0.22)      $  0.03     $     -
</TABLE> 

      Under US GAAP, the $2,527,000 which related to general reserves and
      miscellaneous accrued liabilities is fully reserved for with a valuation
      allowance in 1994.
<PAGE>
 
                                       SIGNATURES

        Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused the Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                        MERIDIAN GOLD INC.

                                        By:/s/Brian J. Kennedy/
                                           -------------------------------------
                                           Brian J. Kennedy
                                           President and Chief Executive Officer

Date:  May 16, 1997
<PAGE>
 
                                   INDEX TO EXHIBITS

        The following documents are being filed with the Commission as exhibits
to, and are incorporated by reference into, and form a part of, this Annual
Report on Form 20-F.

NUMBER       EXHIBIT                                           SEQUENTIAL 
------       -------                                           ----------
                                                               PAGE NUMBER
                                                               -----------

2.1*         Form of certificate representing Common Shares of 
             the Company (filed with the Company's Registration 
             Statement on Form 8-B (No. 001-12003))

2.2*         Form of certificate representing Instalment
             Receipts of the Company (filed with the
             Company's Registration Statement on Form 8-B
             (No. 001-12003))

2.3*         Articles of Amalgamation, as amended (filed
             with the Company's Registration Statement on
             Form S-4 (No. 333-9171))

2.4          By-laws, as amended

2.5          Executive Employment Agreement dated July 1,
             1996 between the Company and Christopher D.S.
             Bates

2.6          Executive Employment Agreement dated July 31,
             1996 between the Company and Donald L. Beckwith

2.7          Executive Employment Agreement dated December
             1, 1996 between the Company and Edward H. Colt

2.8          Executive Employment Agreement dated July 31,
             1996 between the Company and Brian J. Kennedy

2.9          Executive Employment Agreement dated July 31,
             1996 between the Company and Richard C. Lorson

2.10*        Meridian Gold Inc. 1996 Stock Option Plan
             (filed with the Company's Registration
             Statement on Form S-4 (No. 333-9171))

2.11*        Shareholder Rights Plan (filed with the
             Company's Registration Statement on Form 8-B
             (No. 001-12003)

2.12*        Instalment Receipt Agreement (filed with the
             Company's Registration Statement on Form 8-B
             (No. 001-12003)
<PAGE>
 
2.13*        Joint Venture Agreement between Freeport
             Exploration Company FMC Corporation (filed with
             FMC Gold Company's Registration Statement on
             Form S-1 (No. 33-14429))

------------
*   Incorporated by reference pursuant to Rule 12b-32 under the Securities and
    Exchange Act of 1934, as amended.