Meridian Gold announces Management's Discussion and Analysis of financial condition and results of operations three and nine months ended September 30, 2007



    RENO, NV, Oct. 23 /CNW/ -

    MANAGEMENT'S DISCUSSION AND ANALYSIS
    ------------------------------------
    The following Management Discussion and Analysis ("MD&A") is limited to
matters that, in the opinion of management of Meridian Gold Inc. ("Meridian
Gold", "We" or the "Company"), are material, and represents management's
knowledge through October 22, 2007. This MD&A should be read in conjunction
with our audited consolidated financial statements and related notes for the
year ended December 31, 2006 and the unaudited interim consolidated financial
statements and related notes for the three and nine month periods ended
September 30, 2007. The Company prepares its consolidated financial statements
in accordance with Canadian generally accepted accounting principles ("GAAP")
and reports in United States Dollars ("USD").

    OPERATIONS

    Net earnings (loss) fell short of expectations due to significant defense
costs associated with the offer by Yamana Gold Inc. during the third quarter
($30 million), and the timing of metal sales. Had the company shipped all its
metal produced and not incurred the defense cost net earnings would have
exceeded the internal estimates due to increased production and favorable
metal pricing.
    The tables on the following page reflect operating statistics for each of
the Company's mines that are in commercial production for the three and nine
month periods ended September 30, 2007 together with comparable prior year
amounts.

    
    -----------------------------------------------------------------
                                   Summary of Operating Results
                                  Three months ended September 30,
                                               2007

                                         Minera
                              El Penon  Florida(2)  Rossi(3)   Total
                              ---------------------------------------
    Gold production
     (000's ounces)               59.0      15.2       4.1      78.3
    Silver production
     (000's ounces)              2,168        45         7     2,220
    Zinc production (tonnes)         -       801         -       801
    Gold equivalent production
     (000's ounces)              100.2      16.1       4.3     120.6
    Tonnes ore mined
     (thousands)                   254       105        16       375
    Mill tonnes processed
     (thousands)                   263       107        11       381
    Gold grade (grams/tonne)       7.4       5.5      13.2       n/a
    Silver grade (grams/tonne)     280        19        31       n/a
    Net cash cost of
     production per gold
     ounce(1)                  $   (39)  $   379   $   494   $    66
    Total net cost of
     production per gold
     ounce(1)                  $    36   $   647   $   626   $   181
    Cash cost of production
     per gold equivalent
     ounce(1)                  $   244   $   394   $   500   $   271
    Total production cost
     per gold equivalent
     ounce(1)                  $   282   $   655   $   619   $   343
    Co-product cost per
     gold ounce(1)             $   241   $   392   $   500   $   248
    Co-product cost per
     silver ounce(1)           $     4   $     8   $     9   $     5
    -----------------------------------------------------------------


    -----------------------------------------------------------------
                                   Summary of Operating Results
                                  Three months ended September 30,
                                               2006

                                         Minera
                              El Penon  Florida(2)  Rossi(3)   Total
                              ---------------------------------------
    Gold production
     (000's ounces)               53.7      20.5         -      74.2
    Silver production
     (000's ounces)              1,461        60         -     1,521
    Zinc production (tonnes)         -     1,012         -     1,012
    Gold equivalent production
     (000's ounces)               81.2      21.6         -     102.8
    Tonnes ore mined
     (thousands)                   199       106         -       305
    Mill tonnes processed
     (thousands)                   235       109         -       344
    Gold grade (grams/tonne)       7.4       7.2         -       n/a
    Silver grade (grams/tonne)     210        24         -       n/a
    Net cash cost of
     production per gold
     ounce(1)                  $     -   $   239   $     -   $    66
    Total net cost of
     production per gold
     ounce(1)                  $    86   $   420   $     -   $   178
    Cash cost of production
     per gold equivalent
     ounce(1)                  $   204   $   259   $     -   $   216
    Total production cost
     per gold equivalent
     ounce(1)                  $   261   $   431   $     -   $   297
    Co-product cost per
     gold ounce(1)             $   204   $   258   $     -   $   215
    Co-product cost per
     silver ounce(1)           $     4   $     5   $     -   $     4
    -----------------------------------------------------------------



    -----------------------------------------------------------------
                                   Summary of Operating Results
                                  Nine months ended September 30,
                                               2007

                                         Minera
                              El Penon  Florida(2)  Rossi(3)   Total
                              ---------------------------------------
    Gold production
     (000's ounces)              175.4      47.2       7.0     229.6
    Silver production
     (000's ounces)              5,850       240        10     6,100
    Zinc production (tonnes)         -     2,617         -     2,617
    Gold equivalent production
     (000's ounces)              289.0      51.9       7.2     348.1
    Tonnes ore mined
     (thousands)                   720       321        22     1,063
    Mill tonnes processed
     (thousands)                   738       319        17     1,074
    Avg. milled gold grade
     (grams/tonne)                 7.8       5.7      14.6       n/a
    Avg. milled silver grade
     (grams/tonne)                 269        35        33       n/a
    Net cash cost of
     production per gold
     ounce(1)                  $   (80)  $   188   $   424   $    (8)
    Total net cost of
     production per gold
     ounce(1)                  $   (13)  $   476   $   541   $   107
    Cash cost of production
     per gold equivalent
     ounce(1)                  $   203   $   232   $   431   $   212
    Total production cost
     per gold equivalent
     ounce(1)                  $   245   $   506   $   539   $   288
    Co-product cost per
     gold ounce(1)             $   203   $   231   $   431   $   243
    Co-product cost per
     silver ounce(1)           $     4   $     5   $     8   $     4
    -----------------------------------------------------------------


    -----------------------------------------------------------------
                                   Summary of Operating Results
                                  Nine months ended September 30,
                                               2006

                                         Minera
                              El Penon  Florida(2)  Rossi(3)   Total
                              ---------------------------------------
    Gold production
     (000's ounces)              179.8      20.5         -     200.3
    Silver production
     (000's ounces)              5,167        60         -     5,227
    Zinc production (tonnes)         -     1,012         -     1,012
    Gold equivalent production
     (000's ounces)              276.1      21.6         -     297.7
    Tonnes ore mined
     (thousands)                   645       106         -       751
    Mill tonnes processed
     (thousands)                   695       109         -       804
    Avg. milled gold grade
     (grams/tonne)                 8.4       7.2         -       n/a
    Avg. milled silver grade
     (grams/tonne)                 249        24         -       n/a
    Net cash cost of
     production per gold
     ounce(1)                  $   (64)  $   239   $     -   $   (33)
    Total net cost of
     production per gold
     ounce(1)                  $    17   $   420   $     -   $    58
    Cash cost of production
     per gold equivalent
     ounce(1)                  $   163   $   259   $     -   $   170
    Total production cost
     per gold equivalent
     ounce(1)                  $   215   $   431   $     -   $   231
    Co-product cost per
     gold ounce (1)            $   162   $   258   $     -   $   171
    Co-product cost per
     silver ounce (1)          $     3   $     5   $     -   $     3
    -----------------------------------------------------------------
    Notes
    -----
    (1) Net cash cost of production per gold ounce, total net cost of
        production per gold ounce, cash cost of production per gold
        equivalent ounce, total production cost per gold equivalent
        ounce, and co-product cost per gold/silver ounce are non-GAAP
        measures. See the section on "Non-GAAP Measures" in this
        MD&A.
    (2) The Company acquired Minera Florida and its earnings are
        included in the Company's statement of operations beginning
        July 1, 2006. Accordingly, historical comparisons of the
        Minera Florida mine for the nine month period ended
        September 30, 2006 include operational statistics for the
        three month period then ended.
    (3) The amounts for Rossi represent Meridian's share of the 40%
        interest in a joint venture with Barrick Gold Corporation.
        The Rossi mine began commercial production in April 2007.
    

    El Pensn
    --------
    Ore tonnes mined increased approximately 55,000 tonnes to 253,700 tonnes
and 75,000 tonnes to 719,500 tonnes for the third quarter and first nine
months of 2007, respectively, compared to the same periods in 2006. The daily
extraction rate, which includes ore, development and non-mineralized material,
increased by approximately 1,360 tonnes to 6,110 tonnes per day and 935 tonnes
to 5,985 tonnes per day for the third quarter and first nine months of 2007,
respectively, compared to the same periods in 2006. The production increase
stems from expansion projects the Company initiated at the end of 2006 and the
commencement of production from Fortuna.
    Mill throughput at El Pensn for the third quarter of 2007 increased
compared to the third quarter of 2006 as the capital projects were completed
and the mill processing was further optimized. The average production for the
third quarter was 2,863 tonnes per day, the highest per day average yet at El
Pensn. The remaining plant expansion projects continued to advance toward
increasing mill capacity to beyond 2,800 tonnes per day on a sustainable
basis. The remaining projects are scheduled for completion during the fourth
quarter 2007.
    Gold production during the third quarter increased by 5,300 ounces due to
increased throughput. Gold production during the first nine months of 2007
decreased by 4,400 ounces compared to the same period in 2006, which was
primarily attributable to a reduction in grade of mined ore to levels close to
the average grade for the reserve. Silver production increased by 707,000
ounces and 684,000 ounces for the third quarter and first nine months of 2007,
respectively, compared to the same periods of 2006. The increase in silver
production was due to increased mill throughput and higher grades of ore
milled primarily in the third quarter.
    The decreases in net cash cost of production per gold ounce to ($39),
including by-product credits, and total net production costs per gold ounce to
$36 at El Pensn for the third quarter 2007 compared to the same period in 2006
were the result of higher silver prices, partially offset by higher costs
related to higher reagent and commodities prices. The increase in cash cost of
production per gold equivalent ounce and total cost of production per gold
equivalent ounce was the result of higher costs for maintenance, energy,
reagents, and commodity prices. The Company has historically maintained
minimal amounts of finished goods inventory of gold and silver. On September
30, 2007, the Company's finished goods inventory at El Pensn consisted of
approximately 5,300 ounces of gold and 185,000 of ounces of silver, which was
higher than normal. (The measurements for net cash cost of production per gold
ounce, total net production cost per gold ounce, cash cost of production per
gold equivalent ounce, total cost of production per gold equivalent ounce, and
co-product cost per gold/silver ounce are non-GAAP measurements. An
explanation and reconciliation of these measurements can be found at the end
of Management's Discussion and Analysis section of this report).

    Minera Florida
    --------------
    Meridian Gold exercised its purchase option agreement and took control of
Minera Florida as of July 1, 2006. Accordingly, historical comparisons of the
Minera Florida mine for the nine month period ending September 30, 2006
include operations data for the three month period ended September 30, 2006.
    During the quarter a significant amount of infill drilling was performed
on various ore bodies in the Minera Florida district. This work is focused on
constructing exploration drifts and drilling in order to convert measured,
indicated and inferred resources to proven and probable reserves by year-end.
    The mine is currently sourcing underground ore principally from the Pedro
Valencia, Millenium, and Berta veins. 104,600 and 320,100 tonnes of ore were
mined during the third quarter and first nine months of 2007, respectively.
This production resulted in an average production rate of 1,140 tonnes of ore
per day in the third quarter of 2007.
    The plant processed 107,000 and 319,000 tonnes of ore in the third
quarter and first nine months of 2007, respectively, resulting in production
of 15,200 ounces of gold, 45,000 ounces of silver and 801 tonnes of zinc for
the third quarter of 2007 and 47,200 ounces of gold, 240,000 ounces of silver
and 2,617 tonnes of zinc for the first nine months of 2007. Gold and silver
production in the third quarter of 2007 decreased by 5,300 and 15,000 ounces,
respectively compared to the same period of 2006. The decrease in gold and
silver production was primarily due to a reduction in grade of mined ore to
levels close to the average for the reserve.
    The increase in net cash cost of production per gold ounce to $379 and
$239 for the third quarter and first nine months of 2007, respectively, was
attributable to the reduction in grade of mined ore as described above and a
delay in shipping zinc for the third quarter. If the Company had shipped the
zinc produced in the third quarter, net cash cost of production would have
been more in line with recent operating history. (The measurements for net
cash cost of production per gold ounce, total net production cost per gold
ounce, cash cost of production per gold equivalent ounce, total cost of
production per gold equivalent ounce, and co-product cost per gold/silver
ounce are non-GAAP measurements. An explanation and reconciliation of these
measurements can be found at the end of Management's Discussion and Analysis
section of this report).

    Rossi/Storm
    -----------
    Commercial production at the Rossi/Storm mine, a 40% owned joint venture
with Barrick Exploration, commenced in the second quarter. The Company's share
of ore tonnes mined was 16,000 and 22,000 tonnes for the third quarter and
first nine months of 2007, respectively. The Company's share of mill tonnes
processed was 11,000 and 17,000 for the third quarter and first nine months of
2007, respectively. The Company's share of the above production resulted in
4,100 ounces of gold and 7,000 ounces of silver for the third quarter of 2007
and 7,000 ounces of gold and 10,000 ounces of silver for the first nine months
of 2007. The increase in net cash cost of production per gold ounce from $322
to $494 per ounce was primarily due to a significant reduction in the gold
grade of ore mined during the third quarter to levels two grams per tonne
below the reserve average. The joint venture has recently implemented a
definition drilling program to better define the ore body and enhance the ore
grade. (The measurements for net cash cost of production per gold ounce, total
net production cost per gold ounce, cash cost of production per gold
equivalent ounce, total cost of production per gold equivalent ounce, and
co-product cost per gold/silver ounce are non-GAAP measurements. An
explanation and reconciliation of these measurements can be found at the end
of Management's Discussion and Analysis section of this report).

    FINANCIAL RESULTS

    The table below reflects precious metal sales for the three and nine
month periods ended September 30, 2007 and comparable information for the same
periods in 2006.

    
                               Three months ended   Nine months ended
                                  September 30,       September 30,
                                 2007      2006      2007      2006
                               --------  --------  --------  --------
    Gold sold (000's ounces)      75.0      72.5     222.7     196.0
    Silver sold (000's ounces)   2,135     1,483     5,901     5,101
    Zinc sold (tonnes)               -         -     2,106         -
    Realized gold price
     ($/ounce)                 $   669   $   616   $   661   $   598
    Realized silver price
     ($/ounce)                 $ 12.73   $ 11.61   $ 12.85   $ 11.19
    Realized zinc price
     ($/tonne)                 $     -   $     -   $ 3,390   $     -
    

    Three Month Period Ended September 30, 2007 Compared with the
    Three Month Period Ended September 30, 2006

    Revenue.
    --------
    Revenue increased $14.7 million, or 24%, to $76.9 million in the third
quarter of 2007 compared to $62.2 million in the third quarter of 2006. The
increase in revenue is primarily attributable to additional gold and silver
ounces sold together with increased average realized metals prices. $2.8
million of the above increase was the result of the inclusion of the Company's
share of revenues from the Rossi joint venture, which began commercial
production in April of 2007. The Company did not ship zinc during the third
quarter of 2007. Additionally, as described in "operations" of this
Management's Discussion and Analysis, the El Pensn mine finished goods
inventory consisted of approximately 5,300 ounces of gold and 185,000 ounces
of silver. The sale of the above zinc and precious metals inventory will be
reflected in the coming quarter's revenue.

    Cost of sales before depreciation, depletion and amortization.
    --------------------------------------------------------------
    In the third quarter of 2007, cost of sales amounted to $31.1 million, an
increase of $8.0 million compared to cost of sales in the third quarter of
2006 of $23.1 million. $2.1 million of the increase was attributable to the
Company's share of cost of sales of the Rossi joint venture, which began
commercial production in April 2007. The remaining increase is due to a 28%
increase in ore tonnes mined and a 12% increase in ore tonnes processed at El
Pensn together with increased electricity costs and $1.1 million of higher
costs paid to the mine's subcontractor in settlement of a labor dispute with
the subcontractor's unionized employees, which was partially offset by a
slight reduction in total mining and ore processing costs at Minera Florida.

    Depreciation, depletion, and amortization.
    ------------------------------------------
    Depreciation, depletion and amortization increased $0.3 million in the
third quarter of 2007 to $8.8 million compared to the same period in 2006,
reflecting the additional charges from the Rossi joint venture of $0.5 million
and $0.3 million from the Minera Florida mine, partially offset by decreased
depreciation costs at the El Pensn mine due to a significant portion of the
plant assets being fully depreciated as of year end 2006.

    Exploration.
    ------------
    Exploration expense in the third quarter of 2007 was $9.7 million
compared to $6.2 million for the same period in 2006. The increased spending
for the third quarter of 2007 compared to the comparable period in 2006 is
largely due to increased exploration at the Mercedes property in Mexico and in
the new discoveries at our flagship El Pensn mine.

    Selling, general, and administrative.
    -------------------------------------
    Selling, general and administrative expenses were $4.8 million lower in
the third quarter of 2007 compared to the same period in 2006. The third
quarter decrease is attributable to $5.5 million in costs for incentive
payments, restricted and share option awards associated with the retirement of
the Company's CEO and costs associated with the hiring of a new CEO, which
were incurred in the third quarter of 2006 and which did not recur in the
third quarter of 2007. The above decrease was partially offset by increased
employee headcount, higher salary and related employee costs, and increased
spending aimed at achieving the Company's strategic goals in the 2007 period.

    Other expense (income).
    -----------------------
    Other expense for the third quarter of 2007 was $0.2 million lower than
the comparable amount in 2006 primarily due to third quarter 2007
marked-to-market gains related to the zinc forward sales contracts entered
into during the fourth quarter of 2006.

    Earnings from operations.
    -------------------------
    Due to the factors described above, we reported earnings from operations
of $21.8 million in the third quarter of 2007 compared to $13.9 million for
the third quarter of 2006.

    Interest income, net:
    ---------------------
    Interest income, net of interest expense was $1.0 million lower in the
third quarter of 2007 compared to the third quarter of 2006. The decrease was
attributable to lower amounts invested in the third quarter of 2007 and $0.5
million of commitment fees and amortization of deferred financing costs
related to the new credit facility.

    Gain on sale of assets:
    -----------------------
    Gain on sale of assets for the third quarter of 2007 was $0.1 million
with no amount from the same period in 2006.

    Other income (expense):
    -----------------------
    The Company incurred $30.0 million in investment banking and legal fees
relating to its review, evaluation, and response to an offer by Yamana Gold
Inc. (Yamana) to acquire all of the outstanding shares of Meridian Gold Inc.
during the third quarter of 2007. During the fourth quarter the Company
expects to incur $9.0 million of additional investment banking and legal fees.
See Note 13 to the Interim Consolidated Financial Statements for further
information relating to other costs the Company expects to incur based upon a
successful completion of the Yamana offer.

    Income tax expense.
    -------------------
    Income tax expense in the third quarter of 2007 was $4.4 million lower
than the third quarter of 2006. Although the Company had a pre-tax loss of
$6.5 million, it did not obtain a tax benefit from $30.0 million of other
non-operating expenses it incurred in its review, evaluation, and response to
the Yamana offer as described in the section above.

    Net earnings (loss).
    --------------------
    For the reasons described above, the Company reported a net loss of $12.9
million in the third quarter of 2007 compared to net earnings of $5.7 million
for the same period in 2006. As described in "Revenue" and "Other income
(expense)" above, had the Company shipped zinc from its Minera Florida mine,
its finished goods inventory at the El Pensn mine, net of the related cost of
this inventory, and had the Company not incurred $30.0 million of defense
costs, earnings would have been in line with internal budget estimates due to
increased metal production and favorable pricing.

    Nine Month Period Ended September 30, 2007 Compared with the Nine
    Month Period Ended September 30, 2006

    Revenue.
    --------
    Revenue increased $52.6 million, or 30%, to $227.6 million in the first
nine months of 2007 compared to $175.0 million in the first nine months in
2006. $28.8 million of the increase was attributable to revenues from the
Mineral Florida mine for the first half of 2007 with no comparable amounts
from the same period of 2006. An additional $4.6 million of the increase
resulted from the inclusion of the Company's share of revenues from the Rossi
joint venture, which began commercial production in April of 2007. The
remaining increase in revenue was attributable to additional gold and silver
ounces sold and higher realized prices for both gold and silver sales, which
was partially offset by reduced sales of gold ounces from the El Pensn mine.
The decrease in metal sales from the El Pensn mine was the result of lower
gold ore grades processed in the first nine months of 2007 compared to the
same period in 2006. As described in "Revenue" for the three month period
ended September 30, 2007 compared with the three month period ended September
30, 2006 in Management's Discussion and Analysis, the Company did not ship
zinc during the third quarter and its finished goods inventory was higher than
normal levels. The sale of the above zinc and precious metals inventory will
be reflected in the coming quarter's revenue.

    Cost of sales before depreciation, depletion and amortization.
    --------------------------------------------------------------
    In the first nine months of 2007, cost of sales amounted to
$79.4 million, an increase of $26.8 million compared to cost of sales in the
same period in 2006 of $52.6 million. $11.1 million of the increase in cost of
sales is due to costs related to the Minera Florida mine in the first half of
2007 with no comparable amounts from the same period of 2006. $2.9 million of
the increase was attributable to the Company's share of cost of sales of the
Rossi joint venture, which began commercial production in April 2007. The
remaining increase is due to a 12% increase in ore tonnes mined and a 6%
increase in ore tonnes processed at El Pensn together with increased
electricity costs and $1.1 million of higher costs paid to the mine's
subcontractor in settlement of a labor dispute with the subcontractor's
unionized employees.

    Depreciation, depletion, and amortization.
    ------------------------------------------
    Depreciation, depletion and amortization increased $7.4 million in the
first nine months of 2007 to $25.9 million. The increase was the result of
charges from the Minera Florida mine of $9.4 million during the first half of
2007 with no comparable amounts for the same period in 2006 and $0.8 million
of charges from the Rossi joint venture, which was offset by decreased
depreciation costs at the El Pensn mine due to a significant portion of the
plant assets being fully depreciated as of year end 2006.

    Exploration.
    ------------
    Exploration expense in the first nine months of 2007 was $25.1 million
compared to $18.0 million for the same period in 2006. The increase in
spending is largely due to increased exploration at the Mercedes property in
Mexico, in the district surrounding El Pensn, the La Pepa project, and the
Jeronimo project along with reconnaissance spending at other Chilean
locations.

    Selling, general, and administrative.
    -------------------------------------
    Selling, general and administrative expenses were $2.1 million lower in
the first nine months of 2007 compared to the same period in 2006. $5.5
million of the decrease is attributable to costs for incentive payments,
restricted and share option awards associated with the retirement of the CEO
and costs associated with the hiring of a new CEO in the third quarter of
2006. The above decrease was offset by increased employee headcount, higher
salary and related employee costs, and increased spending aimed at achieving
the Company's strategic goals in the 2007 period.

    Other expense (income).
    -----------------------
    Other income of $1.3 million for the first nine months of 2007 was $2.1
million higher than other expense of $0.8 million recorded in the comparable
period of 2006, due to marked-to-market gains for the first nine months of
2007 related to the zinc forward sales contracts entered into during the
fourth quarter of 2006.

    Earnings from operations.
    -------------------------
    Due to the factors described above, we reported earnings from operations
of $84.1 million in the first nine months of 2007 compared to $68.6 million
for the first nine months of 2006.

    Gain on sale of assets:
    -----------------------
    Gain on sale of assets of $0.7 million for the first nine months of 2007
quarter was primarily attributable to the sale of equity securities held by
the company with no amount from the same period of 2006.

    Interest income, net:
    ---------------------
    Interest income, net of interest expense was $2.7 million lower for the
first nine months of 2007 than the first nine months of 2006. The decrease was
attributable to lower amounts invested in 2007 and $0.7 million of commitment
fees and amortization of deferred financing costs of $0.7 million related to
the new credit facility.

    Other income (expense):
    -----------------------
    See "other income (expense)" for the three month period ended September
30, 2007 compared with the three month period ended September 30, 2006 in
Management's Discussion and Analysis for an explanation of the $30.0 million
in non-operating expense incurred by the Company.

    Income tax expense.
    -------------------
    Income tax expense in the first nine months of 2007 was $4.9 million
lower than the same period in 2006. Although the Company had lower pre-tax
income, its effective tax rate in 2007 was significantly higher than the 2006
period as the result of not obtaining a tax benefit from $30.0 million of
other non-operating expenses it incurred in its review, evaluation, and
response to the Yamana offer as described in the section above. The above was
partially offset by the realization of a one-time tax benefit of $3.5 million
in a foreign jurisdiction in the second quarter of 2007.

    Net earnings.
    -------------
    For the reasons described above, we reported net earnings of $30.5
million in the first nine months of 2007 compared to $42.1 million for the
same period in 2006. As described in "Revenue" and "Other income (expense)"
above, had the Company shipped zinc from its Minera Florida mine, its finished
goods inventory at the El Pensn mine, net of the related cost of this
inventory, and had the Company not incurred $30.0 million of defense costs,
earnings would have been in line with internal budget estimates due to
increased metal production and favorable pricing.

    Liquidity
    ---------
    Cash balances, including restricted cash, short-term and long-term
investments, increased to $221.1 million as of September 30, 2007 compared to
$214.7 million as of December 31, 2006. The above increase is due to cash
flows generated by operations and cash flows generated by a reduction in long
term investments offset by capital expenditures and an increase in short term
investments. Working capital increased to $176.5 million at September 30, 2007
from $174.5 million at December 31, 2006 for largely the same reasons
indicated above, offset by an expected payment of a liability incurred in
connection with the acquisition of Minera Florida in a lump sum in the fourth
quarter of 2007, which has been classified as a current liability.
    Cash to meet the Company's operating needs, finance capital expenditures
and fund exploration activities during the third quarter of 2007 was provided
from operations and from existing cash reserves. Cash provided by operating
activities, including changes in non-cash working capital and other operating
amounts, was $11.0 million and $71.9 million in the third quarter and first
nine months of 2007, respectively, compared to $11.2 million and $60.7
million, respectively, in the same periods in 2006.
    As further described in Note 3 to the interim consolidated financial
statements, in May 2007 the Company entered into an agreement for a $300
million revolving credit facility consisting of three separate tranches of
$100 million. As of September 30, 2007, no amounts have been borrowed under
the facility. The revolving credit facility's purpose was to provide an
alternate source of liquidity to fund activities outside of Chile. The
agreement contains a provision allowing the lender to terminate its commitment
to extend credit under the facility upon a change in control (See note 13 to
the Interim Consolidated Financial Statements).

    Changes in Accounting Policies and Presentation

    The Company's Interim Consolidated Financial Statements have been
prepared in accordance with Canadian GAAP. These Interim Consolidated
Financial Statements should be read in conjunction with the Company's Audited
Consolidated Financial Statements for the year ended December 31, 2006. The
accounting policies used in the preparation of these Interim Consolidated
Financial Statements are consistent with those used in the Company's Annual
Audited Consolidated Financial Statements, except as described below:

    Changes in Significant Accounting Policies

    Commencing January 1, 2007, the Company adopted the new Canadian
Institute of Chartered Accountants (CICA) Handbook Section 3855, Financial
Instruments - Recognition and Measurement; Section 3865, Hedges; Section 1530,
Comprehensive Income and Section 3861, Financial Instruments - Disclosure and
Presentation. The above standards resulted in changes in the accounting for
financial instruments and hedges as well as the recognition of certain
transitional adjustments that have been recorded as available for sale
investments and unrealized foreign currency translation gains on net
investments in self sustaining foreign operations in opening accumulated other
comprehensive income in shareholders' equity. The comparative interim
Consolidated Financial Statements have not otherwise been restated. For a
description of the principal changes in accounting for financial instruments
and hedges due to the adoption of the accounting standards, see Note 2 to the
Interim Consolidated Financial Statements.

    Critical Accounting Estimates

    The critical accounting estimates remain unchanged from those disclosed
in the Company's 2006 Annual Report.

    Other

    Certain amounts in the Interim Consolidated Financial Statements for the
prior period have been reclassified to conform to the presentation adopted in
the current period.

    Summary of Quarterly Results

    (Unaudited and expressed in millions of US dollars, except per
    share data)

    
                                                2007            2006
                                      ----------------------- -------
                                         Q3      Q2      Q1      Q4
                                        ----    ----    ----    ----
    Revenue                           $ 76.9  $ 84.3  $ 66.4  $ 65.0
    Pre-impairment net earnings(1)     (12.9)   24.5    18.9     6.5
    Net earnings (loss)                (12.9)   24.5    18.9     6.5

    Basic earnings per share,
     pre-impairment(2)                $(0.13) $ 0.24  $ 0.19  $ 0.06
    Diluted earnings per share
     pre-impairment                   $(0.13) $ 0.24  $ 0.19  $ 0.06
    Basic earnings (loss)
     per share(2)                     $(0.13) $ 0.24  $ 0.19  $ 0.06
    Diluted earnings (loss)
     per share                        $(0.13) $ 0.24  $ 0.19  $ 0.06


                                                2006            2005
                                      ----------------------- -------
                                         Q3      Q2      Q1      Q4
                                        ----    ----    ----    ----
    Revenue                           $ 62.2  $ 57.3  $ 55.5  $ 49.3
    Pre-impairment net earnings(1)       5.7    18.8    17.6    12.3
    Net earnings (loss)                  5.7    18.8    17.6  (374.3)

    Basic earnings per share,
     pre-impairment(2)                $ 0.06  $ 0.19  $ 0.18  $ 0.12
    Diluted earnings per share
     pre-impairment                   $ 0.06  $ 0.19  $ 0.17  $ 0.12
    Basic earnings (loss)
     per share(2)                     $ 0.06  $ 0.19  $ 0.18  $(3.73)
    Diluted earnings (loss)
     per share                        $ 0.06  $ 0.19  $ 0.17  $(3.73)


    (1) Pre-impairment net earnings is a non-GAAP measure and is
        equal to net earnings (loss) before impairment of mineral
        properties and other in the net amount of $386.3 million
        recorded in the fourth quarter of 2005
    (2) Quarterly amounts may not sum to full year amounts due to
        rounding
    

    Outstanding Share Data

    As of September 30, 2007, 101,305,120 (December 31, 2006 - 101,090,400)
common shares were outstanding and options to purchase 774,488 shares of
common stock were held by directors and employees with exercise prices ranging
between $2.25 and $26.79 per share, of which options to purchase 650,760
shares of common stock were exercisable with expiry dates between November
2007 and February 2016.

    Non-GAAP Measures

    Meridian Gold has provided measures of "net cash cost per gold ounce",
"total net cost per gold ounce", "cash cost per gold equivalent ounce", "total
cost per gold equivalent ounce", and "co-product cost per gold/silver ounce",
which are included in this document. Net cash cost per gold ounce is
determined according to the Gold Institute Standard by dividing net cash costs
by gold ounces produced.
    The Company believes that in addition to conventional measures prepared
in accordance with Canadian generally accepted accounting principles ("GAAP"),
stakeholders use non-GAAP measures to evaluate the Company's performance and
its ability to generate cash flow. These non-GAAP performance measures do not
have any standardized meaning prescribed by GAAP, and therefore, may not be
comparable to similar measures presented by other companies. Accordingly, they
are intended to provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with GAAP. The calculation for these non-GAAP measures is presented
below.

    
    (Unaudited and in millions of US dollars, except for metal
    production and cash costs per ounce)

                               Three months ended  Nine months ended
                                  September 30,       September 30,
                                 2007      2006      2007      2006
    ---------------------------------------------  ------------------
    By-Product method of
    --------------------
     calculating cost per ounce
     --------------------------
    Cost of sales (Before
     depreciation, depletion,
     and amortization)         $  31.1   $  23.1   $  79.4   $  52.6
    Less reclamation              (0.6)     (0.3)     (1.8)     (0.4)
                               ------------------  ------------------
    Net cost of sales (Before
     depreciation, depletion,
     and amortization)         $  30.5   $  22.8   $  77.6   $  52.2
    Silver revenues              (27.2)    (17.3)    (75.7)    (57.1)
    Zinc revenues                  0.4      (0.5)     (4.7)     (0.5)
    Other                          1.4      (0.1)      0.9      (1.2)
    ---------------------------------------------  ------------------
    Total net cash costs           5.2       4.9      (1.9)     (6.6)
    Gold production in 000's
     ounces from active
     properties                   78.3      74.2     229.6     200.2
    ---------------------------------------------  ------------------
    Total net cash costs
     per gold ounce            $    66   $    66       ($7)     ($33)
    ---------------------------------------------  ------------------
    ---------------------------------------------  ------------------

    Total net cash costs           5.2       4.9      (1.9)     (6.6)
    Depreciation, depletion
     and amortization from
     operations                    8.8       8.3      26.0      18.2
    ---------------------------------------------  ------------------
    Total net cost             $  14.0   $  13.2   $  24.1   $  11.6
    Gold production in ounces
     from active properties       78.3      74.2     229.6     200.2
    ---------------------------------------------  ------------------
    Total net cost per
     gold ounce                $   181   $   178   $   107   $    58
    ---------------------------------------------  ------------------
    ---------------------------------------------  ------------------

    Gold equivalent ounce
    ---------------------
     method of calculating
     ---------------------
     cost per ounce
     --------------

    Gold production in 000's
     ounces from active
     properties                   78.3      74.2     229.6     200.2
    Silver production in 000's
     ounces from active
     properties                  2,220     1,521     6,100     5,227
      Silver Ounce conversion
       Factor:                    52.6      53.1      51.5      53.6
    Converted Silver Ounces
     (ounces/factor)              42.2      28.6     118.4      97.5
    ---------------------------------------------  ------------------
    Gold Equivalent Ounces
     (000's)                     120.5     102.8     348.0     297.7
    ---------------------------------------------  ------------------
    ---------------------------------------------  ------------------

    Net cost of sales (Before
     depreciation, depletion,
     and amortization)         $  30.5   $  22.8   $  77.6   $  52.2
    Zinc revenues                  0.4      (0.5)     (4.7)     (0.5)
    Other                          1.4      (0.1)      0.9      (1.2)
    ---------------------------------------------  ------------------
    Total net cash cost           32.3      22.2      73.8      50.5
    ---------------------------------------------  ------------------
    Total cash cost per gold
     equivalent ounce          $   271   $   216   $   212   $   170
    ---------------------------------------------  ------------------
    ---------------------------------------------  ------------------

    Total net cash cost        $  32.3   $  22.2   $  73.8   $  50.5
    Depreciation, depletion
     and amortization from
     operations                    8.8       8.3      26.0      18.2
    ---------------------------------------------  ------------------
    Total Cost                    41.1      30.5      99.8      68.7
    ---------------------------------------------  ------------------
    Total Cost per gold
     equivalent ounce          $   343   $   297   $   288   $   231
    ---------------------------------------------  ------------------
    ---------------------------------------------  ------------------

    Co-product method of
    --------------------
     calculating cost per ounce
     --------------------------
     (zinc as by-product)
     --------------------

    Gold production in ounces
     from active properties       78.3      74.2     229.6     200.2
    Silver production in ounces
     from Active Properties      2,220     1,521     6,100     5,227
    ---------------------------------------------  ------------------

    Revenue from Gold          $  50.2   $  44.4   $ 147.3   $ 117.3
    Percentage of Total Revenue    65%       72%       66%       67%
    ---------------------------------------------  ------------------

    Revenue from Silver        $  27.2   $  17.3   $  75.7   $  57.1
    Percentage of Total Revenue    35%       28%       34%       33%
    ---------------------------------------------  ------------------

    Total net cost of Sales
     (net of zinc)             $  32.3   $  22.2   $  73.8   $  50.5
    Cost of sales allocated
     to Gold production        $  21.0   $  16.0   $  48.7   $  34.0
    Cost of sales allocated
     to Silver production      $  11.4   $   6.2   $  25.1   $  16.5
    ---------------------------------------------  ------------------

    Co-product cash cost
     of Gold ounce             $   268   $   215   $   213   $   171
    Co-product cash cost
     of Silver ounce           $     5   $     4   $     4   $     3
    ---------------------------------------------  ------------------
    ---------------------------------------------  ------------------
    

    FORWARD-LOOKING STATEMENTS
    --------------------------
    Certain statements in this MD&A constitute "forward-looking statements"
within the meaning of the U.S. Private Securities Litigation Reform Act of
1995 and Canadian securities legislation. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the Company, or other
future events, including forecast production, earnings and cash flows, to be
materially different from any future results, performance or achievements or
other events expressly or implicitly predicted by such forward-looking
statements. When used herein, words such as "anticipate", "estimate",
"believe", "expect", "predict", "plan", "should", "may", "could" and other
similar expressions are intended to identify forward-looking statements. Such
risks, uncertainties and other factors include those set forth in the
Company's Annual Information Form and other periodic filings. Important
factors that could cause actual results to differ materially from those
expressed or implied by such forward-looking statements include, but are not
limited to, factors associated with fluctuations in the market price of
precious metals, changes in the dollar exchange rate, mining industry risks,
uncertainty of title to properties, risk associated with foreign operations,
environmental risks and hazards, proposed legislation affecting the mining
industry, litigation, governmental regulation of the mining industry,
properties without known reserves, uncertainty as to calculations of reserves,
mineral deposits and grades, requirement of additional financing, uninsured
risks, risk of impairment of assets, risk of hedging strategies, competition,
dependence on key management personnel, and completion of the Yamana tender
offer. Such information contained herein represents management's best judgment
as of the date hereof based on information currently available. The Company
does not intend to update this information.
    The Company's filings with the securities regulatory authorities in
Canada are available at www.sedar.com and its filings with the U.S. Securities
and Exchange Commission are available at www.sec.gov through EDGAR.

    
                         Meridian Gold Inc.
                 Interim Consolidated Balance Sheets
         (Unaudited and expressed in millions of US dollars)

                                          September 30,  December 31,
                                               2007          2006
                                          -------------- ------------
    Assets
    Current assets
      Cash and cash equivalents             $      99.8  $      92.8
      Short-term investments                       94.7         84.0
      Restricted cash                              13.8         13.8
      Trade and other receivables                   9.0          6.2
      Inventory                                    10.0          7.0
      Future income taxes - current                 0.5          0.5
      Other current assets                         20.4         15.7
                                          -------------- ------------
    Total current assets                          248.2        220.0

    Mineral property, plant and equipment, net    320.3        276.1
    Other long-term assets                         23.0         31.8
                                          -------------- ------------

    Total assets                            $     591.5  $     527.9
                                          -------------- ------------
                                          -------------- ------------


    Liabilities and Shareholders' Equity
    Current liabilities
      Accounts payable, trade and other     $      46.0  $      20.1
      Other current liabilities                    25.7         25.4
                                          -------------- ------------
    Total current liabilities                      71.7         45.5

    Future income taxes                            23.6         17.6
    Other long-term liabilities                   101.2        103.4
                                          -------------- ------------
    Total liabilities                             196.5        166.5

    Non-controlling interest                       15.3         15.3
    Shareholders' equity (note 6)                 379.7        346.1
                                          -------------- ------------

    Total liabilities and
     shareholders' equity                   $     591.5  $     527.9
                                          -------------- ------------
                                          -------------- ------------


    See accompanying notes to interim consolidated financial
    statements


                         Meridian Gold Inc.
            Interim Consolidated Statements of Operations
         (Unaudited and expressed in millions of US dollars,
                       except per share data)

                               Three months ended  Nine months ended
                                  September 30,       September 30,
                                 2007      2006      2007      2006
                              ------------------- -------------------

    Revenue                   $   76.9  $   62.2  $  227.6  $  175.0

    Costs and expenses
      Cost of sales before
       depreciation, depletion
       and amortization           31.1      23.1      79.4      52.6
      Depreciation, depletion
       and amortization            8.8       8.5      25.9      18.5
      Exploration                  9.7       6.2      25.1      18.0
      Selling, general and
       administrative              5.3      10.1      14.4      16.5
      Other expense (income)       0.2       0.4      (1.3)      0.8
                              ------------------- -------------------
                                  55.1      48.3     143.5     106.4
                              ------------------- -------------------

    Earnings from operations      21.8      13.9      84.1      68.6

    Interest income, net           1.6       2.6       6.5       9.2
    Gain on sale of assets         0.1         -       0.7         -
    Other income (expense)       (30.0)        -     (30.0)        -
                              ------------------- -------------------
    Earnings before taxes         (6.5)     16.5      61.3      77.8

    Income tax expense            (6.4)    (10.8)    (30.8)    (35.7)
                              ------------------- -------------------

    Net earnings (loss)       $  (12.9) $    5.7  $   30.5  $   42.1
                              ------------------- -------------------
                              ------------------- -------------------

    Earnings per share
      Basic                   $  (0.13) $   0.06  $   0.30  $   0.42
      Diluted                 $  (0.13) $   0.06  $   0.30  $   0.42

    Weighted average shares
     outstanding (in millions)
      Basic                      101.4     100.9     101.2     100.7
      Diluted                    101.4     101.3     101.6     101.2

    See accompanying notes to interim consolidated financial
    statements


                         Meridian Gold Inc.
     Interim Consolidated Statements of Retained Earnings (Deficit)
         (Unaudited and expressed in millions of US dollars)

                               Three months ended  Nine months ended
                                  September 30,       September 30,
                                 2007      2006      2007      2006
                              ------------------- -------------------

    Balance at beginning
     of period                $  (74.4) $ (130.0) $ (117.8) $ (166.4)
    Net earnings (loss)          (12.9)      5.7      30.5      42.1
                              ------------------- -------------------
    Balance at end of period  $  (87.3) $ (124.3) $  (87.3) $ (124.3)
                              ------------------- -------------------
                              ------------------- -------------------

    See accompanying notes to interim consolidated financial
    statements


                         Meridian Gold Inc.
    Interim Consolidated Statements of Comprehensive Income (Loss)
         (Unaudited and expressed in millions of US dollars)

                               Three months ended  Nine months ended
                                  September 30,       September 30,
                                 2007      2006      2007      2006
                              ------------------- -------------------

    Net earnings (loss)       $  (12.9) $    5.7  $   30.5  $   42.1
    Other comprehensive income
      Unrealized gain on
       translating financial
       statements of self-
       sustaining foreign
       operations                    -         -       0.1         -
      Change in unrealized gain
       on available for sale
       securities                  0.1         -       0.3         -
      Adjustment for gains and
       losses included in
       net income                    -         -      (0.5)        -
                              ------------------- -------------------
    Total other comprehensive
     income, net of taxes          0.1       0.0      (0.1)      0.0
                              ------------------- -------------------

    Comprehensive income
     (loss)                   $  (12.8) $    5.7  $   30.4  $   42.1
                              ------------------- -------------------
                              ------------------- -------------------

    See accompanying notes to interim consolidated financial
    statements


                         Meridian Gold Inc.
            Interim Consolidated Statements of Cash Flows
         (Unaudited and expressed in millions of US dollars)

                               Three months ended  Nine months ended
                                  September 30,       September 30,
                                 2007      2006      2007      2006
                              ------------------- -------------------
    Cash flow from (used in)
     operating activities
      Net earnings (loss)     $  (12.9) $    5.7  $   30.5  $   42.1
      Non-cash items:
        Provision for
         depreciation,
         depletion and
         amortization              8.8       8.5      25.9      18.5
        Accretion of asset
         retirement obligations    0.6       0.4       1.8       1.0
        Stock-based compensation   0.7       2.8       2.1       4.4
        Gain on sale of assets,
         net                      (0.1)        -      (0.7)        -
        Future income taxes        3.5       2.4       8.4      14.4
      Changes in non-cash
       working capital and
       other accounts:
        Trade and other
         receivables               0.7       5.9      (2.8)     (1.1)
        Inventory                 (1.4)      0.4      (2.9)      0.1
        Other current assets      (3.0)     (5.1)     (2.3)     (5.3)
        Other assets               0.5      (0.6)      1.9      (0.8)
        Accounts payable,
         trade and other          26.1      (0.2)     25.9      (3.3)
        Accrued and other
         liabilities              (4.0)     (4.8)     (3.4)     (3.5)
        Other long-term
         liabilities              (3.8)     (0.3)     (6.4)        -
      Reclamation expenditures    (4.7)     (1.2)     (6.1)     (3.1)
      Pension contributions          -      (2.7)        -      (2.7)
                              ------------------- -------------------
                                  11.0      11.2      71.9      60.7
                              ------------------- -------------------

    Cash flow from (used in)
     investing activities
      Capital expenditures       (30.9)    (11.3)    (61.4)    (22.8)
      Proceeds from sale
       of assets                   0.1         -       0.7         -
      Acquisitions (net of
       cash received of $0.7)        -    (118.9)        -    (118.9)
      Short-term investments     (27.2)     78.6     (10.7)    137.3
      Long-term investments        7.4      (2.5)     11.2     (28.8)
                              ------------------- -------------------
                                 (50.6)    (54.1)    (60.2)    (33.2)
                              ------------------- -------------------

    Cash flow from (used in)
     financing activities
      Loan fees                   (0.2)        -      (4.7)        -
      Leasing arrangements        (0.1)        -      (0.5)        -
      Repayment of loans             -      (1.8)        -      (1.8)
      Proceeds from issuance
       of share capital            0.2       1.6       0.5       6.7
                              ------------------- -------------------
                                  (0.1)     (0.2)     (4.7)      4.9
                              ------------------- -------------------

    Increase (decrease) in
     cash and cash equivalents   (39.7)    (43.1)      7.0      32.4
    Cash and cash equivalents,
     beginning of period         139.5     133.8      92.8      58.3
                              ------------------- -------------------
    Cash and cash equivalents,
     end of period            $   99.8  $   90.7  $   99.8  $   90.7
                              ------------------- -------------------
                              ------------------- -------------------
    Cash and cash equivalents $   99.8  $   90.7  $   99.8  $   90.7
    Short-term investments        94.7      72.0      94.7      72.0
                              ------------------- -------------------
    Cash and short-term
     investments              $  194.5  $  162.7  $  194.5  $  162.7
                              ------------------- -------------------
                              ------------------- -------------------
    Cash paid for income
     taxes                    $    8.6  $   15.2  $   29.0  $   27.9
    Cash paid for interest    $    0.2  $      -  $    0.2  $      -

    See accompanying notes to interim consolidated financial
    statements


    Meridian Gold Inc.
    Notes to Interim Consolidated Financial Statements (unaudited)
    Three and nine months ended September 30, 2007
    (In US dollars)

    1.  Basis of Presentation

    These unaudited interim consolidated financial statements have
    been prepared by the Company in accordance with Canadian
    generally accepted accounting principles ("GAAP"). These
    unaudited interim consolidated financial statements do not
    include all information and note disclosures required by Canadian
    GAAP for annual financial statements, and therefore should be
    read in conjunction with the Company's audited consolidated
    financial statements for the year ended December 31, 2006. The
    preparation of these financial statements is based on accounting
    policies and practices consistent with those used in the
    preparation of the audited annual consolidated financial
    statements, except as disclosed in note 2.

    2.  Changes in Accounting Policies and Presentation

    Accounting changes

    (a) The Company adopted Canadian Institute of Chartered
        Accountants (CICA) Handbook Section 1530 "Comprehensive
        Income" ("Section 1530") on January 1, 2007. Comprehensive
        income is composed of the Company's net income and other
        comprehensive income. Other comprehensive income includes
        changes in unrealized gains and losses on available-for-sale
        securities, foreign currency translation gains and losses on
        the net investment in self-sustaining operations and changes
        in the fair market value of derivative instruments designated
        as cash flow hedges, all net of income taxes. The components
        of comprehensive income are disclosed in the Interim
        Consolidated Statement of Comprehensive Income. Cumulative
        changes in other comprehensive income are included in
        accumulated other comprehensive income which is part of
        shareholders' equity. The effect of adopting Section 1530
        resulted in $54.0 million previously reported as a cumulative
        translation adjustment within Shareholder's equity forming
        part of Accumulated other comprehensive income as of
        January 1, 2007 (Note 8).

    (b) On January 1, 2007, the Company adopted CICA Handbook Section
        3855 "Financial Instruments - Recognition and Measurement
        ("Section 3855'") and CICA Handbook Section 3861 "Financial
        Instruments - Disclosure and Presentation ("Section 3861").
        Section 3855 was adopted without restatement of previous
        period financial statements. Section 3855 requires all
        financial instruments be classified as one of the following:
        held for trading, held to maturity, loans and receivables,
        and available for sale. Financial instruments held for
        trading are measured at fair value with gains and losses
        recognized in net income. Financial instruments held to
        maturity and loans and receivables are measured at amortized
        cost. Available for sale financial instruments are measured
        at fair value with unrealized gains and losses recognized in
        other comprehensive income. Any financial instrument can be
        irrevocably designated as held for trading upon initial
        recognition. The result of adopting Section 3855 was an
        increase in carrying value of available for sale marketable
        securities of $0.5 million on January 1, 2007, which is
        included in Accumulated other comprehensive income.

    (c) The Company adopted CICA Handbook Section 3865 "Hedges"
        ("Section 3865") on January 1, 2007. This standard specifies
        the criteria under which hedge accounting is to be applied
        for fair value hedges, cash flow hedges, and hedges of net
        investment in a self-sustaining foreign operation. In hedge
        accounting, the carrying value of a hedged item is adjusted
        by gains or losses attributable to the hedged risk and
        recognized in net income, when it is appropriate to do so.
        The change in fair value of the hedged item, to the extent
        the underlying hedging relationship is effective, is offset
        by changes in fair value of the derivative. The effective
        portion of the change in the fair value of the hedging
        derivative will be recognized in "other comprehensive
        income". The ineffective portion will be recognized in net
        income. The amounts recognized in "other comprehensive
        income" will be reclassified to net income in the periods in
        which net income is affected by variability of the hedged
        item. The adoption of Section 3865 had no effect on the
        consolidated financial statements of the Company as it had no
        hedging relationships as of January 2007.

    3.  Revolving Credit Facility

    In May 2007 a subsidiary of the Company entered into an agreement
    for a $300 million revolving credit facility, which is scheduled
    to be available until May 2012 subject to certain reductions
    described below. Borrowings under the credit facility are
    available in three separate $100 million tranches subject to
    satisfaction of conditions precedent for each tranche. The first
    two tranches may be used for general corporate purposes,
    including acquisitions, with reductions in availability to
    $175 million in November 2010 and to $150 million in November
    2011. The third tranche is available only for acquisitions.

    The credit facility is guaranteed by the Company and certain
    foreign subsidiaries, which own the El Penon and Minera Florida
    mine properties and conduct mining operations. Additionally, the
    Company's interests in the El Penon and Minera Florida mine
    properties have been pledged as collateral for the credit
    facility. The credit facility requires the Company to maintain
    certain financial covenants as defined in the agreement.
    Additionally, the agreement includes certain negative covenants,
    which limit or restrict the Company's ability to incur additional
    debt, grant additional liens, alter the Company's business, make
    investments, loans, advances, or guarantees, engage in business
    acquisitions or business combinations, and sell assets. The
    Company is in compliance with all of these covenants as of
    September 30, 2007. The agreement contains a provision allowing
    the lender to terminate its commitment to extend credit under the
    facility upon a change in control (See note 13).

    Interest rates on borrowings are based upon the dollar LIBOR rate
    for an interest period selected by the Company and the Company is
    required to pay a commitment fee on the unused facility at an
    initial annual rate of 0.375%. Interest rates and the commitment
    fees are subject to adjustment based upon a leverage ratio as
    defined in the agreement.

    Interest expense in the third quarter and first nine months of
    2007 was $0.5 million and $0.7 million, respectively, including
    commitment fees and amortization of deferred financing costs. At
    September 30, 2007, no amounts had been borrowed under the credit
    facility.

    4.  Reclamation Liability

    Changes in the Company's reclamation liability for the three and
    nine month periods ended September 30, 2007 and 2006 are as
    follows:

                               Three months ended  Nine months ended
    (in millions of               September 30,       September 30,
     US dollars)                 2007      2006      2007      2006
    --------------------------------------------- -------------------
    Balance, beginning of
     period                   $   36.0  $   24.0  $   36.0  $   25.3
    Addition (Rossi/Storm)           -         -       0.2         -
    Addition (Minera Florida)        -      12.1         -      12.1
    Accretion                      0.6       0.4       1.8       1.0
    Expenditures                  (4.7)     (1.0)     (6.1)     (2.9)
    --------------------------------------------- -------------------
    Balance, end of period    $   31.9  $   35.5  $   31.9  $   35.5
    --------------------------------------------- -------------------


    5.  Employee future benefits

    The total net defined benefit expense of the Company's pension
    plan was $0.1 million and $0.3 million for the three and nine
    month periods ended September 30, 2007, respectively (2006 -
    $0.2 million and $0.4 million).

    6.  Consolidated Shareholders' Equity

    (in millions of US dollars)
                                          September 30,  December 31,
                                               2007          2006
                                          ---------------------------
    Share capital                           $     404.3  $     402.0
    Additional paid in capital                      8.3          7.9
    Retained earnings (deficit)                   (87.3)      (117.8)
    Accumulated other comprehensive income         54.4         54.0
                                          ---------------------------
    Total shareholder's equity              $     379.7  $     346.1
                                          ---------------------------


    7.  Share Capital

    (a) As at September 30, 2007, 101,305,120 (December 31, 2006 -
    101,090,400) common shares were outstanding and stock options to
    purchase 774,488 (December 31, 2006 - 827,497) shares held by
    directors and employees were outstanding with exercise prices
    ranging between $2.25 and $26.79 per share, of which options to
    purchase 701,943 (December 31, 2006 - 609,870) shares were
    exercisable with expiry dates up to February 2016.

    (b) Stock options and restricted shares

    No stock options were granted during the nine months ended
    September 30, 2007 compared to 17,500 for the nine month period
    ending September 30, 2006. 36,394 and 720,158 stock options were
    exercised during the nine months ended September 30, 2007 and
    September 30, 2006, respectively with weighted average exercise
    price of $14.76 and $9.36 per share respectively. There were
    195,290 and 144,804 restricted shares granted during the nine
    months ended September 30, 2007 and September 30, 2006,
    respectively, that had a grant date average fair values of $28.04
    and $24.49 per share, respectively.

    8.  Accumulated Other Comprehensive Income

    Accumulated other comprehensive income includes the after-tax
    change in unrealized gains and losses on available-for-sale
    securities and unrealized foreign currency translation
    adjustments on net investments in self-sustaining foreign
    operations. Changes in accumulated other comprehensive income for
    the nine months ended September 30, 2007 and September 30, 2006
    are illustrated in the following table:

    (in millions of US dollars)
                                                     2007      2006
                                                  --------- ---------
    Balance January 1                             $   54.0  $   54.1
    Transition adjustment on adoption of
     Financial Instruments standard (Note 2(b))        0.5         -
    Net Other Comprehensive Income six months
     ending September 30                              (0.1)        -
                                                  --------- ---------
    Balance September 30                          $   54.4  $   54.1
                                                  --------- ---------


    9.  Acquisitions

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

    The following table summarizes the estimated fair value of the
    assets acquired and liabilities assumed at the date of
    acquisition, after the adjustments made in the six months ended
    June 30, 2007. During the six month period ended June 30, 2007,
    the Company finalized the purchase price allocation for Minera
    Florida, with adjustments from that presented at December 31,
    2006 being an increase to mineral property, plant and equipment
    of $8.3 million with the corresponding increase to long-term
    liabilities of $2.3 million and long-term future income taxes of
    $6.0 million, as shown in the following table.

    Minera Florida

                               December 31,                 June 30,
                                   2006      Adjustments      2007
                               ------------ ------------ ------------

    Current assets             $       4.4                $      4.4
    Mineral property, plant
     and equipment                   132.5          8.3        140.8
    Other long-term assets             5.5                       5.5
                               ------------ ------------ ------------
    Total assets acquired            142.4          8.3        150.7
                               ------------ ------------ ------------

    Current liabilities              (10.5)                    (10.5)
    Long-term liabilities            (32.3)        (8.3)       (40.6)
                               ------------ ------------ ------------
    Total liabilities assumed        (42.8)        (8.3)       (51.1)
                               ------------ ------------ ------------

    Net assets acquired        $      99.6  $         -  $      99.6
                               ------------ ------------ ------------


    10. Segments

    El Penon and Minera Florida are reportable segments. Segment
    information for the three and nine month periods ended
    September 30, 2007 and September 30, 2006 are presented in the
    following tables:

    (in millions of US dollars)

                               Three months ended September 30, 2007
                                          Minera     All
                              El Penon   Florida     Other     Total
                             ----------------------------------------
    Revenues                  $   64.5  $    9.9  $    2.5  $   76.9
    Income before taxes           34.9      (0.4)    (41.0)     (6.5)
    Expenditures for capital
     assets                        8.2       7.0      15.7      30.9


                               Three months ended September 30, 2006
                                          Minera       All
                              El Penon    Florida    Other     Total
                             ----------------------------------------
    Revenues                  $   49.1  $   13.5  $   (0.4) $   62.2
    Income before taxes           26.9       2.9     (13.3)     16.5
    Expenditures for capital
     assets                        9.1       2.0       0.2      11.3


                                Nine months ended September 30, 2007
                                          Minera       All
                              El Penon   Florida     Other     Total
                             ----------------------------------------
    Revenues                  $  186.1  $   38.6  $    2.9  $  227.6
    Income before taxes          110.3       7.9     (56.9)     61.3
    Expenditures for capital
     assets                       27.8      13.7      19.9      61.4


                                Nine months ended September 30, 2006
                                          Minera       All
                              El Penon   Florida     Other     Total
                             ----------------------------------------
    Revenues                  $  161.6  $   13.5  $   (0.1) $  175.0
    Income before taxes          100.1       2.9     (25.2)     77.8
    Expenditures for capital
     assets                       19.4       2.0       1.4      22.8


    11. Legal claims

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

    12. Other

    Certain amounts in the interim consolidated financial statements
    of the prior period have been reclassified to conform to
    presentation adopted in the current period.

    13. Support Agreement with Yamana Gold Inc.

    On September 24, 2007, the Company and Yamana Gold Inc. (Yamana)
    announced they had entered into a support agreement pursuant to
    which Yamana agreed to revise its offer to purchase all of the
    outstanding shares of the Company and the Company's Board of
    Directors agreed to unanimously recommend that its shareholders
    accept Yamana's revised offer.

    Under the support agreement and Yamana's revised offer, the
    Company's shareholders will receive C$ 7.00 in cash plus 2.235
    Yamana common shares for each share of the Company's shares
    tendered and taken up and paid for by Yamana. Completion of the
    offer is subject to certain conditions including that 50.1
    percent of the issued and outstanding shares of the Company on a
    fully diluted basis are tendered to the offer and taken up by the
    offer. On October 14, 2007, Yamana announced approximately 78% of
    the Company's shareholders tendered their shares to the Yamana
    offer. Yamana has extended its tender offer to November 2, 2007
    to acquire the remaining shares of the Company.

    The Company has entered into several agreements that either have
    change in control provisions or are conditional upon successful
    completion of the Yamana offer and will result in either
    recognition of incremental expenses or write off of deferred
    costs on the closing date. An estimate of these costs is
    presented in the following table:

     (in millions of US Dollars)

     Defense costs                              9.0
     Change in control costs                   48.2
                                          ----------
                                               57.2
                                          ----------

    None of the above costs have been accrued or reflected in the
    financial statements as of or for the period ending September 30,
    2007.
    






For further information:

For further information: Krista Muhr, Senior Manager, Investor
Relations, Meridian Gold Inc., Phone: (775) 850-3764, Fax: (775) 850-4564,
krista.muhr@meridiangold.com

Organization Profile

MERIDIAN GOLD

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890