SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

SCHEDULE TO/A

TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Amendment No. 9)

Meridian Gold Inc.

(Name of Subject Company)

Yamana Gold Inc.

(Name of Filing Persons (Offeror))

Common Stock
(Title of Class of Securities)

589975101
(CUSIP Number of Class of Securities)

Jacqueline Jones
Yamana Gold Inc.
150 York Street, Suite 1102
Toronto, Ontario M5H 3S5
Canada
(416) 815-0220

(Name, address and telephone number of person authorized to receive notices
 and communications on behalf of filing persons)

 

CALCULATION OF FILING FEE

 

(1)           Estimated solely for the purpose of calculating the registration fee in accordance with Rule 0-11(d) and Rule 0-11(a)(4) of the Securities Exchange Act of 1934, as amended. The transaction valuation is equal to the product of (i) (a) $28.40, which is the average of high and low sale prices of Meridian common shares as reported on the New York Stock Exchange on July 11, 2007, and (b) 101,811,536, which is the estimated number of outstanding Meridian common shares as of March 31, 2007 (assuming full conversion of all outstanding exercisable options and warrants for Meridian common shares).

(2)                                  The amount of the filing fee is calculated in accordance with Rule 0-11 of the Securities Exchange Act of 1934, as amended.

x                                 Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

Amount previously paid:           $67,866.86
Form or Registration No.:          Form F-10
Filing Party:                                                                                Yamana Gold Inc.
Date Filed:                                                                                       July 20, 2007

Amount previously paid:           $20,900.59
Form or Registration No.:          Schedule TO
Filing Party:                                                                                Yamana Gold Inc.
Date Filed:                                                                                       July 20, 2007

Check the appropriate boxes below to designate any transactions to which the statement relates:

x                                 third-party tender offer subject to Rule 14d-1.

o                                   issuer tender offer subject to Rule 13e-4.

o                                   going private transaction subject to Rule 13e-3.

o                                   amendment to Schedule 13D under Rule 13d-2.

Check the following box if the filing is a final amendment reporting the results of the tender offer:o

This Amendment No. 9 (this “Amendment”) amends and supplements the Tender Offer Statement on Schedule TO filed July 20, 2007 (as so amended, the “Schedule TO”) filed by Yamana Gold Inc., a corporation incorporated under the laws of Canada (“Yamana”).

The Schedule TO relates to the offer by Yamana to purchase all of the outstanding common shares of Meridian Gold Inc. (“Meridian”) on the basis of 2.235 Yamana common shares plus Cdn$4.00 in cash for each Meridian common share, together with the associated rights under the shareholder rights plan of Meridian, and including the common shares of Meridian that may become outstanding after the date of the Offer (the “Offer”) but before the expiry time of the Offer upon the exercise of stock options or other securities of Meridian that are convertible into or exchangeable or exercisable for common shares of Meridian. The Offer is subject to the terms and conditions set forth in the Offer and Circular, dated July 19, 2007 (the “Offer and Circular”) as amended by the Notice of Variation and Extension, dated August 14, 2007, filed as Exhibit (a)(1)(Q) to the Schedule TO.

As permitted by General Instruction F to Schedule TO, the information set forth in the Offer and Circular, the Letter of Transmittal and the Notice of Guaranteed Delivery, including all schedules, exhibits and annexes thereto, is hereby expressly incorporated by reference in response to all items of information required to be included in, or covered by, this Schedule TO and is supplemented by the information specifically provided herein.

Capitalized terms used herein and not defined herein have the respective meanings assigned to such terms in the Offer and Circular, as supplemented and amended. Except as specifically provided herein, this amendment does not modify any of the information previously reported on the Schedule TO.

Item 4.  TERMS OF THE TRANSACTION

i.                                         REPORTING CURRENCIES AND ACCOUNTING PRINCIPLES

The third sentence under the heading “REPORTING CURRENCIES AND ACCOUNTING PRINCIPLES” on page v is hereby deleted.

ii.                                     Summary Term Sheet

The response to the question “IF I ACCEPT THE OFFER WHEN WILL I BE PAID?” in the “SUMMARY TERM SHEET” on page 5 of the Offer and Circular is hereby deleted in its entirety and replaced with the following:

“If the conditions of the Offer are satisfied or waived, and if we consummate the Offer and take up your Shares, you will receive payment for the Shares you tendered promptly after the Shares are accepted.”

iii.                                 Summary of the Offer

The paragraph entitled “Payment for Deposited Shares” on page 11 of the Offer and Circular is hereby deleted in its entirety and replaced with the following:

“If all the conditions referred to under “Conditions of the Offer” in Section 4 of the Offer have been satisfied or waived at or before the Expiry Time, the Offeror will take up Shares validly deposited pursuant to the Offer and not properly withdrawn, promptly after the Expiry Time.  Any Shares deposited to the Offer after the first date on which Shares have been taken up by the Offeror but before the Expiry Date will be taken up and paid for promptly following such deposit. See “Take up of and Payment for Deposited Shares” in Section 6 of the Offer.”

The Summary of the Offer section is amended by adding the following as the last subsection thereof:

“COMBINED HISTORICAL RESERVES

The following reserve data is derived from the annual report of Yamana, Meridian and Northern Orion. You should read the table below together with other information about reserves that Yamana, Meridian and Northern Orion have filed with the Securities and Exchange Commission and incorporated by reference  into this document.

Total Proven and Probable Reserves by Company (net interest)

2

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		As of December 31, 2006
		Yamana		Meridian		Northern Orion		Total
Gold (million ozs.)		6.8		2.3		6.1		15.2
Silver (million ozs.)		—		83.7		—		83.7
Copper (billion lbs)		2.3		—		8.5		10.8
Molybdenum (million lbs)		—		—		546.3		546.3

 

Total Proven and Probable Reserves by Geographical Region (net interest)

		As of December 31, 2006
		Gold		Silver		Copper		Molybdenum
		(million ozs.)		(million ozs.)		(billion lbs)		(billion lbs)
Brazil		6.3		—		2.3		—
Chile		2.3		83.7		—		—
Argentina		6.1		—		8.5		0.5
Central America		0.5		—		—		—
Total		15.2		83.7		10.8		0.5	”

 

iv.                                    Offer                  Section 2.                                          Time for Acceptance

The section entitled “2. Time for Acceptance” on page 27 of the Offer and Circular is hereby amended and restated in its entirety as follows:

“2.                                 Time for Acceptance

The Offer is open for acceptance until 8:00 p.m. (Toronto time) on September 7, 2007, or until such later time and date or times and dates to which it may be extended, unless the Offer is withdrawn by the Offeror upon the failure of one or more of the Conditions to the Offer specified in Section 4 hereof.”

v.                                        Offer                  Section 4.                                          Conditions of the Offer

Paragraph (b) under the heading “4. Conditions of the Offer” on page 31 of the Offer and Circular is hereby amended and restated in its entirety as follows:

“The closing of the Northern Orion Transaction is subject to satisfaction or waiver of the following conditions:

·                  the interim order granted by the Supreme Court of British Columbia dated July 23, 2007 shall not have been set aside or modified in a manner unacceptable to Yamana and Northern Orion, acting reasonably;

·                  the Northern Orion shareholders shall have approved the Arrangement by at least 75% of the votes cast;

·                  satisfaction of the Minimum Deposit Condition and all other conditions to the Meridian Offer shall have been satisfied or waived and Yamana shall be obligated under applicable law to take up and pay for the Meridian Shares;

·                  there will have been no material change in the employment arrangements of any senior officer of Northern Orion or any subsidiary thereof and neither Northern Orion nor any subsidiary will have hired any additional senior officers;

·                  the Northern Orion Transaction shall be effective on or before December 31, 2007;

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·                  the final order of the Supreme Court of British Columbia in connection with the Northern Orion Transaction shall have been granted in form and substance satisfactory to Yamana and Northern Orion, acting reasonably, and shall not have been set aside or modified in a manner unacceptable to such parties, acting reasonably, on appeal or otherwise;

·                  no law, ruling, order or decree will be in force and no action taken under any law or by any governmental entity or other regulatory authority, that makes it illegal or otherwise restrains, enjoins or prohibits the consummation of the Northern Orion Transaction in accordance with its terms or results or could reasonably be expected to result in a judgment, order, decree or assessment of damages, directly or indirectly, relating to the Northern Orion Transaction that has, or could reasonably be expected to have, a material adverse effect on Yamana, Northern Orion or their respective subsidiaries;

·                  all required acceptances and approvals of the TSX, the NYSE and the LSE for the transactions contemplated by the Northern Orion Agreement and of the listing of the Yamana Shares to be issued or issuable under the Northern Orion Transaction shall have been obtained and the TSX shall have approved the continued listing of the Northern Orion Warrants;

·                  all required governmental and third party consents and approvals and any registrations, filings and advisory requests with, any governmental entity set out in the disclosure memorandum will have been obtained, and all third person and other consents, waivers, permits, exemptions, orders, approvals, agreements and amendments and modifications to agreements, indentures or arrangements in each case on terms that are reasonably satisfactory to the parties will have been obtained or received on terms that are reasonably satisfactory to the parties, the failure of which to obtain or the non-expiry of which would, or could reasonably be expected to have, a material adverse effect on Northern Orion or Yamana or materially impede the completion of the Northern Orion Transaction;

·                  the distribution of Yamana securities pursuant to the Northern Orion Transaction will be exempt from the prospectus and registration requirements of and will not be subject to resale restrictions under applicable Canadian securities laws, and will be exempt from the registration requirements of applicable US Securities Act and will be registered or exempt from the registration requirements of applicable state securities laws;

·                  the Northern Orion Agreement shall not have been terminated pursuant to its terms;

·                  the respective representations and warranties made by each of Northern Orion and Yamana in the Northern Orion Agreement must be true and correct as of the effective date of the Northern Orion Transaction, except where any failure or breach would not individually or in the aggregate, in the reasonable judgment of Northern Orion or Yamana, as the case may be, have a material adverse effect on Northern Orion or Yamana, as applicable;

·                  no change will have occurred in the capital structure of Northern Orion or any Northern Orion subsidiaries, without the prior written consent of Yamana, such consent not to be unreasonably withheld;

·                  there must not have occurred any changes or states of facts that, either individually or in the aggregate, have, or could reasonably be expected to have, a material adverse effect on Yamana or any material subsidiaries of Yamana;

·                  each of Northern Orion and Yamana must have complied in all material respects with its respective covenants in the Northern Orion Agreement;

·                  no more than 2% of the outstanding Northern Orion Shares shall be subject to the exercise of dissent rights;

·                  the Support Agreement shall continue to be in full force and effect and will not have been terminated except as provided therein;

·                  the directors of each of Northern Orion and Yamana shall have adopted all necessary resolutions and all other necessary corporate action must have been taken by Northern Orion and Yamana to permit the consummation of the Northern Orion Transaction; and

·                  the Loan Agreement shall be in full force and effect and will not have been terminated.”

Paragraph (i) under the heading “4. Conditions of the Offer” on page 33 of the Offer and Circular is hereby amended by replacing the first clause thereof as follows:

“(i)                               the Offeror shall have determined, in its reasonable discretion, that none of Meridian…”

The last paragraph under the heading “4. Conditions of the Offer” on page 35 is hereby amended and restated in its entirety as follows:

“Any waiver of a condition or the termination or withdrawal of the Offer shall be deemed to have been given and to be effective on the day on which it is delivered or otherwise communicated in writing to the Depositary at its principal office in Toronto, Ontario. The Offeror forthwith after giving any such notice, will make a public announcement of such waiver or withdrawal and, to the extent required by applicable Law, cause the Depositary as soon as is practicable thereafter to notify the registered holders of Shares in the manner set forth under “Notice and Delivery” in Section 11 of the Offer. In the event that the Offeror waives a material condition to the Offer, the Offeror will disseminate notice of such waiver to Shareholders in a manner reasonably calculated to inform Shareholders of such waiver and will allow sufficient time for Shareholders to consider the effect of such waiver on the Offer.  If the Offer is withdrawn, the Offeror shall not be obligated to take up, accept for payment or pay for any Shares deposited pursuant to the Offer, and the Depositary will promptly return all certificates for Deposited Shares and Letters of Transmittal, Notices of Guaranteed Delivery and related documents in its possession to the parties by whom they were deposited.”

vi.                                    Offer                Section 5.                                          Extension, Variation or Change in the Offer

The last paragraph on page 37 of the Offer and Circular under the heading “5.  Extension, Variation or Change in the Offer” is hereby amended and restated in its entirety as follows:

“Notwithstanding the provisions of the US Exchange Act regarding subsequent offering periods, the Offeror will permit withdrawal of Shares deposited during any Subsequent Offering Period, if there is one, at any time prior to the expiry of such Subsequent Offering Period; provided, however, that this right of withdrawal will not apply in respect of Deposited Shares taken up by the Offeror prior to the Subsequent Offering Period.  Shares may be withdrawn during the Subsequent Offering Period, if there is one, by following the procedures described in Section 7 of the Offer.  Withdrawing holders of Shares who have deposited such Shares during the Subsequent Offering Period and have received payment for such Shares must also return such payment to the Offeror prior to any withdrawal by including the payment received for such Shares with the notice of withdrawal submitted to the Depositary in compliance with the procedures described in Section 7 of the Offer.  Subject to the following sentence, the Expiry Time with respect to a subsequent Offer shall be 5:00 p.m. (Toronto time) on the last day of the Subsequent Offering Period, unless determined otherwise pursuant to the provisions of this Section 5. The foregoing sentence will not limit the requirement that the conditions to the Offer set forth under “Conditions of the Offer” in Section 4 of the Offer, be satisfied or waived prior to the initial Expiry Time, which will be before the commencement of the Subsequent Offering Period.”

vii.                                Offer                Section 6.                                          Take up of and Payment for Deposited Shares

The first paragraph under the heading “6. Take up of and Payment for Deposited Shares” on page 38 of the Take Over Bid Circular is hereby amended and restated in its entirety as follows:

“If all the conditions referred to under “Conditions of the Offer” in Section 4 of the Offer have been satisfied or waived at or before the Expiry Time, the Offeror will become obligated to take up and pay for Shares validly deposited under the Offer and not properly withdrawn promptly following the Expiry Time. Any Shares deposited to the Offer after the first date on which Shares have been taken up by the Offeror but before the Expiry Date will be taken up and paid for promptly.”

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viii.                            Circular                                                Section 3.                                          Northern Orion

The second sentence of the first paragraph under the heading “Northern Orion Transaction — Northern Orion Agreement” is hereby amended and restated as follows:

“It is subject to, and is qualified in its entirety by reference to, all the provisions of the Northern Orion Agreement.”

The text under the heading “Northern Orion Transaction — Northern Orion Agreement - Termination” is hereby amended and restated in its entirety as follows:

“The Northern Orion Agreement may be terminated at any time prior to the completion of the Northern Orion Transaction as follows:

·  by mutual written agreement between Northern Orion and Yamana;

·  by Yamana if (i) the board of directors of Northern Orion has withdrawn or modified in a manner adverse to Yamana, its approval or recommendation of the Northern Orion Transaction (including pursuant to a Superior Proposal, as defined in the Northern Orion Agreement) or (ii) the board of directors of Northern Orion has approved or recommended an Acquisition Proposal (as defined in the Northern Orion Agreement);

·  by Northern Orion in order to enter into a definitive written agreement with respect to a Superior Proposal, subject to compliance with certain terms of the Northern Orion Agreement including payment of the termination fee under such Agreement;

·  by Northern Orion or Yamana if the required approval of at least 75% of the votes cast by Northern Orion shareholders has not been obtained at a meeting of shareholders of Northern Orion;

·  by Yamana if Northern Orion fails to hold its shareholder meeting within the specified timeframe set out in the Northern Orion Agreement (or such later date consented to by Yamana), unless such failure results from: (i) delays in obtaining all required regulatory approval that are beyond the control of Northern Orion or delays resulting from any action or inaction of Yamana; (ii) an adjournment of such meeting for not more than 10 business days due to its obligation to adjourn such meeting in respect of Acquisition Proposals and Superior Proposals; or (iii) an adjournment otherwise permitted by the Northern Orion Agreement;

·  by Yamana or Northern Orion, as the case may be, if there is a material breach by the other party of its covenants prior to the completion of the Northern Orion Transaction;

·  by Yamana or Northern Orion if the Minimum Deposit Condition is not met;

·  by Yamana or Northern Orion if any of the conditions in the Northern Orion Agreement for the benefit of the terminating party is not satisfied or waived in accordance with the terms of the Northern Orion Agreement relating to those conditions; or

·  by Yamana if Yamana’s financial advisor has withdrawn its opinion that the Northern Orion Transaction together with the Offer is fair, from a financial point of view, to Yamana or Yamana shareholders, as a result of a permitted corporate action of Northern Orion in respect of the Agua Rica project.”

ix.                                   Circular                                              Section 22.                                   Acquisition of Shares Not Deposited Pursuant to the Offer

Section 22, “Acquisition of Shares Not Deposited Pursuant to the Offer”, is hereby amended by replacing the first sentence in second paragraph under the heading “Compelled Acquisition” with the following:

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“The foregoing describes the right of Compelled Acquisition that may be available to a Shareholder under Section 206.1 of the CBCA.”

x.             Notice of Variation              Section 8.              Recent Developments

Section 8 of the Notice of Variation, “Recent Developments” is amended by adding the following as the last paragraph thereof:

“On August 1, 2007, the Globe & Mail published an article in which each of two institutional shareholders, Fidelity and Royce & Associates LLC, indicated that it had not taken a position with respect to the Offer.”

Item 10.  FINANCIAL STATEMENTS

SCHEDULE “A” TO OFFER AND CIRCULAR – PRO FORMA FINANCIAL STATEMENTS AND NOTES

Schedule “A” is deleted and replaced it its entirety as with the following:

6

SCHEDULE “A”

TABLE OF CONTENTS

		Page
PRO FORMA CONSOLIDATED BALANCE SHEET AS AT JUNE 30, 2007		A-2
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2007		A-3
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2006		A-4
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS		A-9 – A-24
SCHEDULES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS		A-25 – A-27

 

A-1

Yamana Gold Inc.

Pro forma consolidated balance sheet

June 30, 2007

(Unaudited)

(Expressed in thousands of U.S. dollars)

 

A-2

Yamana Gold Inc.

Pro forma consolidated statement of operations

six month period ended June 30, 2007

(Unaudited)

(Expressed in thousands of U.S. dollars except per share amounts)

								Initial			Initial									Yamana
		Yamana			Meridian			Pro forma			Yamana			Northern Orion			Pro forma			consolidated
		Gold Inc.			Gold Inc.			adjustments			pro forma			Resources Inc.			adjustments			pro forma
								(Note 6)									(Note 6)
Sales		$	328,800		$	150,700		$	—		$	479,500		$	—		$	—		$	479,500
Cost of sales		(120,955		)	(48,300		)	—			(169,255		)	—			—			(169,255		)
Depreciation, amortization and depletion		(24,104		)	(17,100		)(a)(vii)	(48,400		)	(89,604		)	—			—			(89,604		)
Accretion of asset retirement obligation		(707		)	—			—			(707		)	—			—			(707		)
Mine operating earnings		183,034			85,300			(48,400		)	219,934			—			—			219,934
Corporate administration		(18,909		)	(9,100		)	—			(28,009		)	(1,445		)	—			(29,454		)
Property maintenance and exploration		—			(15,400		)	—			(15,400		)	(1,268		)	—			(16,668		)
Professional and consulting		—			—			—			—			(866		)	—			(866		)
Other		—			1,500			—			1,500			—			—			1,500
Foreign exchange (loss) gain		(6,693		)	—			—			(6,693		)	6,946			—			253
Loss on impairment of mineral properties		(1,821		)	—			—			(1,821		)	—			—			(1,821		)
Non-production costs during business interruption		(10,465		)	—			—			(10,465		)	—			—			(10,465		)
Arrangement transaction costs		—			—			—			—			(325		)	—			(325		)
Stock-based compensation		(561		)	—			—			(561		)	(1,074		)	—			(1,635		)
Operating earnings (loss)		144,585			62,300			(48,400		)	158,485			1,968			—			160,453
Investment and other business income		5,016			4,900			—			9,916			5,311			—			15,227
Equity earnings of Minera Alumbrera Ltd.		—			—			—			—			27,208		(b)(vii)	(13,300		)	13,908
Interest expense		(6,025		)	—		(a)(viii)	(15,000		)	(21,025		)	—			—			(21,025		)
Gain on sale of assets		—			600			—			600			—			—			600
Unrealized loss on derivatives		(28,700		)	—			—			(28,700		)	—			—			(28,700		)
Earnings before income taxes expense		114,876			67,800			(63,400		)	119,276			34,487			(13,300		)	140,463
Income tax expense		(34,690		)	(24,400		)	21,400			(37,690		)	(593		)	4,000			(34,283		)
Net earnings		$	80,186		$	43,400		$	(42,000	)	$	81,586		$	33,894		$	(9,300	)	$	106,180
Earnings per share (Note 7)
Basic		$	0.23								$	0.14								$	0.16
Diluted		$	0.22								$	0.14								$	0.15

 

A-3

Yamana Gold Inc.

Pro forma consolidated statement of operations

year ended December 31, 2006

(Unaudited)

(Expressed in thousands of U.S. dollars except per share amounts)

		Pro forma						Initial				Initial											Yamana
		Yamana			Meridian			Pro forma				Yamana			Northern Orion				Pro forma				consolidated
		Gold Inc.			Gold Inc.			adjustments				pro forma			Resources Inc.				adjustments				pro forma
		(Schedule 1)						(Note 6)											(Note 6)
Sales		$	178,692		$	240,000		$		—		$	418,692		$		—		$		—		$	418,692
Cost of sales		(106,130		)	(76,100		)	—				(182,230		)	—				—				(182,230		)
Depreciation, amortization and depletion		(37,320		)	(28,100		)(a)(vii)	(97,000			)	(162,420		)	—				—				(162,420		)
Accretion of asset retirement obligation		(636		)	—			—				(636		)	—				—				(636		)
Mine operating earnings		34,606			135,800			(97,000			)	73,406			—				—				73,406
Corporate administration		(28,606		)	(22,700		)	—				(51,306		)	(2,777			)	—				(54,083		)
Take-over bid expenses		(4,054		)	—			—				(4,054		)	—				—				(4,054		)
Property maintenance and exploration		—			(26,600		)	—				(26,600		)	(1,825			)	—				(28,425		)
Professional and consulting		—			—			—				—			(2,087			)	—				(2,087		)
Foreign exchange gain		5,216			—			—				5,216			122				—				5,338
Loss on impairment of mineral properties		(3,675		)	(4,600		)	—				(8,275		)	—				—				(8,275		)
Stock-based compensation		(45,042		)	—			—				(45,042		)	(5,165			)	—				(50,207		)
Operating (loss) earnings		(41,555		)	81,900			(97,000			)	(56,655		)	(11,732			)	—				(68,387		)
Investment and other business income		7,423			12,300			—				19,723			7,846				—				27,569
Equity earnings of Minera Alumbrera Ltd.		—			—			—				—			93,167			(b)(vii)	(30,500			)	62,667
Interest expense		(28,935		)	—		(a)(viii)	(30,000			)	(58,935		)	—				—				(58,935		)
Unrealized loss on derivatives		(35,773		)	—			—				(35,773		)	—				—				(35,773		)
Loss arising from assets sold		(2,186		)	—			—				(2,186		)	—				—				(2,186		)
Write-off of other receivables and other business loss		(12,299		)	—			—				(12,299		)	(500			)	—				(12,799		)
(Loss) earnings before income taxes		(113,325		)	94,200			(127,000			)	(146,125		)	88,781				(30,500			)	(87,844		)
Income tax recovery (expense)		25,941			(45,600		)	43,000				23,341			(2,000			)	9,200				30,541
Net (loss) earnings		$	(87,384	)	$	48,600		$	(84,000		)	$	(122,784	)	$	86,781			$	(21,300		)	$	(57,303	)
(Loss) earnings per share (Note 7)
Basic and diluted		$	(0.26	)								$	(0.22	)									$	(0.09	)

 

A-4

Yamana Gold Inc.

Notes to the pro forma consolidated financial statements

June 30, 2007

(Unaudited)

(Expressed in thousands of U.S. dollars, unless otherwise noted)

1.             Basis of presentation

The unaudited pro forma consolidated financial statements have been prepared in connection with the proposed acquisitions of Meridian Gold Inc. (“Meridian”) and Northern Orion Resources Inc. (“Northern Orion”) by Yamana Gold Inc. (“Yamana”).  The unaudited pro forma consolidated financial statements have been prepared for illustrative purposes only and give effect to the proposed transactions and recent acquisitions completed by Yamana pursuant to the assumptions described in Note 6 to these pro forma consolidated financial statements.  The unaudited pro forma consolidated balance sheet as at June 30, 2007 gives effect to the proposed transactions by Yamana as if they had occurred as of June 30, 2007.  The unaudited pro forma consolidated statements of operations for the six month period ended June 30, 2007 and for the year ended December 31, 2006 give effect to the proposed transactions and recent acquisitions completed by Yamana as if they were completed on January 1, 2006.

The pro forma consolidated financial statements are not necessarily indicative of the operating results or financial condition that would have been achieved if the proposed transaction had been completed on the dates or for the periods presented, nor do they purport to project the results of operations or financial position of the consolidated entities for any future period or as of any future date.  The pro forma consolidated financial statements do not reflect any special items such as payments pursuant to change of control provisions or integration costs or operating synergies that may be incurred as a result of the acquisitions.

The pro forma adjustments and allocations of the purchase price for Northern Orion and Meridian are based in part on estimates of the fair value of assets acquired and liabilities to be assumed.  The final purchase price allocations will be completed after asset and liability valuations are finalized as of the date of the completion of the acquisitions.  In addition, the allocations of the purchase price for recently completed acquisitions by Yamana are based in part on preliminary estimates of the fair values of the respective assets acquired and liabilities assumed and are open for subsequent adjustment based on valuations to be completed at a later date.  Any final adjustments may change the allocation of purchase price which could affect the fair value assigned to the assets and liabilities in these unaudited pro forma consolidated financial statements.

In preparing the unaudited pro forma consolidated balance sheet and the unaudited pro forma consolidated statements of operations, the following historical information, that was prepared in accordance with Canadian GAAP, was used:

(a)                                  the unaudited consolidated balance sheet of Yamana as at June 30, 2007, and the unaudited consolidated statement of operations for the six month period ended June 30, 2007;

(b)                                 the unaudited consolidated balance sheet of Northern Orion as at June 30, 2007, and the unaudited consolidated statement of operations for the six month period ended June 30, 2007;

(c)                                  the unaudited consolidated balance sheet of Meridian as at June 30, 2007, and the unaudited consolidated statement of operations for the six month period ended June 30, 2007;

(d)                                 the audited consolidated financial statements of Yamana for the year ended December 31, 2006;

(e)                                  the audited consolidated financial statements of Northern Orion for the year ended December 31, 2006;

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Yamana Gold Inc.

Notes to the pro forma consolidated financial statements (Continued)
June 30, 2007

(Unaudited)

(Expressed in thousands of U.S. dollars, unless otherwise noted)

1.             Basis of presentation (continued)

(f)            the audited consolidated financial statements of Meridian for the year ended December 31, 2006;

(g)                                 the unaudited consolidated statement of operations of Desert Sun Mining Corporation (“DSM”) for the period from January 1, 2006 to March 31, 2006; and

(h)                                 the unaudited consolidated statement of operations of Viceroy Exploration Ltd. (“Viceroy”) for the period from January 1, 2006 to September 30, 2006.

The unaudited pro forma consolidated balance sheet and the unaudited pro forma consolidated statements of operations should be read in conjunction with the June 30, 2007 unaudited interim consolidated financial statements and the December 31, 2006 audited consolidated financial statements including the notes thereto, as listed above.

The accounting policies used in preparing the pro forma financial statements are set out in Yamana’s consolidated financial statements for the year ended December 31, 2006.  While management believes that accounting policies of Northern Orion and recently acquired entities are consistent in all material respects, accounting policy differences may be identified upon consummation of the proposed acquisition.  Management has not had the opportunity to assess the impact, if any, of Meridian accounting policy differences with those of Yamana.  Accounting policy differences may be identified upon consummation of the proposed acquisition.

2.             Conversion of historical financial statements to U.S. dollars

The unaudited pro forma consolidated financial statements are presented in U.S. dollars and, accordingly, Viceroy’s unaudited statement of operations for the nine months ended September 30, 2006 and for the period from October 1, 2006 to October 13, 2006, and DSM’s unaudited statement of operations for the three months ended March 31, 2006 were converted from Canadian dollars to U.S. dollars using the average exchange rate for each period.

The exchange rates used for conversion to U.S. dollars from Canadian dollars are as follows:

As at August 9, 2007		$	1.0527
Average for the nine months ended September 30, 2006		1.1327
Average for the period from October 1, 2006 to October 13, 2006		1.1277
Average for the three months ended March 31, 2006		1.1546

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Yamana Gold Inc.

Notes to the pro forma consolidated financial statements (Continued)
June 30, 2007

(Unaudited)

(Expressed in thousands of U.S. dollars, unless otherwise noted)

3.             Acquisition of Meridian

On June 27, 2007, Yamana announced a proposal to acquire all the outstanding common shares of Meridian (the “Original Offer”).  Under the Original Offer, the shareholders of Meridian were to receive 2.235 Yamana shares plus $2.94 (Cdn$3.15) in cash.  Based on a volume adjusted share price of $11.39 (Cdn$12.19), determined with reference to the share price of Yamana common shares for the two days prior to, the day of, and the two days subsequent to the date of announcement, the purchase price equates to total consideration of $28.40 (Cdn$30.39) per share.  On August 13, 2007, Yamana announced an amended offer (the “Amended Offer”) to acquire all the outstanding shares of Meridian.  Under the Amended Offer the shareholders of Meridian will receive 2.235 Yamana shares plus $3.80 (Cdn$4.00) in cash.  Based on a volume adjusted share price of $11.08 (Cdn$11.67) determined with reference to the share price of Yamana common shares for the three day period ended August 9, 2007, the purchase price equates to total consideration of $28.56 (Cdn$30.08) per share.  As at June 30, 2007, there were 101,203,037 common shares of Meridian outstanding.

The business combination, if completed, will be accounted for as a purchase transaction with Yamana as the acquirer of Meridian.  Yamana is not making an offer to acquire or substitute any options outstanding to acquire common shares of Meridian (“Meridian options”).  For purposes of these pro forma financial statements it has been assumed that all Meridian options are exercised prior to the closing date and that Yamana will acquire the Meridian shares issued pursuant to the exercise of the Meridian options under the Offer.

The Company has estimated the fair value of Meridian’s assets and liabilities.  As Yamana has not had access to information relative to the respective fair value of Meridian’s mineral property, plant and equipment, the allocation at this time is very preliminary in nature.

The Company expects the accounting for the acquisition to result in a significant amount of goodwill. Goodwill is the excess cost of the acquired company over the sum of the amounts assigned to assets acquired less liabilities assumed. Generally accepted accounting principles in the U.S. require that goodwill not be amortized, but instead allocated to a level within the reporting entity referred to as the reporting unit and tested for impairment, at least annually. There is currently diversity in the mining industry associated with certain aspects of the accounting for business combinations and related goodwill. This diversity includes how companies define Value Beyond Proven and Probable reserves (“VBPP”), what an appropriate reporting unit is and how goodwill is allocated among reporting units. The methods of allocating goodwill have included allocations primarily to a single exploration reporting unit and allocations among individual mine reporting units depending on the relevant circumstances. We understand the industry is also evaluating other methodologies for allocating goodwill. The method of allocating goodwill will likely have an impact on the amount and timing of any future goodwill impairment, if any. Yamana has not completed its determination of the combined company’s reporting units nor its method of allocating goodwill to those reporting units. The ultimate accounting for VBPP and goodwill may not be comparable to other companies within the mining industry.

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Yamana Gold Inc.

Notes to the pro forma consolidated financial statements (Continued)
June 30, 2007

(Unaudited)

(Expressed in thousands of U.S. dollars, unless otherwise noted)

3.             Acquisition of Meridian (continued)

The allocation of the purchase price is based upon management’s preliminary estimates and certain assumptions with respect to the fair value increment associated with the assets to be acquired and the liabilities to be assumed.  The actual fair values of the assets and liabilities will be determined as of the date of acquisition and may differ materially from the amounts disclosed above in the assumed pro forma purchase price allocation because of changes in fair values of the assets and liabilities to the date of the transaction, and as further analysis (including of identifiable intangible assets, for which no amounts have been estimated and included in the preliminary amounts shown above) is completed.  Consequently, the actual allocation of the purchase price will likely result in different adjustments in the unaudited pro forma consolidated statements of operations.  Following completion of the transaction, the earnings of the combined company will reflect the impact of purchase accounting adjustments, including the effect of changes in the cost bases of both tangible and identifiable intangible assets and liabilities on production costs and depreciation, depletion and amortization expense.

The fair value of the net assets of Meridian to be acquired pursuant to the Amended Offer will ultimately be determined after the closing of the transaction.  The Company will complete a full and detailed valuation of the Meridian assets using an independent party.  Therefore, it is likely that the fair values of assets and liabilities acquired will vary from those shown below and the differences may be material.

The preliminary purchase price allocation is subject to change and is summarized as follows:

Purchase of Meridian shares (226,188,788 Yamana common shares)		$	2,506,451
Yamana shares issuable on exercise of Meridian options (1,768,741 Yamana common shares)		19,600
Cash consideration (including cash of $3,007 payable due to exercise of Meridian options)		387,557
Estimated transaction costs		17,000
Purchase consideration		$	2,930,608

 

The purchase price was allocated as follows:

Net working capital acquired (including cash of $102.1 million)					$	213,891
Mineral property, plant and equipment
Producing		$	1,635,385
Non-producing		619,485			2,254,870
Other long-term assets					31,000
Long-term liabilities					(101,000		)
Future income tax liability					(708,469		)
Non-controlling interest					(15,300		)
Net identifiable assets					1,674,992
Excess of purchase price allocated to goodwill					1,255,616
					$	2,930,608

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Yamana Gold Inc.

Notes to the pro forma consolidated financial statements (Continued)
June 30, 2007

(Unaudited)

(Expressed in thousands of U.S. dollars, unless otherwise noted)

3.             Acquisition of Meridian (continued)

For information purposes only, using a reference date of June 27, 2007, the date of the original announcement, Yamana’s share price was $12.15 (Cdn$13.02) per share, which equated to total consideration of $30.09 (Cdn$32.25) per Meridian common share.

4.             Acquisition of Northern Orion

Also on June 27, 2007, Yamana announced that it had entered into a business combination arrangement to acquire all the outstanding common shares of Northern Orion.  Under the proposed transaction, the shareholders of Northern Orion will receive 0.543 of a Yamana common share for each Northern Orion common share outstanding.  As at June 30, 2007, there were 154,087,161 common shares of Northern Orion outstanding.  The volume adjusted share price of Yamana common shares for the period of two days prior to the day of the announcement, the day of the announcement, and the two days after the date of the announcement was $11.39 (Cdn$12.19).

The business combination, if completed, will be accounted for as a purchase transaction, with Yamana as the acquirer of Northern Orion.  Yamana will also exchange all outstanding options and share purchase warrants of Northern Orion for similar securities of Yamana which, for purposes of these pro forma consolidated financial statements, have been assumed to be at an exchange ratio of 0.543 and at a price equivalent to the original price divided by 0.543.  The fair value of the net assets of Northern Orion to be acquired will ultimately be determined at the closing of the transaction.  Therefore, it is likely that the fair values of assets and liabilities acquired will vary from those shown below and the differences may be material.

Yamana has estimated the fair value of Northern Orion’s interest in Minera Alumbrera Ltd. at $340,000 and the fair value of Northern Orion’s non-producing properties at $432,000.  The remainder of the purchase price over the carrying value of the assets acquired and liabilities assumed of $421,955 has been assigned as goodwill.

The Company expects the accounting for the acquisition to result in a significant amount of goodwill. Goodwill is the excess cost of the acquired company over the sum of the amounts assigned to assets acquired less liabilities assumed. Generally accepted accounting principles in the U.S. require that goodwill not be amortized, but instead allocated to a level within the reporting entity referred to as the reporting unit and tested for impairment, at least annually. There is currently diversity in the mining industry associated with certain aspects of the accounting for business combinations and related goodwill. This diversity includes how companies define Value Beyond Proven and Probable reserves (“VBPP”), what an appropriate reporting unit is and how goodwill is allocated among reporting units. The methods of allocating goodwill have included allocations primarily to a single exploration reporting unit and allocations among individual mine reporting units depending on the relevant circumstances. We understand the industry is also evaluating other methodologies for allocating goodwill. The method of allocating goodwill will likely have an impact on the amount and timing of any future goodwill impairment, if any. Yamana has not completed its determination of the combined company’s reporting units nor its method of allocating goodwill to those reporting units. The ultimate accounting for VBPP and goodwill may not be comparable to other companies within the mining industry.

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Yamana Gold Inc.

Notes to the pro forma consolidated financial statements (Continued)
June 30, 2007

(Unaudited)

(Expressed in thousands of U.S. dollars, unless otherwise noted)

4.             Acquisition of Northern Orion (continued)

The allocation of the purchase price is based upon management’s preliminary estimates and certain assumptions with respect to the fair value increment associated with the assets to be acquired and the liabilities to be assumed. The actual fair values of the assets and liabilities will be determined as of the date of acquisition and may differ materially from the amounts disclosed above in the assumed pro forma purchase price allocation because of changes in fair values of the assets and liabilities to the date of the transaction, and as further analysis (including of identifiable intangible assets, for which no amounts have been estimated and included in the preliminary amounts shown above) is completed. Consequently, the actual allocation of the purchase price may result in different adjustments in the unaudited pro forma condensed combined statements of income. Following completion of the transaction, the earnings of the combined company will reflect the impact of purchase accounting adjustments, including the effect of changes in the cost bases of both tangible and identifiable intangible assets and liabilities on production costs and depreciation, depletion and amortization expense.

The preliminary purchase price allocation is subject to change and is summarized as follows:

Purchase of Northern Orion shares (83,669,328 Yamana common shares)		$	952,688
Fair value of options and warrants acquired		242,918
Estimated transaction costs		17,000
Purchase consideration		$	1,212,606

 

The purchase price was allocated as follows:

Net working capital acquired (including cash of $237.2 million)		$	237,984
Property plant and equipment, net		223
Mineral properties and other assets		432,186
Equity investment in Minera Alumbrera Ltd.		340,478
Long-term liabilities		(15,231		)
Future income tax liability		(204,989		)
Net identifiable assets		790,651
Excess of purchase price allocated to goodwill		421,955
		$	1,212,606

 

For information purposes only, using a reference date of June 27, 2007, the date of the original announcement, Yamana’s share price was $12.15 (Cdn$13.02) per share which equates to total consideration of $6.60 (Cdn$7.07) per Northern Orion common share.

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Yamana Gold Inc.

Notes to the pro forma consolidated financial statements (Continued)
June 30, 2007

(Unaudited)

(Expressed in thousands of U.S. dollars, unless otherwise noted)

5.             Recent acquisition of DSM and Viceroy by Yamana

(a)          Acquisition of DSM

On April 5, 2006, Yamana completed the acquisition of DSM which owns the Jacobina gold mine in the Bahia state of Brazil.  Total consideration paid was approximately $632 million comprised of approximately 63.9 million common shares, transaction costs and substitution of issued options and share purchase warrants.  Yamana exchanged all outstanding shares, options and share purchase warrants of DSM for similar securities of Yamana at an exchange ratio of 0.6 of a Yamana common share for 1 DSM common share or equivalent.

Yamana has consolidated the results of operations from the Jacobina mine from the date of acquisition.

The purchase price was calculated as follows:

Common shares issued to acquired 100% of DSM (63,746,381 Yamana common shares)		$	534,852
Fair value of options and warrants issued		92,658
Transaction costs		3,094
Shares issued for employee severance (174,068 common shares)		1,361
Purchase consideration		$	631,965

 

The purchase price was allocated as follows:

Net working capital acquired (including cash of $18.1 million)		$	26,944
Property plant and equipment, net		37,792
Mineral properties and other assets		665,867
Other assets		3,548
Silicosis liability		(17,154		)
Long-term liabilities		(6,954		)
Future income tax liability		(133,078		)
Net identifiable assets		576,965
Residual purchase price allocated to goodwill		55,000
		$	631,965

 

As a result of this acquisition, the unaudited pro forma consolidated statements of operations for the year ended December 31, 2006 have been adjusted to include operations of DSM for the three month period ended March 31, 2006.

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