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. 12)

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. 12 (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

The last paragraph under the heading “NOTICE TO SHAREHOLDERS IN THE UNITED KINGDOM” on page iii in the Offer and Circular is hereby deleted.

Section 27 of the Offer and Circular, “OFFEREES’ STATUTORY RIGHTS” is hereby deleted in its entirety and replaced with the following:

“In the event that there is a misrepresentation contained in a take-over bid circular or a notice of change or variation that is required to be delivered to securityholders in connection with a take-over bid, subject to certain defences, the securities legislation in the provinces of Ontario, Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland, Nova Scotia and Saskatchewan provides securityholders with, in addition to any other rights they may have at law, rights of rescission against an offeror and/or a right of action for damages against each of: (i) an offeror, (ii) every person who was a director of the offeror at the time the circular or notice was signed, (iii) every person whose consent has been filed, as prescribed, regarding a report, opinion or statement made by such person in connection with the circular or notice; and (iv) each person who signed the certificate in the circular or notice, excluding persons included in (ii) above.  The securities legislation in Quebec provides that a person who has transferred securities in response to a take-over bid effected with a circular or exemption, as proscribed by such legislation, containing a misrepresentation may apply to have the transfer rescinded or the price revised, and such person may also claim damages from the offeror, its officers and its directors, and from those experts whose opinions, containing a misrepresentation, appeared in the circular with such person’s consent.

The foregoing is a summary only of the rights of rescission and rights of action that may be available to a Shareholder and is qualified by the specific provisions of the securities legislation in each of the provinces of Canada.  Shareholders should refer to the applicable provision of the securities legislation in their province and consult their own legal advisors with respect to their rights based on their particular circumstances.”

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

“Yamana and Northern Orion have agreed to terminate the loan agreement as of August 30, 2007.”

Item 7.    SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION

Yamana and Northern Orion have agreed to terminate the loan agreement as of August 30, 2007.

2

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Item 10.  FINANCIAL STATEMENTS

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

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

3

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-5 – 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;

A-5

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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

A-6

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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.

A-7

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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

A-8

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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.

A-9

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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.

 

A-11

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 (continued)

(b)          Acquisition of Viceroy

On October 14, 2006, the Company acquired approximately 95% of the outstanding common shares of Viceroy.  The Company offered Viceroy shareholders 0.97 of a Yamana common share for each Viceroy common share.  Subsequently, the Company commenced and completed the compulsory acquisition of the remaining Viceroy common shares not already owned at the same ratio of 0.97 of a Yamana common share for each Viceroy common share.  Yamana exchanged all outstanding shares, options and share purchase warrants of Viceroy for similar securities of Yamana at an exchange ratio of 0.97 of a Yamana common share for 1 Viceroy common share or equivalent.  Total consideration paid was approximately $549.1 million.  Yamana has consolidated the results of operations from October 13, 2006.

The business combination was accounted for as a purchase transaction with Yamana as acquirer of Viceroy.  The preliminary purchase price allocation is subject to change and is summarized as follows:

Purchase of Viceroy shares (52,542,397 Yamana common shares)		$	509,842
Fair value of options and warrants issued		35,230
Estimated transaction costs		4,075
Purchase consideration		$	549,147

 

The purchase price was allocated as follows:

Net working capital acquired		$	53,881
Property plant and equipment, net		1,666
Mineral properties		661,094
Other assets		2,794
Future income tax liability		(170,288		)
		$	549,147

 

A-12

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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)

6.             Effect of transactions on the consolidated pro forma financial statements

The pro forma consolidated financial statements incorporate the following pro forma assumptions:

(a)          Meridian assumptions

(i)            The assumption that Yamana acquires 100% of the outstanding common shares of Meridian as a result of the Amended Offer.  As per Note 3, this gives rise to an increase to fair value and related future income tax liabilities as follows:

Mineral property, plant and equipment		$	1,956,770
Goodwill		1,255,616
Future income tax liabilities		(684,869		)
		2,527,517
Book value of assets		403,091
Total purchase consideration		$	2,930,608

 

(ii)           The assumption that all of the stock options of Meridian that were outstanding are exercised and converted into Meridian common shares for proceeds of $11,491, which are acquired by Yamana pursuant to the Amended Offer;

(iii)          The pro forma consolidated financial statements include information from the financial statements of Meridian as at June 30, 2007 and for the six month period ended June 30, 2007 and the year ended December 31, 2006.  It has been assumed that asset classifications are consistent with those used by Yamana in their presentation and that Meridian’s accounting policies conform to those of Yamana;

(iv)          These pro forma adjustments eliminate the historical equity accounts of Meridian;

(v)           This pro forma adjustment reflects the issuance of 228.0 million shares of Yamana for $2,526,051 in connection with the Amended Offer.  This includes the shares issuable in connection with the assumed exercise of Meridian stock options;

(vi)          This assumption provides for the recording of expenses of the transaction totaling $17 million;

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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)

6.             Effect of transactions on the consolidated pro forma financial statements (continued)

(a)          Meridian assumptions (continued)

(vii)         This pro forma adjustment represents the estimated increase to depreciation, depletion and amortization expense (six months to June 30, 2007 - $48,400: Year Ended December 31, 2006 - $97,000) associated with the preliminary fair value adjustment of approximately $1.4 billion allocated to mineral property, plant and equipment. Yamana has not completed an assessment of the fair values of assets and liabilities and the related business integration plans and synergies. The ultimate purchase price allocation will include possible adjustments to the fair values of depreciable tangible assets, proven and probable reserves, reserves related to current development projects, value beyond proven and probable reserves (referred to in this document as VBPP) and intangible assets after a full review has been completed. The concept of VBPP is described in Financial Accounting Standards Board Emerging Issue Task Force Issue No. 04-3 (“EITF 04-3”) and has been interpreted differently by mining companies. Our preliminary adjustment to plant, equipment and development costs, as discussed below, includes VBPP attributable to mineralized material that Yamana believes could be brought into production should market conditions warrant. Mineralized material is a mineralized body that has been delineated by appropriately spaced drilling and/or underground sampling to support reported tonnage and average grade of metals. Such a deposit may not qualify as proven and probable reserves until legal and economic feasibility are concluded based upon a comprehensive evaluation of unit costs, grade, recoveries and other material factors. Our preliminary adjustments to mineral property, plant, equipment and development costs do not include adjustments attributable to inferred mineral resources or exploration potential referred to in the EITF 04-3 Working Group Report No. 1. We intend to allocate a portion of the purchase price to all VBPP, including inferred mineral resources and exploration potential, in accordance with EITF 04-3 after performing a more thorough analysis to determine the fair value of these assets.

The preliminary allocation of $1.4 billion to mineral property, plant, equipment and development costs is primarily based on a fair value assessment of estimated cash flows.  Yamana has not completed an assessment of the fair values of assets and liabilities and the related business integration plans and synergies. The ultimate purchase price allocation will include possible adjustments to fair values of depreciable tangible assets, proven and probable reserves, reserves related to current development projects, mill and leach stockpiles, product inventories, VBPP and intangible assets after a full review has been completed.

For the purpose of preparing the unaudited pro forma consolidated statements of operations, Yamana assumed an average estimated remaining useful life of 16 years for the El Penon Mine and 7 years for the Minera Florida Mine, which was based on an analysis of publicly available information.  A one-year change in the estimated useful life would have an approximate $6 million impact on the pro forma depreciation, depletion and amortization expense on an annual basis. Additionally, for each $100 million that the final fair value of property, plant, equipment and development costs differs from the pro forma fair value, related depreciation, depletion and amortization expense would increase or decrease by approximately $7 million annually, assuming a weighted average 15-year life; and

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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)

6.             Effect of transactions on the consolidated pro forma financial statements (continued)

(a)          Meridian assumptions (continued)

(viii)        It has been assumed that Yamana drew down $400 million of a revolving line of credit in order to finance the $387 million cash component of the acquisition of Meridian.  Interest expense has been recorded in the amount of $15 million and $30 million during the six month period ended June 30, 2007 and the year ended December 31, 2006 respectively.  Interest expense has been provided at 7.5%, which approximates the current rate under the facility and amortization of debt issue costs.  A 1/8% change to the effective interest rate would change the interest expense by $500.

(b)          Northern Orion assumptions

(i)            The assumption that Yamana acquires 100% of the outstanding common shares of Northern Orion as a result of the transaction.  As per Note 4 this gives rise to an increase to fair value and related future income tax liabilities as follows:

Mineral properties		$	309,654
Investment in Minera Alumbrera Ltd. (“Alumbrera”)		240,000
Goodwill		421,955
Future income tax liabilities		(181,386		)
		790,223
Book value of assets		422,383
Total purchase consideration		$	1,212,606

 

(ii)           These pro forma adjustments eliminate the historical equity accounts of Northern Orion;

(iii)          This pro forma adjustment reflects the issuance of 83.7 million shares of Yamana for $952,688 in connection with the Offer;

(iv)          The assumption that, as at June 27, 2007, 12,567,500 stock options and 56,571,850 share purchase warrants of Northern Orion were outstanding and were exchanged for 6,824,153 stock options and 30,718,515 share purchase warrants of Yamana with fair values of $35,403 and $207,515, respectively.  We have assumed that all options vest immediately upon completion of the transaction;

(v)           The cash component of the Northern Orion acquisition is approximately $200 (Cdn$0.001 per common share of Northern Orion) and has not been reflected in these pro forma financial statements.

(vi)          This assumption provides for the recording of expenses of the transaction totaling $17 million;

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