---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended November 30, 2012

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from __________ to
__________

Commission File Number: 1-35447

NOVACOPPER INC.(Exact Name
of Registrant as Specified in Its Charter)

|British Columbia                         | 98-1006991         
|---------------------------------------- | -------------------
|(State or Other Jurisdiction of          | (I.R.S. Employer   
|Incorporation or Organization)           | Identification No.)
|                                         |                    
|Suite 2300, 200 Granville Street         |                    
|Vancouver, British Columbia              |                    
|Canada                                   | ****V6C 1S4****    
|(Address of Principal Executive Offices) | (Zip Code)         

(604) 638-8088(Registrants Telephone Number, Including Area Code)

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

|Title of Each Class         | Name of Each Exchange on Which
      Registered
|--------------------------- | -----------------------------------------------
|Common Shares, no par value | NYSE MKT                                       

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. Yes [ ] No [x]

Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section
15(d) of the Act. Yes [ ] No [x]

Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
[x] No [ ]

Indicate by check mark whether
the registrant has submitted electronically and posted on its corporate Web
site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such
files). Yes [x] No [ ]

Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. [
]

---

Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated filer and smaller reporting company
in Rule 12b-2 of the Exchange Act. (Check one):

|Large accelerated filer [ ] | Accelerated filer [x] | Non-accelerated filer [ ]            | Smaller reporting company [ ]
|--------------------------- | --------------------- | ------------------------------------ | -----------------------------
|                            |                       | (Do not check if a smaller reporting |                              
|                            |                       | company)                             |                              

Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes [ ] No [x]

As at May 31, 2012, the aggregate market value of the
registrants Common Shares held by non-affiliates was approximately $72.9 million. As of
February 7, 2013, the registrant had 52,767,511 Common Shares, no par value,
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the
registrant's definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A not later than March 30, 2013, in
connection with the registrants 2013 annual meeting of stockholders, are
incorporated herein by reference into Part III of this Annual Report on Form
10-K.

---

NOVACOPPER INC.

TABLE OF CONTENTS

|                                  | Page          
|--------------------------------- | --------------
|GLOSSARY
      OF TECHNICAL TERMS | 5             
|PART
      I                      |               
|                                  | Item
      1. 
|                                  | Item
      1A.
|                                  | Item
      1B.
|                                  | Item
      2. 
|                                  | Item
      3. 
|                                  | Item
      4. 
|PART
      II                     |               
|                                  | Item
      5. 
|                                  | Item
      6. 
|                                  | Item
      7. 
|                                  | Item
      8. 
|                                  | Item
      9. 
|                                  | Item
      9A.
|                                  | Item
      9B.
|PART
      III                    |               
|                                  | Item
      10.
|                                  | Item
      11.
|                                  | Item
      12.
|                                  | Item
      13.
|                                  | Item
      14.
|PART
      IV                     |               
|                                  | Item
      15.

i

---

Unless the context otherwise requires, the words we, us,
our, the Company and NovaCopper refer to NovaCopper Inc., a British
Columbia corporation, either alone or together with its subsidiaries as the
context requires as of November 30, 2012.

CURRENCY

All dollar amounts are in United States currency unless
otherwise stated. References to C$ refer to Canadian currency, and $ or US$ to
United States currency. All dollar amounts are expressed in thousands of
dollars, except references to per share amounts.

FORWARD-LOOKING STATEMENTS

The information discussed in this annual report on Form 10-K
includes forward-looking information and forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934 (the Exchange
Act), and applicable Canadian securities laws. These forward-looking statements
may include statements regarding perceived merit of properties, exploration
results and budgets, mineral reserves and resource estimates, work programs,
capital expenditures, operating costs, cash flow estimates, production estimates
and similar statements relating to the economic viability of a project,
timelines, strategic plans, including our plans and expectations relating to the
Upper Kobuk Mineral Projects, completion of transactions, market prices for
precious and base metals, or other statements that are not statements of fact.
These statements relate to analyses and other information that are based on
forecasts of future results, estimates of amounts not yet determinable and
assumptions of management.

Statements concerning mineral resource estimates may also be
deemed to constitute forward-looking statements to the extent that they
involve estimates of the mineralization that will be encountered if the property
is developed. Any statements that express or involve discussions with respect to
predictions, expectations, beliefs, plans, projections, objectives, assumptions
or future events or performance (often, but not always, identified by words or
phrases such as expects, is expected, anticipates, believes, plans,
projects, estimates, assumes, intends, strategy, goals,
objectives, potential, possible or variations thereof or stating that
certain actions, events, conditions or results may, could, would,
should, might or will be taken, occur or be achieved, or the negative of
any of these terms and similar expressions) are not statements of historical
fact and may be forward-looking statements. Forward-looking statements are
subject to a variety of known and unknown risks, uncertainties and other factors
that could cause actual events or results to differ from those reflected in the
forward-looking statements, including, without limitation:

- uncertainties relating to the assumptions underlying our resource
  estimates, such as metal pricing, metallurgy, mineability, marketability and
  operating and capital costs;
- uncertainty of whether there will ever be production at our Arctic or
  Bornite Projects;
- uncertainty of estimates of capital costs, operating costs, production and
  economic returns;
- risks related to our ability to commence production and generate material
  revenues or obtain adequate financing for our planned exploration and
  development activities;
- risks related to our ability to finance the development of our mineral
  properties through external financing, strategic alliances, the sale of
  property interests or otherwise;
- risks related to market events and general economic conditions;
- uncertainty related to inferred mineral resources;
- uncertainty related to the economic projections contained herein derived
  from the Preliminary Economic Assessment titled NI 43-101 Preliminary
  Economic Assessment, Ambler Project, Kobuk, AK dated effective February 1,
  2012 (the PEA);
- risks related to lack of infrastructure;
- risks and uncertainties relating to the interpretation of drill results,
  the geology, grade and continuity of our mineral deposits;
- mining and development risks, including risks related to infrastructure,
  accidents, equipment breakdowns, labor disputes or other unanticipated
  difficulties with or interruptions in development, construction or production;
- the risk that permits and governmental approvals necessary to develop and
  operate mines on our properties will not be available on a timely basis or at
  all;

2

---

- commodity price fluctuations;
- risks related to governmental regulation and permits, including
  environmental regulation;
- risks related to the need for reclamation activities on our properties and
  uncertainty of cost estimates related thereto;
- uncertainty related to title to our mineral properties;
- our history of losses and expectation of future losses;
- risks inherent in the acquisition of new properties;
- risks related to increases in demand for equipment, skilled labor and
  services needed for exploration and development of mineral properties, and
  related cost increases;
- increased competition in the mining industry;
- our need to attract and retain qualified management and technical
  personnel;
- risks related to conflicts of interests of some of our directors;
- risks related to potential future litigation;
- risks related to our majority shareholder;
- risks related to global climate change;
- risks related to adverse publicity from non-governmental organizations;
- uncertainty as to our ability to maintain the adequacy of internal control
  over financial reporting as per the requirements of Section 404 of the
  Sarbanes-Oxley Act (SOX); and
- increased regulatory compliance costs relating to Dodd-Frank.

This list is not exhaustive of the factors that may affect any
of our forward-looking statements. Forward-looking statements are statements
about the future and are inherently uncertain, and our actual achievements or
other future events or conditions may differ materially from those reflected in
the forward-looking statements due to a variety of risks, uncertainties and
other factors, including, without limitation, those referred to in this report
under the heading Risk Factors and elsewhere.

Our forward-looking statements are based on the beliefs,
expectations and opinions of management on the date the statements are made, and
we do not assume any obligation to update forward-looking statements if
circumstances or managements beliefs, expectations or opinions should change,
except as required by law. For the reasons set forth above, investors should not
place undue reliance on forward-looking statements.

CAUTIONARY NOTE TO UNITED STATES INVESTORS

Unless otherwise indicated, all resource estimates, and any
future reserve estimates, included or incorporated by reference in this annual
report on Form 10-K have been, and will be, prepared in accordance with Canadian
National Instrument 43-101 Standards of Disclosure for Mineral Projects(NI 43-101) and the Canadian Institute of Mining, Metallurgy and Petroleum
Definition Standards for Mineral Resources and Mineral Reserves (CIM Definition
Standards). NI 43-101 is a rule developed by the Canadian Securities
Administrators which establishes standards for all public disclosure an issuer
makes of scientific and technical information concerning mineral projects. NI
43-101 permits the disclosure of an historical estimate made prior to the
adoption of NI 43-101 that does not comply with NI 43-101 to be disclosed using
the historical terminology if the disclosure: (a) identifies the source and date
of the historical estimate; (b) comments on the relevance and reliability of the
historical estimate; (c) to the extent known, provides the key assumptions,
parameters and methods used to prepare the historical estimate; (d) states
whether the historical estimate uses categories other than those prescribed by
NI 43-101; and (e) includes any more recent estimates or data available.

3

---

Canadian standards, including NI 43-101, differ significantly
from the requirements of the SEC, and reserve and resource information contained
or incorporated by reference into this annual report on Form 10-K may not be
comparable to similar information disclosed by U.S. companies. In particular,
and without limiting the generality of the foregoing, the term resource does
not equate to the term reserves. Under SEC Industry Guide 7, mineralization
may not be classified as a reserve unless the determination has been made that
the mineralization could be economically and legally produced or extracted at
the time the reserve determination is made. SEC Industry Guide 7 does not define
and the SECs disclosure standards normally do not permit the inclusion of
information concerning measured mineral resources, indicated mineral
resources or inferred mineral resources or other descriptions of the amount
of mineralization in mineral deposits that do not constitute reserves by U.S.
standards in documents filed with the SEC. U.S. investors should also understand
that inferred mineral resources have a great amount of uncertainty as to their
existence and great uncertainty as to their economic and legal feasibility. It
cannot be assumed that all or any part of an inferred mineral resource will
ever be upgraded to a higher category. Under Canadian rules, estimated inferred
mineral resources may not form the basis of feasibility or pre-feasibility
studies except in rare cases. Investors are cautioned not to assume that all or
any part of an inferred mineral resource exists or is economically or legally
mineable. Disclosure of contained ounces in a resource is permitted disclosure
under Canadian regulations; however, the SEC normally only permits issuers to
report mineralization that does not constitute reserves by SEC standards as
in-place tonnage and grade without reference to unit measures. The requirements
of NI 43-101 for identification of reserves are also not the same as those of
the SEC, and any reserves reported by us in the future in compliance with NI
43-101 may not qualify as reserves under SEC standards. Accordingly,
information concerning mineral deposits set forth herein may not be comparable
to information made public by companies that report in accordance with United
States standards.

CAUTIONARY NOTE TO ALL INVESTORS CONCERNING ECONOMIC
ASSESSMENTS THAT INCLUDE INFERRED RESOURCES

Mineral resources that are not mineral reserves have no
demonstrated economic viability. The preliminary assessment on the Arctic
project is preliminary in nature and include "inferred mineral resources" that
are considered too speculative geologically to have economic considerations
applied to them that would enable them to be categorized as mineral reserves.
There is no certainty that the feasibility studies or preliminary assessments at
the Arctic project will ever be realized.

4

---

GLOSSARY OF TECHNICAL TERMS

We estimate and report our resources and we will estimate and
report our reserves according to the definitions set forth in NI 43-101. We will
modify and reconcile the reserves as appropriate to conform to SEC Industry
Guide 7 for reporting in the U.S. The definitions for each reporting standard
are presented below with supplementary explanation and descriptions of the
parallels and differences.

The following technical terms defined in this section are used
throughout this Form 10-K:

NI 43-101 Definitions:

AA is atomic absorption.

Ag is the chemical symbol for silver.

AGP is
  acid-generating potential.

AMT is audiomagnetotelluric.

ARD is acid rock
  drainage.

Au is the chemical symbol for gold.

CIM is the Canadian Institute of Mining, Metallurgy and
Petroleum.

Co is the chemical symbol for cobalt.

CO2 is carbon dioxide.

CS-AMT is controlled source audio-frequency
magnetotelluric.

Cu is the chemical symbol for copper.

DIGHEM is a proprietary geophysical survey system.

dilution is waste, which is unavoidably mined with ore.

dip is the angle of inclination of a geological feature/rock
from the horizontal.

EM is electromagnetic.

FA-AAA is fire assay  atomic absorption.

fault is the surface of a fracture along which movement has
occurred.

Fe is the chemical symbol for iron.

gangue are non-valuable components of the ore.

grade is the measure of concentration of gold within
mineralized rock.

g is a gram.

g/t is grams per metric tonne.

ha is a Hectare.

ICP is induced couple plasma.

ICP-AES is inductively coupled plasma atomic emission
spectroscopy.

5

---

indicated mineral resource means that part of a mineral
resource for which quantity, grade or quality, densities, shape and physical
characteristics can be estimated with a level of confidence sufficient to allow
the appropriate application of technical and economic parameters, to support
mine planning and evaluation of the economic viability of the deposit. The
estimate is based on detailed and reliable exploration and testing information
gathered through appropriate techniques from locations such as outcrops,
trenches, pits, workings and drill holes that are spaced closely enough for
geological and grade continuity to be reasonably assumed.

inferred mineral resource means that part of a mineral
resource for which quantity and grade or quality can be estimated on the basis
of geological evidence, limited sampling and reasonably assumed, but not
verified, geological and grade continuity. The estimate is based on limited
information and sampling gathered through appropriate techniques from locations
such as outcrops, trenches, pits, workings and drill holes.

IRR is internal rate of return.

km is a kilometre.

m is a metre.

Mg is the chemical symbol for magnesium.

micron or μm is 0.000001 metres.

measured mineral resource means that part of a mineral
resource for which quantity, grade or quality, densities, shape and physical
characteristics are so well established that they can be estimated with a level
of confidence sufficient to allow the appropriate application of technical and
economic parameters, to support mine planning and evaluation of the economic
viability of the deposit. The estimate is based on detailed and reliable
exploration, sampling and testing information gathered through appropriate
techniques from locations such as outcrops, trenches, pits, workings and drill
holes that are spaced closely enough for both geological and grade continuity to
be reasonably assured.

mineral reserve means the economically mineable part of a
measured or indicated mineral resource demonstrated by at least a preliminary
feasibility study. This study must include adequate information on mining,
processing, metallurgical, economic and other relevant factors that demonstrate,
at the time of reporting, that economic extraction can be justified. A mineral
reserve includes diluting materials and allowances for losses that may occur
when the material is mined.

mineral resource means a concentration or occurrence of
natural solid inorganic material, or natural solid fossilized organic material
in or on the earths crust in such form and quantity and of such a grade or
quality that it has reasonable prospects for economic extraction. The location,
quantity, grade, geological characteristics and continuity of a mineral resource
are known, estimated or interpreted from specific geological evidence and
knowledge.

mm is a millimetre.

MS is massive sulfide.

MW is million watts.

NPV is net present value

ounce or oz is a troy ounce.

Pb is the chemical symbol for lead.

ppm is parts per million.

probable mineral reserve means the economically mineable part
of an indicated and, in some circumstances, a measured mineral resource
demonstrated by at least a preliminary feasibility study. This study must
include adequate information on mining, processing, metallurgical, economic and
other relevant factors that demonstrate, at the time of reporting, that economic
extraction can be justified.

6

---

proven mineral reserve means the economically mineable part
of a measured mineral resource demonstrated by at least a preliminary
feasibility study. This study must include adequate information on mining,
processing, metallurgical, economic and other relevant factors that demonstrate,
at the time of reporting, that economic extraction is justified.

QA/QC is quality assurance and quality control.

RC is rotary circulation drilling.

RQD is rock quality description.

SP is self-potential.

strike is the duration of line formed by the intersection of
strata surfaces within the horizontal plane, always perpendicular to the dip
direction.

tailings is the finely ground waste rock from which valuable
minerals or metals have been extracted.

tonne is a metric tonne: 1,000 kilograms or 2,204.6
pounds.

t/d is tonnes per day.

XRF is x-ray fluorescence spectroscopy.

Zn is the chemical symbol for zinc.

SEC Industry Guide 7 Definitions:

exploration stage prospect is one which is not in either the
development or production stage.

development stage project is one which is undergoing
preparation of an established commercially mineable deposit for its extraction
but which is not yet in production. This stage occurs after completion of a
feasibility study.

mineralized material refers to material that is not included
in the reserve as it does not meet all of the criteria for adequate
demonstration for economic or legal extraction.

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

production stage project is actively engaged in the process
of extraction and beneficiation of mineral reserves to produce a marketable
metal or mineral product.

proven reserve refers to reserves for which (a) quantity is
computed from dimensions revealed in outcrops, trenches, workings or drill
holes; grade and/or quality are computed from the results of detailed sampling
and (b) the sites for inspection, sampling and measurement are spaced so closely
and the geologic character is so well defined that size, shape, depth and
mineral content of reserves are well-established.

reserve refers to that part of a mineral deposit which could
be economically and legally extracted or produced at the time of the reserve
determination. Reserves must be supported by a feasibility study done to
bankable standards that demonstrates the economic extraction. (Bankable
standards implies that the confidence attached to the costs and achievements
developed in the study is sufficient for the project to be eligible for external
debt financing.) A reserve includes adjustments to the in-situ tonnes and grade
to include diluting materials and allowances for losses that might occur when
the material is mined.

7

---

PART I

Item 1. BUSINESS

Our principal business is the exploration and development of
our Upper Kobuk Mineral Projects (Upper Kobuk Mineral Projects or UKMP
Projects) located in the Ambler mining district in Northwest Alaska, United
States which comprises (i) the Arctic Project, which contains the high-grade
polymetallic volcanogenic massive sulfide (VMS) deposit located on the Ambler
lands (Arctic Project); and (ii) the Bornite Project, which contains a
carbonate-hosted copper deposit (Bornite Project). Our goals include expanding
mineral resources and advancing our projects through technical, engineering and
feasibility studies so that production decisions can be made on those projects.

Name, Address and Incorporation

NovaCopper Inc. was incorporated on April 27, 2011 under the
Business Corporations Act(British Columbia) (BCBCA). Our registered
office is located at Suite 2600, Three Bentall Centre, 595 Burrard Street,
Vancouver, British Columbia, Canada, and our executive office is located at
Suite 2300, 200 Granville Street, Vancouver, British Columbia, Canada.

Corporate Organization Chart

The following chart depicts our corporate structure together
with the jurisdiction of incorporation of our subsidiary. All ownership is 100%.



Business Cycle

Our business, at its current exploration phase, is not
cyclical. Exploration activities are conducted primarily during snow-free
months. The optimum field season at the Upper Kobuk Mineral Projects is from
late May to late September. The length of the snow-free season at the Upper
Kobuk Mineral Projects varies from about May through November at lower
elevations and from July through September at higher elevations.

NovaCoppers Strategy

Our business strategy is focused on creating value for
stakeholders through our ownership and advancement of the Arctic Project and the
Bornite Project and through the pursuit of similarly attractive base metal
projects. We plan to:

8

---

- advance the Arctic Project towards development with key activities
  including increased definition of the mineral resources, technical studies to
  support completion of a pre-feasibility study, and the initiation of baseline
  environmental studies;
- advance exploration in the Ambler mining district and, in particular, at
  the Bornite Project, pursuant to the NANA Agreement (as more particularly
  described under History of NovaCopper  Agreement with NANA
  Regional Corporation) through resource development and technical
  studies; and
- pursue project level or corporate transactions that are value accretive.

The Arctic Project PEA represents an early stage study and
highlights certain opportunities for us to further expand upon. Prior to
commencing production, further studies that demonstrate the economic viability
of the Arctic Project must be completed including pre-feasibility studies, all
necessary permits must be obtained, a production decision must be made by our
Board, financing for construction and development must be arranged and
construction must be completed. In addition, we will be required to address
certain infrastructure challenges, including road access, and obtain additional
rights, including surface use rights and access rights. See Item 1A. Risk
Factors.

Significant Developments in 2012

- On March 28, 2012, the securityholders of NovaGold Resources Inc.
  (NovaGold) voted in favor of the special resolution approving the spin-out
  of NovaCopper Inc. and its wholly-owned subsidiary NovaCopper US Inc.
  (NovaCopper US) (Plan of Arrangement or Arrangement). On April 30, 2012,
  46,578,078 Common Shares of NovaCopper (each, a NovaCopper Share or Common
  Share) were distributed to NovaGold shareholders such that each NovaGold
  shareholder of record on the effective date received one NovaCopper Common
  Share for every six common shares of NovaGold held. In accordance with the
  terms of the Arrangement, NovaCopper has committed to NovaGold to deliver up
  to 6,181,352 NovaCopper Shares to satisfy holders of NovaGold warrants,
  performance share units, and deferred shares units on record as of the close
  of business April 27, 2012, on the same basis as NovaGold shareholders
  received under the Plan of Arrangement, at the time of exercise or vesting, as
  applicable. NovaCopper was funded with $40.0 million in cash by NovaGold as
  part of the Plan of Arrangement.
- On April 25, 2012, we began trading on the Toronto Stock Exchange (TSX)
  in Canada and NYSE-MKT (formerly NYSE- AMEX) in the United States.
- During 2012, we completed the recruitment and hiring of our senior
  management team. Our President and CEO, Rick Van Nieuwenhuyse, Vice President
  (VP) and Chief Financial Officer, Elaine Sanders, Senior VP Exploration, Joe
  Piekenbrock, and VP Human Resources and Workforce Development, Sacha Iley,
  joined the Company full time from their previous employment at NovaGold. We
  also announced the addition of Patrick Donnelly as VP Corporate Communications
  in August 2012.
- On July 18, 2012, we reported an initial resource estimate prepared under
  National Instrument 43-101  Standards of Disclosure for Mineral Projects (NI
  43-101) for the Ruby Creek zone of the Bornite property in a report entitled
  NI 43- 101 Technical Report Resource Estimation  Ruby Creek zone, Bornite
  deposit, Upper Kobuk Mineral Project, Northwest Alaska. At a 0.5% copper
  cut-off grade, the Ruby Creek zone contains Indicated Resources of 6.8 million
  tonnes at 1.19% Cu or 178.7 million pounds of contained copper and Inferred
  Resources of 47 million tonnes of 0.84% Cu or 883.2 million pounds of
  contained copper. Resources are stated as contained within a potentially
  economic resource limiting pit shell using a metal price of $3.00 per pound
  copper, mining costs of $1.50 per tonne, processing costs of $10.00 per tonne,
  100% recoveries and an average pit slope of 45 degrees. See Cautionary
  Note to United States Investors.
- On October 10, 2012, we announced the completion of our 2012 drilling
  campaign at our UKMP Projects which accomplished approximately 17,209 meters
  of which 15,457 meters were drilled at the South Reef zone of the Bornite
  property and 1,752 meters at the Sunshine deposit on the Ambler lands. Results
  from the drilling campaign have been released throughout the fall of 2012.
- On November 14, 2012, we announced initial metallurgical optimization
  results from the Arctic deposit through the completion of a metallurgical test
  work program. The work results in an increase of copper recoveries to 88.6%
  from 86.8% and zinc recoveries to 91.7% from 81.1% previously reported in our
  PEA for the Arctic project entitled NI 43-101 Preliminary Economic Assessment
  Ambler Project, Kobuk, AK. It also resulted in improved precious metal
  recoveries to the copper concentrate.

9

---

Subsequent Events

- Effective December 1, 2012, we became a domestic issuer under U.S. federal
  securities laws. Previously, we were a foreign private issuer under U.S.
  federal securities laws and were exempt from certain provisions of the U.S.
  federal securities laws, including U.S. proxy rules and Section 16 reporting.
- On January 2, 2013, we announced our largest shareholder, Electrum
  Strategic Resources L.P. (Electrum), added an additional 5.2 million
  NovaCopper Shares to their holdings through the exercise of NovaGold warrants.
  Under the Plan of Arrangement, each holder of NovaGold warrants on record as
  of April 30, 2012 received the right to receive one NovaCopper Share for every
  six common shares of NovaGold held at the time of exercise. We received no
  proceeds from the exercise of the NovaGold warrants. Between January 10, 2013
  to January 18, 2013, we issued an additional 0.9 million NovaCopper Shares to
  various holders upon their exercise of NovaGold warrants.
- On February 5, 2013, NovaCopper released an updated NI 43-101 resource
  estimate for the Bornite property in a report entitled NI 43-101 Technical
  Report Resource Estimation  South Reef and Ruby Creek zones, Bornite deposit,
  Upper Kobuk Mineral Projects, Northwest Alaska, further to the resource
  estimate previously released on July 18, 2012 with respect to the Ruby Creek
  zone. The South Reef zone at the Bornite Project, which lies roughly 400 to
  600 meters southeast of the Ruby Creek zone, reports at a 1.0% copper cut-off
  grade, Inferred Resources of 43.1 million tonnes of 2.54% Cu or 2,409 million
  pounds of contained copper. Inferred resources are stated as potentially being
  economically viable in an underground mining scenario based on a projected
  metal price of $2.75 per pound copper and total site operating costs of $60.00
  per tonne. See Cautionary Note to United States Investors.

History of NovaCopper

Spin-Out

We were formerly a wholly-owned subsidiary of NovaGold. At a
special meeting of securityholders of NovaGold held on March 28, 2012, the
securityholders voted in favour of a special resolution approving the
distribution of Common Shares of NovaCopper to the shareholders of NovaGold as a
return of capital through a statutory Plan of Arrangement under the Companies
Act(Nova Scotia).

On April 30, 2012, all of the outstanding NovaCopper Shares
were distributed to shareholders of NovaGold such that each NovaGold shareholder
of record at the close of business on April 27, 2012 received one NovaCopper
Share for every six common shares in the capital of NovaGold held at that time.
The NovaCopper Shares were listed and posted for trading on the TSX and on the
NYSE-MKT under the symbol NCQ on April 25, 2012.

Agreement with NANA Regional Corporation

On October 19, 2011, NANA Regional Corporation, Inc. (NANA),
an Alaska Native Corporation headquartered in Kotzebue, Alaska, and NovaCopper
US entered an Exploration Agreement and Option Agreement (the NANA Agreement)
for the cooperative development of NANAs respective resource interests in the
Ambler mining district of Northwest Alaska. The NANA Agreement consolidates our
and NANAs land holdings into an approximately 142,831-hectare land package and
provides a framework for the exploration and any future development of this
high-grade and prospective poly-metallic belt.

The NANA Agreement grants NovaCopper US the nonexclusive right
to enter on, and the exclusive right to explore, the Bornite lands and the
Alaska Native Claims Settlement Act (ANCSA) lands (each as defined in the NANA
Agreement) and in connection therewith, to construct and utilize temporary
access roads, camps, airstrips and other incidental works. In consideration for
this right, NovaCopper US paid to NANA $4 million in cash. NovaCopper US will
also be required to make payments to NANA for scholarship purposes in accordance
with the terms of the NANA Agreement. NovaCopper US has further agreed to use
reasonable commercial efforts to train and employ NANA shareholders to perform
work for NovaCopper US in connection with its operations on the Bornite lands,
ANCSA lands and Ambler lands (as defined in the NANA Agreement) (collectively,
the Lands). Under the NANA Agreement, NANA also has the right to appoint a
board member to NovaCoppers Board of Directors within a five year period
following our public listing on a stock exchange.

The NANA Agreement has a term of 20 years, with an option in
favour of NovaCopper US to extend the term for an additional 10 years. The NANA
Agreement may be terminated by mutual agreement of the parties or by NANA if
NovaCopper US does not meet certain expenditure requirements on the Bornite
lands and ANCSA lands.

If, following receipt of a feasibility study and the release
for public comment of a related draft environmental impact statement, we decide
to proceed with construction of a mine on the Lands, NovaCopper US will notify
NANA in writing and NANA will have 120 days to elect to either (a) exercise a non-transferrable
back-in-right to acquire an undivided ownership interest between 16% and 25% (as
specified by NANA) of that specific project; or (b) not exercise its
back-in-right, and instead receive a net proceeds royalty equal to 15% of the
net proceeds realized by NovaCopper US from such project (following the
recoupment by NovaCopper of all costs incurred, including operating, capital and
carrying costs). The cost to exercise such back-in-right is equal to the
percentage interest in the project multiplied by the difference between (i) all
costs incurred by NovaCopper US or its affiliates on the project, including
historical costs incurred prior to the date of the NANA Agreement together with
interest on the historical costs; and (ii) $40 million (subject to exceptions).
This amount will be payable by NANA to NovaCopper US in cash at the time the
parties enter into a joint venture agreement and in no event will the amount be
less than zero.

10

---

In the event that NANA elects to exercise its back-in-right,
the parties will as soon as reasonably practicable form a joint venture, with
NANAs interest being between 16% to 25% and NovaCopper US owning the balance of
the interest in the joint venture. Upon formation of the joint venture, the
joint venture will assume all of the obligations of NovaCopper US and be
entitled to all the benefits of NovaCopper US under the NANA Agreement in
connection with the mine to be developed and the related Lands. A partys
failure to pay its proportionate share of costs in connection with the joint
venture will result in dilution of its interest. Each party will have a right of
first refusal over any proposed transfer of the other partys interest in the
joint venture other than to an affiliate or for the purposes of granting
security. A transfer by either party of any net proceeds royalty interest in a
project other than for financing purposes will also be subject to a first right
of refusal. A transfer of NANAs net smelter return on the Lands is subject to a
first right of refusal by NovaCopper.

In connection with possible development of a mine on the
Bornite lands or ANCSA lands, NovaCopper US and NANA will execute a mining lease
to allow NovaCopper US or the joint venture to construct and operate a mine on
the Bornite lands or ANCSA lands. These leases will provide NANA a 2% net
smelter royalty as to production from the Bornite lands and a 2.5% net smelter
royalty as to production from the ANCSA lands. If NovaCopper US decides to
proceed with construction of a mine on the Ambler lands, NANA will enter into a
surface use agreement with NovaCopper US which will afford NovaCopper US access
to the Ambler lands along routes approved by NANA on the Bornite lands or ANCSA
lands. In consideration for the grant of such surface use rights, NovaCopper US
will grant NANA a 1% net smelter royalty on production and an annual payment of
$755 per acre (as adjusted for inflation each year beginning with the second
anniversary of the effective date of the NANA Agreement and for each of the
first 400 acres (and $100 for each additional acre) of the lands owned by NANA
and used for access which are disturbed and not reclaimed.

NovaCopper and NANA have formed an oversight committee, which
consists of four representatives from each of NovaCopper and NANA (the
Oversight Committee). The Oversight Committee is responsible for certain
planning and oversight matters carried out by NovaCopper under the NANA
Agreement. The planning and oversight matters that are the subject of the NANA
Agreement will be determined by majority vote. The representatives of each of
NovaCopper and NANA attending a meeting will have one vote in the aggregate and
in the event of a tie, the NovaCopper US representatives jointly shall have a
deciding vote on all matters other than Sustainability Matters, as that term is
defined in the NANA Agreement. There shall be no deciding vote on Sustainability
Matters and NovaCopper may not proceed with such matters unless approved by
majority vote of the Oversight Committee or with the consent of NANA, such
consent not to be unreasonably withheld or delayed.

Principal Markets

Our principal objective is to become a producer of copper.

Specialized Skill and Knowledge

All aspects of our business require specialized skills and
knowledge. Such skills and knowledge include the areas of geology, mining and
accounting. See Executive Officers of NovaCopper for details as to the
specific skills and knowledge of our directors and management.

Environmental Protection

Mining is an extractive industry that impacts the environment.
Our goal is to evaluate ways to minimize that impact and to develop safe,
responsible and profitable operations by developing natural resources for the
benefit of our employees, shareholders and communities and maintain high
standards for environmental performance at our Upper Kobuk Mineral Projects. We
strive to meet or exceed environmental standards at our Upper Kobuk Mineral
Projects. One way we do this is through collaborations with local communities,
including Native Alaskan groups. We are currently active only in Alaska, which
has established environmental standards and regulations that we intend to strive
to exceed. Our environmental performance will be overseen at the Board level and
environmental performance is the responsibility of the project manager.

- All new activities and operations will be managed for compliance with
  applicable laws and regulations. In the absence of regulation, best management
  practices will be applied to manage environmental risk.

11

---

- We will strive to limit releases to the air, land or water and
  appropriately treat and dispose of waste.

See Arctic Project  Environmental Considerations.

Employees

As of November 30, 2012, we had 21 full-time employees, 13 of
whom were employed at our executive office in Vancouver, BC, and 8 of whom were
employed at our Upper Kobuk Mineral Projects. The number of individuals employed
by us fluctuates throughout the year depending on the season; however on
average, we had 50 employees during 2012. We have entered into employment
agreements with five individuals. Additionally, we have had up to 10 individuals
in Canada providing services to us through the Services Agreement between
NovaCopper and NovaGold effective as of April 19, 2012, as amended September 1,
2012 (the Services Agreement) through the year ended November 30, 2012. The
parties intend to terminate the Services Agreement on May 1, 2013 as NovaCopper
has developed its own internal capabilities and limited the use of the Service
Agreement.

We believe our success is dependent on the performance of our
management and key employees, many of whom have specialized skills in
exploration in Alaska and the base metals industry. Substantially all of our
exploration site employees have been active in the Ambler mining district for
the last five years and are knowledgeable as to the geology, metallurgy and
infrastructure related to mining development.

Segment Information

We operate in one geographical jurisdiction, being the United
States, and all of our mineral properties and plant and equipment are located in
Alaska. Segment information relating to our assets is provided under the section
heading Item 8. Financial Statements and Supplementary Data below.

Competitive Conditions

The mineral exploration and development industry is competitive
in all phases of exploration, development and production. There is a high degree
of competition faced by us in Alaska and elsewhere for skilled management
employees, suitable contractors for drilling operations, technical and
engineering resources, and necessary exploration and mining equipment, and many
of these competitor companies have greater financial resources, operational
expertise, and/or more advanced properties than us. Additionally, our operations
are in a remote location where skilled resources and support services are
limited. We have in place experienced management personnel and continues to
evaluate the required expertise and skills to carry out our operations. As a
result of this competition, we may be unable to achieve our exploration and
development in the future on terms we consider acceptable or at all. See
Item 1A. Risk Factors.

Available Information

We make available, free of charge, on or through our Internet
website, at www.novacopper.comour annual
report on Form 10-K which includes our audited financial statements, our
quarterly reports and our current reports on Form 8-K and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the U.S.
Securities Exchange Act of 1934. Our Internet website and the information
contained therein or connected thereto are not intended to be, and are not
incorporated into this annual report on Form 10-K.

Item 1A. RISK FACTORS

Investing in our securities is speculative and involves a high
degree of risk due to the nature of our business and the present stage of
exploration of our mineral properties. The following risk factors, as well as
risks currently unknown to us, could materially adversely affect our future
business, operations and financial condition and could cause them to differ
materially from the estimates described in forward-looking information relating
to NovaCopper, or our business, property or financial results, each of which
could cause purchasers of securities to lose all or part of their investments.

We have not defined any proven or probable reserves and none
of our mineral properties are in production or under development.

We have no history of commercially producing precious or base
metals and all of our properties are in the exploration stage. We have not
defined or delineated any measured resources or proven or probable reserves on
any of our projects or properties located in Northwest Alaska. Mineral
exploration involves significant risk, since few properties that are explored
contain bodies of ore that would be commercially economic to develop into
producing mines. We cannot assure you that we will establish the presence of any
measured resources, or proven or probable reserves at the Upper
Kobuk Mineral Projects or any other properties. The failure to establish
measured resources, or proven or probable reserves, would severely restrict our
ability to implement our strategies for long-term growth.

12

---

Even if one of our mineral projects is determined to be
economically viable to develop into a mine, such development may not be
successful.

If the development of one of our projects is found to be
economically feasible and approved by our board of directors (the Board), such
development will require obtaining permits and financing, the construction and
operation of mines, processing plants and related infrastructure, including road
access. As a result, we are and will continue to be subject to all of the risks
associated with establishing new mining operations, including:

- the timing and cost, which can be considerable, of the construction of
  mining and processing facilities and related infrastructure;
- the availability and cost of skilled labour and mining equipment;
- the availability and cost of appropriate smelting and refining
  arrangements;
- the need to obtain necessary environmental and other governmental approvals
  and permits and the timing of the receipt of those approvals and permits;
- the availability of funds to finance construction and development
  activities;
- potential opposition from non-governmental organizations, environmental
  groups or local groups which may delay or prevent development activities; and
- potential increases in construction and operating costs due to changes in
  the cost of fuel, power, materials and supplies.

The costs, timing and complexities of developing our projects
may be greater than anticipated because our property interests are not located
in developed areas, and, as a result, our property interests are not currently
served by appropriate road access, water and power supply and other support
infrastructure. Cost estimates may increase significantly as more detailed
engineering work is completed on a project. It is common in new mining
operations to experience unexpected costs, problems and delays during
construction, development and mine start-up. In addition, delays in the early
stages of mineral production often occur. Accordingly, we cannot provide
assurance that we will ever achieve or that our activities will result in
profitable mining operations at our mineral properties.

In addition, there can be no assurance that our mineral
exploration activities will result in any discoveries of new mineralization. If
further mineralization is discovered there is also no assurance that the
mineralization would be economical for commercial production. Discovery of
mineral deposits is dependent upon a number of factors and significantly
influenced by the technical skill of the exploration personnel involved. The
commercial viability of a mineral deposit is also dependent upon a number of
factors which are beyond our control, including the attributes of the deposit,
commodity prices, government policies and regulation and environmental
protection.

We have no history of production and no revenue from mining
operations.

We have a very limited history of operations and to date have
generated no revenue from mining operations. As such, we are subject to many
risks common to such enterprises, including under-capitalization, cash
shortages, limitations with respect to personnel, financial and other resources
and lack of significant revenues. There is no assurance that the Upper Kobuk
Mineral Projects or any other projects will be commercially mineable, and we may
never generate revenues from our mining operations.

We may not have sufficient funds to develop our mineral
projects or to complete further exploration programs.

We have limited financial resources. We currently generate no
mining operating revenue, and must primarily finance exploration activity and
the development of mineral projects by other means. In the future, our ability
to continue exploration, development and production activities, if any, will
depend on our ability to obtain additional external financing. Any unexpected
costs, problems or delays could severely impact our ability to continue
exploration and development activities. The failure to meet ongoing obligations
on a timely basis could result in a loss or a substantial dilution of our
interests in projects.

13

---

The sources of external financing that we may use for these
purposes include project or bank financing or public or private offerings of
equity and debt. In addition, we may enter into one or more strategic alliances
or joint ventures, decide to sell certain property interests, or utilize one or
a combination of all of these alternatives. The financing alternative we chose
may not be available on acceptable terms, or at all. If additional financing is
not available, we may have to postpone further exploration or development of, or
sell, one or more of our principal properties.

Changes in the market price of copper and other metals,
which in the past have fluctuated widely, will affect our ability to finance
continued exploration and development of our projects and affect our operations
and financial condition.

Our long-term viability will depend, in large part, on the
market price of copper and other metals. The market prices for these metals are
volatile and are affected by numerous factors beyond our control, including:

- global or regional consumption patterns;
- the supply of, and demand for, these metals;
- speculative activities;
- the availability and costs of metal substitutes;
- expectations for inflation; and
- political and economic conditions, including interest rates and currency
  values.

We cannot predict the effect of these factors on metal prices.
A decrease in the market price of copper and other metals could affect our
ability to raise funds to finance the exploration and development of any of our
mineral projects, which would have a material adverse effect on our financial
condition and results of operations. The market price of copper and other metals
may not remain at current levels. In particular, an increase in worldwide
supply, and consequent downward pressure on prices, may result over the longer
term from increased copper production from mines developed or expanded as a
result of current metal price levels. There is no assurance that a profitable
market may exist or continue to exist.

Actual capital costs, operating costs, production and
economic returns may differ significantly from those described in the technical
report for the Arctic Project.

The PEA technical report is an early stage study that is
preliminary in nature. There can be no assurance that the results described in
the PEA will be realized. The capital costs to take our projects into production
may be significantly higher than anticipated.

None of our mineral properties have an operating history upon
which we can base estimates of future operating costs. Decisions about the
development of the Arctic Project (or the Bornite Project) will ultimately be
based upon feasibility studies. Feasibility studies derive estimates of cash
operating costs based upon, among other things:

- anticipated tonnage, grades and metallurgical characteristics of the ore to
  be mined and processed;
- anticipated recovery rates of metals from the ore;
- cash operating costs of comparable facilities and equipment; and
- anticipated climatic conditions.

Cash operating costs, production and economic returns, and
other estimates contained in studies or estimates prepared by or for us may
differ significantly from those anticipated by the PEA and there can be no
assurance that our actual operating costs will not be higher than currently
anticipated.

The Upper Kobuk Mineral Projects are located in a remote
area of Alaska, and access to them is limited. Exploration and any future
development or production activities may be limited and delayed by
infrastructure challenges, inclement weather and a shortened exploration
season.

The Upper Kobuk Mineral Projects are located in a remote area
of Alaska. Access to the Upper Kobuk Mineral Projects is limited and there is
currently no infrastructure in the area.

14

---

We cannot provide assurances that the State of Alaskas
proposed road that would provide access to the Ambler mining district will be
built, that it will be built in a timely manner, that the cost of accessing the
proposed road will be reasonable, that it will be built in the manner
contemplated, or that it will sufficiently satisfy the requirements of the Upper
Kobuk Mineral Projects. In addition, successful development of the Upper Kobuk
Mineral Projects will require the development of the necessary infrastructure.
If adequate infrastructure is not available in a timely manner, there can be no
assurance that:

- the development of the Upper Kobuk Mineral Projects will be commenced or
  completed on a timely basis, if at all;
- the resulting operations will achieve the anticipated production volume; or
- the construction costs and operating costs associated with the development
  of the Upper Kobuk Mineral Projects will not be higher than anticipated.

As the UKMP Projects are located in a remote area, exploration,
development and production activities may be limited and delayed by inclement
weather and a shortened exploration season.

We will incur losses for the foreseeable future.

We expect to incur losses unless and until such time as our
mineral projects generate sufficient revenues to fund continuing operations. The
exploration and development of our mineral properties will require the
commitment of substantial financial resources that may not be available.

The amount and timing of expenditures will depend on a number
of factors, including the progress of ongoing exploration and development, the
results of consultants analyses and recommendations, the rate at which
operating losses are incurred, the execution of any joint venture agreements
with strategic partners and the acquisition of additional property interests,
some of which are beyond our control. We cannot provide assurance that we will
ever achieve profitability.

Mineral resource and reserve calculations are only
estimates.

Any figures presented for mineral resources in this Form 10-K
and in our other filings with securities regulatory authorities and those which
may be presented in the future or any figures for mineral reserves that may be
presented by us in the future are and will only be estimates. There is a degree
of uncertainty attributable to the calculation of mineral reserves and mineral
resources. Until mineral reserves or mineral resources are actually mined and
processed, the quantity of metal and grades must be considered as estimates only
and no assurances can be given that the indicated levels of metals will be
produced. In making determinations about whether to advance any of our projects
to development, we must rely upon estimated calculations as to the mineral
resources and grades of mineralization on our properties.

The estimating of mineral reserves and mineral resources is a
subjective process that relies on the judgment of the persons preparing the
estimates. The process relies on the quantity and quality of available data and
is based on knowledge, mining experience, analysis of drilling results and
industry practices. Valid estimates made at a given time may significantly
change when new information becomes available. While we believe that the mineral
resource estimates included in this Form 10-K for the Upper Kobuk Mineral
Projects are well established and reflect managements best estimates, by their
nature mineral resource estimates are imprecise and depend, to a certain extent,
upon analysis of drilling results and statistical inferences that may ultimately
prove to be inaccurate. There can be no assurances that actual results will meet
the estimates contained in feasibility studies. As well, further studies are
required.

Estimated mineral reserves or mineral resources may have to be
recalculated based on changes in metal prices, further exploration or
development activity or actual production experience. This could materially and
adversely affect estimates of the volume or grade of mineralization, estimated
recovery rates or other important factors that influence mineral reserve or
mineral resource estimates. The extent to which mineral resources may ultimately
be reclassified as mineral reserves is dependent upon the demonstration of their
profitable recovery. Any material changes in mineral resource estimates and
grades of mineralization will affect the economic viability of placing a
property into production and a propertys return on capital. We cannot provide
assurance that mineralization can be mined or processed profitably.

Our mineral resource estimates have been determined and valued
based on assumed future metal prices, cut-off grades and operating costs that
may prove to be inaccurate. Extended declines in market prices for copper, zinc,
lead, gold and silver may render portions of our mineralization uneconomic and
result in reduced reported mineral resources, which in turn could have a
material adverse effect on our results of operations or financial condition. We
cannot provide assurance that mineral recovery rates achieved in small scale
tests will be duplicated in large scale tests under on-site conditions or in
production scale.

15

---

A reduction in any mineral reserves that may be estimated by us
in the future could have an adverse impact on our future cash flows, earnings,
results of operations and financial condition. No assurances can be given that
any mineral resource estimates for the Upper Kobuk Mineral Projects will
ultimately be reclassified as mineral reserves. See Cautionary Note to
United States Investors.

Significant uncertainty exists related to inferred mineral
resources.

There is a risk that inferred mineral resources referred to in
this Form 10-K cannot be converted into measured or indicated mineral resources
as there may be limited ability to assess geological continuity. Due to the
uncertainty that may attach to inferred mineral resources, there is no assurance
that inferred mineral resources will be upgraded to resources with sufficient
geological continuity to constitute proven and probable mineral reserves as a
result of continued exploration. See Cautionary Note to United States
Investors.

Mining is inherently risky and subject to conditions or
events beyond our control.

The development and operation of a mine is inherently dangerous
and involves many risks that even a combination of experience, knowledge and
careful evaluation may not be able to overcome, including:

- unusual or unexpected geological formations;
- metallurgical and other processing problems;
- metal losses;
- environmental hazards;
- power outages;
- labour disruptions;
- industrial accidents;
- periodic interruptions due to inclement or hazardous weather conditions;
- flooding, explosions, fire, rockbursts, cave-ins and landslides;
- mechanical equipment and facility performance problems; and
- the availability of materials and equipment.

These risks could result in damage to, or destruction of,
mineral properties, production facilities or other properties, personal injury
or death, including to our employees, environmental damage, delays in mining,
increased production costs, asset write downs, monetary losses and possible
legal liability. We may not be able to obtain insurance to cover these risks at
economically feasible premiums, or at all. Insurance against certain
environmental risks, including potential liability for pollution and other
hazards associated with mineral exploration and production, is not generally
available to companies within the mining industry. We may suffer a material
adverse effect on our business if we incur losses related to any significant
events that are not covered by our insurance policies.

General economic conditions may adversely affect our growth,
future profitability and ability to finance.

The unprecedented events in global financial markets in the
past several years have had a profound impact on the global economy. Many
industries, including the copper mining industry, are impacted by these market
conditions. Some of the key impacts of the current financial market turmoil
include contraction in credit markets resulting in a widening of credit risk,
devaluations, high volatility in global equity, commodity, foreign exchange and
precious metal markets and a lack of market liquidity. A worsening or slowdown
in the financial markets or other economic conditions, including but not limited
to, consumer spending, employment rates, business conditions, inflation, fuel
and energy costs, consumer debt levels, lack of available credit, the state of
the financial markets, interest rates and tax rates, may adversely affect our
growth and ability to finance. Specifically:

- the global credit/liquidity crisis could impact the cost and availability
  of financing and our overall liquidity;

16

---

- the volatility of copper and other metal prices would impact our estimates
  of mineral resources, revenues, profits, losses and cash flow, and the
  feasibility of our projects;
- negative economic pressures could adversely impact demand for our future
  production, if any;
- construction related costs could increase and adversely affect the
  economics of any project in the Ambler district;
- volatile energy, commodity and consumables prices and currency exchange
  rates would impact our estimated production costs; and
- the devaluation and volatility of global stock markets would impact the
  valuation of our equity and other securities.

We cannot provide assurance that we will successfully
acquire commercially mineable mineral rights.

Exploration for and development of copper properties involves
significant financial risks which even a combination of careful evaluation,
experience and knowledge may not eliminate. While the discovery of an ore body
may result in substantial rewards, few properties which are explored are
ultimately developed into producing mines. Major expenses may be required to
establish reserves by drilling, constructing mining and processing facilities at
a site, developing metallurgical processes and extracting metals from ore. We
cannot ensure that our current exploration and development programs will result
in profitable commercial mining operations.

The economic feasibility of development projects is based upon
many factors, including the accuracy of mineral resource estimates;
metallurgical recoveries; capital and operating costs; government regulations
relating to prices, taxes, royalties, land tenure, land use, importing and
exporting and environmental protection; and metal prices, which are highly
volatile. Development projects are also subject to the successful completion of
feasibility studies, issuance of necessary governmental permits and availability
of adequate financing.

Most exploration projects do not result in the discovery of
commercially mineable ore deposits, and no assurance can be given that any
anticipated level of recovery of ore reserves, if any, will be realized or that
any identified mineral deposit will ever qualify as a commercially mineable (or
viable) ore body which can be legally and economically exploited. Estimates of
mineral reserves, mineral resources, mineral deposits and production costs can
also be affected by such factors as environmental permitting regulations and
requirements, weather, environmental factors, unforeseen technical difficulties,
the metallurgy of the mineralization forming the mineral deposit, unusual or
unexpected geological formations and work interruptions. If current exploration
programs do not result in the discovery of commercial ore, we may need to
write-off part or all of our investment in our existing exploration stage
properties, and may need to acquire additional properties.

Material changes in mineral reserves, if any, grades, stripping
ratios or recovery rates may affect the economic viability of any project. Our
future growth and productivity will depend, in part, on our ability to develop
commercially mineable mineral rights at our existing properties or identify and
acquire other commercially mineable mineral rights, and on the costs and results
of continued exploration and potential development programs. Mineral exploration
is highly speculative in nature and is frequently non-productive. Substantial
expenditures are required to:

- establish mineral reserves through drilling and metallurgical and other
  testing techniques;
- determine metal content and metallurgical recovery processes to extract
  metal from the ore; and
- construct, renovate or expand mining and processing facilities.

In addition, if we discover ore, it would take several years
from the initial phases of exploration until production is possible. During this
time, the economic feasibility of production may change. As a result of these
uncertainties, there can be no assurance that we will successfully acquire
commercially mineable (or viable) mineral rights.

We are subject to significant governmental
regulations.

Our exploration activities are subject to extensive federal,
state, provincial and local laws and regulations governing various matters,
including:

- environmental protection;
- the management and use of toxic substances and explosives;

17

---

- the management of natural resources;
- the exploration and development of mineral properties, including
  reclamation;
- exports;
- price controls;
- taxation and mining royalties;
- management of tailing and other waste generated by operations;
- labour standards and occupational health and safety, including mine safety;
  and
- historic and cultural preservation.

Failure to comply with applicable laws and regulations may
result in civil or criminal fines or penalties or enforcement actions, including
orders issued by regulatory or judicial authorities enjoining, curtailing or
closing operations or requiring corrective measures, installation of additional
equipment or remedial actions, any of which could result in significant
expenditures. We may also be required to compensate private parties suffering
loss or damage by reason of a breach of such laws, regulations or permitting
requirements. It is also possible that future laws and regulations, or more
stringent enforcement of current laws and regulations by governmental
authorities, could cause us to incur additional expense or capital expenditure
restrictions, suspensions or closing of our activities and delays in the
exploration and development of our properties.

We require further permits in order to conduct current and
anticipated future operations, and delays in obtaining or failure to obtain such
permits, or a failure to comply with the terms of any such permits that we have
obtained, would adversely affect our business.

Our current and anticipated future operations, including
further exploration, development and commencement of production on our mineral
properties, require permits from various governmental authorities. Obtaining or
renewing governmental permits is a complex and time-consuming process. The
duration and success of efforts to obtain and renew permits are contingent upon
many variables not within our control. Due to the preliminary stages of the
Upper Kobuk Mineral Projects, it is difficult to assess what specific permitting
requirements will ultimately apply.

Shortage of qualified and experienced personnel in the U.S.
federal and Alaskan State agencies to coordinate a federally led joint
environmental impact statement process could result in delays or inefficiencies.
Backlog within the permitting agencies could affect the permitting timeline of
the Upper Kobuk Mineral Projects. Other factors that could affect the permitting
timeline include (i) the number of other large-scale projects currently in a
more advanced stage of development which could slow down the review process for
the Upper Kobuk Mineral Projects and (ii) significant public response regarding
the Upper Kobuk Mineral Projects.

We cannot provide assurance that all permits that we require
for our operations, including any for construction of mining facilities or
conduct of mining, will be obtainable or renewable on reasonable terms, or at
all. Delays or a failure to obtain such required permits, or the expiry,
revocation or failure to comply with the terms of any such permits that we have
obtained, would adversely affect our business.

Our activities are subject to environmental laws and
regulations that may increase our costs and restrict our operations.

All of our exploration, potential development and production
activities are subject to regulation by governmental agencies under various
environmental laws. These laws address emissions into the air, discharges into
water, management of waste, management of hazardous substances, protection of
natural resources, antiquities and endangered species and reclamation of lands
disturbed by mining operations. Environmental legislation is evolving and the
general trend has been towards stricter standards and enforcement, increased
fines and penalties for noncompliance, more stringent environmental assessments
of proposed projects and increasing responsibility for companies and their
officers, directors and employees. Compliance with environmental laws and
regulations may require significant capital outlays on our behalf and may cause
material changes or delays in our intended activities. Several regulatory
initiatives are currently ongoing within the State of Alaska that have the
potential to influence the permitting process for the Upper Kobuk Mineral
Projects. These include a revision of the Alaska Mixing Zone Regulations which
may be required in order to permit a mixing zone for discharge in Subarctic
Creek. Future changes in these laws or regulations could have a significant
adverse impact on some portion of our business, requiring us to re-evaluate
those activities at that time.

18

---

Environmental hazards may exist on our properties that are
unknown to us at the present time and that have been caused by previous owners
or operators or that may have occurred naturally. We may be liable for
remediating such damage.

Failure to comply with applicable environmental laws,
regulations and permitting requirements may result in enforcement actions
thereunder, including orders issued by regulatory or judicial authorities,
causing operations to cease or to be curtailed, and may include corrective
measures requiring capital expenditures, installation of additional equipment or
remedial actions.

Land reclamation requirements for our exploration properties
may be burdensome.

Land reclamation requirements are generally imposed on mineral
exploration companies (as well as companies with mining operations) in order to
minimize long term effects of land disturbance. Reclamation may include
requirements to:

- treat ground and surface water to drinking water standards;
- control dispersion of potentially deleterious effluents; and
- reasonably re-establish pre-disturbance land forms and vegetation.

In order to carry out reclamation obligations imposed on us in
connection with exploration, potential development and production activities, we
must allocate financial resources that might otherwise be spent on further
exploration and development programs. In addition, regulatory changes could
increase our obligations to perform reclamation and mine closing activities. If
we are required to carry out unanticipated reclamation work, our financial
position could be adversely affected.

Title and other rights to our properties may be subject to
challenge.

We cannot provide assurance that title to our properties will
not be challenged. We own mineral claims which constitute our property holdings.
We may not have, or may not be able to obtain, all necessary surface rights to
develop a property. Title insurance is generally not available for mineral
properties and our ability to ensure that we have obtained a secure claim to
individual mining properties may be severely constrained. Our mineral properties
may be subject to prior unregistered agreements, transfers or claims, and title
may be affected by, among other things, undetected defects. We have not
conducted surveys of all of the claims in which we hold direct or indirect
interests. A successful claim contesting our title to a property will cause us
to lose our rights to explore and, if warranted, develop that property or
undertake or continue production thereon. This could result in our not being
compensated for our prior expenditures relating to the property. In addition,
our ability to continue to explore and develop the property may be subject to
agreements with other third parties including agreements with native
corporations and first nations groups, for instance, the lands at the Upper
Kobuk Mineral Projects are subject to NANA Agreement (as more particularly
described under History of NovaCopper Agreement with NANA Regional
Corporation).

Risks inherent in acquisitions of new properties.

We may actively pursue the acquisition of exploration,
development and production assets consistent with our acquisition and growth
strategy. From time to time, we may also acquire securities of or other
interests in companies with respect to which we may enter into acquisitions or
other transactions. Acquisition transactions involve inherent risks, including
but not limited to:

- accurately assessing the value, strengths, weaknesses, contingent and other
  liabilities and potential profitability of acquisition candidates;
- ability to achieve identified and anticipated operating and financial
  synergies;
- unanticipated costs;
- diversion of management attention from existing business;
- potential loss of our key employees or key employees of any business
  acquired;
- unanticipated changes in business, industry or general economic conditions
  that affect the assumptions underlying the acquisition;
- decline in the value of acquired properties, companies or securities;

19

---

- assimilating the operations of an acquired business or property in a timely
  and efficient manner;
- maintaining our financial and strategic focus while integrating the
  acquired business or property;
- implementing uniform standards, controls, procedures and policies at the
  acquired business, as appropriate; and
- to the extent that we make an acquisition outside of markets in which it
  has previously operated, conducting and managing operations in a new operating
  environment.

Acquiring additional businesses or properties could place
increased pressure on our cash flow if such acquisitions involve a cash
consideration. The integration of our existing operations with any acquired
business will require significant expenditures of time, attention and funds.
Achievement of the benefits expected from consolidation would require us to
incur significant costs in connection with, among other things, implementing
financial and planning systems. We may not be able to integrate the operations
of a recently acquired business or restructure our previously existing business
operations without encountering difficulties and delays. In addition, this
integration may require significant attention from our management team, which
may detract attention from our day-to-day operations. Over the short-term,
difficulties associated with integration could have a material adverse effect on
our business, operating results, financial condition and the price of NovaCopper
Shares. In addition, the acquisition of mineral properties may subject us to
unforeseen liabilities, including environmental liabilities, which could have a
material adverse effect on us. There can be no assurance that any future
acquisitions will be successfully integrated into our existing operations.

Any one or more of these factors or other risks could cause us
not to realize the anticipated benefits of an acquisition of properties or
companies, and could have a material adverse effect on our financial
condition.

High metal prices in recent years have encouraged increased
mining exploration, development and construction activity, which has increased
demand for, and cost of, exploration, development and construction services and
equipment.

The relative strength of metal prices in recent years has
encouraged increases in mining exploration, development and construction
activities around the world, which has resulted in increased demand for, and
cost of, exploration, development and construction services and equipment. While
recent market conditions have had a moderating effect on the costs of such
services and equipment, increases in such costs may continue with the resumption
of an upward trend in metal prices. Increased demand for and cost of services
and equipment could result in delays if services or equipment cannot be obtained
in a timely manner due to inadequate availability, and may cause scheduling
difficulties due to the need to coordinate the availability of services or
equipment, any of which could materially increase project exploration,
development and/or construction costs.

We face industry competition in the acquisition of
exploration properties and the recruitment and retention of qualified
personnel.

We compete with other exploration and producing companies, many
of which are better capitalized, have greater financial resources, operational
experience and technical capabilities or are further advanced in their
development or are significantly larger and have access to greater mineral
reserves, for the acquisition of mineral claims, leases and other mineral
interests as well as for the recruitment and retention of qualified employees
and other personnel. If we require and are unsuccessful in acquiring additional
mineral properties or in recruiting and retaining qualified personnel, we will
not be able to grow at the rate we desire, or at all.

We may experience difficulty attracting and retaining
qualified management and technical personnel to grow our business.

We are dependent on the services of key executives and other
highly skilled and experienced personnel to advance our corporate objectives as
well as the identification of new opportunities for growth and funding. Mr. Van
Nieuwenhuyse, Ms. Sanders, and Mr. Piekenbrock are currently our only executive
officers. It will be necessary for us to recruit additional skilled and
experienced executives. Our inability to do so, or the loss of any of these
persons or our inability to attract and retain suitable replacements for them,
or additional highly skilled employees required for our activities, would have a
material adverse effect on our business and financial condition.

Some of our directors and officers have conflicts of
interest as a result of their involvement with other natural resource
companies.

Certain of our directors and officers also serve as directors
or officers, or have significant shareholdings in, other companies involved in
natural resource exploration and development or mining-related activities,
including, in particular, NovaGold. To the extent that such other companies may
participate in ventures in which we may participate in, or in ventures which we
may seek to participate in, our directors and officers may have a conflict of
interest in negotiating and concluding terms respecting the extent of such participation. In all cases where our directors and officers
have an interest in other companies, such other companies may also compete with
us for the acquisition of mineral property investments. Such conflicts of our
directors and officers may result in a material and adverse effect on our
profitability, results of operation and financial condition. As a result of
these conflicts of interest, we may miss the opportunity to participate in
certain transactions, which may have a material adverse effect on our financial
position.

20

---

In the future we may be subject to legal
proceedings.

Due to the nature of our business, we may be subject to
numerous regulatory investigations, claims, lawsuits and other proceedings in
the ordinary course of our business. The results of these legal proceedings
cannot be predicted with certainty due to the uncertainty inherent in
litigation, including the effects of discovery of new evidence or advancement of
new legal theories, the difficulty of predicting decisions of judges and juries
and the possibility that decisions may be reversed on appeal. There can be no
assurances that these matters will not have a material adverse effect on our
business.

Our largest shareholder has significant influence on us and
may also affect the market price and liquidity of the Securities.

Electrum is our single largest shareholder, controlling
approximately 26.7% of the outstanding voting securities. Accordingly, Electrum
will have significant influence in determining the outcome of any corporate
transaction or other matter submitted to the shareholders for approval,
including mergers, consolidations and the sale of all or substantially all of
our assets and other significant corporate actions. Unless significant
participation of other shareholders takes place in such shareholder meetings,
Electrum may be able to approve such matters itself. The concentration of
ownership of the shares by Electrum may: (i) delay or deter a change of control
of the Company; (ii) deprive shareholders of an opportunity to receive a premium
for their shares as part of a sale of the Company; and (iii) affect the market
price and liquidity of the shares. Without the consent of Electrum, we could be
prevented from entering into transactions that are otherwise beneficial to us.
The interests of Electrum may differ from or be adverse to the interests of our
other shareholders. The effect of these rights and Electrums influence may
impact the price that investors are willing to pay for securities. If Electrum
sells a substantial number of shares in the public market, the market price of
the shares could fall. The perception among the public that these sales will
occur could also contribute to a decline in the market price of the shares.

Global climate change is an international concern, and could
impact our ability to conduct future operations.

Global climate change is an international issue and receives an
enormous amount of publicity. We would expect that the imposition of
international treaties or U.S. or Canadian federal, state, provincial or local
laws or regulations pertaining to mandatory reductions in energy consumption or
emissions of greenhouse gasses could affect the feasibility of our mining
projects and increase our operating costs.

Adverse publicity from non-governmental organizations could
have a material adverse effect on us.

There is an increasing level of public concern relating to the
effect of mining production on our surroundings, communities and environment.
Non-governmental organizations (NGOs), some of which oppose resource
development, are often vocal critics of the mining industry. While we seek to
operate in a socially responsible manner, adverse publicity generated by such
NGOs related to extractive industries, or our operations specifically, could
have an adverse effect on our reputation and financial condition or our
relationship with the communities in which we operate.

We may fail to achieve and maintain the adequacy of our
internal control over financial reporting as per the requirements of the
Sarbanes-Oxley Act.

We are required to document and test our internal control
procedures in order to satisfy the requirements of Section 404 of SOX. It
requires an annual assessment by management of the effectiveness of our internal
control over financial reporting and an attestation report by our independent
auditors addressing this assessment. We may in the future fail to achieve and
maintain the adequacy of our internal control over financial reporting, as such
standards are modified, supplemented or amended from time to time, and we may
not be able to ensure that we can conclude on an ongoing basis that we have
effective internal control over financial reporting in accordance with Section
404 of SOX. Our failure to satisfy the requirements of Section 404 of SOX on an
ongoing, timely basis could result in the loss of investor confidence in the
reliability of our financial statements, which in turn could harm our business
and negatively impact the trading price of our Common Shares. In addition, any
failure to implement required new or improved controls, or difficulties
encountered in their implementation, could harm our operating results or cause
us to fail to meet our reporting obligations. Future acquisitions of companies
may provide us with challenges in implementing the required processes,
procedures and controls in our acquired operations. Acquired companies may not
have disclosure control and procedures or internal control over financial
reporting that are as thorough or effective as those required by securities laws
currently applicable to us.

21

---

Our business is subject to evolving corporate governance and
public disclosure regulations that have increased both our compliance costs and
the risk of noncompliance, which could have an adverse effect on our stock
price.

We are subject to changing rules and regulations promulgated by
a number of United States and Canadian governmental and self-regulated
organizations, including the SEC, the Canadian Securities Administrators, the
NYSE MKT, the TSX, and the Financial Accounting Standards Board. These rules and
regulations continue to evolve in scope and complexity and many new requirements
have been created in response to laws enacted by the United States Congress,
making compliance more difficult and uncertain. For example, on July 21, 2010,
the United States Congress passed the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank), which resulted in the SEC adopting rules that
will require us to disclose on an annual basis, beginning in 2014, certain
payments made by us, our subsidiaries or entities we control, to the U.S.
government and foreign governments, including sub-national governments. Our
efforts to comply with the Dodd-Frank act, the rules and regulations promulgated
thereunder, and other new rules and regulations have resulted in, and are likely
to continue to result in, increased general and administrative expenses and a
diversion of management time and attention from revenue-generating activities to
compliance activities.

Future sales or issuances of equity securities could
decrease the value of any existing Common Shares, dilute investors voting power
and reduce our earnings per share.

We may sell additional equity securities (including through the
sale of securities convertible into common shares) and may issue additional
equity securities to finance our operations, exploration, development,
acquisitions or other projects. We are authorized to issue an unlimited number
of Common Shares. We cannot predict the size of future sales and issuances of
equity securities or the effect, if any, that future sales and issuances of
equity securities will have on the market price of the common shares. Sales or
issuances of a substantial number of equity securities, or the perception that
such sales could occur, may adversely affect prevailing market prices for the
Common Shares. With any additional sale or issuance of equity securities,
investors will suffer dilution of their voting power and may experience dilution
in our earnings per share.

Our Common Shares are subject to various factors that have
historically made share prices volatile.

The market price of our common shares may be subject to large
fluctuations, which may result in losses to investors. The market price of the
Common Shares may increase or decrease in response to a number of events and
factors, including: our operating performance and the performance of competitors
and other similar companies; volatility in metal prices; the arrival or
departure of key personnel; the number of Common Shares to be publicly traded
after an offering; the publics reaction to our press releases, material change
reports, other public announcements and our filings with the various securities
regulatory authorities; changes in earnings estimates or recommendations by
research analysts who track the Common Shares or the shares of other companies
in the resource sector; changes in general economic and/or political conditions;
acquisitions, strategic alliances or joint ventures involving us or our
competitors; and the factors listed under the heading Cautionary Statement
Regarding Forward-Looking Information.

The market price of the Common Shares may be affected by many
other variables which are not directly related to our success and are,
therefore, not within our control, including other developments that affect the
market for all resource sector securities, the breadth of the public market for
the Common Shares and the attractiveness of alternative investments.

We do not intend to pay any cash dividends in the
foreseeable future.

We have not declared or paid any dividends on our Common
Shares. We intend to retain future earnings, if any, to finance the growth and
development of our business and do not intend to pay cash dividends on the
Common Shares in the foreseeable future. Any return on an investment in the
Common Shares will come from the appreciation, if any, in the value of the
Common Shares. The payment of future cash dividends, if any, will be reviewed
periodically by the Board and will depend upon, among other things, conditions
then existing including earnings, financial condition and capital requirements,
restrictions in financing agreements, business opportunities and conditions and
other factors.

We may be a passive foreign investment company in future
periods, which may have adverse U.S. federal income tax consequences for U.S.
shareholders.

U.S. investors in the Company should be aware that we believe
we were not a passive foreign investment company (PFIC) for the year ending
November 30, 2012 but may be a PFIC in future tax years. If we are a PFIC for
any year during a U.S. shareholders holding period, then such U.S. shareholder
generally will be required to treat any gain realized upon a disposition of
Common Shares and any so-called excess distribution received on its Common
Shares as ordinary income, and to pay an interest charge on a portion of such
gain or distributions, unless the shareholder makes a timely and effective
qualified electing fund election (QEF Election) or a mark-to-market
election. A U.S. shareholder who makes a QEF Election generally must report on a
current basis its share of our net capital gain and ordinary earnings for any
year in which we are a PFIC, whether or not we distribute any amounts to its
shareholders. A U.S. shareholder who makes the mark-to-market election generally
must include as ordinary income each year the excess of the fair market value of the Common Shares over the
taxpayers basis therein. This paragraph is qualified in its entirety by the
discussion below the heading Certain U.S. Federal Income Tax Considerations.
Each U.S. shareholder should consult its own tax advisor regarding the PFIC
rules and the U.S. federal income tax consequences of the acquisition,
ownership, and disposition of Common Shares.

22

---

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2. PROPERTIES

The following descriptions summarize selected information about
our Upper Kobuk Mineral Projects, which are located in the Ambler mining
district of Alaska and include the Arctic Project and the Bornite Project. All
of the Upper Kobuk Mineral Projects are without known reserves, as defined under
SEC Industry Guide 7, and all proposed programs for the properties are
exploratory in nature.

Arctic Project, Ambler District, Alaska

Arctic  Technical Report

Except with respect to the land size disclosure and the
disclosure regarding the number of claims (which were both increased subsequent
to the effective date of the PEA), and the information under the heading
Arctic Project  Current Activities, or as otherwise stated, the
scientific and technical information relating to the Arctic Project contained in
this Form 10-K is derived from, and in some instances is an extract from, the
technical report titled NI 43-101 Preliminary Economic Assessment, Ambler
Project, Kobuk, AK dated effective February 1, 2012 prepared by Neil Rigby,
PhD, CEng, MIMM, Russ White, P. Geo., Jeffrey Volk, MSc, CPG, FAusIMM, Terry
Braun, P.E., M.S. and Eric J. Olin, MSc, MBA, RM-SME all of whom work for SRK
Consulting (U.S.), Inc. (SRK), and all of whom are Qualified Persons as
defined in NI 43-101. Scott Petsel, P. Geo, an employee to the Company and a
Qualified Person as defined in NI 43-101, approved the scientific and technical
information under the heading Arctic Project Current Activities, and
the land size disclosure and the disclosure regarding the number of claims for
the Ambler lands. The information regarding the Arctic Project is based on
assumptions, qualifications and procedures which are not fully described herein.
Reference should be made to the full text of the PEA which has been filed with
certain Canadian securities regulatory authorities pursuant to NI 43-101 and is
available for review on SEDAR at www.sedar.comand on EDGAR at www.sec.gov.

Arctic Project - Overview

The Ambler lands comprises 112,946 acres (45,708 hectares) of
State of Alaska mining claims and Federal patented mining claims located in the
Ambler mining district, in the southern Brooks Range of Northwest Alaska at
geographic coordinates N67.17o latitude and W156.38o longitude, within which VMS
mineralization can be found. The current size of the Ambler lands are
approximately 65km long x 8km wide and comprises a total of 45,708 hectares.

Exploration on the Arctic Project was intermittent between
discovery in 1965 and 1998. From 1998 until 2003, there was no work performed on
the Arctic Project. An exploration agreement was signed on March 22, 2004, as
amended, between Kennecott Arctic Company and NovaGold under which NovaGold had
the ability to earn a 51% interest in the Ambler lands. Since 2004, NovaGold has
been performing project level and regional mapping, drilling, geophysics and
geochemical surveys.

Under a purchase agreement dated December 18, 2009 between
NovaGold, its wholly-owned subsidiary Alaska Gold Company and Kennecott
Exploration Company and Kennecott Arctic Company (collectively, Kennecott)
NovaGold agreed to pay Kennecott a total purchase price of $29 million for a
100% interest in the Ambler lands, to be paid as to: $5 million by the issuance
of 931,098 NovaGold common shares and two instalments of $12 million in cash
each, due 12 months and 24 months, respectively, from the closing date on
January 7, 2010. Kennecott retained a security interest in the Ambler lands to
secure these cash payments. The NovaGold shares were issued in January 2010, the
first $12 million payment was made on January 7, 2011 and the second $12 million
payment was made early on August 5, 2011 and Kennecott released its security
interest. Kennecott retained a 1% net smelter royalty that it had subsequently
sold to a third party that is purchasable by the Company at any time for a
one-time payment of $10 million.

The Ambler lands host a number of deposits, including the
high-grade copper-zinc-lead-gold-silver Arctic deposit, which was the focus of
the PEA. The Arctic deposit is currently estimated at 19.4 million tonnes of
indicated mineral resources grading 4.05% Cu, 5.81 % Zn, 0.97% Pb, 0.80g/t Au
and 59.55 g/t Ag and 11.4 million tonnes of inferred mineral resources grading
3.47% Cu, 4.84% Zn, 0.80% Pb, 0.64g/t Au and 46.75g/t Ag.

Based on the PEA, mining of the Arctic Project is envisioned as
an underground operation processing up to 4,000 tonnes of material per day. The
current estimated resource base of 19.4 million tonnes of indicated mineral
resources and 11.4 million tonnes of inferred mineral resources support a 25-year mine life. The mine is
anticipated to produce three concentrates: a copper concentrate with gold
byproduct, a lead concentrate with silver and gold byproducts and a zinc
concentrate with silver byproduct, with copper cash costs, net of byproducts at
long-term metal prices estimated at $0.89/lb copper. Average annual payable
metal production is forecast at 69 million pounds of copper, 80 million pounds
of zinc, 12 million pounds of lead, 11,000 ounces of gold and 899,000 ounces of
silver. Life-of-mine (LOM) payable metal production is estimated at
approximately 1.7 billion pounds of copper, 2.0 billion pounds of zinc, 312
million pounds of lead, 267,000 ounces of gold and 22 million ounces of silver.
The production schedule is based on processing average-grade material through
the life of the operation of a total of 29.9 million tonnes, with potential
upside to be obtained by mining higher-grade ore during the early years of the
project.

23

---

Start-up capital is estimated at $262 million including a 25%
contingency of $52 million which is envisioned as a three year construction
period. Sustaining capital of $134 million comprises primarily underground
development, equipment and tailings dam expansion throughout the mine life and
includes a contingency of $34 million. The total LOM capital cost estimate is
$430 million, which is considered accurate to ±30%.

Arctic Project cash costs, defined as the sum of total
operating, freight, marketing, and royalty costs, are estimated at $132/t
milled. Operating costs include mining and processing costs estimated at $48.6/t
milled and $29.6/t milled, respectively. Operating costs include annual payments
of $15 million for 20 years beginning in the sixth year of mine operations to
the State of Alaska for road access as more fully discussed below.

Using base case metal prices of $2.50/lb copper, $1.05/lb zinc, $1.00/lb lead, $1,100/oz gold and $20/oz silver, project value on a post-tax basis (NPV8%) is $533 million with an IRR of 26%. Post-tax cash flow is estimated at $1.7 billion, with full payback occurring in year three of operations using base case metal prices. A one percent change of discount rate was evaluated.

Because of the remote location of the Arctic Project,
infrastructure, specifically transport of material and personnel to and from the
Arctic Project and power, are the largest cost items. There is no developed
surface access to the Arctic Project area and no power infrastructure near the
Arctic Project area.

Infrastructure required for the project includes building and
upgrading an access road connecting the mine site to the village of Kobuk, camp
accommodations, administration and maintenance facilities, the mine and plant
site area, the tailings facility and diesel power generation. Due to the remote
location of the project, primary access is currently by air using both fixed
wing aircraft and helicopters. SRK examined various alternatives for improved
access to the project area and transport of materials. Of these alternatives,
access to the project is proposed to be via a road approximately 340 kilometers
(211 miles) long extending west from the Dalton Highway along generally level
terrain to the village of Kobuk, where it would connect with existing roads to
the proposed project area. We have had constructive discussions with the State
of Alaska regarding the concept of a public/private partnership for construction
and operation of the road. For the PEA, SRK has assumed that the road would be
designed and constructed by the State of Alaska. We would then reimburse the
State on an agreed-upon basis over the operating life of the mine. A similar
arrangement exists between the State and the Red Dog mine in northwest Alaska
for its road and port facility. For the purposes of the PEA, SRK assumed that we
would pay to the State of Alaska an annual fee of $15 million for 20 years
beginning in the sixth year of mine operations.

Arctic Project - Property Description and
Location

The Arctic Project is located in the Ambler mining district
(Figure 1), in the southern Brooks Range of Northwest Alaska at geographic
coordinates N67.17o latitude and W156.38o longitude. Work is performed at the
site using Universal Transverse Mercator (UTM) North American Datum (NAD)
1927 Zone 4. The center of the Ambler lands area is 263km east of the town of
Kotzebue, 29km north of the village of Kobuk, 260km west of the Dalton Highway
and 480km northwest of Fairbanks. The current size of the Ambler lands are
approximately 65km long x 8km wide and comprises a total of 45,348 ha.

24

---

Figure 1: Regional Location Map



The Ambler lands comprise 45,708 ha (112,946 acres) of State of
Alaska mining claims and Federal patented mining claims in the Kotzebue
Recording District. The Ambler land tenure consists of 1,356 contiguous State of
Alaska claims, including 875 40-acre State claims, 481 160-acre State claims,
and two US Mineral Surveys comprising 272 acres of Federal patented land. Rent
for each Alaska State claim is paid annually to the Alaska Department of Natural
Resources. The Federal patented claim corners at the Ambler lands were located
by U.S. Government Surveys (USGS). There are no annual fees or other holding
costs for the Federal patented mining claims. The Arctic deposit is located near
the southern edge of the center of the claim block. Mineralization is
interpreted to extend west and east and potentially north of the Arctic deposit
and is covered by our claims in these directions.

In 1971, the United States Congress passed the ANCSA which
settled land and financial claims made by the Alaska Natives and provided for
the establishment of 13 regional corporations to administer those claims. These
are known as the Alaska Native Regional Corporations. One of these 13 regional
corporations is NANA. Lands controlled by NANA bound a portion of the southern
border of the claim block. In addition, the northern property border is within
25km of national park lands.

25

---

Figure 2: Prospect Location Map



To date, the Ambler mining district has been the subject of
various early stage exploration programs. However, there has been no actual mine
development or production within the Arctic Project area boundaries, and
therefore no known mine workings or mill tailings are present on the property.
In addition, there are no indications of any known environmental impairment or
enforcement actions associated with NovaGolds and our activities on the Arctic
Project to date. Prior to approximately 1987, Bear Creek Mining Company (BCMC)
was the exploration subsidiary of Kennecott.

Various permits are required during the exploration phase of
the Arctic Project. The permit for exploration on the property, the State of
Alaska Annual Hardrock Exploration Permit, is initially obtained and thereafter
renewed annually through the Alaska Department of Natural Resources  State
Division of Mining, Land and Water (Alaska DNR). We hold a current exploration
permit in good standing with the Alaska DNR, and have (along with NovaGold) done
so each year since 2004. In addition, since the property is situated within the
Northwest Arctic Borough, a Title 9 permit is required for specified exploration
activities.

A number of statutory reports and payments are required to
maintain the claims in good standing on annual basis. Additional permits will be
necessary to carry out environmental baseline studies, detailed engineering
studies and other activities as the Arctic deposit moves closer to
development.

The Arctic Project will require multiple permits from
regulatory agencies and other entities at the Federal, State and local (Borough)
levels. As a result of the remoteness of the Arctic Project and the lack of
existing infrastructure, it is likely that a significant permitting effort will
also be a part of the development of support infrastructure. Due to the
preliminary stages of the Arctic Project, it is difficult to assess what
specific permitting requirements will ultimately apply to the Arctic
Project.

Arctic Project - Accessibility, Climate, Local Resources,
Infrastructure and Physiography

Accessibility is one of the most significant challenges of
developing the Arctic Project. Currently the project has no access
infrastructure. Numerous past studies have demonstrated that access
infrastructure will be required to make this a viable project.

There is no developed surface access to the Ambler mining
district. Primary access is by air using both fixed wing aircraft and
helicopters. There are four well maintained, 1,524m-long gravel airstrips
capable of accommodating charter aircraft. From the Arctic Project, these
airstrips are located 66km west at Ambler, 46km southwest at Shungnak, 36km
southwest at Kobuk and 32km southwest at Dahl Creek. Additionally, there is a
smaller and lesser-maintained dirt airstrip near the Bornite deposit. From these
points of fixed wing access, helicopter use is required to access the Arctic
Project site and transport personnel, equipment and supplies. A one-lane dirt track suitable for high-clearance
vehicles or construction equipment links the project site to the Dahl Creek
Camp. River access to Ambler, Shungnak and Kobuk by barge is occasionally
possible via the Kobuk River from Kotzebue Sound via Hotham Inlet. High water
during seasonal runoff is necessary for successful navigation of this route
since the Kobuk River is commonly shallow and impassible upstream of the village
of Ambler. The village of Kobuk is located 36km away and is accessible by fixed
wing aircraft.

26

---

The climate in the Ambler mining district is typical of a
sub-arctic environment. The exploration season for the Arctic Project is from
late May until late September. Weather conditions change suddenly during the
field season and can be vary significantly from year to year. During this time
period average high temperatures range from 4 to 18°C, while average lows range
from -2 to 10°C. Record high and low temperatures during these months are 29 and
-17°C, respectively. Extended sunlight in late May and early June accelerates
melting of the winter snow pack on the property. By late September or early
October, poor weather prohibits safe helicopter travel to the property. Heavy
rains and snow are also possible in August. The winter is long and cold and the
property is typically blanketed by snow and ice. During this time, snow cover
allows for increased access to the property by snow machine, track vehicle or by
fixed wing aircraft. Winter temperatures are routinely below -28°C and can
exceed -51°C. Annual precipitation in the region is roughly 546.1mm with the
most rainfall occurring from July through October and the most snowfall
occurring from December through April.

The Arctic Project is located along the south side of the
Brooks Range, one of the longest mountain ranges in Alaska. The Brooks Range
separates the arctic region from the Alaskan interior. The Arctic Project is
located on the east side of Subarctic Creek straddling a 970m ridge between
Subarctic Creek and the Kogoluktuk River Valley. Subarctic Creek is a tributary
of the Shungnak River. The Arctic Project area is marked by steep and rugged
terrain with extreme topographic relief. Elevations range from 30m above mean
sea level (amsl) at Ambler along the Kobuk River to 1,180m amsl on the peak
immediately north of the Arctic Project area. The divide between the Shungnak
and Kogoluktuk Rivers in the Ambler Lowlands is just 220m amsl. Nearby surface
water includes Subarctic Creek, the Shungnak and Kogoluktuk Rivers, the Kobuk
River, and numerous small lakes. The Kobuk Valley marks the transition zone
between boreal forest and arctic tundra. Spruce, birch and poplar are found in
better-drained portions of the valley, with lichen and moss covering the ground.
Willow and alder thickets as well as isolated cottonwoods follow drainages, and
alpine tundra are found on the higher slopes and ridges. Tussock tundra and low,
heath-type vegetation covers most of the flat floor of the valley. Permafrost is
a layer of soil at variable depths beneath the surface where the temperature has
been below freezing continuously from a few to several thousands of years.
Permafrost exists where summer heating fails to penetrate to the base of the
layer of frozen ground and occurs in most of the northern third of Alaska as
well as in discontinuous or isolated patches in the central portion of the
State.

Because of the remote location of the Arctic Project,
infrastructure, specifically transport of material and personnel to and from the
Arctic Project and power, are the largest cost items. There is no developed
surface access to the Arctic Project area and no power infrastructure near the
Arctic Project area. SRK examined various methods for accessing the Arctic
Project and transporting materials. Of these various methods, the PEA focuses on
the use of a new road to the Dalton Highway.

27

---

The proposed access road alignment is shown in Figure 3. The
length of the proposed road is approximately 340km (211 miles). It extends west
from the Dalton Highway along generally level terrain to the village of Kobuk
where it would connect with existing roads to Bornite and the proposed mine
area. The road alignment is consistent with alignments that the Alaska
Department of Transportation (ADOT) has previously considered to access the
Ambler district as well as all of the western coast of Alaska. ADOT is currently
undertaking a major planning study to further define access options, including
detailed road alignment and engineering evaluations, for the Ambler district. We
assume that the proposed access road would be constructed and operated by the
State of Alaska or a partnership created by the State of Alaska. As such, the
PEA assumes that the State of Alaska would construct and maintain the road and
that we would be required to pay annual fees.

Figure 3: Proposed Ambler Road



The PEA assumes the use of two existing airports versus
constructing and maintaining a dedicated airstrip. These are the Dahl Creek
airport and the Kobuk airport, both are located southwest of the Arctic Project
at 32km and 36km, respectively. Each has a maintained gravel runway suitable for
personnel and cargo charter aircraft.

Currently, electrical power in the region is produced by local
diesel generators as well as small wind generators in communities where wind
power can be economically harnessed. There are no interconnections with other
power grids in the State of Alaska. SRK estimates that a mine complex at the
Arctic deposit will require 10.2MW capacity for a nominal 4,000t/d operation.
This capacity estimate is sufficient to meet the combined demand from the mine
and process facilities, the support infrastructure, and the man-camp. The PEA
assumes the site will generate all its power needs by using diesel
generators.

Water supply for consumptive uses is assumed to be available
both from groundwater and surface water and that its quality is acceptable.

The transport of mine concentrates is to occur direct from the
Arctic deposit site in bulk form using container boxes hauled on
tractor-trailers; therefore the infrastructure requirements set out in the PEA
incorporates a container loading facility as well as a truck staging and
maintenance facility in a single structure. From here, the over-the-highway
trucks will be loaded with filled containers, weighed and then driven to a rail
site at Fairbanks using the proposed Ambler road and the existing Dalton
Highway. An off-site support facility is planned at the Pump Station 5 intersect
which includes a dormitory for rest and a light maintenance facility to handle
unforeseen issues with the tractor-trailers. Once in Fairbanks the
concentrate-laden containers will be off-loaded from the trucks and loaded onto
rail for transport to the nearest shipping port and subsequently to the
contracted smelter.

28

---

In addition to the previously mentioned truck staging facility,
the preliminary mine design for the Arctic deposit in the PEA includes: the full
assortment of support facilities including an administration building/offices,
dry, laboratory, first aid clinic, lunch room, training room, process plant
maintenance shop, warehouse and the mill building; a power station in its own
dedicated facility located in close proximity to the fuel depot area; an
underground main mine shop; a mill and tailings disposal at the head of
Subarctic Creek; and underground waste disposal facilities will be adjacent to
the camp. Camp facilities will accommodate at least 200 people at one time,
including sleeping quarters, lavatories, a dining facility and recreational
facilities are also included in the preliminary design. Additionally, Pump
Station 5 facilities include a dormitory to facilitate the personnel located at
this off-site location along with the passing truck drivers.

The total personnel requirements are estimated to be 420
workers. These labor requirements are comprised of approximately 250
mineworkers, 110 process staff and 60 infrastructure related workers. This
figure includes the off-site personnel at Pump Station 5, but excludes any
contract workers such as truck drivers or campsite support labor. Typically, the
mine site crews will change on a standard fly-in-fly-out work schedule unless
they normally live in the regional villages and towns.

Arctic Project - History

BCMC conducted regional exploration of the Cosmos Hills and the
southern Brooks Range while drilling extensively at Bornite. Stream silts
sampling in 1963 revealed a 1,400ppm Cu anomaly in Arctic Creek. This anomaly
contributed to discoveries of massive sulfide at Arctic and Dead Creeks in 1965.
In 1966 and 1967, BCMC drilled eight core holes at Dead Creek, also intercepting
massive sulfide. Structural complexities at Dead Creek hindered progress and
BCMC focused on the Arctic Creek area. In 1967, eight core holes were drilled at
Arctic Creek yielding impressive massive sulfide intercepts over a strike length
of 460m. This successful program resulted in the continuation of drilling over
the next several seasons at the Arctic Project. BCMC intermittently conducted
exploration programs on the Arctic Project from August 1967 to 1998. Over that
span, 92 holes were drilled at the Arctic Project, including 14 large diameter
metallurgical holes, totaling 17,572m. No drilling or additional exploration on
the Arctic Project was conducted between 1998 and 2003.

In addition to drilling on the Arctic Project, BCMC continued
their exploration of other prospects in the Ambler district. Competing
companies, including Sunshine Mining Company, Anaconda, Noranda, Teck Cominco,
Resource Associates of Alaska, Watts, Griffis and McOuat Ltd. (WGM), and
Houston Oil and Minerals Company, entered into a claim staking war in the Ambler
mining district in the early 1970s. District exploration by Sunshine Mining
Company and others resulted in two substantial discoveries, the Sun deposit
located 60km east of the Arctic deposit and the Smucker deposit located 40km
west of the Arctic deposit. District exploration continued until the early 1980s
on the four larger deposits (Arctic, Bornite, Smucker and Sun) as well as many
lesser-defined prospects within the district, including Sunshine Creek, CS, Bud,
Horse Creek, Cliff, Dead Creek, Kogo, Red, BT and Tom Tom.

In the 1990s, Kennecott Minerals, the successor of BCMC, began
to re-evaluate the Arctic deposit. This included a review of the deposit geology
and the assembly of a computer database. A new computer-generated block model
was constructed and an updated resource was estimated from the block model. The
result is outlined in Table 1 Historical Resource Estimate  1990,below.
Although believed by our management to have been relevant and reliable, this
historical resource estimate predates the development of NI 43-101 reporting
guidelines, was not estimated in compliance with NI 43-101 procedures and should
not be relied on.

Arctic Project - Historical Metallurgical
Testwork

The first three metallurgical test campaigns performed on the
Arctic deposit mineralized material were conducted at the Kennecott Research
Center between 1968 and 1976. The focus was on selective flotation to provide
separate copper, lead and zinc concentrates for conventional smelting.

The initial amenability testing was carried out in 1968 on
individual samples and their composites made from cores from eight diamond
drillholes. Core drilled prior to 1998 was drilled using NQ- and BQ-sized
strings. An additional four samples were obtained from three holes and tested in
1972. Laboratory scale bench tests included a conventional selective flotation
approach to produce three separate (copper, lead and zinc) concentrates. The
major problems encountered were:

- Difficult copper-lead separation; and
- Zinc deportment to the copper and the lead concentrates.

The highest-grade copper concentrate contained over 30% Cu, 2
to 3% Zn and less than 1% Pb, but at a low copper recovery of less than 80%. The
lead concentrate was low-grade 17 to 36% Pb and assayed 5 to 25% Cu. The
subsequent sphalerite flotation was generally efficient. The zinc concentrate
grade was 55% and the zinc recovery up to 70%, depending on how much zinc
floated in the preceding copper and lead flotation. Silver generally followed
galena.

29

---

During 1975, large diameter cores from 14 drillholes were used
for more detailed testing to develop the concentrator flowsheet and process
parameters. Two composites were prepared: No.1 (Eastern zone) and No.2 (Western
zone). Most of the test work was conducted on the composite No.1, which
represented 75% of the resources. The test program included mineralogical
examinations, bench scale testing of various process parameters for each
selective flotation step and locked cycle tests. Complete analyses were done on
a number of concentrates to identify potential impurities. Preliminary tests for
bulk flotation of all sulfides were also carried out.

A 1976 conceptual study for the selection of the metallurgical
process for the Arctic deposit established that the Kennecott Sulfide Process
could be developed as an economic hydro metallurgical alternative to smelting.
Bulk concentrate could be amenable for processing with this novel
technology.

Historical testing showed that a clear separation of various
sulfide minerals is difficult because of fine interlocking of mineral grains. It
showed that the economically most important minerals, chalcopyrite and
sphalerite, could be recovered into selective copper and zinc concentrates with
commercial concentrate grades and good recoveries. Lead and precious metals
easily reported to the copper concentrate. The production of a selective
high-grade lead concentrate was not successful. Only a low-grade, silver-bearing
lead concentrate (17 to 36% Pb) was obtained, containing high amounts of iron,
copper and zinc. Generally, the copper concentrate grade and recovery depended
on the amounts of lead and zinc prevented from floating during copper flotation
and cleaning. Production of two selective copper and zinc concentrates could be
confidently projected, although additional testing would be required to optimize
the flow sheet and all process parameters.

Silver was mainly associated with galena. The highest silver
recovery to copper concentrate was achieved when lead was recovered as well. If
galena was rejected from the copper concentrate, 20 to 40% of the silver,
associated with tetrahedrite and tennantite, remained in the copper
concentrate.

Gold assaying was very sporadic during the three test campaigns
and was not provided. It was noted, however, that at least 70% of the gold
reported to the copper concentrate, although not enough testing was performed to
predict gold recovery.

Arctic Project - Historical Drilling

Between 1967 to July 1985, 86 holes were drilled (including 14
large diameter metallurgical test holes) totaling 16,080m. In 1998, Kennecott
drilled six core holes totaling 1,492m in the Arctic deposit to test for
extensions of the known resource, and to test for grade and thickness
continuity. Drilling for all BCMC/Kennecott campaigns in the Arctic deposit area
(19661998) totals 92 core holes for a combined 17,572m.

No drilling was performed on the project between 1998 and 2003.
NovaGold took control of the project in 2004. The 20042006 and 2008 drill
programs conducted by NovaGold are described under the heading Arctic
Project  Drilling.

Arctic Project - Historical Geophysics

In 1998, an airborne geophysical survey of the entire claim
block generated numerous electromagnetic anomalies. Additional geophysical
surveys have been performed by NovaGold and are discussed under the heading
Arctic Project  Exploration.

Arctic Project - Historical Resource
Estimates

A resource estimate was performed on the Arctic deposit by
Kennecott based on 70 holes. This resource estimate was performed in 1990 and is
summarized in Table 1. This estimate is considered to be that of an inferred
resource. Although believed by our management to be relevant and reliable, this
historical resource estimate predates the development of NI 43-101 reporting
guidelines, was not estimated in compliance with NI 43-101 procedures and should
not be relied on. See Cautionary Note to United States Investors.

Table 1: Historical Resource Estimate - 1990

|Classification |  | Tonnes (kt) |  |  | Cu% |  |  | Zn% |  |  | Pb% |  |  | Ag g/t |  |  | Au s/t | 
|-------------- |  | ----------- |  |  | --- |  |  | --- |  |  | --- |  |  | ------ |  |  | ------ | 
|Inferred       |  | 36,300      |  |  | 4.0 |  |  | 5.5 |  |  | 0.8 |  |  | 54.9   |  |  | 0.7    | 

30

---

Arctic Project - Geologic Setting

Regional Geology

The Ambler district occurs within an eastwest trending zone of
Devonian to Jurassic age submarine volcanic and sedimentary rocks. VMS deposits
and prospects are hosted in the Middle Devonian to Early Mississippian age
Ambler Sequence, a group of metamorphosed bimodal volcanic rocks with
interbedded tuffaceous, graphitic and calcareous volcanoclastic metasediments.
The Ambler Sequence occurs in the upper part of the Anirak Schist, the thickest
member of the Coldfoot subterrane. VMS mineralization can be found along the
entire 110km strike length of the district. Hitzman notes that the 1,980m-thick
Devonian age section of the Cosmos Hills, which includes the 915m-thick Bornite
Carbonate Sequence, is equivalent in age to the Anirak Schist and was
mineralized during the Ambler mineralizing event.

The Ambler district is characterized by a series of eastwest
trending belts of rocks of increasing metamorphic grade northward across the
strike of the units. The structure of the district is isoclinally folded in the
northern area and thrust faulted in the southern half. The Devonian to
Mississippian age Angayucham basalt and the Triassic to Jurassic age mafic
volcanic rocks are in low-angle thrust contact with various units of the
Coldfoot subterrane along the northern edge of the Ambler Lowlands.

District/Property Geology

Rocks that form the Ambler schist belt consist of a
lithologically diverse sequence of lower Paleozoic possibly Devonian age
carbonate and siliciclastic strata with interlayered mafic lava flows and sills.
The clastic strata, derived from terrigenous continental and volcanic sources,
were deposited primarily by mass-gravity flow into the sub-wavebase environment
of an extending marginal basin.

Our work shows that the Ambler sequence underwent two periods
of intense, penetrative deformation. Sustained upper greenschist-facies
metamorphism with coincident formation of a penetrative schistosity and
isoclinal transposition of bedding marks the first deformation period. Pervasive
similar-style folds on all scales deform the transposed bedding and schistosity,
defining the subsequent event. At least two later non-penetrative compressional
events deform these earlier fabrics. Our observations of the structural and
metamorphic history of the Ambler district are consistent with current tectonic
evolution models for the schist belt, based on the work of others elsewhere in
southern Brooks Range.

The local base of the Ambler section consists of variably
metamorphosed carbonates historically referred to as the Gnurgle Gneiss. We
interpret these strata as calc-turbidites, perhaps deposited in a sub-wavebase
environment adjacent to a carbonate bank. Calcareous schists overlie the Gnurgle
Gneiss and host sporadically distributed mafic sills and pillowed lavas. These
fine-grained clastic strata indicate a progressively quieter depositional
environment up section, and the presence of pillowed lavas indicates a rifting,
basinal environment. The overlying Arctic-sulfide host section consists mostly
of fine-grained carbonaceous siliciclastics and indicates further isolation from
a terrigenous source terrain. The section above the Arctic host contains
voluminous reworked silicic volcanic strata with the Button Schist at its base.
The paucity of volcanically derived strata below the Arctic host section and
abundance above indicates that the basin and surrounding hinterlands underwent
major tectonic reorganization during deposition of the Arctic section. Greywacke
sands that we interpret as channeled high-energy turbidites occur throughout the
section but concentrate high in the local stratigraphy.

Three mineralized horizons comprise the Arctic deposit: the
Main Sulfide Horizon, the Upper South Horizon and the Warm Springs Horizon. The
Main Sulfide Horizon is further subdivided into three zones: the southeast zone,
the central zone and the northwest zone. Previous deposit modeling was
grade-based resulting in numerous individual mineralized zones representing
relatively thin sulfide horizons.

Work from the 2004 campaign suggests that mineralization at the
Arctic deposit can be explained using two locally folded and refolded
mineralized horizons. The primary exception is in the area of Warm Springs and
east of Warm Springs where mineralization occurs stratigraphically higher than
anticipated using this model. Thrust faulting may have an effect on massive
sulfide horizon geometry in this area.

Five lithologic groups and/or types found within the Arctic
Project area include:

- Metarhyolite: Includes the Button Schist, which is described as a
  porphyroblastic quartz feldspar porphyry. It also includes a variety of less
  porphyroblastic felsic schists considered as metamorphosed rhyolitic
  volcaniclastic and tuffaceous rocks. Members of this group occur both
  stratigraphically above and below the main mineralized sequence at the Arctic
  deposit. These units have been interpreted as separate metavolcanics, though
  similarities occur between the basal Button Schist and the uppermost units;

31

---

- Quartz Mica Schist: Locally contains varying proportions of carbonate,
  chlorite, graphite and feldspar. Protolith for these rocks may have been
  tuffaceous sediments, volcaniclastics and dirty carbonates;
- Talc Schist: Highly talc chlorite altered products of metavolcanic or
  graphitic schist units with talc in excess of 30%. Original texture often
  destroyed by alteration;
- Graphitic Schist: Dark grey to black, fissile, well-foliated quartz-banded
  schist found throughout the deposit; and
- Base-Metal, Sulfide-Bearing Schist: This is the mineralized lithology at
  the Arctic deposit. These contain highly-altered schists containing varying
  amounts of talc, chlorite, barite, quartz, muscovite, carbonate and massive,
  relatively non- schistose zones.

Studies in 2004 suggest the base-metal, sulfide-bearing schist
is more a product of alteration than primary lithology and, as a result, should
be included in the quartz mica schist group.

The three main zones of hydrothermal alteration occurring at
the Arctic Project have been defined as:

- A main chloritic zone occurring within the footwall of the deposit
  consisting of phengite and magnesium-chlorite;
- A mixed alteration zone occurring below and lateral to sulfide
  mineralization consisting of phengite and phlogopite along with talc, calcite,
  dolomite and quartz; and
- A pyritic zone overlying the sulfide mineralization.

Talc has been recognized as a significant component of the
mineralized assemblage at the Arctic deposit. Distribution is poorly understood
at present though logging observations would suggest that the core of the
antiform opening to the east or the footwall of the mineralized horizon has
increased quantities. Along the mineralized horizon itself the upper limb of the
antiform to the east appears to have the greatest quantity of talc and might in
part be a guide to the fluid feeder of the system. Quantitative determinations
of talc based on visual logging are extremely difficult due to the light green
foliated texture of the talc which is difficult to discern from chlorite and
muscovite species. Logging estimates are often based more on tactile
characteristics of the core than visual characteristics.

Based on this discussion, talc has been very conservatively
estimated at 20% throughout the deposit. With some detailed work further
defining mineral assemblages specifically solid solution relationships in
chlorites and carbonates, CO2 analyses to define total amounts of Mg bearing
carbonates and added ICP analyses throughout the deposit to further define the
overall distribution of Mg, a strongly quantitative estimate of talc can be made
in the future. An added point to grasp from the ICP analysis of talc is that
high-grade copper intervals contain less talc than low grade intervals.

Arctic Project - Deposit Type

The mineralization at the Arctic Project and within the Ambler
district consists of Devonian age, polymetallic (Zn-Cu-Pb-Ag) VMS occurrences.
VMS deposits are formed by and associated with sub-marine volcanic-related
hydrothermal events. These events are related to spreading centers such as fore
arc, back arc or mid-ocean ridges. VMS deposits are often stratiform
accumulations of sulfide minerals that precipitate from hydrothermal fluids on
or below the seafloor. These deposits are found in association with volcanic,
volcaniclastic and/or siliciclastic rocks. They are classified by their
depositional environment and associated proportions of mafic and/or felsic
igneous rocks to sedimentary rocks. There are five general classifications based
on rock type and depositional environment:

- Mafic rock dominated often with ophiolite sequences, often called Cyprus
  type;
- Bimodal-mafic type with up to 25% felsic volcanic rocks;
- Mafic-siliciclastic type with approximately equal parts mafic and
  siliclastic rocks, which can have minor felsic rocks and are often called
  Beshi type;
- Felsic-siliclastic type with abundant felsic rocks, less than 10% mafic
  rocks and shale rich; and
- Bimodal-felsic type where felsic rocks are more abundant than mafic rocks
  with minor sedimentary rocks, also termed Kuroko type.

32

---

Prior to any subsequent deformation and/or metamorphism, these
deposits are often bowl- or mound-shaped with stockworks and stringers of
sulfide minerals found near vent zones. These types of deposit exhibit an
idealized zoning pattern as follows:

- Pyrite and chalcopyrite near vents;
- A halo around the vents consisting of chalcopyrite, sphalerite and pyrite;
- A more distal zone of sphalerite and galena and metals such as manganese;
  and
- Increasing manganese with oxides such as hematite and chert.

Alteration halos associated with VMS deposits often contain
sericite, ankerite, chlorite, hematite and magnetite close to the VMS with weak
sericite, carbonate, zeolite, prehnite and chert more distal. These alteration
assemblages and relationships are dependent on degree of post deposition
deformation and metamorphism. A modern analog of this type of deposit is found
around fumeroles or black smokers in association with rift zones.

At the Arctic deposit, sulfides occur as semi-massive (10 to
30% sulfide) to massive (>30% sulfide) layers, typically dominated by pyrite
with substantial disseminated sphalerite and chalcopyrite and trace amounts of
galena

Arctic Project - Exploration

Exploration on the Arctic Project was intermittent between
discovery in 1965 and 1998. From 1998 until 2003, there was no work performed on
the Arctic Project. NovaGold entered into negotiations with Kennecott to explore
the Arctic Project in mid-2003. Negotiations were completed and an exploration
agreement signed on March 23, 2004. Beginning in 2004, NovaGold performed
project level and regional mapping, drilling, geophysics and geochemical
surveys. NovaGold purchased Kennecotts ownership in January, 2010 and continues
exploration activities at the Arctic Project.

The 2004 drilling focused on the Arctic deposit area and was
principally designed to verify the grade and continuity of the mineralized
intercepts encountered in the previous drill campaigns. Eleven holes totaling
2,996m were drilled in potential extensions of mineralization and on an adjacent
geophysical anomaly. During 2005, approximately 3,030m of core drilling was
completed, and in the 2006 field season an additional 3,010m of drilling in 12
drill holes was completed. The 2006 program focused on regional extensions and
included drilling at the Dead Creek, Sunshine Creek, COU and Red prospects.
NovaGold completed a 14 hole drill program totaling 3,306m in 2008. All holes
were designed to infill within the then defined resource area, and three holes
were drilled for metallurgical testing purposes. None of the assay results were
available at the time of construction of the original 2008 resource model.

Local and regional mapping performed during the 20052006
mapping program enabled Paul Lindberg to complete a model of an unfolded view of
the Arctic deposit geology. These results provide a good platform on which to
build subsequent models of original zoning patterns, changing thicknesses and
other laterally variable characteristics of the deposit.

A total of 2,106 stream silt and soil samples were collected
during the 2004 mapping program as part of an effort to develop a regional
geochemistry model for future district exploration. This program was carried out
by NovaGold personnel and the model is still being developed.

During 2005, two Time Domain Electro-Magnetic (TDEM)
induction ground surveys were performed at the Arctic deposit and COU. COU is
within the claim block and is a significant anomaly of similar size and tenor a
few kilometers to the northwest of the town of Ambler. The 2006 exploration
program focused on a regional basis to extend existing mineralization and to
identify new mineralized targets within the claim block, and included 13 TDEM
surveys performed to enhance previous work performed by Kennecott in 1998. Data
evaluation is ongoing.

Oriented data were collected from select angle drill holes. The
clay impression method was used to orient the core with data capture done using
a circular protractor for beta values and a standard protractor for alpha
values. The majority of oriented measurements were of foliation with a NW strike
and a SW dip, similar to those observed on the surface.

Exploration activities at the Arctic Project have been
performed within industry standards using appropriate models and techniques for
a VMS target. SRK agrees with the techniques used at this project.

33

---

Arctic Project - Mineralization

Mineralization at the Arctic deposit occurs as stratiform
semi-massive to massive sulfide beds. The sulfide beds average 4m thick but vary
from less than 1m up to 18m thick. The bulk of the mineralization is within four
zones located between two thrust faults, the upper Warm Springs Thrust and the
Lower Thrust. A smaller fifth zone is located below the Lower Thrust. All of
these zones are within an area of roughly 1km, with average zone length ranging
from 850m to 600m and width ranging from 700m to 350m. Mineralization has been
defined to a depth of approximately 250m below the surface and is open in
several areas. Host rocks are primarily graphitic chlorite schists and
fine-grained quartz sandstones.

Marginal to the Arctic deposit, mineralization is locally
present as discontinuous thin, wispy sulfide bands. No stockworks or stringers
in association with the mineralization have been observed. These features are
common in near-vent VMS deposits. Much of the core from the 2004 and 2005
programs within the deposit exhibits characteristics and textures common to
replacement-style mineralization.

Mineralization is predominately coarse-grained sulfides
consisting mainly of chalcopyrite, sphalerite, galena, pyrite and pyrrhotite,
and may or may not include tetrahedrite. Tetrahedrite-tennantite, electrum and
enargite are also present in minor amounts. Pyrite is commonly associated with
the massive sulfide horizons, and pyrrhotite and arsenopyrite are present in
lesser amounts. Gangue minerals associated with the mineralized horizons include
quartz, barite, white mica, black chlorite, calcite, dolomite and cymrite, while
talc is common in the footwall.

Arctic Project - Drilling

Between 1967 to July 1985, 86 holes were drilled (including 14
large diameter metallurgical test holes) totaling 16,080m. In 1998, Kennecott
drilled six core holes totaling 1,492m in the Arctic deposit to test for
extensions of the known resource, and to test for grade and thickness
continuity. Drilling for all BCMC/Kennecott campaigns in the Arctic deposit area
(19661998) totals 92 core holes for a combined 17,572m.

Arctic Project - Drill Program and Objectives

The 2004 drilling focused on the Arctic deposit area and was
principally designed to verify the grade and continuity of the mineralized
intercepts encountered in the previous drill campaigns. Alternate geologic
models for the Arctic deposit were investigated through surface mapping, drill
core re-logging and re-interpretation of previous drill results. Eleven holes
totaling 2,996m were drilled. Significant mineralized intervals were encountered
in eight of the eleven holes drilled in the program. The twin and infill
drilling confirmed previously drilled intervals of base-metal
mineralization.

Drilling in 2005 again focused on extending and confirming
mineralization, particularly in the lower limb of the Arctic Antiform.
Approximately 3,030m of core drilling was completed and, although good
mineralization was encountered in several holes, structural discontinuities
appear to limit expansion of mineralization to the south and east. Results
suggest that the model remains open to the northeast and that the faulted
off-root zone has yet to be identified. Drill spacing for all programs is
dependent on the steep, rugged terrain for locating drill rigs; however, it
varies from 90 to 120m. Sections have been drawn at 61m intervals.

During the 2006 field season, an additional 3,010m of drilling
in 12 drill holes was completed. This drill program was focused on a more
regional basis to extend existing mineralization and to identify new mineralized
targets within the Ambler lands. These holes were drilled at the Dead Creek,
Sunshine Creek, COU and Red prospects.

NovaGold completed a 14 hole drill program totaling 3,306m in
2008. All holes were designed to infill within the Arctic deposit, and three
holes were drilled for metallurgical testing purposes.

All NovaGold drill core was logged, photographed and sawn, with
half sent to the lab for analyses and half stored near the property. Core
logging was done using metric measurements. Lithology and visual alteration
features were captured on observed interval breaks. Mineralization data,
including total sulfide (recorded as percent), sulfide type (recorded as a
relative amount), gangue and vein mineralogy were collected for each sample
interval with an average interval of approximately 2m. Structure data were
collected as point data. Geotechnical data (core recovery, RQD) were collected
along drill run intervals. Using the 2004 logging procedure as a guide, data
from the earlier campaigns were taken from those drill logs and entered into the
database, with a focus on mineralization information.

The overall objectives of the three drill programs were:

- Verification of mineralized intercepts from previous drill campaigns (twin
  holes);

34

---

- Continuity of higher grade intercepts in the central part of the resource
  area (infill holes);
- Exploring possible extensions of mineralized zones; and
- Recording data electronically and building a 3-D model of the Arctic
  deposit.

Arctic Project - Drill Results

Significant mineralized intervals were encountered in eight of
the 11 holes drilled in 2004. Twin and infill drilling confirmed previously
drilled intervals of high-grade base-metal mineralization. The results of the
2004 drilling program show a high degree of variability in thickness and grade
within areas of the deposit.

Drill holes designed to test extension of the Arctic deposit
failed to extend significant mineralization. Some holes encountered locally
anomalous or lower grade material, possibly representing distal mineralization.
An abrupt decrease in grade occurred in AR04-81 below a fault zone, suggesting
that the mineralized zones may be offset or folded south of the known deposit.
AR04-87 was abandoned due to an inability to penetrate a major fault zone, and
was subsequently re-drilled as AR04-88. This hole ended at 387.6m in altered
quartz muscovite schist, short of the targeted Button Schist.

The 2006 drilling program completed 3,010m in 12 holes. This
program was performed to test mineralization extensions and geophysical
anomalies outside the immediate Arctic deposit area, but within the claim block.
These holes were drilled at the Dead Creek, Sunshine Creek, COU and Red
prospects.

NovaGold completed a 14 hole drill program totaling 3,306m in
2008. All holes were designed to infill within the currently defined resource
area, and three holes were drilled for metallurgical testing purposes.

At Dead Creek, the holes were located based on a combination of
geophysics and geology. Each hole penetrated the targeted stratigraphy, and
showed that the sulfide system diminishes to the north and east but remains open
to the south and west. One of the Back-Door Creek holes penetrated an 8m zone
that contained several 2 to 7cm-thick pyrrhotite bands, but with only a trace of
chalcopyrite. This zone correlates stratigraphically with a mineralized interval
in a nearby historical hole, suggesting metallic mineral zonation from pyrite
and base-metal sulfide to pyrrhotite.

Drilling in the Sunshine Creek area tested the western extent
of mineralization observed in historical drill holes, which is interpreted to be
two sulfide-bearing horizons that lie sub-parallel to the stratigraphy, above a
carbonate package. We interpret the two mineralized horizons as limbs of an F2
anticline. Drill intercepts from 2006 that correlate with these two horizons had
significantly lower grade and were thinner than historical intercepts.
Preliminary results indicate that the sulfide horizon becomes dominated by
pyrrhotite to the west. We currently interpret this compositional change to
represent a more distal portion of the mineralized system.

Drilling at COU was performed to investigate an electromagnetic
anomaly and consisted of one hole. The source of this anomaly was a thick
sequence of graphitic black schist that contained abundant continuous pyrrhotite
bands. Downhole a few hundred meters it was recognized that the hole was still
in the hanging wall to the stratigraphic package that hosts the Arctic Project.
This resulted in extending the hole. The hole was stopped slightly above its
target because of safety considerations. This hole has proven vital to our
understanding of the regional F2 folds and to the stratigraphic stacking order
in this area.

NovaGold drilled four holes into the Red prospect, located in
the lowlands of the Kogoluktuk Valley, about 5km east of the Arctic Project.
These holes tested an electromagnetic anomaly and intersected a sulfide vein
system hosted by siltstone believed to underlie the Gnurgle Gneiss. The veins
have a quartz-calcite-fluorite gangue, and their margins commonly contain
concentrations of secondary brown biotite, suggesting an affinity to relatively
high-temperature potassic alteration. The F1 structural fabric deforms the
veins, suggesting that they are relatively old. The vein style of mineralization
makes this occurrence unique in the district.

An ongoing effort to gather and compile data for a new resource
model for the Arctic deposit includes re-logging of historical drill core,
detailed logging of individual mineralized intersections at 1:50 scale and work
with hole-to-hole correlations.

Multiple drillhole intersections have resulted in a reasonably
accurate knowledge of the orientation of the mineralization. Mineralization
follows enclosing stratigraphic layering and is further defined, except where
tightly folded, by bedding parallel to bedding subparallel foliation.

Most holes intersect the mineral zone nearly perpendicular to
foliation and to the mineralization, so the intersections represent near true
thickness. Exceptions are where mineralized zones wrap around tight fold hinges,
but these instances are rare.

35

---

Arctic Project - Sampling Method and Approach

The sampling protocol for all the NovaGold drill programs at
the Arctic deposit from 20042008 was the same. Core logging geologists mark the
sample intervals, which range from 1 to 3m in length. Varying rock types,
lithologic contacts and mineralized zones influence sample interval selection.
Sample boundaries are placed at lithologic contacts. Each hole was sampled in
its entirety, even in areas that encountered significant intervals of
unmineralized core. Sample intervals of 2 to 3m are most common in weakly to
unmineralized core, and sample intervals of 1 to 2m are more common in
mineralized zones or areas of varying lithology. Sample intervals used are well
within the width of the average mineralized zone in the resource area. This
sampling approach is considered sound and appropriate for this style of
mineralization and alteration. Core recovery was good to excellent, resulting in
quality samples with little to no bias. There are no known drilling and/or
recovery factors that could materially impact accuracy.

Sampling of drill core prior to 2004 by Kennecott and BCMC
focused primarily on the mineralized zones. During the 1998 campaign, Kennecott
did sample some broad zones of alteration and weak mineralization, but much of
the unaltered and unmineralized rock remains unsampled. ALS Chemex was also used
for analyses conducted by Kennecott.

Earlier BCMC sampling was even more restricted to mineralized
zones of core. Intervals of visible sulfide mineralization were selected for
sampling and analyses were conducted by Union Assay Office Inc. of Salt Lake
City, Utah. Numerous intervals of weak to moderate mineralization remain
unsampled in the historic drill care. NovaGold conducted some limited sampling
of this historical drill core to gain a better understanding of trace element
distribution around the Arctic deposit. During the relogging of much of this
historical core, 1m intervals were selected over each 10m of unmineralized core.
These 1m intervals were sawn in half, with one-half returned to the box and the
other half placed in a bag, labeled and sent to the laboratory for analysis.
This type of sampling was used to determine trace element distribution about the
deposit; none of the mineralized zones were sampled in this way.

With the lack of outcrop in a folded metamorphic terrane, it is
necessary to have a good understanding of the geologic model to predict
positioning of the drill to get a sample of true thickness in the mineralized
zone. NovaGold diligently relogged core and mapped the project, and we have been
diligently relogging core and mapping the project to gain this understanding.
The use of oriented core is very important to this interpretation. SRK has
confidence that the samples collected at the Arctic Project are representative
of the geometry of the mineralized zone.

Arctic Project - Sample Preparation, Analyses and
Security

The core from the NovaGold programs was sawn in half, with half
sent to labs in Fairbanks, AK for sample preparation and the other half returned
to the core box for storage. Samples were crushed to 70% <2mm and a nominal
250g split was sent to Vancouver, B.C. for analysis by ALS Chemex. There the
splits were pulverized to 85% <75um. Initial gold analysis was done by FA-AAA
on a nominal 30g split of the pulp. Samples returning over limit gold values
(>10ppm) were rerun using fire assay techniques. Initial results for all
other elements (27) were done via four acid digestion ICP analysis on a nominal
25g split of the pulp. Samples with over limit values for copper
(>10,000ppm), lead (>10,000ppm), zinc (>10,000ppm) or silver
(>100ppm) were rerun using AA techniques.

Gold values for duplicate samples (both blind and laboratory)
from 2004 and for those samples re-assayed from earlier programs locally showed
high variability, indicating a possible nugget effect. As a result, a series of
samples was selected for MSA analysis. Results are pending.

A QA/QC program was instituted for the 2004 drill program and
utilized for subsequent programs. Samples were broken into 20 sample batches
that included three QA/QC samples. The QA/QC samples included one duplicate, one
blank and one standard. Duplicate samples were prepared at the prep facility by
taking a second split from the entire prepped sample. A local limestone source
was used as the blank material. A series of samples taken from the source area
and assayed confirm that the limestone is a suitable blank material. The
standard material was obtained from WCM Minerals of Burnaby, B.C. A base-metal
standard was selected that best represented the grade of the Arctic deposit
mineralization. Samples were either in the custody of NovaGold personnel or the
assay labs at all times.

A search was made through Kennecotts Reno, NV warehouse for
sample pulps from pre-1998 drill campaigns. A total of 290 pulps were located,
mainly from the earliest drill programs, and sent to ALS Chemex Labs in
Vancouver, B.C. for analysis. The samples were analyzed for gold by FA-AAA as
well as 27 additional elements by ICP analysis (see analytical description).
Samples were arranged in batches of approximately 20, each with inserted QA/QC
samples. Of the 290 total pulps, 11 contained insufficient volume for any
analysis. The variable number of sample pairs is the result of either
insufficient sample size for analysis of select elements in 2004 (mainly over
limits) or because some elements were not selected for assay in earlier
campaigns. Zinc, silver and gold analyses all compared favorably. While lead
showed the largest variability, the average grades are relatively low, thereby
having little effect on the tonnage value. Copper values also had high
variability and averaged 10% lower than the original values. ALS Chemex has
attained ISO 9001:2000 registration. In addition, the ALS Chemex Vancouver
laboratory is accredited to ISO 17025 by Standards Council of Canada for a number of specific test procedures
including fire assay Au by AA, ICP and gravimetric finish, multi-element ICP and
AA Assays for Ag, Cu, Pb and Zn.

36

---

The apparently poor reproducibility of historic assay values is
likely a sign of a highly variable deposit, and not an assaying issue. While
sample assays are suitable for this PEA, further analysis and comparisons are
recommended for prefeasibility.

The QA/QC data appears to be reasonable for a program of this
scope, a few discrepancies exist which are normal. A formal assessment should
also be done before prefeasibility, and any significant problems addressed by
re-assaying samples which had issues.

Arctic Project - Data Verification

NovaGold performed a review of existing Ambler land data at the
Kennecott offices in Salt Lake City, Utah with a focus on data relating to the
Arctic Project. Numerous reports and studies were scanned. All available assay
certificates as well as the current database were copied and/or scanned. All
pre-2004 drill assay values in the database provided by Kennecott were compared
to assay values from the original assay certificates. Local discrepancies,
mainly associated with precious metal results, were identified and
corrected.

SRK was supplied with paper and scanned electronic certificates
for the pre-2004 programs. Assay certificates for 472 samples out of 1,854 of
these samples were unavailable for review. SRK checked 10% of pre-2004 assay
certificates against the database. Only minor typographical discrepancies were
found and corrected. All of the highest 5% grades of all five elements were
checked where available. SRK also received electronic certificates (CSV text
files) for 2,612 assays (88% of the Arctic samples) from the 20042005
drilling/sampling program, which also included numerous samples selected from
previously drilled core. All of these assays were verified successfully with the
provided database. QA/QC data was also made available for the 2005 sampling
program, consisting of 166 duplicate samples, 282 standards and 293 blanks.
These samples were well within acceptable limits. Although a few of the paper
certificates were unavailable, the available certificates provided reasonable
assurance that the database is accurate.

Arctic Project - Mineral Resource Estimate

The mineral resource estimate was prepared by Russ White,
P.Geo, Associate Resource Geologist at SRK Denver. Grade estimations were made
using ordinary kriging based on a three-dimensional block model constructed
using Vulcan® commercial mine planning software. The project limits are based on
a UTM coordinate system (NAD 1927, Zone 24), and the block model is based on a
parent block size of 5m X x 5m Y x 5m Z, with a sub-cell size of 5m X x 5m Y x
0.2m Z. Five mineralized massive sulfide zones have been defined along a
northeasterly striking corridor, with all zones tending to dip moderately to the
southwest. The mineralization at the Arctic deposit occurs as massive sulfide
lenses hosted within weakly to unmineralized schistose country rocks.
Potentially economic mineralization is associated with coarse-grained sulfides.
For the resource estimation work, all of the massive sulfide zones are
collectively referred to as the Arctic deposit.

The resource estimate has been generated from composites
derived from drill hole sample assay results, and is constrained by manually
interpreted sulfide bed boundaries constructed by SRK. No three dimensional
geologic model was utilized to constrain the resource estimate. Grade
interpolation parameters have been defined based largely on the geologic
understanding of controls on mineralization, drillhole spacing and
geostatistical analysis of the data. The resources have been classified by their
proximity to the sample locations and number of drill holes used to inform the
blocks. SRK finds the resource model and resource classification to be
acceptable for resource reporting under CIM guidelines.

The drillhole database used for resource estimation consists of
131 core holes, 108 of which intercepted significant mineralization. Of the
approximately 28,310m drilled within the resource, 6,220 intervals were sampled
representing 12,434m of sampled drilling. Sample lengths vary from 0.1 to 12m,
and average about 1.9m. Each interval contains assays for copper, zinc, lead,
gold and silver, as well as codes for lithology and mineralized zone. In 2008,
NovaGold completed an additional 14 hole drill program of which 12 are
incorporated (2 holes remain unassayed).

A separate database table includes specific gravity
measurements for 404 samples taken from 47 drillholes.

The Arctic Project has no known reserves.

Arctic Project - Resource Classification and Mineral
Resource Statement

The mineral resources have been classified according to the
CIM Standards on Mineral Resources and Reserves: Definitions and Guidelines
(November 2005). The PEA is preliminary in nature and includes inferred mineral
resources that are considered too speculative geologically to have the economic
considerations applied to them that would enable them to be categorized as
mineral reserves. There is no certainty that the estimates contained in
the PEA will ever be realized. Mineral resources that are not mineral reserves
do not have demonstrated economic viability.

37

---

Resources in the MS zones, which were estimated by the first
(50m) search, were classified as indicated. This is roughly based on a distance
that is twice the variogram range and within one cross section distance inside a
modeled shape, which is based on correlated intervals. All blocks outside of the
MS zones, and all other estimated blocks too distant from the samples for the
first pass, were classified as inferred. No resources were classified as
measured. Inferred resources have a great amount of uncertainty as to their
existence and as to whether they can be mined legally or economically. It cannot
be assumed that all or any part of inferred resources will ever be upgraded to a
higher category.

Table 2: Mineral Resource Statement - Indicated (as of May
9, 2011)

Cautionary Note to United States Investors concerning
estimates of Indicated Resources.This section uses the term indicated
resources. We advise United States investors that this term is not recognized
by the SEC. United States investors are cautioned not to assume that estimates
of indicated mineral resources are economically minable, or will be upgraded
into measured mineral resources. See Risk Factors and Cautionary
Note to United States Investors.

Resource
     Category
    Zone
    Tonnage
      (kt)
    Metal Grades
    Contained MetalCu (%)
    Au (g/t)
    Ag (g/t)
    Zn (%)
    **Pb** (%)
    Cu (klb)
    Au (koz)
    Ag (koz)
    Zn (klb)
    Pb (klb)Indicated
    1
      2
      3
      4
      11
    5,667
      3,792
      2,448
      7,020
      517
    4.50
      4.55
      3.56
      3.57
      4.16
    0.91
      0.52
      0.67
      0.96
      0.25
    63.39
      50.7953.6965.1832.86
    6.15
      6.055.565.683.32
    1.06
      0.970.910.960.34
    562,238
      380,495191,960552,85847,407
    165
      63532164
    11,549
      6,1934,22614,711546
    767,839
      505,486299,991879,66937,857
    131,817
      81,22349,137149,0323,859All Zones
    19,445
    4.05
    0.80
    59.55
    5.81
    0.97
    1,734,958
    501
    37,226
    2,490,842
  415,068


|Notes:
|------
|(1)   
|(2)   
|(3)   
|      
|(4)   
|(5)   
|(6)   

38

---

Table 3: Mineral Resource Statement - Inferred (as of May 9,
2011)

Cautionary Note to United States Investors concerning
estimates of Inferred Resources.This section uses the term inferred
resources. We advise United States investors that this term is not recognized
by the SEC. The estimation of inferred resources involves far greater
uncertainty as to their existence and economic viability than the estimation of
other categories of resources. United States investors are cautioned not to
assume that estimates of inferred mineral resources exist, are economically
minable, or will be upgraded into measured or indicated mineral resources. See
Risk Factors and Cautionary Note to United States
Investors.

Resource
     Category
    Zone
    Tonnage
     (kt)
    Metal Grades
    Contained
      MetalCu(%)
    Au(g/t)
    Ag(g/t)
    Zn(%)
    Pb(%)
    Cu(klb)
    Au(koz)
    Ag(koz)
    Zn(klb)
    Pb(klb)Inferred
    0123411
    1,2422,9181,3861,1774,313373
    2.163.824.163.993.184.25
    0.350.700.390.470.840.29
    4.1453.8345.4348.4555.3333.66
    2.195.535.905.044.883.30
    0.700.920.790.610.830.35
    59,013245,933127,207103,633302,35434,930
    146618181163
    1655,0502,0251,8337,672404
    59,879355,508180,283130,809463,89327,118
    19,09759,42524,11415,75179,3262,904All Zones
    11,409
    3.47
    0.64
    46.75
    4.84
    0.80
    873,070
    235
    17,149
    1,217,489
    200,616


|Notes:
|------
|(1)   
|(2)   
|(3)   
|      
|(4)   
|(5)   
|(6)   

Arctic Project - Environmental Considerations

Development of the Arctic Project will be subject to extensive
environmental baseline analyses, environmental impact assessment and evaluation,
and associated permitting requirements reflective of the direct, indirect and
cumulative impacts associated with full project build-out, and the sensitive
environment in which it is to be constructed. Development of the Arctic Project
will include significant infrastructure development including the mine, mill,
tailings impoundment and ancillary facilities, including on-site employee
housing, as well as off-site infrastructure such as power generation and
communications, and surface access. An existing year-round airstrip near the
site capable of accommodating charter aircraft for a complete fly-in/fly out
year-round operation will be used. The complexity of the environmental impact
review and permitting the various facilities will be dependent on siting of
facilities in relationship to the various river basins and valleys surrounding
the Arctic Project development target areas. Further, the Arctic Project will be
situated near a number of parks and protected areas, including Kobuk National
Park located 80km west, the Great Kobuk Sand Dunes and the Kobuk Valley and
Selawik Wilderness areas 30 to 40km west, Selawik National Wildlife Refuge 20 to
25km southwest and the Gates of the Ambler National Park and Preserve
approximately 80km northeast.

Due to the preliminary stages of this project, it is difficult
to assess what specific permitting requirements will ultimately apply to the
Arctic Project. Therefore, it is equally difficult to fully assess the proper
content of specific baseline data gathering programs and/or the scope of the
environmental review and project alternatives. Until all aspects of the Arctic
Project are defined and further refined, it is difficult to list what required
permits are anticipated and what timelines might be involved to complete
environmental reviews and permitting processes. While it is envisioned that the
Arctic Project will operate as a zero-discharge facility, significant baseline
conditions assessment and facilities design and engineering will be required to
establish the viability of such. The duration of time required for full project
refinement may evolve during the environmental review and permitting processes
and will directly correlate with the overall permitting timeline which is unknown at this
time. There can be no assurance that the Arctic Project will be able to obtain
or maintain all necessary licenses or permits or that the Arctic Project will
obtain and maintain such licenses or permits on terms that enable operations to
be conducted at economically justifiable costs.

39

---

Key subjects requiring further study include:

- Project definition - substantial scientific and technical data still must
  be collected prior to the finalization of the Arctic Project definition.
- Alternatives  what alternatives to the Arctic Project definition are
  feasible.
- Socio-environmental studies - Archaeological, cultural resources,
  biological environmental (including wildlife migration and special status
  plants and wildlife species) studies must be completed for the Arctic Project
  site, service and/or access road rights of way and any other facilities that
  may be located outside the immediate vicinity of the mine. As required by the
  National Environmental Policy Act (NEPA), a direct, indirect and cumulative
  affects assessment would need to be conducted. It is anticipated that the
  project will require preparation of an environmental impact statement.
  Additional studies will be required to review project alternatives on
  minimization of impacts to reduce the potential mitigation required.
- Acid generating potential - preliminary data obtained from historic reports
  indicate that the waste rock and tailings could potentially exhibit AGP
  concerns.
- Effluent management  viability of zero discharge facility to be studied.
- Stream impact - there is a potential that Subarctic Creek and/or the
  associated riparian zone along with various other additional streams and/or
  surface water features will be impacted by encroachment of project facilities.
- Hydrogeology - additional technical analyses will be required to assess
  hydrogeological conditions, including groundwater flow and potential fate and
  transport analyses.
- Community engagement and perceptions - the potential for impacts real or
  perceived to the subsistence hunting and fishing opportunities for the local
  population could result in public opposition to the Arctic Project. Early and
  expanded community engagement and governmental affairs programs will aid in
  minimizing these anticipated risks. As part of the NEPA process, it is
  anticipated that there will be public involvement through the scoping process.
- Subsistence hunting/fishing - the perceived impacts to the subsistence
  hunting and fishing opportunities for the local population could result in
  public opposition to the Arctic Project, resulting in additional environmental
  review, permitting requirements and/or delays. Alternative studies may be
  required to determine preferred options.
- Affected environment- technical analyses on air quality and climate,
  topography, geology, geotechnical considerations, surface water quality and
  hydrology, ground water quality and hydrology, aquatic resources, soils,
  vegetation and wetland, wildlife, recreation, visual resources, land use and
  noise.

In 2010 and 2011, the Arctic Project initiated an assessment of
baseline hydrology, water quality and aquatic life. Additional studies will be
needed on the environmental resources of the Arctic Project area in order to
adequately define and establish baseline conditions at the site. The studies
that have been performed are largely based on historical geological and
geochemical data in order to characterize the rock mass. However, based on the
rock mass characterization performed and summarized in these reports, ARD will
likely be an issue addressed during project design in order to get operating
permits. There is no assurance all approvals or required license and permits
will be obtained.

The Arctic Project will require multiple permits from
regulatory agencies and other entities at the Federal, State and local (Borough)
levels. Due to the remoteness of the Arctic Project and lack of existing
infrastructure, it is likely that a substantial environmental review and
significant permitting effort will also be a part of the development of support
infrastructure. Both mine and infrastructure-related environmental review and
permitting efforts will be heavily focused toward water and air quality permits,
specifically, how those permits could administer discharges, emissions and other
waste management aspects associated with the operational facilities. Given the
remoteness and environmentally sensitive location of the Arctic Project, the
environmental review and permitting process may be protracted and/or more
difficult over that which would be expected at a similar facility in or near a
more developed area. It is possible that we will not be able to secure the
necessary permits or that a legal challenge could be brought through one or more
of these requirements or processes that could delay, increase costs or require
the suspension of one or more permits.

40

---

The NEPA and the Council of Environmental Quality Regulations
40 CFR parts 15001508 will govern the Federal environmental permitting process
for the Arctic Project. Issuance of permit(s) by a Federal agency constitutes a
Federal action, which by law requires review through the NEPA process. Since
development of the Arctic Project would require a number of Federal level
permits, the Arctic Project will most likely be required to complete the NEPA
process.

The NEPA process requires that all elements of a project and
their direct, indirect and cumulative impacts be considered. A reasonable range
of project alternatives are evaluated to assess their comparative environmental
impacts, including consideration of feasibility and practicability. Typically,
mining projects of this magnitude require the preparation of an environmental
impact statement. The Alaska Division of Environmental Conservation could act as
the lead state agency with responsibility to coordinate the state permitting
process. Upon completion of the NEPA process, it is anticipated that a record of
decision will be prepared by one or more agencies that presents the preferred
alternative for the Arctic Project and the basis for the decision. Federal,
state and local agencies needing to issue permits for the operation of the
Arctic Project will then be able to take whatever steps are needed to complete
the applicable permitting process and impose whatever restrictions or covenants
may apply.

No assurance can be given that new laws and regulations will
not be enacted or that exiting laws and regulations will not be applied in a
manner that could limit or curtail the Arctic Project. Amendments to current
laws, regulations, licenses and permits governing operations and activities of
mining companies, or more stringent implementation thereof, could have a
material adverse impact on the Arctic Project and cause increases in capital
expenditures or production costs, or reduction in levels of production, or
abandonment, or delays in the development of the business.

Arctic Project - Current Activities

Field work at the Arctic Project during 2011 included
approximately 7,100 metres of exploration and geotechnical drilling. Exploration
drilling focused on the Bornite target and geotechnical drilling to provide
structural information on the Arctic deposit for a greater understanding of the
deposit as well as subsurface hydrologic information. In addition, significant
progress was made in establishing camp infrastructure to support larger field
programs including the building of a 40-man camp near the Bornite Project.

The 2012 work program focused on advancing the environmental
and engineering studies required to initiate a pre-feasibility study for the
project, with geotechnical, metallurgical and hydrological studies as well as
environmental baseline data collection. Approximately 1,752 meters of
exploration drilling has been completed during 2012 on the Sunshine target which
is 12 kilometers west of the Arctic deposit. Additional exploration drilling may
be planned for prospects in the Ambler belt which have been identified through
further analysis and mapping during 2012.

NovaCopper also completed initial metallurgical optimization
results from the Arctic Project through the completion of a metallurgical test
work program in 2012. The work results in an increase of copper recoveries to
88.6% from 86.8% and zinc recoveries to 91.7% from 81.1% previously reported in
our PEA. It also resulted in improved precious metal recoveries to the copper
concentrate.

Bornite Project, Ambler District, Alaska

Bornite Project

Except for the information under the heading Bornite
Project  Recent Developments and except as otherwise stated, the
scientific and technical information relating to the South Reef and Ruby Creek
zones of the Bornite Project contained in this Form 10-K is derived from, and in
some instances is an extract from, the technical report titled NI 43-101
Technical Report for the Bornite Deposit, South Reef and Ruby Creek zones,
Northwest Alaska dated effective January 31, 2013 (the Bornite Report)
prepared by Bruce Davis, FAusIMM and Robert Sim, P. Geo of BD Resource
Consulting, Inc. (BDRC), and who are Qualified Persons as defined in NI
43-101. Scott Petsel, P. Geo, an employee to the Company and a Qualified Person
as defined in 43-101, approved the scientific and technical information under
the heading Bornite Project  Recent Developments. The information
regarding the Bornite Project, the South Reef zone and the Ruby Creek zone is
based on assumptions, qualifications and procedures which are not fully
described herein. Reference should be made to the full text of the Bornite
Report which has been filed with certain Canadian securities regulatory
authorities pursuant to NI 43-101 and is available for review on SEDAR at
www.sedar.comand on EDGAR at www.sec.gov.

Bornite Project - Property Description and
Location

The UKMP Projects which encompasses the Bornite deposit and the
previously reported Arctic deposit are located approximately 260 km east of
Kotzebue, Alaska and 460 km northwest of Fairbanks, Alaska. The closest village
is the community of Kobuk, approximately 17 km to the south situated along the
banks of the Kobuk River. The Bornite Project constitutes a land package of approximately 97,483 hectares and is governed by the NANA
Agreement. See History of NovaCopper  Agreement with NANA Regional
Corporation.

41

---

Bornite Project - Accessibility, Climate, Local
Resources, Infrastructure, and Physiography

The Bornite Project is located in Northwest Alaska in the
Cosmos Hills on the southern flank of the Brooks Range. It is circa 67.1 o north
latitude and 156.38 o west longitude, approximately 260 km east of Kotzebue,
Alaska and 460 km northwest of Fairbanks, Alaska. Kobuk is the closest community
to Bornite. There is daily air service from Kotzebue to Kobuk. Twenty-six
kilometers of improved gravel road connect Kobuk to the Bornite Camp. On the
road to the Bornite camp are the Dahl camp and a 1,460 meter airstrip. During
the summer months the Dahl camp airstrip is suitable for larger aircraft such as
C-130 and DC-6. A second, shorter airstrip is adjacent to the Bornite camp. This
is suitable for smaller aircraft to support the Bornite camp with personnel and
supplies. The two other villages close to Bornite are Shungnak, 16 km downriver
from Kobuk, and Ambler, 48 km further downriver from Shungnak. The discussion
regarding the accessibility challenges relating to the Arctic Project,
particularly with respect to the development of an access road from the Dalton
Highway, is applicable to the Bornite Project as well. (See Arctic Project
Overview).

The Bornite camp is 64 km north of the Arctic Circle. Average
rainfall is approximately 43 cm per year while average snowfall is approximately
142 cm per year. Summers are generally mild and sunny while winters are
extremely dark and cold. Extreme temperatures recorded in Kobuk range from 90oF
in summer to -68oF in winter.

The Bornite Project is located on Ruby Creek on the northern
edge of the Cosmos Hills. The Cosmos Hills are part of the southern flank of the
Brooks Range in Northwest Alaska. Topography in the area is moderately rugged.
Maximum relief in the Cosmos Hills is approximately 1000 meters with an average
of 500 to 700 meters. Talus covers the upper portions of the hills. Glacial and
fluvial sediments occupy valleys.

Alder brush and spruce grows in protected valleys, but exposed
terrain is tundra-covered. Water is abundant. Discontinuous permafrost occurs
throughout the area and is more prevalent on north-facing slopes.

Year-round exploration is not possible with the current camp
facilities, so the field season is May to October. The Bornite camp closes
during winter and a caretaker is on site during the months of November through
April. Power and electricity are provided by diesel generators.

Except for resident personnel, the logistical resources
necessary for the exploration work are limited. Most equipment and supplies are
flown by charter flights from either Fairbanks or Kotzebue. Some supplies are
flown in from Anchorage, Alaska.

In 2011, the camp was expanded to twenty sleeping tents, three
administrative tents, two shower/bathroom tents, one medical tent, and one
dining/cooking tent. With these additions, the camp capacity was increased to 49
beds. A 100 by 30 foot core logging facility was also built in summer of
2011.

In 2012, the camp was further expanded with the addition of a
laundry tent, a women's shower/washroom tent, a recreation tent, several
additional sleeping tents, and a twice-as-large kitchen tent. Camp capacity
increased to 71 beds. The septic field was upgraded to accommodate the increase
in camp population. One of the two-person cabins was winterized for use by the
winter caretaker. A permitted landfill was established to allow for the
continued cleanup and rehabilitation of the historic shop facilities and
surroundings.

The Dahl Creek camp is an overflow facility to the Bornite
camp. This camp has a main cabin for dining and administrative duties, and a
shower facility. Sleeping facilities include two hard sided sleeping areas with
7 beds (primarily used for staff), two four-person sleeping tents and three
two-person sleeping tents for a total of 21 beds. There are support structures
including a shop and storage facilities.

Bornite Project - History

Kennecott and Bear Creek Mining Tenure

Regional exploration began in the early 1900s when gold
prospectors noted copper occurrences in the hills north of Kobuk, Alaska. In
1947, local prospector Rhinehart Rhiny Berg along with various partners
traversing in the area located outcropping mineralization along Ruby Creek
(Bornite) on the north side of the Cosmos Hills. They subsequently staked claims
over the Ruby Creek showings and constructed an airstrip for access. In 1956, R.
Chadwick of Kennecott Mining Company heard about the Ruby Creek property from a
Bureau of Mines employee in Nome and followed up with Rhiny Berg. In 1957, as a
result of this communication, Bear Creek Mining Company (BCMC), Kennecott's
exploration subsidiary, optioned the property from Berg.

42

---

Exploration drilling in 1961 and 1962 culminated in the
discovery of the No.1 Ore Body in what is referred to as the Upper Reef where
DDH-RC-34 cut 20 meters of 24% copper. The discovery of the No.1 Ore Body led to
the development of an exploration shaft in 1966. The shaft which reached a depth
of 328 meters encountered a significant watercourse and was flooded near
completion depth. The shaft was subsequently dewatered and an exploration drift
developed to provide access for sampling, mapping and to accommodate underground
drilling to further delineate the No.1 Ore Body. A total of 59 underground holes
were drilled and after the program the shaft was allowed to re-flood.

In unison with ongoing exploration at Bornite, BCMC initiated
preliminary metallurgical test work in 1961. A total of 32 assay rejects samples
from five AX diamond drill holes weighing approximately 68 kilograms from drill
holes (RC-34, 54, 60, 61 and 65) that penetrated mainly the No.1 Ore Body were
submitted for analysis.

The discovery of the Arctic Project in 1965 prompted a hiatus
in exploration at Bornite. In the late 1990s, Kennecott resumed its evaluation
of the Bornite deposit and the mineralization in the Cosmos Hills with an
intensive soil, stream, and rock chip geochemical sampling program using 32
element ICP analysis. Grid soil sampling yielded 765 samples. Ridge and spur
sampling resulted in an additional 850 soil samples in the following year.
Skeletonized core samples (85 samples) from key historic drill holes were also
analyzed using 32 element ICP analytical methods. Geochemical sampling
identified multiple areas of elevated copper and zinc in the Bornite region.

Kennecott completed numerous geophysical surveys as an integral
part of exploration throughout their tenure on the property. Various reports,
notes, figures, and data files stored in Kennecotts Salt Lake City exploration
office indicated that geophysical work included, but was not limited to, the
following:

- Airborne magnetic and electromagnetic (EM) surveys (fixed-wing INPUT)
  (1950s)
- Gravity, single point (SP), Audio-Frequency Magneto-Telluric (AMT), EM,
  borehole and surface IP/resistivity surveys (1960s)
- Gravity, airborne magnetic, and Controlled Source Audio-frequency
  Magneto-Telluric (CSAMT) surveys (1990s)

We have little information or documentation associated with
these geophysical surveys except those conducted in the 1990s. Where data are
available in earlier surveys, the lack of details in data acquisition,
coordinate systems and data reduction procedures limit their usefulness. The
only complete geophysical report available concerns down hole IP/resistivity
results. Most notable of the 1990s surveys is the 1996 Bouger gravity survey
from the Bornite deposit into the Ambler lowlands. The Bornite deposit itself is
seen as a significant 3 milligal anomaly. Numerous 2 to more than 6 milligal
anomalies occur under cover in the Ambler lowlands and near the Aurora and
Pardner Hills occurrences.

The wide range of geophysical techniques used in and around the
deposit over a span of 40 years probably indicates the difficulty Kennecott/BCMC
was having directly detecting ore. When applying EM and IP/resistivity methods,
the problem appears to be that deeper mineralization is often masked by the
response of near-surface conductive and polarizable rocks.

In addition to the geophysical surveys conducted by Kennecott,
the Alaska DNR and Geometries completed an aeromagnetic survey of portions of
the Ambler district in 1974-1975.

Kennecott Ambler District Exploration

Concurrently with the ongoing work at Bornite (Ruby Creek),
BCMC mounted an aggressive regional exploration program beginning in 1962 both
within the Cosmos Hills and within the adjacent Ambler Schist belt.

In 1965, while re-evaluating a 1400 ppm copper geochemical
anomaly from sampling completed in 1963, BCMC geologists discovered sulfides in
float on the east side of Arctic Ridge a short distance below the crest of the
ridge. Eight core holes were drilled in 1967 intersecting massive sulfide
mineralization over a 1,500 foot strike length. Initial results were
sufficiently encouraging that BCMC changed their focus to the Arctic deposit
from the Bornite (Ruby Creek) mineralization. BCMC subsequently drilled 84 core
holes at Arctic totaling 15,689 meters from August 1967 to July 1985.

In 1973 a claim staking war began which was to last over two
years as Anaconda, Noranda, WGM, and Sunshine Mining entered the Ambler
district. BCMC and its competitors discovered several other prospects, including
two potential deposits (Sun and Smucker). Both the Bornite (Ruby Creek) and
Arctic deposits received patents on the core claim groups. However, the relative
inaccessibility of the Ambler district, along with depressed metals prices,
caused interest in the district to wane and significant exploration or
development activity in the district ended in 1985. Cominco acquired the claims
covering the Sun and Smucker deposits from Anaconda in 1987. Kennecott sold its Bornite (Ruby Creek)
deposit and the surface development at Bornite to NANA in 1986. The area's
inaccessibility remains the single largest obstacle in the development of the
Ambler district.In 1993 Kennecott Minerals, after negotiating an agreement with
NANA, began a reevaluation of the Arctic deposit that included reinterpretation
of the geology of the deposit and the assembly of a computer database. In 1995,
a computer-generated block model was constructed and an updated resource of the
deposit was calculated from the block model. In September 1997, a total of 2,035
State of Alaska claims were located; these covering most of the known Ambler
schist belt rocks.

43

---

NovaGold Tenure - Ambler Mining District

An exploration agreement between Kennecott Arctic Company and
NovaGold under which NovaGold had the ability to earn a 51% interest in the
Ambler lands was signed on March 22, 2004. Between 2004 and 2009 NovaGold
conducted project and regional level mapping, geophysical and geochemical
surveys and drilling on Ambler lands.

Under a purchase agreement dated December 18, 2009 between
NovaGold, its wholly-owned subsidiary Alaska Gold Company and Kennecott
Exploration Company and Kennecott Arctic Company, NovaGold agreed to pay
Kennecott a total purchase price of US$29 million for a 100% interest in the
Ambler lands. On August 5, 2011, NovaGold made the final payment thereby
completing NovaGolds obligations under the purchase agreement.

Historical Resource Estimations

All of the historic resource estimates presented below were
made prior to the implementation of NI 43-101. They do not conform to NI 43-101
reporting standards and should not be relied upon or interpreted as such. They
are presented here for information purposes only.

Though no NI 43-101 compliant resource estimates have ever been
released by Kennecott or NANA, a series of non-NI 43-101 compliant historical
resources have been compiled for the Bornite Project. The earliest and most
widely repeated resource number reported 91 million tons at 1.2% Cu in an
unconstrained polygonal resource estimate. At a constrained 1% Cu cut-off grade,
21.2 million tons of 3.04% Cu and at a 2.5% Cu cut-off, 5.2 million tons of
5.83% Cu were reported. The estimation is based on an 11.0 ft3/ton
tonnage factor for the Lower Reef or lower grade mineralization and a 10.0
ft3/ton tonnage factor for the higher grade Upper Reef
mineralization. It is not known if the tonnage factors were based on any direct
specific gravity measurements of the Bornite drill core. Metals such as silver
and cobalt were not considered in any of the historical estimations.

Another non-NI 43-101 compliant historical resource estimate
was completed in 1968 for the No.1 Ore Body. The unverified estimate is
180,000-200,000 tons at 8.4% Cu. A second resource estimate in 1971, is
summarised in Kennecott annual reports for the project. In either case, the
details of the estimation could not be verified. The second estimation was
apparently tabulated using a grade times thickness cut-off criterion.

In the late 1970s, Bear Creek restated the 5 million tonne
resource, including the No. 1 Ore Body and other unnamed bodies of high grade
ore east and west of the shaft.

In 1974 another internal Kennecott resource estimation for
Bornite was completed. The estimation using a polygonal methodology is not
considered entirely accurate as down-hole surveys were not available for all
drill holes. The ore (mineralized) lenses where erratic, however, in total, it
was felt that the resource was, a reasonable approximation of the potential of
the two reefs. A 10.5 ft3/ton tonnage factor for >1% copper
mineralization and an 8.0 ft3/ton tonnage factor for >4% Cu
mineralization was utilized.

These estimations reported 5 million tons (4.56 million tonnes)
at 4% Cu and 40 million tons (36.2 million tonnes) at 2% Cu, respectively
without reporting cut-off grades. The sources of these estimations are unknown.

In 1997, a more rigorous resource estimation of the Ruby Creek
(Bornite) deposit used Vulcan 3D modeling and resource estimation software. A
series of grade shells at 0.2%, 0.5% and 1.0% copper were manually constructed
on sections and imported into the Vulcan. Within each shell, separate resource
calculations at 0.5%, 1.0%, 2%, and 4.0% copper cut-off grades were made. The
grade shells were constructed irrespective of various lithologies or
mineralization styles. Attempts to create meaningful semi-variograms for copper
mineralization were unsuccessful. Lacking useful semi-variograms, an inverse
distance squared weighting methodology was used to estimate the resource.
Results of the estimation are shown in Table 4.

44

---

Table 4: Bornite Historical Resource (Kennecott, 1997)

Cut-off(% Cu)
    0.2% Grade shell
    0.5% Grade shell
    1% Grade shellTonnage(M tonnes)
    Grade(Cu %)
    Tonnage(M tonnes)
    Grade(Cu %)
    Tonnage(M tonnes)
    Grade(Cu %)0.5
    71.6
    1.24
    40.5
    1.41
    17.1
    2.021.0
    27.0
    2.09
    22.3
    1.92
    14.2
    2.262.0
    6.6
    4.48
    4.7
    4.02
    4.0
    4.394.0
    2.2
    8.06
    1.5
    7.15
    1.1
    9.54


An approximation of the specific gravity, based on the
relationship of copper grade to specific gravity, was supplied by Kennecott. No
support for the approximation was presented. The author recognized that the
tonnages for massive pyrite areas with low grade copper zones are significantly
underestimated.

Bornite Project - Geological Setting and
Mineralization

The Bornite Project is located within the Arctic Alaska
Terrane, a sequence of mostly Paleozoic continental margin rocks that make up
the Brooks Range and North Slope of Alaska. It is within the Phyllite Belt
geologic subdivision, which together with the higher grade Schist Belt,
stretches almost the entire length of the Brooks Range and is considered to
represent the hinterland of the Jurassic Brooks Range orogeny. The southern
margin of the Phyllite Belt is marked by melange and low angle faults associated
with the Kobuk River fault zone, while the northern boundary is thought to be
gradational with the higher grade metamorphic rocks of the Schist Belt.

The autochthonous stratigraphy of the Ambler district is
characterized by lower greenschist to epidote-amphibolite facies, pelitic,
carbonate and local metavolcanic rocks.

The geology of the Ruby Creek resource area of the Bornite
Project is composed of alternating beds of carbonate rocks (limestone and
dolostone) and calcareous phyllite. Limestone transitions laterally into
dolostone, which hosts the majority of the mineralization and is considered to
be hydrothermal in origin. Spatial relationships and petrographic work establish
dolomitization as genetically related to early stages of the copper mineralizing
system.

Our geologists have been unable to identify any meta-igneous
rocks in the resource area; all lithologies described are interpreted as
metasedimentary in origin.

Potentially the earliest and most prominent structure in the
resource area is the northeast-trending, steeply northwest-dipping Iron Mountain
structure which is interpreted as either a pre or syn-mineral (Devonian) growth
fault; or, the post-mineral (Cretaceous) axis of a small overturned kink fold.
Numerous observations can be made to support both interpretations. Importantly,
the distribution of pre-mineral sedimentary breccias and the mineralization
which is relatively undeformed along the corridor suggest an early
ore-controlling origin of the structure likely modified by later post mineral
deformation.

To the north, the Bornite Carbonate sequence is in fault
contact with the Beaver Creek phyllite along the moderately north-dipping Beaver
Creek fault.

Bornite Project - Mineralization

Copper mineralization in the South Reef zone consists of one to
as many as three mineralized intervals (at a 0.5% cut-off) coalescing into a
crudely stratiform body hosted in secondary dolomite developed at or near the
Iron Mountain structure. The body which is approximately 250 m to 300 m wide and
750 m long varies in true thickness from roughly 10 m to as much as 170 m.

Copper mineralization at the Ruby Creek zone consists of at
least seven stacked, crudely-stratiform bodies hosted in secondary dolostone.
These approximately tabular zones are semi-equant in plan view and range from
approximately 75 to 1700 meters in dimension (at a 0.2% copper cut-off). True
thicknesses vary greatly and range from roughly 1 to greater than 150 meters
with thicknesses up to 200 meters where multiple zones are closely stacked.

High grade mineralizationmassive copper sulfides of greater
than 10% copperoccurs as stratiform bodies with footprints of 50 to 150 meters
and thicknesses ranging from 1 to 17 meters.

45

---

The Bornite deposit area is divided into three generalized
zones or loci of increased grade and thickness: the South Reef zone and the Ruby
Creek zone comprised of the Lower Reef and Upper Reef. The Lower and Upper Reefs
of the Ruby Creek zone are separated stratigraphically, but lie along a common
north-easterly trend, and the South Reef is located about 750 m to the southeast
along a similar north-easterly trend.Copper mineralization at the Bornite
Project is comprised of chalcopyrite, bornite, and chalcocite distributed in
stacked, roughly stratiform zones exploiting favorable stratigraphy within the
dolomitized limestone package. Mineralization occurs, in order of increasing
grade, as disseminations, irregular and discontinuous stringer-style veining,
breccia matrix replacement, and stratiform massive sulfides. Typical high grade
mineralization is composed of strong chalcocite, bornite and chalcopyrite
mineralization.

The distribution of copper mineral species is zoned around the
bottom-center of each zone, with bornite-chalcocite-chalcopyrite at the core and
progressing outward to chalcopyrite-pyrite. Additional volumetrically minor
copper species include carrollite, digenite, tennantite-tetrahedrite, and
covellite. Stringer pyrite and locally significant sphalerite occur above and
around the copper zones, while locally massive pyrite and sparse pyrrhotite
occur in association with siderite alteration below copper mineralization in the
Lower Reef.

In addition to the copper mineralization, significant cobalt mineralization (e.g. RC11-0187 with 34.7m at 0.10% Co in the South Reef, RC11-0184 with 5.5m at 0.44% Co in the Upper Reef) is found accompanying bornite-chalcocite mineralization. Cobalt occurs with high grade copper as both carrollite (Co2CuS4) and as cobaltiferous rims on recrystallized pyrite grains.

Appreciable silver values (e.g. RC11-0184 with 5.5m at 30.9g/t)
are also found with bornite-rich mineralization in the South Reef and Ruby Creek
zones.

The Bornite carbonate sequence host to the mineralization at
the Bornite Project is exposed over approximately 16 km along the north slope of
the Cosmos Hills and to a lesser extent on the southern margin of the Cosmos
Hills arch. Numerous areas of hydrothermal dolomitization and copper
mineralization occur across the entire width of outcropping carbonates and are
the focus of ongoing regional exploration by us Most notable of the known
prospects are the Pardner Hill and Aurora Mountain areas, where outcropping
mineralization was discovered and drill-tested during the Kennecott era.

The Pardner Hill prospect is located 3 miles (5 kilometers)
west of the Bornite deposit and consists of a 3 kilometer long Cu (± Zn) soil
and rock geochemical anomaly in rubble cropping ferroan dolostone. Kennecott
drilled 16 holes in the area and defined a stratiform copper mineralized zone
roughly 150 by 400 meters and varying from 5 to 35 meters thick at the southern
end of the geochemical anomaly. Mineralization remains open down-dip and to the
south.

Dolomitization and anomalous copper and zinc geochemistry also
characterize the Aurora Mountain prospect, located 3.6 miles (6 kilometers) west
of Bornite. Anomalies are distributed along a 2 kilometer mineralized horizon
about a third of which has been tested by 4 Kennecott era drill holes.

Bornite Project - Exploration

Exploration in and around the Bornite Project by Kennecott from
1957 to 1998 is summarized above. In addition to the extensive drilling
completed during the more than 40 year tenure of Kennecott in the district,
Kennecott completed widespread surface geochemical sampling, regional and
property scale mapping, and numerous geophysical surveys employing a wide
variety of techniques. The majority of this data has been acquired by us and
forms the basis for renewed exploration targeting Bornite-style mineralization
in the Bornite carbonate sequence.

NovaGold as the precursor company to us began to actively
pursue an agreement to explore the Bornite Project with NANA in 2005 resulting
in an initial airborne geophysical survey in 2006. Negotiations on the
consolidation and exploration of the entire Ambler district continued for the
next several years culminating in the NANA Agreement in October, 2011.

With the NANA Agreement approaching completion, NovaGold
initiated work in 2010 to begin to characterize the exploration potential and
depositional controls by re-logging and re-analyzing select drill holes with a
Niton portable XRF to determine geochemical variability. In 2011, NovaGold began
an initial drill program to verify the historical database and exploration
potential and conducted additional geophysical surveys to provide better
targeting tools for continued exploration in the district. In 2012, NovaCopper
expanded the IP geophysical coverage completing a major district-wide survey
that targeted the prospective Bornite Carbonate sequence.

2006 NovaGold Exploration

In 2006, NovaGold contracted Fugro World Wide to complete a
detailed helicopter DIGHEM magnetic, electromagnetic and radiometric survey of
the Cosmos Hills. The survey covered a rectangular block roughly 11 by 30 miles
(18 by 49 kilometers which totaled 2852 line kilometers). The survey was flown at a 1000
foot (300 meter) line spacing with a line direction of N20E. The DIGHEM
helicopter survey system produced detailed profile data of magnetics, EM
responses and radiometrics (total count, uranium, thorium and potassium) and was
processed into maps of magnetics, discrete EM anomalies, EM apparent
resistivities, and radiometric responses.

46

---

2010 NovaGold Exploration

In 2010, in anticipation of completing the NANA Agreement, NANA
granted NovaGold permission to begin low level exploration at the Bornite
Project consisting of re-logging and re-analysis of select drill holes using a
Niton portable XRF. A profile containing Kennecott surface diamond drill holes
RC-27, -29, -32, -35, -53, -0, -62 and -102 and underground drill hole RU-16
were re-logged and analyzed in the Bornite Camp in 2010.

In general, the re-logging agreed moderately well with the 1996
Kennecott interpretation. Apparent general relationships include: 1) a thick
area of dolomitization centred at ~ RC-60 corresponding with mineralization, and
surrounding and overlying the No. 1 Ore Body; 2) iron-rich dolomite, forming an
inner alteration zone; and 3) a strong stratigraphic control with mineralization
occurring in dolomitized limestones immediately overlying a graphitic
phyllite.

One notable distinction from the Kennecott interpretation in
the re-logging was the recognition of a significant stratigraphic and structural
discontinuity between the southeastern and northwestern parts of the section. A
sharp, apparent truncation or offset of mineralization, dolomitization and
stratigraphic units across this boundary is apparent in the re-logging effort.
Interpretation of the discontinuity remains unclear at this time but could
represent either a post-mineral offset or a potential syn-mineral feeder
structure associated with mineralization in the No. 1 Ore Body.

The apparent structural complexity in the area surrounding the
No. 1 Ore Body including the inferred structural discontinuity east of the No. 1
Ore Body contrast with the stratigraphic and structural continuity evident in
weakly- to un-mineralized strata in the northwest part of the section. The
structural heterogeneity in the area of the No. 1 Ore Body suggests that
inferred structures in this area may have been active during hydrothermal
activity and may have in part controlled mineral deposition.

In addition to the 2010 re-logging effort, NovaGold contracted
a consulting geophysicist to compile a unified airborne magnetic map for the
Ambler district from Kennecott, Alaska DNR and NovaGold airborne geophysical
surveys.

2011 NovaGold Exploration

In light of the relatively poor understanding of appropriate
ground geophysical techniques for the prospect and the extensive cover over
perspective stratigraphic terrain dipping shallowly to the north in the Ambler
lowlands, NovaGold in 2011 contracted Zonge International to conduct both
dipole-dipole complex resistivity induced polarization (CRIP) and natural
source audiomagnetotelluric (NSAMT) surveys over the prospect to develop
better geophysical tools for further exploration.

NSAMT data were acquired along two lines totaling 5.15 line-km,
with one line oriented generally N-S through the center of the survey area and
one being the southernmost E-W line in the survey area. CRIP data were acquired
on five lines  four E-W lines and one N-S line  for a total coverage of 14.1
line-km and 79 collected CRIP stations. The initial objective of the survey was
to investigate geological structures and the distribution of sulfides possibly
associated with copper mineralization.

Results from the paired surveys show that wide spaced
dipole-dipole resistivity is the most effective technique in direct targeting of
the mineralization package. Broad low resistivity anomalies reflecting the
pyrite haloes and mineralization appear to define the limits of the fluid
package. Well defined and often very strong chargeability anomalies are also
present but appear in part to be masked by phyllitic units which also have
strong chargeability signatures. The NSAMT show similar resistivity features as
the IP but are less well resolved.

2012 NovaCopper Exploration

In light of the success of the 2011 geophysical program,
NovaCopper contracted Zonge International to conduct a major district-wide
dipole/dipole IP survey, a down-hole IP radial array survey in the South Reef,
and an extensive physical property characterization study of the various
lithologies to better interpret the existing historical geophysical data.

Zonge completed 48 line km of 200 m dipole/dipole IP during
2012, infilling and expanding on the 2011 survey, and stretching across the most
prospective part of the outcropping permissive Bornite Carbonate sequence.
Although the data are only now being interpreted, the results show a
well-defined low resistivity area associated with mineralization and variable IP
signatures attributed both to mineralization and the overlying Beaver Creek
phyllite. Numerous target areas occur in the immediate Bornite area with lesser
targets occurring in the Aurora Mountain and Pardner Hill areas and in the far
east of the survey area. During the 2012 drill program at South Reef, a single drill hole was targeted on a low
resistivity area approximately 500 m to 600 m southeast of the South Reef trend.
Although the drill hole intersected some dolomite alteration in the appropriate
stratigraphy, no significant sulphides were encountered.

47

---

In addition to the extensive ground IP survey, Zonge also
completed 9 km of down-hole radial IP using an electrode placed in drill hole
RCDH12-0197 to further delineate the trend and potential in and around the South
Reef. Mineralization shows as broad conductive areas in both the Ruby Creek and
the South Reef zones. The resistivity survey indicates there is potential to
expand the South Reef zone to the northeast and to the south.

Exploration Potential

The Ambler district in which the Bornite Project is located,
was the focus of major exploration activities in the 1960s though the early
1980s after which the district received little attention. Exploration beginning
after NovaGolds entry into the district in 2004 using current exploration
techniques and ore genesis models suggests the Bornite carbonate sequence is a
substantial exploration target.

Outcropping exposures of the ore-hosting carbonate stratigraphy
along with large areas of precursor dolomite alteration occur over roughly 18 km
of strike along the northern flank of the Cosmos Hills. Historical exploration
drilling has focused solely on outcropping mineralization and subsurface
extensions at Bornite and the Aurora/Pardner Hill areas. Much of the carbonate
belt has yet to be evaluated.

Recent USGS dating of mineralization in the Ambler district has
shown that the VMS belt hosting the Arctic deposit and the Bornite
carbonate-hosted mineralization are contemporaneous and only slightly post-date
enclosing stratigraphy. This early and extensive syngenetic/early epigenetic
signature, along with the overall fluid chemistry of the system investigated by
early workers, point to large saline basin-generated fluid transport as the
mechanism controlling the metallogeny of the Ambler district. Importantly
similar metallogenies related to saline, basin-generated fluids and their
associated deposits form some of the largest Cu-districts in the world.

Understanding the potential scale of mineralization in the
Ambler district has led us to adopt geophysical and geochemical zonation as
their main tools of exploration.

Airborne geophysics undertaken in 2006, along with district
wide compilations of select third party data discussed above show that the
Bornite carbonate section and bounding stratigraphy simply dip to the north
under the Ambler lowlands toward the Ambler schist belt. This opens important
potential to explore for high-grade Bornite-style carbonate-hosted deposits at
depth using new deeper-penetrating geophysical techniques.

The geophysical surveys have delineated significant NNE to NE
oriented structures which appear in part to control local basin morphology and
mineralization. Better understanding of basin development and its structural
framework is critical to exploration of Bornite-style systems.

In 1999, Kennecott completed an initial gravity survey of the
lowlands showing significant gravimetric anomalies which may indicate structural
dislocations and potential alteration and mineralization. In 2011, we
investigated both deep IP and NSAMT geophysical techniques. Results from the
2011 program led to a 2012 district-wide, 200 m dipole-dipole, deep-penetrating
IP survey. That survey along with extensive 2012 physical property data capture
for all lithologies and existing ground IP, gravity and airborne EM and magnetic
surveys is currently being used to develop a comprehensive geophysical model of
the district to support future exploration targeting.

In addition to the geophysical techniques utilized in
exploration, recent ICP trace element analysis suggests a series of effective
zonation vectors, including very distinct high iron (as pyrite) and zinc (as
sphalerite) zones which overly and cap areas of significant copper
mineralization.

Bornite Project - Drilling

The subsurface of the Bornite deposit has been explored by 217
diamond drill holes totaling 70,003 meters in 20 different annual campaigns
dating from 1957 through 2012. Three underground programs totaling 51 drill
holes targeted on the No.1 Ore Body were completed between 1966 and 1968.

All of the drill campaigns except the 2011 NovaGold campaign
and the 2012 NovaCopper campaign, 14 and 22 drill holes, respectively, were
undertaken by Kennecott. Sprague and Henwood, a Pennsylvania-based drill company
completed all of the Kennecott drilling except the 1997 program (3 drill holes)
completed by Tonto Drilling Services, Inc. (a NANA Dynatech company). The 2011
NovaGold and 2012 NovaCopper programs utilized Boart Longyear Company.

48

---

In the initial years of drilling at the Bornite Project,
Kennecott relied on AX core (1.1875 inch diameter) but as deeper holes pursuing
mineralization down dip to north became the norm, use of BX core (1.625 inch
diameter) was gradually implemented. Small diameter AX rods would twist under
the high torque and deviate in undetermined directions. From 1966 to1967
drilling activity at Bornite moved underground and EX diameter core (0.845 inch
diameter) was implemented to define the No.1 Ore Body. Drilling activity moved
back to the surface in 1968 and from 1968 to 1972, BX core was most commonly
drilled. In later years, core size increased to NX (2.125 inch diameter) and in
2011 to NQ (1.874 inch or 47.6 mm diameter) and HQ (2.5 inch or 63.5 mm
diameter). Progressively larger diameter drill rods have been continually
increased over the years in an attempt to minimize drill hole deviations.

Drill Campaigns

In October 1965, Kennecott began a shaft to further investigate
the No.1 Ore Body. In 1966 the shaft reached the 297 meter level. At this level
a 91 meter crosscut was driven due north to the No.1 Ore Body. The shaft was
continued to 328 meter deep to prepare a sump and loading pocket. On October 27,
1966 a small blast to excavate a bay at the bottom of the shaft opened a
watercourse. The in-flood of water quickly exceeded the pump capacity and within
12 hours the 328 meter shaft was flooded to within 13 meters from the
surface.

Prior to the shaft flooding, six diamond drill holes were
completed from the 700 level shaft station and 22 drill holes from the 975 shaft
station and cross cut. In 1967 the shaft bottom was partially sealed then pumped
out and an additional twenty-four holes were drilled from the 975 level and the
700 level shaft stations.

Between 1968 and 1983, Kennecott completed very limited
drilling at the Bornite Project largely focusing on extensions to the No.1 ore
Body or targeting the South reef area. Kennecott subsequently sold the property
to NANA and no exploration drilling occurred between 1983 and 1997. In 1997
Kennecott leased the Bornite Project from NANA and drilled five exploration
holes.

In 2011, NovaGold negotiated a preliminary agreement with NANA,
allowing NovaGold to conduct an exploration program on the Bornite Project in
anticipation of the broader scoped NANA Agreement which was close to completion.
That year NovaGold drilled 14 holes totaling 5,819 meters.

The 2011 NovaGold drill program had three objectives: 1) to
obtain new geologic and assay data to verify and validate the previous work done
by Kennecott; 2) to test extensions of the know deposit; and 3) to drill new
areas for potential mineralization and geologic information near the deposit.

In 2012, NovaCopper, based on the results of its 2011
exploration drilling at South Reef, began aggressively delineating
mineralization in that zone. A total of 21 drill holes and one nearby
exploration drill hole were completed totalling 15,457 m. The drilling was
patterned on hexagonal closely-packed drill spacing with individual holes spaced
approximately 100 m apart on the apices of equilateral triangles.

Results from the South Reef drilling in 2012 are shown in Table
5.

49

---

Table 5: 2012 South Reef Drilling Significant Mineralized
Intervals

thickness
    Cu
    Co
    Au
    Agfrom
    to
    metres
    %
    %
    g/t
    g/tDDH RC12-01951 interval
    581.7
    593.5
    11.711.7
    2.742.74
    --
    --
    --DDH RC12-1962 intervals
    460.2
      489.8
    486.8
      504.1
    26.6
      14.340.8
    2.64
      1.472.23
    ---
    ---
    ---DDH RC12-1972 intervals
    397.4
      442.4
    435.4
      462.6
    37.9
      20.258.1
    3.12
      1.832.67
    ---
    ---
    ---DDH RC12-01982 intervals
    544.6
      631.7
    562.3
      652.9
    17.7
      21.238.9
    1.47
      3.862.77
    -
      0.23-
    -
      0.22-
    ---DDH RC12-01991 interval
    580.0
    586.5
    6.56.5
    4.304.30
    --
    --
    --DDH RC12-02004 intervals
    488.0
      536.3566.0584.3
    502.6
      538.6578.2605.7
    14.7
      2.312.221.4
     50.5
    4.73
      9.473.421.86
     3.41
    -
      ----
    -
      0.39---
    -
    5.6---DDH RC12-02011 intervals
    560.1
    596.5
    36.436.4
    5.275.27
    --
    --
    --DDH RC12-2022 intervals
    533.9
      578.5
    561.8
      591.3
    27.9
      12.840.6
    4.13
      2.413.59
    -
      --
    0.27
      --
    6.1
    --DDH RC12-02033 intervals
    392.1
      444.4629.2
    420.0
      463.6651.7
    27.9
      19.222.569.6
    1.67
      1.592.782.01
    -
      ---
    -
      ---
    -
    -14.9-DDH RC12-0204
    no significant intervals
    -
    -
    -
    -
    -DDH RC12-02052 intervals
    621.2
      638.6
    635.5
      647.2
    14.3
      8.622.9
    2.67
      2.482.60
    -
      --
    -
      --
    -
    --DDH RC12-02062 intervals
    516.6
      657.1
    524.6
      661.2
    8.0
      4.212.2
    4.44
      5.504.80
    -
      --
    -
      0.15-
    -
    --DDH RC12-02071 interval
    540.0
    551.7
    11.711.7
    5.025.02
    --
    --
    --DDH RC12-0208
    hole lost before target depthDDH RC12-0209
    667.5
      686.9
    682.4
      715.7
    14.9
      28.8
    1.68
      3.79
    -
      -
    -
      0.13
    -
-


50

---

including*4 intervals
    723.0729.1752.5
    738.2731.7764.8
    15.22.612.371.2
    5.9422.262.93
     3.66
    ----
    -0.30--
    ----DDH RC12-0210
    no significant intervals -
      exploration drill hole - 500meast
    -
    -
    -DDH RC12-0211including*
     including*4 intervals
    619.8
      637.2651.7656.3
     673.7676.2
    628.0
      642.5669.2658.5
     686.9679.4
    8.2
      5.317.52.213.2
     3.244.2
    7.91
      4.085.1016.80
     6.9614.286.06
    -
      -0.070.450.06
     0.08-
    0.15
      -0.473.180.23
     0.42-
    -
      -11.0258.70-
     --DDH RC12-02122 intervals
    551.2
      570.4
    559.9
      578.5
    8.7
      8.216.8
    4.95
      3.644.31
    -
      --
    -
      0.15-
    -
    --DDH RC12-02131 interval
    606.7
    610.3
    3.6
     3.6
    3.97
     3.97
    -
     -
    -
     -
    6.5
     -DDH RC12-02143 intervals
    480.3
      498.1540.5
    493.8
      533.3565.6
    13.5
      35.225.173.8
    2.27
      2.503.182.69
    -
      ---
    -
      ---
    -
    ---DDH RC12-0215*1 interval
    634.5
    652.1
    17.617.6
    2.052.05
    --
    --
    --DDH RC12-0215W**1 interval
    628.7
    644.5
    15.915.9
    2.542.54
    --
    --
    --DDH RC12-02163 intervals
    599.6
      627.7671.0
    609.8
      639.2726.7
    10.1
      11.455.777.2
    2.80
      4.714.454.27
    -
      -0.05-
    -
      -0.27-
    -
      8.4--


All of the drill data collected during the Kennecott drilling
programs (1958  1997) was logged on paper drill logs, copies of which are
stored in the Kennecott Exploration office in Salt Lake City, Utah. Electronic
scanned copies of the paper logs, in PDF format, are held by us.

In 1995, Kennecott entered the drill assay data, the geologic
core logs, and the down hole collar survey data into an electronic format. In
2009, NovaGold geologists verified the geologic data from the original paper
logs against the Kennecott electronic format and then merged the data into a
Microsoft SQL database.

For the 2011 and 2012 NovaGold/NovaCopper drill programs, a
commercial computer based core logging system was used. The core logging
software, GeoSpark Logger was developed by GeoSpark Consultants Inc. The data
logger program stores the information logged in a Microsoft SQL database which
in turn is validated then merged into the main database. In 2012, the system was
modified to allow each laptop to sync daily to the master Data Logger database
residing on the Bornite Camp server. The server was periodically backed up and
the database was sent to Vancouver, British Columbia for backup storage. The
camp server is stored in the Fairbanks field office at the end of each field
season. Hardcopies of the 2011 and 2012 drill core logs are stored in the
Fairbanks office. Scanned copies of the Kennecott-era drill logs are also stored
in the Fairbanks field office.

51

---

In general, core recovery averaged >90 percent with only
slightly poorer recovered in phyllitic rocks. Mineralized dolomitic units had
excellent recoveries in excess of 93 percent. South Reef drilling, in 2012,
showed core recovery rates of 88.8% overall and 88.3% in the mineralized
dolomite and massive sulphide intervals.

Bornite Project - Sample Preparation, Analyses and
Security

During the 2011 and 2012 drill programs at the Bornite Project,
we utilized strict sampling protocols developed for the nearby Arctic deposit in
2004 and documented in written NovaGold procedures manuals for all subsequent
years. The following discussion outlines the standard protocols used by us in
2011 and 2012. The entire length of each hole was sampled excluding recovered
overburden. Core-logging geologists marked each sample interval on the core and
labelled the core boxes using a china marker. A tear-off sample tag was affixed
to the core box at the beginning of each sample interval which typically ranged
from 1 to 3 meters in length though samples as short as 0.35 meters and as long
as 6.09 meters were taken in a few instances. Sample intervals within
mineralized zones were limited to a 2 meter maximum length. Sample breaks were
placed at lithological contacts and changes in alteration and sulfide
mineralization. There are no known drilling or recovery issues that could
materially impact accuracy.

The core was digitally photographed and cut in half using
diamond core saws after logging at the on-site core facility. If the drill core
intersected mineralization at a shallow angle, the core logging geologist would
place a guide line on the core to ensure a representative sample. Oriented core
was cut along the orientation mark to preserve the orientation of the core
unless otherwise marked by the core geologist. One-half of the cut core was
returned to the box for storage on-site and the other half was bagged and
labeled for sample processing and analysis.

Sampling of drill core by Kennecott during their tenure on the
property focused primarily on moderate to strongly mineralized zones. Numerous
intervals of weak to moderate mineralization remain un-sampled in the historic
drill core and in the 1997 campaign, where Kennecott did not intersect
significant mineralization, no analyses were undertaken for resource evaluation.
Intervals of moderate to strong sulfide mineralization were selected for
sampling and analyses were conducted by the Union Assay Office Inc. of Salt Lake
City, Utah, prior to the establishment of the on-site lab in 1962.

The 2011 and 2012 halved core samples were crushed to 70%
passing 2 millimeters and a nominal 250 gram split was pulverized to 85% passing
75 microns at the ALS Minerals Fairbanks facility. The resulting pulp was sent
to ALS Minerals Vancouver lab for analysis. Gold content was determined by fire
assay fusion with an atomic absorption (AA) finish from a nominal 30 gram split.
Initial results for all other elements (48) were determined via four acid
digestion and both ICP-MS and ICP-AES analysis on a nominal 25 gram split.
Samples with over limit values for copper and zinc (>10,000ppm) were re-run
using a four acid digestion, which was diluted for an ICP-AES or AA finish.
Samples greater than 40% Cu were re-run using a volumetric titration finish
after a four acid digestion.

NovaCopper continued its QA/QC program first initiated by
NovaGold in 2004. Three QA/QC samples selected by the logging geologist were
inserted into every 20 sample batch. QA/QC samples included one duplicate, one
blank, and one standard reference material (SRM). Duplicate samples were
prepared at the prep facility by taking a second split from the entire prepped
sample. In 2011, a commercial landscape marble was used as the blank material
for every drill hole, except one. Barren marble core, from a previous abandoned
drill hole, was used as the blank material for one 2011 drill hole and all 2012
drill holes.

In 2011, a very low grade SRM was inserted in batches that
consisted of unmineralized core. The other three SRMs, ranging in accepted
copper values of 0.193% to 2.37%, were inserted to match the estimated copper
content of the core. One SRM was sourced from CDN Resource Laboratories Ltd.
labs in Langley, British Columbia and the other three were from Ore Research and
Exploration in North Victoria, Australia. In 2012, a very low grade SRM was
inserted in batches that consisted of unmineralized core. The other four SRMs,
ranging in accepted copper values of 0.193% to 10.403%, were inserted to match
the estimated copper content of the core. Two SRMs were sourced from CDN labs ;
one was sourced from Ore Research & Exploration Pty Ltd., North Victoria,
Australia; and, the remaining two were sourced from Geostats Pty Ltd. of Western
Australia. Assay performance for blank and SRM samples was within acceptable
limits.

Check samples for a second lab were selected by the project
geologist once all the primary assay results were received. The check samples
consisted of 5% of the total samples from only the mineralized lithologies
(carbonates and semi to massive sulfides) and were randomly selected. These
samples were forwarded to Acme labs, also located in Vancouver, British
Columbia. No bias is apparent.

The QA/QC results are reviewed by the database administer in
the Vancouver office.

All 2011 and 2012 core logging data including sample intervals
and descriptions, were directly entered into a Microsoft Access based
application called DataLogger, created by, and customized for the project by
GeoSpark Consulting Inc., of Nanaimo, British Columbia. In 2011, this data was
imported on a weekly basis into the DataShed database located on a server in the
NovaGold Vancouver Office. In 2012, the system was modified to allow each laptop
to sync daily to the master Data Logger database residing on the Bornite camp server. Assay data was imported directly into
DataShed from csv files either downloaded or e-mailed from ALS Labs.

52

---

Each cut sample interval was placed in a 6-mil polyethylene bag
with the sample number written in black permanent marker with an attached Tyvek
sample card stub detailing the sample number and bar code. Two to four samples
were placed into a larger rice bag labeled with the ALS Minerals address,
project (hole) number, bag number, and sample numbers enclosed. The rice bag was
secured with a pre-number plastic security tie and a twist wire tie. The
security tie number was recorded, along with the total weight. The rice bags
were transported from the Bornite Camp to Fairbanks by chartered flights on a
commercial carrier. A contracted expeditor met the chartered flights at the
airport to pick-up up the sample shipment and deliver directly to the ALS
Minerals prep facility, 1060 Bush Street, Fairbanks. Each drill hole was
dispatched as one project, though many shipments were necessary per hole due to
the limited capacity of the charter flights. ALS processed each batch as they
arrived at the prep facility; however, ALS held the pulps until the entire drill
hole was prepared so that the drill hole was analyzed as a single project or job
in Vancouver. ALS Minerals did not notify us that any security ties were missing
or broken or that any other issues occurred with the sample shipments or
packaging.

In addition to the analytical data, density measurements for
the 2011 and 2012 programs were performed on-site by internal personnel. The
specific gravity of selected samples was calculated by weighing the entire assay
interval dry and then submersed it in water. No known density measurements were
performed by Kennecott.

Our independent Qualified Person (BD Resource Consulting)
considers the Bornite Project drill core sampling protocols, security and
analytical procedures to meet accepted industry standard procedures. Core
recovery is good and there is no evidence that diamond drill recovery could
materially impact the assay sampling results.

Analytical and Test Laboratories

ALS Minerals was used for all primary analyses submitted in
2011 and 2012. The core samples were sent from site to the ALS prep facility in
Fairbanks, Alaska. The samples were processed and reduced to pulps at this
facility and sent to ALS Minerals Vancouver, British Columbia lab for analysis.
ALS Minerals is located at 2103 Dollarton Highway, North Vancouver, British
Columbia, V7H 0A7. ALS Minerals complies with and is accredited for the
requirements of ISO 9001:2008 and ISO/IEC 17025:2005 General Requirements for
the Competence of Testing and Calibration Laboratories.

The ALS Minerals Vancouver lab forwarded the selected check
sample pulps to Acme Analytical Labs, also in Vancouver. Acme Labs is located at
1020 Cordova St. East, Vancouver, British Columbia V6A 4A3. Acme Labs is
compliant with the ISO 9001 Model for Quality Assurance and ISO/IEC 17025
General Requirements for the Competence of Testing and Calibration
Laboratories.

Historical core was analyzed by Union Assay Lab in Salt Lake
City, Utah and by the on-site Kennecott lab established in 1964.

Bornite Project  Database Management and Data
Verification

In 2007, legacy data (1957-1997) was compiled from both digital
and paper logs supplied by Kennecott into a central Microsoft Access
database.

In 2008, the Microsoft Access database was imported into
DataShed©, a SQL based data management software program created by Maxwell
Geoservices Pty Ltd.

In 2011, NovaGold began using a Customizable Data Logger
created by GeoSpark Consulting at the Bornite Project. This Microsoft Access©
based software was used to capture all drilling and surface data. A data entry
technician entered the geological information, collar, and down-hole survey
data, at the Bornite camp. This data was then exported by geologists on site to
Microsoft Excel© or Access format and posted on a secure FTP site for the
Database Manager in Vancouver. These exports were then imported directly into
the DataShed database in Vancouver. Assay data were imported directly from
electronic files provided by the laboratories. At the end of the field season,
all geological information, collar, and down-hole survey information was
visually verified by staff geologists by comparing original files against an
export of the database.

Also in 2011, NovaGold began to capture specific gravity and
geotechnical data, such as Rock Quality Designation (RQD) and core recovery.
Specific gravity data were recorded and then entered into Microsoft Excel
spreadsheets. Geotechnical data were recorded and then entered into the Data
Logger software. Data were exported to the Database Manager in Vancouver to be
included in the DataShed database. A 100% visual check of the specific gravity
and geotechnical logs were completed at the end of the 2011 field season and all
errors and omissions were corrected in the DataShed database.

In 2012, NovaCopper contracted GeoSpark to convert the Bornite
Project DataShed database into a SQL-based data management software program.
GeoSpark was contracted to update the Data Logger software, manage the database,
and provide ongoing QA/QC support. In 2012, NovaCopper geologists logged directly into
the Data Logger software and data were uploaded to the master database on a
daily basis. Assay data were imported directly from electronic files provided by
the laboratories. At the end of the field season, QA/QC checks were conducted on
the database and, at that time, some minor errors and omissions were corrected.
Geotechnical data (RQD and Recovery) was also captured on paper and entered into
the Data Logger program. A 100% visual check of the 2011 Geotechnical logs has
been completed and all errors and omissions have been corrected in the DataShed
Bornite database.

53

---

In order to ensure the integrity of the Bornite Project
database, an independent data management consultant was contracted by NovaGold
to carry out a 100% audit of the historic (1957-1997) collar, down-hole survey,
sample interval and assay data in September 2011. There are no previous known
comprehensive audits of the historic Bornite dataset.

A preliminary Bornite Project database had been constructed in
previous years by NovaGold staff as outlined above, which was used as a starting
point for the Cote audit. After initial review it was determined that since the
2007 NovaGold database was so limited, it was deemed prudent to not simply audit
the database but to rebuild the entire dataset from the original data sources
now in our possession. Collar, down hole survey, sample interval and assay data
were re-entered using double entry procedures to ensure validity. All remaining
data including lithology, alteration and mineralization have not been re-entered
or validated at this time. Discrepancies and errors and subsequent actions and
adjustments to the new database for the collar, downhole survey, interval and
assay data are outlined below and were implemented.

Collar Data

- 213 collars were initially in the Bornite database in DataShed
- 76 of the 213 collars could not be verified with any original data source
- 9 significant conversion errors were identified within the RC holes
- All of the RU and RUS underground holes had significant conversion errors
- All of the verified collar data were merged into the Bornite database in
  DataShed

Down hole Survey Data

- 664 down-hole survey records were initially in the Bornite database in
  DataShed
- 160 of the 664 could not be verified with any original data source
- 20 of the 504 records that could be verified had small (<2 degree)
  errors, mostly due to incorrect calculations using magnetic north.
- All of the verified data was merged into the Bornite database in DataShed

Sample Data

- After backup, all sample data were deleted from the Bornite database in
  DataShed
- 7,385 samples were located from original data sources (documents, drill
  logs, etc.)
- 563 NoSample(s) were created to account for un-sampled intervals
- 819 QC (check) samples were delineated
- 39 overall errors (meterages, sample numbers) were identified
- 28 of the 39 errors were accepted and changes were made to the database
  after review of the results
- All of the verified sample data were merged into the Bornite database in
  DataShed

54

---

Assay Data

- After a similar backup, all assay data was deleted from the Bornite
  database in DataShed
- In a first pass of the assay data, all copper (Cu) values from assay
  certificates were entered
- After the first pass, 1,385 Cu values in the database without verifiable
  data sources listed
- After the first pass, 1,766 cobalt values and 743 base metal values (gold,
  silver, lead, and zinc) were without a verifiable data source. A NovaCopper
  geologist made a second pass and entered the remaining copper assay data from
  other sources (principally drill logs) and then made a third pass and verified
  the remainder of the cobalt and base metal data.
- All of these verified assay values have been merged into the Bornite
  database in DataShed

Overall, there were very few errors (<3%) found between the
entire historic and the re-entered Bornite Project database. Collar errors were
mostly transformation problems between coordinate systems while errors in the
down-hole survey data were small azimuth and dip calculation problems. Minor
errors in the sample data were generally meterage typos. All errors have been
addressed and corrected.

Bruce Davis, FAusIMM, BD Resource Consulting, Inc., examined a
series of randomly selected drill core intervals from the Ruby Creek and South
Reef zones during his site visits in July, 2011 and September, 2012. In all
cases, the type and content of observed copper-bearing minerals supported the
copper grades found in the Bornite Project database.

The South Reef database is derived from 100% NovaCopper-era
drill holes and six Kennecott drill holes which were re-sampled by NovaCopper in
2012.

Bornite Project - Mineral Resource Estimates

The mineral resource statement presented below is a NI 43-101
compliant mineral resource evaluation for the Ruby Creek and South Reef zones
filed by us for the Bornite Project. The mineral resource model was prepared by
BDRC and SIM Geological Inc. and considers diamond drill holes drilled by
Kennecott during the period from 1957 to 1997, NovaGold during 2011 and
NovaCopper during 2012. Bruce Davis, FAusIMM, is the president of BDRC and the
author of the Technical Report. Bruce Davis is an independent qualified
person, within the meaning of NI 43-101..Robert Sim, PGeo, is the president of
SIM Geological Inc. (SGI) and the co-author of the Technical Report. Robert Sim
is an independent qualified person.The effective date of the resource statement
is January 31, 2013.

The Bornite Project has no known reserves.

This section describes the resource estimation methodology and
summarizes the key assumptions considered by BDRC. In the opinion of BDRC, the
resource evaluation reported herein is a sound representation of the copper
mineral resources found at the Bornite Project at the current level of sampling.
The mineral resources have been estimated in conformity with generally accepted
CIM Estimation of Mineral Resource and Mineral Reserves Best Practices
guidelines and are reported in accordance with the Canadian Securities
Administrators National Instrument 43-101. Mineral resources are not mineral
reserves and do not have demonstrated economic viability. There is no certainty
that all or any part of the mineral resource will be converted into mineral
reserve.

The database used to estimate the Bornite Project mineral
resources was audited by an independent consultant, Jack Cote, and the results
of the audit reviewed by BDRC. BDRC is of the opinion that the current drilling
information is sufficiently reliable to interpret with confidence the boundaries
for copper mineralization and that the assay data are sufficiently reliable to
support mineral resource estimation.

The resource estimate has been generated from drill hole sample
assay results and the interpretation of a geologic model which relates to the
spatial distribution of copper. Interpolation characteristics have been defined
based on the geology, drill hole spacing and geostatistical analysis of the
data. The resources have been classified by their proximity to the sample
locations and are reported, as required by NI 43-101, according to the CIM
standards on Mineral Resources and Reserves.

Bornite Project - Mineral Resource Statement

Mineral Resources are classified in accordance with the 2010
CIM Definition Standards for Mineral Resources and Mineral Reserves.

55

---

The Qualified Person for the Mineral Resource estimate is Bruce
Davis a Qualified Person independent of NovaCopper. Mineral Resources for the
Bornite Project are found in Tables 6, 7 and 8.

Table 6: Ruby Creek Zone Resource Estimation at Bornite -
Indicated

See Cautionary Note to United States Investors.This
section uses the term indicated resources. We advise United States investors
that this term is not recognized by the SEC. United States investors are
cautioned not to assume that estimates of indicated mineral resources are
economically minable, or will be upgraded into measured mineral resources. See
Risk Factors and Cautionary Note to United States
Investors.

IndicatedCutoff%Cu
    Tonnes(millions)
    Grade% Cu
    Pounds(millions)0.3
    9.0
    1.00
    198.60.5
    6.8
    1.19
    178.71.0
    2.4
    2.03
    109.31.5
    1.0
    3.26
    71.62.0
    0.6
    4.49
    55.0


Notes:

- Base Case is 0.5% Cu cut-off grade
- Mineral resources are not mineral reserves and do not have demonstrated
  economic viability. There is no certainty that all or any part of the mineral
  resources will be converted into mineral reserves. See Risk Factors
  and Cautionary Note to United States Investors.
- Resources stated as contained within a manually constructed potentially
  economic resource limiting pit shell using metal price of US$3.00 per lb Cu,
  mining costs of US$1.50 per tonne, processing costs of US$10.00 per tonne,
  100% recoveries and an average pit slope of 45 degrees.
- Mineral resource tonnage and contained metal have been rounded to reflect
  the accuracy of the estimate, and numbers may not add due to rounding. Tonnage
  is in metric units. Contained copper pounds as imperial pounds. See Risk
  Factors and Cautionary Note to United States Investors.

The mineral resources for the project have been estimated to
conform to the requirements of CIM (2010). There are no known factors related to
environmental, permitting, legal, title, taxation, socio-economic, marketing or
political issues which could materially affect the mineral resource.

Table 7: Ruby Creek Zone Resource Estimation at Bornite -
Inferred

See Cautionary Note to United States InvestorsThis
section uses the term inferred resources. We advise United States investors
that this term is not recognized by the SEC. The estimation of inferred
resources involves far greater uncertainty as to their existence and economic
viability than the estimation of other categories of resources. United States
investors are cautioned not to assume that estimates of inferred mineral
resources exist, are economically minable, or will be upgraded into measured or
indicated mineral resources. See Risk Factors and Cautionary Note
to United States Investors.

InferredCutoff%Cu
    Tonnes(millions)
    Grade% Cu
    Pounds(millions)0.3
    74.3
    0.68
    1113.30.5
    47.7
    0.84
    883.21.0
    11.4
    1.31
    329.81.5
    1.9
    1.94
    82.82.0
    0.5
    2.65
    30.3


56

---

Notes:

- Base Case is 0.5% Cu cut-off grade
- Mineral resources are not mineral reserves and do not have demonstrated
  economic viability. There is no certainty that all or any part of the mineral
  resources will be converted into mineral reserves. See Risk Factors
  and Cautionary Note to United States Investors.
- Resources stated as contained within a manually constructed potentially
  economic resource limiting pit shell using metal price of US$3.00 per lb Cu,
  mining costs of US$1.50 per tonne, processing costs of US$10.00 per tonne,
  100% recoveries and an average pit slope of 45 degrees.
- Mineral resource tonnage and contained metal have been rounded to reflect
  the accuracy of the estimate, and numbers may not add due to rounding. Tonnage
  is in metric units. Contained copper pounds as imperial pounds.

The mineral resources for the project have been estimated to
conform to the requirements of CIM (2010). There are no known factors related to
environmental, permitting, legal, title, taxation, socio-economic, marketing or
political issues which could materially affect the mineral resource.

Table 8: South Reek Zone Resource Estimation at Bornite -
Inferred

See Cautionary Note to United States InvestorsThis
section uses the term inferred resources. We advise United States investors
that this term is not recognized by the SEC. The estimation of inferred
resources involves far greater uncertainty as to their existence and economic
viability than the estimation of other categories of resources. United States
investors are cautioned not to assume that estimates of inferred mineral
resources exist, are economically minable, or will be upgraded into measured or
indicated mineral resources. See Risk Factors and Cautionary Note
to United States Investors.

InferredCutoff
     %Cu
    Tonnes(millions)
    Grade% Cu
    Pounds(millions)0.5
    104.3
    1.46
    3,3441.0
    43.1
    2.54
    2,4091.5
    28.8
    3.21
    2,0372.0
    25.0
    3.44
    1,8962.5
    21.7
    3.61
    1,7303.0
    16.0
    3.92
    1,3823.5
    9.5
    4.38
    9164.0
    4.9
    4.99
    543


Notes:

- Base Case is 1.0% Cu cut-off grade
- Mineral resources are not mineral reserves and do not have demonstrated
  economic viability. There is no certainty that all or any part of the mineral
  resources will be converted into mineral reserves. See Risk Factors
  and Cautionary Note to United States Investors.
- Resources stated at a 1% cut-off are considered as potentially economically
  viable in an underground mining scenario based on an assumed projected copper
  price of US$2.75/lb and total site operating costs of US$60.00/tonne
- Mineral resource tonnage and contained metal have been rounded to reflect
  the accuracy of the estimate, and numbers may not add due to rounding. Tonnage
  is in metric units. Contained copper pounds as imperial pounds.

The mineral resources for the project have been estimated to
conform to the requirements of CIM (2010). There are no known factors related to
environmental, permitting, legal, title, taxation, socio-economic, marketing or
political issues which could materially affect the mineral resource.

57

---

Bornite Project - Metallurgy

NovaGold did not sample any drill core for metallurgical test
work in 2011. Kennecott composited 32 crushed (coarse reject) AX core samples
from 5 surface holes for metallurgic float tests in 1961. The core samples were
from the high grade No.1 Ore Body and averaged 13.9% Cu.

In late 2012, NovaCopper requested an initial metallurgical
evaluation on a series of varying grade composites developed from the South Reef
zone. Four composites reflecting low-grade (0.5 -1.0% Cu), medium-grade (1.0
-2.0% Cu), high-grade (2.0 -10.0% Cu), and very high-grade (>10.0% Cu) copper
have been submitted to ALS Chemex Labs Ltd. in Vancouver, British Columbia and
G&T Metallurgical Services Ltd. in Kelowna, British Columbia for analysis.
Results are not yet available.

Bornite Project  Exploration and Development
Permitting

Development of the Bornite Project will require a significant
number of permits and authorizations from state, federal, and regional
organizations. Much of the groundwork to support a successful permitting effort
must be undertaken prior to submission of permit applications so that issues can
be identified and resolved, baseline data can be acquired, and regulators and
stakeholders can become familiar with the proposed project.

The comprehensive permitting process for the Bornite Project
can be divided into three categories:

|1. | Exploration state/regional permitting: required to obtain
      approval for drilling, camp operations, engineering, and environmental
      baseline studies.                                                                                                                                                 
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                
|2. | Pre-application phase: conducted in conjunction with
      engineering feasibility studies. This stage includes the collection of
      environmental baseline data and interaction with stakeholders and
      regulators to facilitate the development of a project that can be
      successfully permitted.
|   |                                                                                                                                                                                                                                                                                                                
|3. | The National Environmental Policy Act (NEPA) phase:
      formal agency review of the Federal and State requirements for public and
      agency participation to determine if and how the Project can be done in an
      acceptable manner.                                                                  

Multiple permits are required during the exploration phase of
the Bornite Project. The Annual Hardrock Exploration Permit (AHEA) issued by
ADNR's Division of Mining, Land, and Water is a multi-year permit that is valid
for up to five years. The AHEA is a multi-agency permit that includes various
Nationwide Permits issued by the COE, a Title 16 Fish Habitat Permit issued by
the ADF&G, a Temporary Water Use Permit issued by the ADNR, and a mining
license issued by the ADOR. NovaCopper has retained a valid AHEA permit since
2011. The EPA requires a Spill Prevention, Control, and Countermeasures (SPCC)
plan for bulk fuel storage of greater than 1,320 gallons. NovaCopper has
retained a valid SPCC plan since 2010. Due to the location of the Project within
the Northwest Arctic Borough, several Title 9 Miscellaneous Land Use permits are
required, including permits for mineral exploration, bulk fuel storage, use of
airstrips, and establishment of camps. NovaCopper has retained Title 9 Permits
since 2004. A number of statutory reporting obligations and payments are
required to maintain the claims in good standing on annual basis.

Under the NANA Agreement, NANA is required to complete a
baseline environmental report following completion of cleanup of the former
mining camp on the Bornite lands, to the standards required by the Alaska
Department of Environmental Conservation. This includes removal and disposal as
required by law of all hazardous substances present at the Bornite Project. NANA
has indemnified us and will hold us harmless for any loss, cost, expense or
damage suffered or incurred attributable to the environmental condition of the
Bornite lands at the date of the baseline report which relate to any activities
prior to the date of the agreement.

In addition, there are no indications of any known
environmental impairment or enforcement actions associated with NovaGolds or
our activities to date. As a result, neither NovaGold nor we have incurred
outstanding environmental liabilities in conjunction with its entry into the
NANA Agreement.

Bornite Project  Environmental
Considerations

We have initiated environmental baseline data collection with
respect to the Bornite Project. The general discussion herein regarding
environmental considerations and the Arctic Project is applicable to the Bornite
Project as well. (See Arctic Project  Environmental Considerations).

58

---

Bornite Project  Recent Developments

The 2012 Bornite drilling program has been focused on further
defining the South Reef Zone which was identified as a significant potential
high grade resource area during the 2011 exploration drilling program where
three holes (DDHs RC11-0187, RC11-0192 and RC11-0194) intersected significant
high grade intersections of copper mineralization. As of November 2012, we
completed drilling of 22 holes, comprising approximately 15,457 meters, at the
South Reef zone, which are included above and incorporated into the recently
release South Reef zone resource estimation.

Drilling at South Reef has outlined a 300 meter by 700 meter
northeast trending zone of mineralization. Copper mineralization remains open to
the northwest, north, northeast and south.

Item 3. LEGAL PROCEEDINGS

We are not aware of any material pending or threatened
litigation or of any proceedings known to be contemplated by governmental
authorities that are, or would be, likely to have a material adverse effect upon
us or our operations, taken as a whole. There are no material proceedings
pursuant to which any of our directors, officers or affiliates or any owner of
record or beneficial owner of more than 5% of our securities or any associate of
any such director, officer or security holder is a party adverse to us or has a
material interest adverse to us.

Item 4. MINE SAFETY DISCLOSURES

Operations are subject to regulation by the Federal Mine Safety
and Health Administration (MSHA) under the Federal Mine Safety and Health Act
of 1977 (the Mine Act). At our current stage of exploration, we are not yet
subject to MSHA.

Companies required to file periodic reports under the
Securities Exchange Act of 1934, as amended (the Exchange Act), that operate
mines regulated under the Mine Act are required to make certain disclosures
pursuant to Section 1503(a) of Dodd-Frank. We have nothing to disclose pursuant
to Section 1503(a) of Dodd-Frank for the fiscal year ended November 30, 2012.

59

---

PART II

Item 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Price Range of Common Shares

The NovaCopper Shares are listed on the TSX and the NYSE-MKT
under the symbol NCQ. On February 7, there were 1,509 holders of record of our
shares, which does not include shareholders for which shares are held in nominee
or street name. The following tables set out the market price range of the
Common Shares on the TSX and NYSE-MKT for the 12 months prior to the date
hereof.

NYSE-MKT
    
    
    TSX (C$)Month
    
    High
    
    
    Low
    
    
    High
    
    
    LowApril 25  30, 2012
    
    -
    
    
    -
    
    
    5.16
    
    
    3.06May 2012
    
    3.73
    
    
    2.45
    
    
    3.78
    
    
    2.40June 2012
    
    2.43
    
    
    1.93
    
    
    2.54
    
    
    1.90July 2012
    
    2.21
    
    
    1.75
    
    
    2.28
    
    
    1.75August 2012
    
    2.84
    
    
    1.70
    
    
    2.81
    
    
    1.67September 2012
    
    2.61
    
    
    2.14
    
    
    2.54
    
    
    2.09October 2012
    
    2.55
    
    
    1.79
    
    
    2.55
    
    
    1.76November 2012
    
    2.90
    
    
    1.96
    
    
    2.90
    
    
    1.98December 2012
    
    2.14
    
    
    1.76
    
    
    2.17
    
    
    1.81January 2013
    
    2.11
    
    
    1.93
    
    
    2.16
    
    
    1.92


On February 7, 2012, the closing price of our Common Shares on
the TSX was Cdn$1.92 per Common Share and on the NYSE-MKT was $1.93 per Common
Share.

Dividend Policy

We have not declared or paid any dividends on our common shares
since the date of our incorporation. We intend to retain our earnings, if any,
to finance the growth and development of our business and do not expect to pay
dividends or to make any other distributions in the near future. Our Board will
review this policy from time to time having regard to our financing
requirements, financial condition and other factors considered to be
relevant.

Securities Authorized for Issuance under Equity Compensation
Plans

Plan category
    Number of securities to be issued
     upon exercise of outstandingoptions, warrants and
      rights
    Weighted-average exercise
     price of outstanding options,warrants and rights
    Number of securities remaining available
      forfuture issuance under equity compensationplans
      (excluding securities reflected in column(a))(a)
    (b)
    (c)Equity compensation plans approved by security holders
    4,189,994
    3.11
    476,513Equity compensation plans not approved by security holders
    2,045,500
    N/A
    287,753Total
    6,235,494
    2.09
    764,266


60

---

Stock Performance Graph

The following graph compares the percentage change in the
Companys cumulative total shareholder return on its Common Shares with the
cumulative total return of the S&P/TSX Composite Index, assuming the
reinvestment of dividends, for the past six months as the Company began trading
on April 30, 2012. The performance chart assumes that C$100 per share was
invested on May 31, 2012, in (i) the Companys Common Shares at the closing
price of the Common Shares on such date of C$2.40 per share, as quoted on the
TSX; (ii) the S&P/TSX Composite Index; (iii) the S&P/TSX Venture 30
Index.



Exchange Controls

There are no governmental laws, decrees or regulations in
Canada that restrict the export or import of capital, including foreign exchange
controls, or that affect the remittance of dividends, interest or other payments
to non-resident holders of the securities of NovaCopper, other than Canadian
withholding tax.

Certain Canadian Federal Income Tax Considerations for U.S.
Holders

The following is a general summary of the principal Canadian
federal income tax considerations generally applicable under Income Tax Act(Canada) (the Tax Act) to a holder of Common Shares, each of whom, at all
relevant times, for the purposes of the Tax Act, holds such Common Shares as
capital property, deals at arms length with the Company, is not affiliated with
the Company and, for purposes of the Tax Act, is not, and is not deemed to be, a
resident of Canada and has not and will not use or hold or be deemed to use or
hold the Common Shares in the course of carrying on business in Canada (a
Non-Resident Holder). Special rules, which are not discussed below, may apply
to a non-resident of Canada that is an insurer which carries on business in
Canada and elsewhere.

The Common Shares will generally be considered capital property
to a Non-Resident Holder unless either (i) the Non-Resident Holder holds the
Common Shares in the course of carrying on a business of buying and selling
securities or (ii) the Non-Resident Holder has acquire the Common Shares in a
transaction or transactions considered to be an adventure in the nature of
trade.

The term U.S. Holder, for the purposes of this section, means
a Non-Resident Holder who, for purposes of the Canada-United States Income
Tax Convention(1980) as amended, (the Convention), is at all relevant
times a resident of the United States and is a qualifying person within the
meaning of the Convention. In some circumstances, fiscally transparent entities
(including limited liability companies) will be entitled to benefits under the
Convention. U.S. Holders are urged to consult with their own tax advisors to
determine their entitlement to benefits under the Convention based on their
particular circumstances.

This summary is based on the current provisions of the Tax Act,
the regulations thereunder (the Regulations), the current provisions of the
Convention, counsels understanding of the current administrative policies and
assessing practices of the Canada Revenue Agency (the CRA) publicly available
prior to the date hereof.

This summary also takes into account all specific proposals to
amend the Tax Act and Regulations publicly announced by or on behalf of the
Minister of Finance (Canada) prior to the date hereof (collectively, the
Proposed Tax Amendments). No assurances can be given that the Proposed Tax
Amendments will be enacted or will be enacted as proposed. Other than the
Proposed Tax Amendments, this summary does not take into account or anticipate
any changes in law or the administration policies or assessing practice of CRA,
whether by judicial, legislative, governmental or
administrative decision or action, nor does it take into account provincial,
territorial or foreign income tax legislation or considerations, which may
differ significantly from those discussed herein.

61

---

This summary is of a general nature only and is not
intended to be, nor should it be construed to be, legal or tax advice to any
particular U.S. Holder and no representations with respect to the income tax
consequences to any particular U.S. Holder are made. This summary is not
exhaustive of all Canadian federal income tax considerations. Accordingly, U.S.
Holders should consult their own tax advisors with respect to their own
particular circumstances. The discussion below is qualified
accordingly.

Disposition of Common Shares

A Non-Resident Holder will not be subject to tax under the Tax
Act in respect of any capital gain realized by such Non-Resident Holder on a
disposition of the Common Shares, nor will capital losses arising from the
disposition be recognized under the Tax Act, unless the Common Shares constitute
taxable Canadian property (as defined in the Tax Act) of the Non-Resident
Holder at the time of disposition and the Non-Resident Holder is not entitled to
relief under an applicable income tax treaty or convention. As long as the
shares are then listed on a designated stock exchange (which currently includes
the TSX and the NYSE MKT) at the time of disposition, the Common Shares
generally will not constitute taxable Canadian property of a Non-Resident
Holder, unless at any time during the 60-month period immediately preceding the
disposition: (i) the Non-Resident Holder, persons with whom the Non-Resident
Holder did not deal at arms length, or the Non-Resident Holder together with
all such persons, owned or was considered to own 25% or more of the issued
shares of any class or series of shares of the capital stock of the Company; and
(ii) more than 50% of the fair market value of the Common Shares was determined
directly or indirectly from one or any combination of real or immovable property
situated in Canada, Canadian resource properties (as determined in the Tax
Act), timber resource properties (as defined in the Tax Act) or a options in
respect of, or interests in, or civil law rights in, such properties, whether or
not it exists.

If the Common Shares are taxable Canadian property to a
Non-Resident Holder, any capital gain realized on the disposition or deemed
disposition of such shares, may not be subject to Canadian federal income tax
pursuant to the terms of an applicable income tax treaty or convention between
Canada and the country of residence of a Non-Resident Holder, including the
Convention.

A Non-Resident Holder whose shares are taxable Canadian
property should consult their own advisors.

Dividends on Common Shares

Under the Tax Act, dividends on shares paid or credited to a
Non-Resident Holder will be subject to Canadian withholding tax at the rate of
25% of the gross amount of the dividends. This withholding tax may be reduced
pursuant to the terms of an applicable income tax treaty or convention between
Canada and the country of residence of a Non-Resident Holder. Under the
Convention, a U.S. Holder will generally be subject to Canadian withholding tax
at a rate of 15% of the amount of such dividends. In addition, under the
Convention, dividends may be exempt from Canadian non-resident withholding tax
if paid to certain U.S. Holders that are qualifying religious, scientific,
literary, educational or charitable tax-exempt organizations and qualifying
trusts, companies, organizations or arrangements operated exclusively to
administer or provide pension, retirement or employee benefits that are exempt
from tax in the United States and that have complied with specific
administrative procedures.

Certain U.S. Federal Income Tax Considerations

The following is a general summary of certain anticipated U.S.
federal income tax considerations applicable to a U.S. Holder (as defined below)
arising from and relating to the acquisition, ownership and disposition of
Common Shares.

This summary is for general information purposes only and does
not purport to be a complete analysis or listing of all potential U.S. federal
income tax considerations that may apply to a U.S. Holder as a result of
acquisition of Common Shares. Furthermore, this summary does not take into
account the individual facts and circumstances of any particular U.S. Holder
that may affect the U.S. federal income tax considerations applicable to such
U.S. Holder of Common Shares. Except as specified below, this summary does not
discuss applicable tax reporting requirements. Accordingly, this summary is not
intended to be, and should not be construed as, legal or U.S. federal income tax
advice with respect to any U.S. Holder. U.S. Holders should consult their own
tax advisors regarding the U.S. federal, U.S. state and local, and foreign tax
consequences relating to the acquisition, ownership and disposition of Common
Shares.

No ruling from the U.S. Internal Revenue Service (the IRS) or
legal opinion has been requested, or will be obtained, regarding the potential
U.S. federal income tax considerations applicable to U.S. Holders as discussed
in this summary. This summary is not binding on the IRS, and the IRS is not
precluded from taking a position that is different from, and contrary to, the
positions taken in this summary. In addition, because the authorities on which
this summary is based are subject to various interpretations, the IRS and the
U.S. courts could disagree with one or more of the positions taken in this
summary.

62

---

Scope of this Summary

Authorities

This summary is based on the Code, regulations promulgated by
the Department of the Treasury (whether final, temporary or proposed) (Treasury
Regulations), U.S. court decisions, published rulings and administrative
positions of the IRS, and the Convention, that are applicable and, in each case,
in effect as of the date of this document. Any of the authorities on which this
summary is based could be changed in a material and adverse manner at any time,
and any such change could be applied on a retroactive or prospective basis,
which could affect the U.S. federal income tax considerations described in this
summary. This summary does not discuss the potential effects, whether adverse or
beneficial, of any proposed legislation that, if enacted, could be applied on a
retroactive basis.

U.S. Holders

For purposes of this section, a U.S. Holder is a beneficial
owner of Common Shares that, for U.S. federal income tax purposes, is (a) an
individual who is a citizen or resident of the United States for U.S. federal
income tax purposes; (b) a corporation, or other entity classified as a
corporation for U.S. federal income tax purposes, that is created or organized
in or under the laws of the United States or any state in the United States,
including the District of Columbia; (c) an estate if the income of such estate
is subject to U.S. federal income tax regardless of the source of such income;
or (d) a trust if (i) such trust has validly elected to be treated as a U.S.
person for U.S. federal income tax purposes, or (ii) a U.S. court is able to
exercise primary supervision over the administration of such trust and one or
more U.S. persons have the authority to control all substantial decisions of
such trust.

Non-U.S. Holders

For purposes of this summary, a Non-U.S. Holder is a
beneficial owner of Common Shares that is neither a U.S. Holder nor a
partnership (or other pass-through entity). This summary does not address the
U.S. federal income tax considerations applicable to Non-U.S. Holders relating
to the acquisition, ownership and disposition of Common Shares. Accordingly,
Non-U.S. Holders should consult their own tax advisors regarding the U.S.
federal, U.S. state and local, and foreign tax consequences (including the
potential application of and operation of any tax treaties) relating to the
acquisition, ownership, and disposition of Common Shares.

U.S. Holders Subject to Special U.S. Federal Income Tax
Rules Not Addressed

This summary does not address the U.S. federal income tax
considerations applicable to U.S. Holders that are subject to special provisions
under the Code, including (a) U.S. Holders that are tax-exempt organizations,
qualified retirement plans, individual retirement accounts or other tax-deferred
accounts; (b) U.S. Holders that are financial institutions, underwriters,
insurance companies, real estate investment trusts or regulated investment
companies or that are broker-dealers, dealers, or traders in securities or
currencies that elect to apply a mark-to-market accounting method; (c) U.S.
Holders that have a functional currency other than the U.S. dollar; (d) U.S.
Holders that own Common Shares as part of a straddle, hedging transaction,
conversion transaction, constructive sale or other arrangement involving more
than one position; (e) U.S. Holders that acquired Common Shares in connection
with the exercise of employee stock options or otherwise as compensation for
services; (f) U.S. Holders that hold Common Shares other than as a capital asset
(generally property held for investment purposes) within the meaning of Section
1221 of the Code; or (g) U.S. Holders that own, directly, indirectly or by
attribution, 10% or more, by voting power or value, of the outstanding shares of
the Company. The summary below also does not address the impact on persons who
are U.S. expatriates or former long-term residents of the United States subject
to Section 877 of the Code. U.S. Holders and others that are subject to special
provisions under the Code, including U.S. Holders described immediately above,
should consult their own tax advisors.

If an entity that is classified as a partnership (or other
pass-through entity) for U.S. federal income tax purposes holds Common Shares,
the U.S. federal income tax consequences applicable to such partnership (or
pass-through entity) and the partners of such partnership (or owners of such
pass-through entity) generally will depend on the activities of the
partnership (or pass-through entity) and the status of such partners (or
owners). Partners of entities that are classified as partnerships (and owners of
pass-through entities) for U.S. federal income tax purposes should consult
their own tax advisors regarding the U.S. federal income tax consequences
relating to the acquisition, ownership and disposition of Common Shares.

Tax Consequences Other than U.S. Federal Income Tax
Consequences Not Addressed

This summary does not address the U.S. state and local, U.S.
estate and gift, U.S. alternative minimum tax, or foreign tax consequences to
U.S. Holders relating to the acquisition, ownership, and disposition of Common
Shares. Each U.S. Holder should consult its own tax advisor regarding the U.S.
state and local, U.S. estate and gift, U.S. federal alternative minimum tax and
foreign tax consequences relating to the acquisition, ownership, and disposition
of Common Shares.

63

---

U.S. Federal Income Tax Consequences of the Acquisition,
Ownership and Disposition of Common Shares

Distributions on Common Shares

Subject to the PFIC rules discussed below, a U.S. Holder that
receives a distribution, including a constructive distribution, with respect to
a Common Share will be required to include the amount of such distribution in
gross income as a dividend (without reduction for any Canadian income tax
withheld from such distribution) to the extent of the current or accumulated
earnings and profits of the Company, as computed for U.S. federal income tax
purposes. To the extent that a distribution exceeds the current and accumulated
earnings and profits of the Company, such distribution will be treated first
as a tax-free return of capital to the extent of a U.S. Holders tax basis in
the Common Shares and thereafter as a gain from the sale or exchange of such
Common Shares (see Sale or Other Taxable Disposition of Common Shares
below). However, the Company does not intend to maintain the calculations of
earnings and profits in accordance with U.S. federal income tax principles, and
each U.S. Holder should therefore assume that any distribution by the Company
with respect to the Common Shares will constitute ordinary dividend income.
Subject to applicable limitations, dividends paid by the Company to
non-corporate U.S. Holders, including individuals, generally will be eligible
for the preferential tax rates applicable to long-term capital gains for
dividends, provided certain holding period and other conditions are satisfied,
including that the Company not be classified as a PFIC (as discussed below) in
the tax year of distribution or in the preceding tax year. Dividends received on
Common Shares by corporate U.S. Holders will not be eligible for the dividends
received deduction. The dividend rules are complex, and each U.S. Holder should
consult its own tax advisor regarding the application of such rules.

Sale or Other Taxable Disposition of Common Shares

Subject to the PFIC rules discussed below, upon the sale or
other taxable disposition of Common Shares a U.S. Holder generally will
recognize capital gain or loss in an amount equal to the difference between (a)
the amount of cash plus the fair market value of any property received and (b)
its tax basis in such Common Shares sold or otherwise disposed of. Such gain
generally will be treated as U.S. source for purposes of applying the U.S.
foreign tax credit rules unless the gain is subject to tax in Canada and is
resourced as foreign source under the Convention and such U.S. Holder elects
to treat such gain or loss as foreign source (see a more detailed discussion
at Foreign Tax Credit below). Any such gain or loss generally will be
capital gain or loss, which will be long-term capital gain or loss if, at the
time of the sale or other disposition, such Common Shares are held for more than
one year. Preferential tax rates apply to long-term capital gains of a U.S.
Holder that is an individual, estate, or trust. There are currently no
preferential tax rates for long-term capital gains of a U.S. Holder that is a
corporation. Deductions for capital losses are subject to significant
limitations under the Code.

Foreign Tax Credit

A U.S. Holder who pays (whether directly or through
withholding) Canadian income tax with respect to dividends paid on the Common
Shares generally may elect to deduct or credit such tax. This election is made
on a year-by-year basis and applies to all foreign taxes paid (whether directly
or through withholding) by a U.S. Holder during a year.

Complex limitations apply to the foreign tax credit, including
the general limitation that the credit cannot exceed the proportionate share of
a U.S. Holders U.S. federal income tax liability that such U.S. Holders
foreign source taxable income bears to such U.S. Holders worldwide taxable
income. In applying this limitation, a U.S. Holders various items of income and
deduction must be classified, under complex rules, as either foreign source or
U.S. source. In addition, this limitation is calculated separately with
respect to specific categories of income. Dividends paid by the Company
generally will constitute foreign source income and generally will be
categorized as passive category income. However, and subject to certain
exceptions, a portion of the dividends paid by a foreign corporation will be
treated as U.S. source income for United States foreign tax credit purposes, in
proportion to its U.S. source earnings and profits, if United States persons
own, directly or indirectly, 50 percent or more of the voting power or value of
the foreign corporations shares. A portion of any dividends paid with respect
to the Common Shares may be treated as U.S. source income under these rules,
which may limit the ability of a U.S. Holder to claim a foreign tax credit for
any Canadian withholding taxes payable in respect of such amount. Because the
foreign tax credit rules are complex, U.S. Holders should consult their own tax
advisors regarding the foreign tax credit rules, including the source of any
dividends paid to U.S. Holders.

Subject to certain specific rules, foreign income and
withholding taxes paid with respect to any distribution in respect of stock in a
PFIC should qualify for the foreign tax credit. The rules relating to
distributions by a PFIC are complex, and a U.S. Holder should consult with its
own tax advisor with respect to any distribution received from a PFIC.

Receipt of Foreign Currency

The amount of any distribution paid in foreign currency to a
U.S. Holder in connection with the ownership of Common Shares, or on the sale,
exchange or other taxable disposition of Common Shares, generally will be equal
to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of
actual or constructive receipt (regardless of whether such foreign currency is
converted into U.S. dollars at that time). If the foreign currency received is
not converted into U.S. dollars on the date of receipt, a U.S. Holder will have
a basis in the foreign currency equal to its U.S. dollar value on the date of
receipt. A U.S. Holder that receives foreign currency and converts such foreign
currency into U.S. dollars at a conversion rate other than the rate in effect on
the date of receipt may have a foreign currency exchange gain or loss, which
generally would be treated as U.S. source ordinary income or loss for foreign
tax credit purposes. U.S. Holders should consult their own U.S. tax advisors
regarding the U.S. federal income tax consequences of receiving, owning and
disposing of foreign currency.

64

---

Additional Tax on Passive Income

For tax years beginning after December 31, 2012, certain
individuals, estates and trusts whose income exceeds certain thresholds will be
required to pay a 3.8% Medicare surtax on net investment income including,
among other things, dividends and net gain from disposition of property (other
than property held in a trade or business). U.S. Holders should consult with
their own tax advisors regarding the effect, if any, of this tax on their
ownership and disposition of Common Shares.

Passive Foreign Investment Company Rules

If the Company is considered a PFIC within the meaning of
Section 1297 of the Code at any time during a U.S. Holders holding period, then
certain different and potentially adverse tax consequences would apply to such
U.S. Holders acquisition, ownership and disposition of Common Shares.

PFIC Status of the Company

The Company generally will be a PFIC if, for a given tax year,
(a) 75% or more of the gross income of the Company for such tax year is passive
income or (b) 50% or more of the assets held by the Company either produce
passive income or are held for the production of passive income, based on the
fair market value of such assets. Gross income generally includes all revenues
less the cost of goods sold plus income from investments and from incidental or
outside operations or sources,, and passive income includes, for example,
dividends, interest, certain rents and royalties, certain gains from the sale of
stock and securities, and certain gains from commodities transactions. Active
business gains arising from the sale of commodities generally are excluded from
passive income if substantially all (85% or more) of a foreign corporations
commodities are stock in trade or inventory, depreciable property used in a
trade or business, or supplies regularly used or consumed in a trade or
business, and certain other requirements are satisfied.

For purposes of the PFIC income test and asset test described
above, if the Company owns, directly or indirectly, 25% or more of the total
value of the outstanding shares of another corporation, the Company will be
treated as if it (a) held a proportionate share of the assets of such other
corporation and (b) received directly a proportionate share of the income of
such other corporation. In addition, for purposes of the PFIC income test and
asset test described above, passive income does not include any interest,
dividends, rents or royalties that are received or accrued by the Company from a
related person (as defined in Section 954(d)(3) of the Code), to the extent
such items are properly allocable to the income of such related person that is
not passive income.

Under certain attribution rules, if the Company is a PFIC, U.S.
Holders will be deemed to own their proportionate share of any subsidiary of the
Company which is also a PFIC (a Subsidiary PFIC), and will be subject to U.S.
federal income tax on (a) a distribution on the shares of a Subsidiary PFIC and
(b) a disposition of shares of a Subsidiary PFIC, both as if the U.S. Holder
directly held the shares of such Subsidiary PFIC.

The Company believes that it was not a PFIC for the tax years
ended November 30, 2011 and 2012. The determination of whether the Company (or a
subsidiary of the Company) was, or will be, a PFIC for a tax year depends, in
part, on the application of complex U.S. federal income tax rules, which are
subject to differing interpretations. In addition, whether the Company (or
subsidiary) will be a PFIC for any tax year depends on the assets and income of
the Company (and each such subsidiary) over the course of each such tax year
and, as a result, cannot be predicted with certainty as of the date of this
document. Accordingly, there can be no assurance that the IRS will not challenge
any determination made by the Company (or subsidiary) concerning its PFIC status
or that the Company (and any subsidiary) was not, or will not be, a PFIC for any
tax year. U.S. Holders should consult their own tax advisors regarding the PFIC
status of the Company and any subsidiary of the Company.

Default PFIC Rules under Section 1291 of the
Code

If the Company is a PFIC, the U.S. federal income tax
consequences to a U.S. Holder of the acquisition, ownership and disposition of
Common Shares will depend on whether such U.S. Holder makes a QEF election or
makes a mark-to-market election under Section 1296 of the Code (a
Mark-to-Market Election) with respect to Common Shares. A U.S. Holder that
does not make either a QEF Election or a Mark-to-Market Election will be
referred to in this summary as a Non-Electing U.S. Holder.

65

---

A Non-Electing U.S. Holder will be subject to the rules of
Section 1291 of the Code with respect to (a) any gain recognized on the sale or
other taxable disposition of Common Shares and (b) any excess distribution paid
on the Common Shares. A distribution generally will be an excess distribution
to the extent that such distribution (together with all other distributions
received in the current tax year) exceeds 125% of the average distributions
received during the three preceding tax years (or during a U.S. Holders holding
period for the Common Shares, if shorter).

If the Company is a PFIC, under Section 1291 of the Code any
gain recognized on the sale or other taxable disposition of Common Shares
(including an indirect disposition of shares of a Subsidiary PFIC), and any
excess distribution paid on Common Shares (or a distribution by a Subsidiary
PFIC to its shareholder that is deemed to be received by a U.S. Holder) must be
ratably allocated to each day of a Non-Electing U.S. Holders holding period for
the Common Shares. The amount of any such gain or excess distribution allocated
to the tax year of disposition or excess distribution and to years before the
Company became a PFIC, if any, would be taxed as ordinary income. The amounts
allocated to any other tax year would be subject to U.S. federal income tax at
the highest tax applicable to ordinary income in each such year, and an interest
charge would be imposed on the tax liability for each such year, calculated as
if such tax liability had been due in each such year. A Non-Electing U.S. Holder
that is not a corporation must treat any such interest paid as personal
interest, which is not deductible.

If the Company is a PFIC for any tax year during which a
Non-Electing U.S. Holder holds Common Shares, the Company will continue to be
treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of
whether the Company ceases to be a PFIC in one or more subsequent years. If the
Company ceases to be a PFIC, a Non-Electing U.S. Holder may terminate this
deemed PFIC status with respect to Common Shares by electing to recognize gain
(which will be taxed under the rules of Section 1291 of the Code discussed
above) as if such Common Shares were sold on the last day of the last tax year
for which the Company was a PFIC.

Under proposed Treasury Regulations, if a U.S. Holder has an
option, warrant or other right to acquire stock of a PFIC, such option, warrant
or right is considered to be PFIC stock subject to the default rules of Section
1291 of the Code. Under rules described below, if the Company were a PFIC, the
holding period for the option, warrant or other right would begin on the day
after the date a U.S. Holder acquired the option, warrant or other right. This
would impact the availability of the QEF Election and Mark-to-Market Election
with respect to an option, warrant or other right. Thus, a U.S. Holder would
have to account for an option, warrant or other right and Common Shares under
the PFIC rules and the applicable elections differently (see discussion below
under QEF Election and Market-to-Market Election.)

QEF Election

In the event the Company is a PFIC and a U.S. Holder makes a
QEF Election for the first tax year in which its holding period of its Common
Shares begins, such U.S. Holder generally will not be subject to the rules of
Section 1291 of the Code discussed above with respect to its Common Shares.
However, a U.S. Holder that makes a QEF Election will be subject to U.S. federal
income tax on such U.S. Holders pro rata share of (a) the net capital gain of
the Company, which will be taxed as long-term capital gain to such U.S. Holder,
and (b) the ordinary earnings of the Company, which will be taxed as ordinary
income to such U.S. Holder. Generally, net capital gain is the excess of (a)
net long-term capital gain over (b) net short-term capital gain, and ordinary
earnings are the excess of (a) earnings and profits over (b) net capital
gain. A U.S. Holder that makes a QEF Election will be subject to U.S. federal
income tax on such amounts for each tax year in which the Company is a PFIC,
regardless of whether such amounts are actually distributed to such U.S. Holder
by the Company. However, a U.S. Holder that makes a QEF Election may, subject to
certain limitations, elect to defer payment of current U.S. federal income tax
on such amounts, subject to an interest charge. If such U.S. Holder is not a
corporation, any such interest paid will be treated as personal interest,
which is not deductible.

A U.S. Holder that makes a QEF Election generally (a) may
receive a tax-free distribution from the Company to the extent that such
distribution represents earnings and profits of the Company that were
previously included in income by the U.S. Holder because of such QEF Election
and (b) will adjust such U.S. Holders tax basis in the Common Shares to reflect
the amount included in income or allowed as a tax-free distribution because of
such QEF Election. In addition, a U.S. Holder that makes a QEF Election
generally will recognize capital gain or loss on the sale or other taxable
disposition of Common Shares.

The procedure for making a QEF Election, and the U.S. federal
income tax consequences of making a QEF Election, will depend on whether such
QEF Election is timely. A QEF Election will be treated as timely if it is made
for the first year in the U.S. Holders holding period for the Common Shares in
which the Company was a PFIC. A U.S. Holder may make a timely QEF Election by
filing the appropriate QEF Election documents at the time such U.S. Holder files
a U.S. federal income tax return for such year.

A QEF Election will apply to the tax year for which such QEF
Election is made and to all subsequent tax years, unless such QEF Election is
invalidated or terminated or the IRS consents to revocation of such QEF
Election. If a U.S. Holder makes a QEF Election and, in a subsequent tax year,
the Company ceases to be a PFIC, the QEF Election will remain in effect
(although it will not be applicable) during those tax years in which the Company
is not a PFIC. Accordingly, if the Company becomes a PFIC in a subsequent tax year, the QEF Election will be effective, and the U.S.
Holder will be subject to the QEF rules described above during a subsequent tax
year in which the Company qualifies as a PFIC.

66

---

As discussed above, under proposed Treasury Regulations, if a
U.S. Holder has an option, warrant or other right to acquire stock of a PFIC,
such option, warrant or right is considered to be PFIC stock subject to the
default rules of Section 1291 of the Code on its disposition. However, a holder
of an option, warrant or other right to acquire stock of a PFIC may not make a
QEF Election that will apply to the option, warrant or other right to acquire
PFIC stock. In addition, under proposed Treasury Regulations, if a U.S. Holder
holds an option, warrant or other right to acquire stock of a PFIC, the holding
period with respect to shares of stock of the PFIC acquired upon exercise of
such option, warrant or other right will include the period that the option,
warrant or other right was held. U.S. Holders should consult their own tax
advisors regarding the application of the PFIC rules to Common Shares.

The Company will make available to U.S. Holders, upon their
written request, timely and accurate information as to its status as a PFIC, and
will provide to a U.S. Holder all information and documentation that a U.S.
Holder making a QEF Election with respect to the Company, and any Subsidiary
PFIC in which the Company owns, directly or indirectly, more than 50% of such
Subsidiary PFICs total aggregate voting power, is required to obtain for U.S.
federal income tax purposes in the event it is a PFIC. However, U.S. Holders
should be aware that the Company can provide no assurances that it will provide
any such information relating to any Subsidiary PFIC, in which the Company owns,
directly or indirectly, 50% or less of such Subsidiary PFICs aggregate voting
power. Because the Company may own shares in one or more Subsidiary PFICs, and
may acquire shares in one or more Subsidiary PFICs in the future, they will
continue to be subject to the rules discussed above with respect to the taxation
of gains and excess distributions with respect to any Subsidiary PFIC for which
the U.S. Holders do not obtain the required information. U.S. Holders should
consult their tax advisor regarding the availability of, and procedure for
making, a QEF Election with respect to the Company and any Subsidiary PFIC.

Mark-to-Market Election

A U.S. Holder may make a Mark-to-Market Election only if the
Common Shares are marketable stock. The Common Shares generally will be
marketable stock if they are regularly traded on (a) a national securities
exchange that is registered with the SEC; (b) the national market system
established pursuant to section 11A of the Securities and Exchange Act of 1934;
or (c) a foreign securities exchange that is regulated or supervised by a
governmental authority of the country in which the market is located, provided
that (i) such foreign exchange has trading volume, listing, financial disclosure
and other requirements and the laws of the country in which such foreign
exchange is located, together with the rules of such foreign exchange, ensure
that such requirements are actually enforced; and (ii) the rules of such foreign
exchange ensure active trading of listed stocks. If such stock is traded on such
a qualified exchange or other market, such stock generally will be regularly
traded for any calendar year during which such stock is traded, other than in
de minimis quantities, on at least 15 days during each calendar quarter. Each
U.S. Holder should consult its own tax advisor regarding whether the Common
Shares constitute marketable stock.

A U.S. Holder that makes a Mark-to-Market Election with respect
to its Common Shares generally will not be subject to the rules of Section 1291
of the Code discussed above. However, if a U.S. Holder does not make a
Mark-to-Market Election beginning in the first tax year of such U.S. Holders
holding period for Common Shares or such U.S. Holder has not made a timely QEF
Election, the rules of Section 1291 of the Code discussed above will apply to
certain dispositions of, and distributions on, the Common Shares.

A U.S. Holder that makes a Mark-to-Market Election will include
in ordinary income, for each tax year in which the Company is a PFIC, an amount
equal to the excess, if any, of (a) the fair market value of the Common Shares,
as of the close of such tax year over (b) such U.S. Holders tax basis in such
Common Shares. A U.S. Holder that makes a Mark-to-Market Election will be
allowed a deduction in an amount equal to the excess, if any, of (i) such U.S.
Holders adjusted tax basis in the Common Shares over (ii) the fair market value
of such Common Shares (but only to the extent of the net amount of previously
included income as a result of the Mark-to-Market Election for prior tax
years).

U.S. Holders that make a Mark-to-Market Election generally also
will adjust their tax basis in the Common Shares to reflect the amount included
in gross income or allowed as a deduction because of such Mark-to-Market
Election. In addition, upon a sale or other taxable disposition of Common
Shares, a U.S. Holder that makes a Mark-to-Market Election will recognize
ordinary income or loss (not to exceed the excess, if any, of (a) the amount
included in ordinary income because of such Mark-to-Market Election for prior
tax years over (b) the amount allowed as a deduction because of such
Mark-to-Market Election for prior tax years).

A Mark-to-Market Election applies to the tax year in which such
Mark-to-Market Election is made and to each subsequent tax year, unless the
Common Shares cease to be marketable stock or the IRS consents to revocation
of such election. U.S. Holders should consult their own tax advisors regarding
the availability of, and procedure for making, a Mark-to-Market Election.

Although a U.S. Holder may be eligible to make a Mark-to-Market
Election with respect to Common Shares, no such election may be made with
respect to the stock of any Subsidiary PFIC that a U.S. Holder is treated as
owning because such stock is not marketable.

67

---

Hence, the Mark-to-Market Election will not be effective to
eliminate the interest charge described above with respect to deemed
dispositions of Subsidiary PFIC stock or distributions from a Subsidiary
PFIC.

Other PFIC Rules

Under Section 1291(f) of the Code, the IRS has issued proposed
Treasury Regulations that, subject to certain exceptions, would cause a U.S.
Holder that had not made a timely QEF Election to recognize gain (but not loss)
upon certain transfers of Common Shares that would otherwise be tax-deferred
(e.g., gifts and exchanges pursuant to corporate reorganizations) in the event
the Company is a PFIC during such U.S. Holders holding period for the relevant
shares. However, the specific U.S. federal income tax consequences to a U.S.
Holder may vary based on the manner in which Common Shares are transferred.

Certain additional adverse rules will apply with respect to a
U.S. Holder if the Company is a PFIC, regardless of whether such U.S. Holder
makes a QEF Election. For example, under Section 1298(b)(6) of the Code, a U.S.
Holder that uses Common Shares as security for a loan will, except as may be
provided in Treasury Regulations, be treated as having made a taxable
disposition of such Common Shares.

In any year in which the Company is classified as a PFIC, a
U.S. Holder may be required to file an annual report with the IRS containing
such information as Treasury Regulations and/or other IRS guidance may require.
U.S. Holders should consult their own tax advisors regarding the requirements of
filing such information returns under these rules, including the requirement to
file an IRS Form 8621.

In addition, a U.S. Holder who acquires Common Shares from a
decedent will not receive a step up in tax basis of such Common Shares to fair
market value unless such decedent had a timely and effective QEF Election in
place.

Special rules also apply to the amount of foreign tax credit
that a U.S. Holder may claim on a distribution from a PFIC.

The PFIC rules are complex, and U.S. Holders should consult
their own tax advisors regarding the PFIC rules and how they may affect the U.S.
federal income tax consequences of the acquisition, ownership, and disposition
of Common Shares in the event the Company is a PFIC at any time during such
holding period for such Common Shares.

Information Reporting, Backup Withholding Tax

Certain U.S. Holders are required to report information
relating to an interest in Common Shares subject to certain exceptions
(including an exception for Common Shares held in accounts maintained by certain
financial institutions), by attaching a completed IRS Form 8938, Statement of
Specified Foreign Financial Assets, with their tax return for each year in which
they hold an interest in Common Shares. U.S. Holders are urged to consult their
own tax advisors regarding information reporting requirements relating to their
ownership of Common Shares.

Payments made within the United States, or by a U.S. payor or
U.S. middleman, of dividends on Common Shares, and proceeds arising from certain
sales or other taxable dispositions of Common Shares, may be subject to
information reporting and backup withholding tax, at the rate of 28%, if a U.S.
Holder (a) fails to furnish such U.S. Holders correct U.S. social security or
other taxpayer identification number (generally on Form W-9); (b) furnishes an
incorrect U.S. taxpayer identification number; (c) is notified by the IRS that
such U.S. Holder has previously failed to properly report items subject to
backup withholding tax; or (d) fails under certain circumstances to certify,
under penalty of perjury, that such U.S. Holder has furnished its correct U.S.
taxpayer identification number and that the IRS has not notified such U.S.
Holder that it is subject to backup withholding tax. However, U.S. Holders that
are corporations generally are excluded from these information reporting and
backup withholding tax rules. Any amounts withheld under the U.S. backup
withholding tax rules will be allowed as a credit against a U.S. Holders U.S.
federal income tax liability, if any, or will be refunded, if such U.S. Holder
timely furnishes the required information to the IRS. U.S. Holders should
consult their own tax advisors regarding the information reporting and backup
withholding tax rules.

Unregistered Sales of Equity Securities

None.

Repurchase of Securities

During 2012, neither NovaCopper nor any affiliate of NovaCopper
repurchased Common Shares of NovaCopper registered under Section 12 of the
Exchange Act.

68

---

Item 6. SELECTED FINANCIAL DATA

The selected financial data in the table below have been
selected in part, from our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The selected financial data should be read in conjunction with
those consolidated financial statements and the notes thereto. The selected
financial data for the years ended November 30, 2009 and 2008 were prepared in
accordance with Canadian generally accepted accounting principles and reconciled
to accounting principles generally accepted in the United States. There were no
measurement differences for the years ended November 30, 2009 and 2008.

|in thousands of dollars, except per share
      amounts
|-------------------------------------------------------
|                                                       
|                                                       
|                                                       
|Results of operations                                  
|Loss and comprehensive loss for the period             
|Basic and diluted loss per share                       
|                                                       
|Financial position                                     
|Working capital (deficit)                              
|Total assets                                           
|Total long-term liabilities                            
|Shareholders
      equity                             

Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

This Managements Discussion and Analysis (MD&A) of
NovaCopper Inc. (NovaCopper or the Company) is dated February 7, 2013 and
provides an analysis of NovaCoppers audited financial results for the year
ended November 30, 2012 compared to the year ended November 30, 2011.

The following information should be read in conjunction with
our November 30, 2012 audited consolidated financial statements and related
notes which were prepared in accordance with United States generally accepted
accounting principles (U.S. GAAP). NovaCopper adopted U.S. GAAP on December 1,
2012 applied retrospectively. Previously, we reported under Canadian generally
accepted accounting principles (Canadian GAAP). There were no measurement
differences on adoption at December 1, 2012. A summary of the U.S. GAAP
accounting policies are outlined in note 2 of the audited consolidated financial
statements. All amounts are in United States dollars unless otherwise stated.

Scott Petsel, P.Geo., an employee, Upper Kobuk Mineral Projects
Manager, and a qualified person under National Instrument 43-101 Standards of
Disclosure for Mineral Projects (NI 43-101), has approved the scientific and
technical information in the MD&A.

NovaCoppers shares are listed on the Toronto Stock Exchange
(TSX) and the NYSE-MKT under the symbol NCQ. Additional information related
to NovaCopper is available on SEDAR at www.sedar.com and on EDGAR at
www.sec.gov.

Description of business

NovaCopper is a base metals exploration company focused on
exploring and developing the Ambler mining district located in Alaska, U.S.A.
NovaCopper conducts its operations through a wholly-owned subsidiary, NovaCopper
US Inc. (NovaCopper US). Our Upper Kobuk Mineral Projects or UKMP Projects
consist of the 100% owned Ambler lands which hosts the Arctic
copper-zinc-lead-gold-silver Project and the Bornite carbonate-hosted copper
Project located on the Bornite lands acquired through a collaborative long-term
agreement with NANA Regional Corporation, Inc. (NANA), a Regional Alaska
Native Corporation. NovaCopper is primarily focused on developing copper properties in the Ambler
mining district, some of which also have significant zinc, gold and silver
resources. In addition, NovaCoppers principal properties are located in Alaska,
a region with low geopolitical risk that has a long history of mining,
established permitting standards and governments supportive of resource
development. NovaCopper draws on the expertise of its management and Board of
Directors with their years of experience at NovaGold Resources Inc.
(NovaGold). We are focused on continuing to identify high-grade mineralization
with additional exploration being executed in 2013.

69

---

NovaCopper was formed in 2011 by NovaGold to hold the UKMP
Projects, and was spun-out to shareholders by NovaGold through a Plan of
Arrangement effective April 30, 2012. NovaGold shareholders received one
NovaCopper common share for every six common shares of NovaGold held on the
effective date.

Property review

NovaCoppers principal assets, the UKMP Projects, are located
in the Ambler mining district in Northwest Alaska. Our UKMP Projects comprises a
total of approximately 352,900 acres (142,831 hectares) consisting of the Ambler
and Bornite lands.

Arctic Project

The Ambler lands, which hosts the high-grade
copper-zinc-lead-gold-silver Arctic Project and other mineralized targets within
a 65 kilometer long volcanogenic massive sulfide(VMS) belt, are owned by
NovaCopper US. The Ambler lands, comprising of a number of deposits, most
significantly the Arctic deposit, are located in Northwestern Alaska comprising
112,058 acres (45,348 hectares) of Federal patented mining claims and State of
Alaska mining claims, within which VMS mineralization has been found.

On January 11, 2010, NovaGold purchased 100% of the Ambler
lands. As consideration, NovaGold, issued 931,098 common shares with a fair
value of $5.0 million and agreed to make cash payments to the vendor of $12.0
million each in January 2011 and January 2012, respectively, for total
consideration of $29.0 million. The January 2011 payment was made by NovaGold on
January 7, 2011 and the January 2012 payment was made in advance by NovaGold on
August 5, 2011. Total fair value of the consideration was $26.5 million,
including transaction costs associated with the acquisition of $0.1 million. The
vendor retained a 1% net smelter return royalty that the owner of the property
can purchase at any time for a one-time payment of $10.0 million.

Under U.S. GAAP, we have accounted for the Ambler lands as a
mineral property with acquisition costs capitalized and exploration costs
expensed in accordance with our accounting policies. As a result of the spin-out
of NovaCopper from NovaGold, the audited consolidated financial statements have
been presented under the continuity of interest basis of accounting whereby the
amounts are based on the amounts originally recorded by NovaGold as if the
Company had held the property from inception.

Bornite Project

On October 19, 2011, NovaCopper US and NANA signed a
collaborative agreement to explore and develop the Ambler mining district. Under
the Exploration Agreement and Option to Lease, NovaCopper US acquired the
exclusive right to explore the Bornite property and lands deeded to NANA through
the Alaska Native Claims Settlement Act (ANCSA), located adjacent to the
Arctic Project. The agreement establishes a framework for any future development
of either the Bornite Project or the Arctic Project, of which both projects are
included as part of a larger area of interest as defined in the agreement.

As consideration, NovaCopper paid $4.0 million upon signing the
agreement and gave NANA the right to appoint a member to NovaCoppers Board of
Directors within a five year period following our public listing on a stock
exchange. Upon the decision to proceed with development of a mine within the
area of interest, NANA maintains the right to purchase between a 16%-25%
ownership interest in the mine or retain a 15% net proceeds royalty which is
payable after NovaCopper has recovered certain historical costs, capital and
cost of capital. Should NANA elect to purchase an ownership interest,
consideration will be payable equal to the historical costs incurred on the
properties at the elected percentage purchased less $40.0 million, not to be
less than zero. The parties would form a joint venture and be responsible for
all future costs, including capital costs of the mine based on their pro-rata
share. The completion of the agreement with NANA creates a total land package
incorporating NovaCoppers Ambler lands with the adjacent Bornite and ANCSA
lands for a total of approximately 352,900 acres (142,831 hectares).

NANA would also be granted a net smelter return royalty between
1% and 2.5% upon the execution of a mining lease or a surface use agreement, the
amount which is determined by the portion of land from which production
originates.

Under U.S. GAAP, we have accounted for the Bornite property as
a mineral property with acquisition costs capitalized and exploration costs
expensed.

70

---

Corporate developments

Public listing

On April 25, 2012, NovaCopper began trading on the TSX in
Canada and NYSE-MKT (formerly NYSE-AMEX) in the United States.

On March 28, 2012, the securityholders of NovaGold voted in
favor of the special resolution approving the announced spin-out of NovaCopper
Inc., and its wholly-owned subsidiary NovaCopper US. On April 30, 2012,
46,578,078 shares of NovaCopper were distributed to NovaGold shareholders such
that each NovaGold shareholder of record on the effective date received one
NovaCopper common share for every six common shares of NovaGold held. In
accordance with the terms of the Plan of Arrangement, NovaCopper has committed
to NovaGold to deliver up to 6,181,352 common shares to satisfy holders of
NovaGold warrants, performance share units, and deferred shares units on record
as of the close of business April 27, 2012 on the same basis as NovaGold
shareholders received under the Plan of Arrangement at the time of exercise or
vesting, as applicable. To date, NovaCopper has delivered 6,088,262 common
shares under its commitment. NovaCopper was funded with cash of $40.0 million by
NovaGold as part of the Plan of Arrangement.

US domestic issuer status

Effective December 1, 2012, NovaCopper became a domestic issuer
under U.S. federal securities laws. As a U.S. domestic issuer, we are no longer
exempt from certain provisions of the U.S. federal securities laws, including
U.S. proxy rules and Section 16 reporting, and are required to file reports on
forms required of U.S. companies, including our annual report on Form 10-K.

Executive officers

During 2012, we completed the recruitment and hiring of our
senior management team. Our CEO, Rick Van Nieuwenhuyse, VP and Chief Financial
Officer, Elaine Sanders, Senior VP Exploration, Joe Piekenbrock, and VP Human
Resources and Workforce Development, Sacha Iley, joined the Company full time
from their previous employment at NovaGold in their respective roles. Prior to
joining NovaCopper, services from these officers were provided through a
Services Agreement with NovaGold. We also announced the addition of Patrick
Donnelly as VP Corporate Communications, to assist the Company in its
stakeholder engagement, including shareholders, local communities, Native
Corporations, and various levels of government.

2012 activities

NovaCopper had approved a 2012 projects budget from May to
November 2012 of $16.5 million to support exploration activities and engineering
studies at the Upper Kobuk Mineral Projects following completion of the Plan of
Arrangement. The 2012 program focused exploration efforts on the Bornite
Project, a carbonate-hosted copper deposit located about 17 kilometers southwest
of the Arctic deposit and the Sunshine deposit, a satellite polymetallic
volcanogenic massive sulfide (VMS) deposit located 12 kilometers west of the
Arctic deposit.

We completed 15,457 meters exploring the South Reef and Ruby
Creek zones of the Bornite Project during the 2012 field season which ran from
May to early October. We also completed 1,752 meters at the Sunshine deposit.
The drill results from the 2012 drilling at Bornite have been released
throughout the fall, and are incorporated into the below resource estimate. For
the year ending November 30, 2012, NovaCopper spent $15.3 million in drilling
activities and project support for the 2012 drilling season. We purchased camp
structures and equipment of $1.5 million to support activities at site. Total
spending for the 2012 projects following completion of the Plan of Arrangement
was $15.2 million, under budget by $1.3 million.

On July 18, 2012, NovaCopper reported an initial NI 43-101
compliant resource estimate for the Ruby Creek zone of the Bornite Project in a
report entitled NI 43-101 Technical Report Resource Estimation  Ruby Creek
zone, Bornite deposit, Upper Kobuk Mineral Project, Northwest Alaska. At a 0.5%
copper cut-off grade, the Ruby Creek zone contains Indicated Resources of 6.8
million tonnes at 1.19% Cu or 178.7 million pounds of contained copper and
Inferred Resources of 47 million tonnes of 0.84% Cu or 883.2 million pounds of
contained copper. Resources are stated as contained within a potentially
economic resource limiting pit shell using a metal price of $3.00 per pound
copper, mining costs of $1.50 per tonne, processing costs of $10.00 per tonne,
100% recoveries and an average pit slope of 45 degrees. See Cautionary Note
to United States Investors concerning Reserve and Resource Estimates.

On February 5, 2013, NovaCopper released an updated resource
estimate for the Bornite Project in a report entitled NI 43-101 Technical
Report Resource Estimation  South Reef and Ruby Creek zones, Bornite deposit,
Upper Kobuk Mineral Projects, Northwest Alaska. In addition to the Ruby Creek
zone resources released on July 18, 2012 and stated above, NovaCopper released a
resource estimation on the South Reef zone which lies roughly 400 to 600 meters
southeast of the Ruby Creek zone. The South Reef zone at Bornite reports at a
1.0% copper cut-off grade, Inferred Resources of 43.1 million tonnes of 2.54% Cu
or 2,409 million pounds of contained copper. Resources are stated as potentially being
economically viable in an underground mining scenario based on a projected metal
price of $2.75 per pound copper and total site operating costs of $60.00 per
tonne.

71

---

SeeCautionary Note to United States Investors
concerning Reserve and Resource Estimates.

NovaCopper also continued to optimize development opportunities
at the Arctic deposit by completing metallurgical test work programs.

Outlook

On February 5, 2013 the Company announced an updated resource
at Bornite totaling 43.1 million tonnes of 2.54% Cu. This resource incorporates
a new resource at the South Reef zone from drilling completed in 2012 with the
resource at the Ruby Creek zone previously announced on July 18, 2012. The
Company has an approved budget of $16.0 million for its 2013 exploration
program, technical reviews, formal studies and general and administrative costs.
We plan to focus the 2013 technical program on drilling and engineering to
demonstrate potential synergies for a combined Arctic and Bornite mining
scenario.

We will also continue to focus efforts on community relations
and workforce development strategies, working closely with NANA on these
efforts. We plan to sign a memorandum of understanding with the Alaska
Industrial Development and Export Authority (AIDEA) as the next step to
advancing the road into the Ambler mining district. The State of Alaska and
AIDEA are working on initiating permitting for the road which is expected to
provide access to NovaCoppers UKMP Projects.

We do not currently generate operating cash flows. At November
30, 2012, we had cash and cash equivalents of $22.2 million and working capital
of $21.2 million. At February 7, 2013, we had approximately $19.1 million of
cash and cash equivalents. At present, we believe that the current cash and cash
equivalent balances as of November 30, 2012 are sufficient to cover the
anticipated expenditures on exploration activities and general and
administrative costs for 2013. Additional capital will be necessary to conduct
additional exploration drilling and engineering studies on our properties to
advance our projects to a positive production decision. Based on anticipated but
not committed expenditures on our projects, we are likely to require financing
within the next twelve to eighteen months. Future financings are anticipated
through debt financing, equity financing, convertible debt, exercise of options,
or other means. The continued operations of the Company are dependent on its
ability to obtain additional financing or to generate future cash flows.
However, there can be no assurance that we will be successful in our efforts to
raise additional capital.

Summary of results

|in thousands of dollars,                 |  
|---------------------------------------- | -
|except for per share amounts             |  
|                                         |  
|                                         |  
|                                         |  
|Accretion expense                        |  
|Amortization                             |  
|General and administrative               |  
|Mineral properties expense               |  
|Professional fees                        |  
|Salaries                                 |  
|Salaries  stock-based compensation      |  
|Loss and comprehensive loss for the year |  
|Basic and diluted loss per common share  | $

For the year ended November 30, 2012, NovaCopper reported a net
loss of $31.0 million (or $0.67 basic and diluted loss per common share)
compared to a net loss of $11.3 million for the corresponding period in 2011 (or
$0.44 basic and diluted loss per common share) and a net loss of $3.3 million
for the corresponding period in 2010 (or $0.14 basic and diluted loss per common
share). This variance was primarily due to significantly increased activities at
its UKMP Projects during the 2012 field season, stock-based compensation,
salaries and general and administrative expenses. Mineral property expenses
consist of direct drilling, personnel, community, resource reporting and other
exploration expenses, as well as indirect project support expenses such as fixed
wing charters, helicopter support, fuel, and other camp operation costs. In
2012, NovaCopper became a publicly listed entity, and as a result, recorded
stock-based compensation expense for the first time. Total expense recognized
for the year was $9.4 million which included the granting of 6.3 million options
to directors ($4.1 million), officers and employees ($5.1 million) and an
expense of $0.2 million for NovaGold Arrangement Options from the spin-out. As
NovaCopper was not a publicly traded entity in 2011 and 2010, there is no
similar charge. Further, as a result of becoming a separate public company,
expenses were incurred relating to general and administrative expenses and
salaries as it first had its own employees in 2012. The comparable basic and
diluted loss per common share for 2012 is significantly higher than 2011 and
2010 mainly as a result of the increased net loss as well as a greater number of
shares outstanding. The Company had 100 common shares outstanding at the end of
2011 held by NovaGold following its incorporation as a wholly-owned subsidiary of NovaGold in April
2011. Under U.S. GAAP, as a spin-out of NovaGold through a stock split, the
comparable loss per share in prior periods has been restated to incorporate the
shares distributed as if the spin-out occurred at inception. Expenses to April
30, 2012, the date of completion of the spin-out, were funded by NovaGold and
its affiliates.

72

---

Other important variances for the twelve-month period ended
November 30, 2012 compared to the same period in 2011 are as follows: (a) $1.0
million accretion expense in 2011 from payments owing on the Ambler land
acquisition which were completed in 2011 which resulted in no comparable expense
in 2012; (b) $2.3 million in general and administrative expenses in 2012
compared to $1.3 million in 2011, primarily as a result of NovaCopper becoming a
public company following the completion of the spin-out from NovaGold and the
start-up expenses associated with becoming independent from NovaGold; (c) $15.3
million on mineral properties expense in 2012 compared to $8.6 million in 2011,
due to increased activities in 2012 at the Companys UKMP Projects operating a
four-drill program when compared to two-drill program in 2011; and (d) $2.4
million salaries expense in 2012 compared to $0.1 million in the same period in
2011, primarily because the Company for the first time had corporate employees
during 2012 which included a onetime expense of $0.6 million to account for the
issuance of 76,005 common shares under the Presidents employment agreement on
the completion of the spin-out.

Fourth quarter results

During the fourth quarter of 2012, we incurred a net loss of
$7.8 million compared to $1.7 million for the comparable period in 2011. The
increase in net loss in 2012 compared to 2011 was a result of NovaCopper being a
separate public company including salaries of $1.3 million, stock-based
compensation expense of $1.9 million, and general and administrative expenses of
$0.8 million for which there was no comparable expense in the prior year. Other
items increasing the net loss resulted from mineral property expenses of $3.1
million in the fourth quarter of 2012 compared to $0.2 million in the fourth
quarter of 2011 arising from a longer field season and a larger drilling
program.

Selected financial data

Annual informationThe following annual information
is prepared in accordance with U.S. GAAP.

|in
      thousands of dollars            | 
|---------------------------------------- | 
|                                         | 
|                                         | 
|                                         | 
|Interest income                          | 
|Expenses                                 | 
|Loss and comprehensive loss for the year | 
|Total assets                             | 
|Total liabilities                        | 

Quarterly information

The following unaudited quarterly information is prepared in
accordance with U.S. GAAP.

|in thousands of dollars,                  | 
|----------------------------------------- | 
|except per share amounts                  | 
|                                          | 
|                                          | 
|Interest income                           | 
|Mineral property expenses                 | 
|Loss for the quarter                      | 
|Loss per common share  basic and diluted | 

Factors that can cause fluctuations in NovaCoppers quarterly
results include the length of the exploration field season at the properties,
timing of property acquisition payments, stock option vesting, and issuance of
shares. Other factors that have caused fluctuations in the quarterly results
that would not be expected to re-occur include the incorporation of NovaCopper
and completion of the spin-out. Prior to April 2011, NovaCopper had no shares
outstanding as it was not yet incorporated. As a result of the spin-out, the
loss per common share has been restated as if the distribution of common shares
would have occurred at inception.

During the first quarter of 2011, we recorded a $0.3 million
accretion expense as a result of accretion relating to payments owing on the
Ambler land acquisition due in January 2011 and 2012. During the second quarter
of 2011, we had mineral property expenses of $2.4 million as a result of the
start-up of the exploration field season During the third quarter of 2011, we
had mineral property expenses of $5.6 million as the full quarter was during the
exploration field season and accretion expense of $0.5 million due to an early
payment of payments owing on the Ambler land acquisition. During the fourth
quarter of 2011, NovaCopper incurred $1.3 million in general and administrative
expenses as a result of general expenses that were incurred as part of
NovaCopper incurring management fees from NovaGold. During the first quarter of
2012, we recorded expenses of $0.6 million in mineral property expenses in
preparation activities for field season and ongoing engineering studies. During
the second quarter of 2012, NovaCopper had stock-based compensation expense of
$5.5 million, $0.7 million for general and administrative and $0.7 million for
salaries expense recorded as a result of the completion of the spin-out from
NovaGold. During the third quarter of 2012, mineral property expenses of $9.1
million were recorded as a larger exploration program was conducted than
previous years during which the third quarter encompasses the majority of the
field season. Additionally, stock-based compensation expense of $2.0 million was
recognized due to the vesting of previously granted stock options. During the
fourth quarter of 2012, mineral property expenses of $3.1 million were recorded
for the end of the 2012 field season. Stock-based compensation expense of $1.9
million was also recognized due to the vesting of previously granted stock
options.

73

---

The Companys properties are not yet in production;
consequently, the Company believes that its loss (and consequent loss per common
share) is not a primary concern to investors in the Company.

Liquidity and capital resources

At November 30, 2012, NovaCopper had $22.2 million in cash and
cash equivalents. We expended $19.9 million on operating activities during the
twelve-month period ended November 30, 2012, compared with expenditures of $9.7
million for operating activities for the same period in 2011. A majority of cash
spent on operating activities during both periods was expended on mineral
property expenses, which also accounts for the significant increase similar to
our earlier discussions. As the exploration field season in the Ambler district
is between May and early October of each year, a significant portion of the
mineral property expenses and operating activities are incurred during this time
frame. The remaining increase in operating activities from 2011 to 2012 is
mostly due to expenditures in the period for general and administrative and
salaries expense for which there was no comparative spending in 2011.

During the year ended November 30, 2012, $43.8 million in cash
from financing activities was generated compared with $15.1 million in the same
period in 2011. Cash of $40.0 million was received from NovaGold in April 2012
with the completion of the Plan of Arrangement. Additional funding of $3.8
million was received to fund operating expenses incurred up to April 30, 2012
compared with $15.1 million in operating expense funding provided in the same
period in 2011. The decrease in funding relates to five months of funding in
2012 compared to nine months of funding in 2011. In 2011, a portion of the total
$39.1 million in funding received from NovaGold repaid the remaining $24.0
million note payable on the purchase of the Ambler lands.

During the year, the Company expended $1.6 million on investing
activities compared with $1.4 million in 2011. In 2011, the Companys focus was
on building a camp and acquiring equipment to assist in that effort. In 2012,
the Company spent a comparable amount on acquiring additional equipment to
maintain and improve road access and expand sleeping capacity of its camp.

Based on the current exploration budget outlined under
Outlook, we have sufficient working capital for the next twelve months. The
Company expects that it will undertake financing within the next twelve to
eighteen months to fund its exploration activity and general corporate expenses.
There is no assurance the Company will be able to complete such financings on
favourable terms or at all.

Contractual obligations

Contractual obligated undiscounted cash flow requirements as at
November 30, 2012 are as follows.

|in thousands of dollars,                 | 
|---------------------------------------- | 
|unless otherwise specified               | 
|                                         | 
|                                         | 
|Accounts payable and accrued liabilities | 
|Due to related parties (a)               | 
|Total                                    | 

|(a) | Amounts due to related parties consist of current
      accounts payable owing to NovaGold under its Services
  Agreement.
|--- | --------------------------------------------------------------------------------------------------------------------------

Off-balance sheet arrangements

The Company has no material off-balance sheet arrangements or
operating leases at this time. It expects to enter into an operating lease for
office space and related equipment in the next twelve months.

74

---

Outstanding share data

At February 7, 2013, NovaCopper had 52,767,511 common shares
issued and outstanding. At February 7, 2013, NovaCopper had 6,064,994 stock
options with a weighted-average exercise price of $3.11, 2,076,541 NovaGold
arrangement options with a weighted-average exercise price of $4.22, and
1,295,500 restricted share units and 750,000 deferred share units outstanding.

Related party transactions

Expenses to April 30, 2012 were funded by NovaGold and its
affiliates. NovaGold is a company with directors in common. During the year
ended November 30, 2012, NovaGold and its affiliates provided management and
office services totaling $0.7 million to NovaCopper, including rental of office
space and a one-time set-up fee of $49,000 pursuant to a Services Agreement.
NovaCoppers CFO and VP, HR and Workforce Development were sharing their costs
between the two companies until they transitioned full time to NovaCopper in
November 2012.

During the year ended November 30, 2012, we provided
exploration and management services in the amount of $0.1 million to NovaGold
under the Services Agreement. The Services Agreement terminates on May 1,
2013.

NovaCopper had accounts receivable of $43,000 at November 30,
2012 and $nil at November 30, 2011 due from NovaGold. NovaCopper had payables
due to related parties of $127,000 at November 30, 2012 and $395,000 at November
30, 2011 due to NovaGold and its affiliates. The amount due at November 30, 2011
was contributed as part of NovaGolds funding of NovaCopper prior to the
effective date of the Plan of Arrangement.

New accounting pronouncements

Unless otherwise noted, the following revised standards and
amendments are effective for annual periods beginning on or after December 1,
2011 or as noted. The Company is continuing to assess the impact of these
standards and amendments or has determined whether it will early adopt them as
noted.

| | i.   | Share-based payments and exercise price                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      | The Financial Accounting Standards Board (FASB) issued
      accounting standard update (ASU) to Topic 718 which provides guidance on
      whether a share-based payment award with an exercise price denominated in
      the currency of a market in which the underlying equity security trades
      should be classified as a liability when the exercise price is not
      denominated in either a foreign operations functional currency or the
      currency in which an employees pay is denominated. The guidance clarifies
      that if a share-based payment award with an exercise price denominated in
      a currency of a market in which a substantial portion of the entitys
      equity securities trade, it would not be considered to contain a condition
      that is not a market, performance or service condition that would require
      classification as a liability if it otherwise qualifies for equity
      classification. This guidance is effective for interim and annual periods
      beginning after December 15, 2010 and is effective for the Company
      beginning December 1, 2011. Adoption of this guidance had no impact on the
      Companys interim consolidated financial statements.                                                                                    
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ii.  | Presentation of comprehensive income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      | In June 2011, the FASB issued an update to Topic 220,
      Presentation of Comprehensive Income. This ASU provides that an entity
      that reports items of other comprehensive income has the option to present
      comprehensive income in either 1) a single statement that presents the
      components of net income and total net income, the components of other
      comprehensive income and total other comprehensive income, and a total for
      comprehensive income; or 2) a two-statement approach which presents the
      components of net income and total net income in a first statement,
      immediately followed by a financial statement that presents the components
      of other comprehensive income, a total for other comprehensive income, and
      a total for comprehensive income. The option in current U.S. GAAP that
      permits the presentation of other comprehensive income in the statement of
      changes in equity was eliminated. The guidance will be applied
      retrospectively and is effective for annual periods beginning after
      December 15, 2011. Early adoption is permitted. The Company has elected to
      early adopt the guidance effective December 1, 2011. The Companys current
      one-statement approach resulted in no impact to presentation.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | iii. | Comprehensive income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      | In December 2011, the FASB issued Comprehensive Income 
      Deferral of the Effective Date for Amendments to the Presentation of
      Reclassifications of Items out of Accumulated Other Comprehensive Income
      in Accounting Standards Update No. 2011-05 (ASU 2011-12). ASU 2011-12
      defers changes in Update 2011-05 that relate to the presentation
  of reclassification adjustments. ASU 2011-12 is effective for
fiscal years, and interim periods within those years, beginning after December
15, 2011 (year ending November 30, 2013 for the Company). The Company does not
expect the adoption of ASU 2011-12 to have a material impact on our results of
operations, financial condition, or cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

75

---

Critical accounting estimates

The most critical accounting estimates upon which NovaCoppers
financial status depends are those requiring estimates of the recoverability of
its capitalized mineral properties, impairment of long-lived assets and
valuation of stock-based compensation.

Mineral properties and development costs

All direct costs related to the acquisition of mineral property
interests are capitalized. Mineral property exploration expenditures are
expensed when incurred. When it has been established that a mineral deposit is
commercially mineable and an economic analysis has been completed in accordance
with Industry Guide 7, the costs subsequently incurred to develop a mine on the
property prior to the start of mining operations are capitalized and will be
amortized against production following commencement of commercial production
using the unit of production method over the estimated life of proven and
probable reserves.

The acquisition of title to mineral properties is a complicated
and uncertain process. NovaCopper has taken steps, in accordance with industry
standards, to verify the mineral property in which it has an interest. Although
we have made efforts to ensure that legal title to its property is properly
recorded, there can be no assurance that such title will ultimately be
secured.

Impairment of long-lived assets

Management assesses the possibility of impairment in the
carrying value of its long-lived assets whenever events or circumstances
indicate that the carrying amounts of the asset or asset group may not be
recoverable. Management calculates the estimated undiscounted future net cash
flows relating to the asset or asset group using estimated future prices, proven
and probable reserves and other mineral resources, and operating, capital and
reclamation costs. When the carrying value of an asset exceeds the related
undiscounted cash flows, the asset is written down to its estimated fair value,
which is usually determined using discounted future cash flows. Managements
estimates of mineral prices, mineral resources, foreign exchange, production
levels and operating capital and reclamation costs are subject to risk and
uncertainties that may affect the determination of the recoverability of the
long-lived asset. It is possible that material changes could occur that may
adversely affect Managements estimates.

Stock-based compensation

Compensation expense for options granted to employees,
directors and certain service providers is determined based on estimated fair
values of the options at the time of grant using the Black-Scholes option
pricing model, which takes into account, as of the grant date, the fair market
value of the shares, expected volatility, expected dividend yield and the
risk-free interest rate over the expected life of the option. The cost is
recognized using the graded attribution method over the vesting period of the
respective options. The expense relating to the fair value of stock options is
included in expenses and is credited to contributed surplus.

Disclosure controls and procedures

Disclosure controls and procedures are designed to ensure that
information required to be disclosed in reports filed or submitted by the
Company under U.S. and Canadian securities legislation is recorded, processed,
summarized and reported within the time periods specified in those rules,
including providing reasonable assurance that material information is gathered
and reported to senior management, including the Chief Executive Officer (CEO)
and Chief Financial Officer (CFO), as appropriate, to permit timely decisions
regarding public disclosure. Management, including the CEO and CFO, has
evaluated the effectiveness of the design and operation of the Companys
disclosure controls and procedures, as defined in Rule 13a-15(e) and15d-15(e) of
the US Exchange Act and the rules of Canadian Securities Administration, as at
November 30, 2012. Based on this evaluation, the CEO and CFO have concluded that
the Companys disclosure controls and procedures were effective.

76

---

Internal control over financial reporting

Management is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rule 13a-15(f)
and 15d-15(f)of the U.S. Exchange Act and National Instrument 52-109
Certification of Disclosure in Issuers Annual and Interim filings. Any system
of internal control over financial reporting, no matter how well designed, has
inherent limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation. Management has used the Committee of Sponsoring
Organizations of the Treadway Commission framework to evaluate the effectiveness
of the Companys internal control over financial reporting. Based on this
assessment, management has concluded that as at November 30, 2012, the Companys
internal control over financial reporting was effective.

The effectiveness of the Companys internal control over
financial reporting has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, which has expressed its opinion
in its report included with the Companys annual consolidated financial
statements.

Risk factors

NovaCopper and its future business, operations and financial
condition are subject to various risks and uncertainties due to the nature of
its business and the present stage of exploration of its mineral properties.
Certain of these risks and uncertainties are under the heading Item 1A. Risk
Factors.

77

---

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

We are engaged in the acquisition and exploration of base metal
projects and related activities, including exploration, engineering, permitting
and the preparation of feasibility studies. The value of our properties is
related to the price of copper and zinc and changes in the prices of base metals
could affect our ability to generate future revenues.

Base metal prices may fluctuate widely from time to time and
are affected by numerous factors, including the following: expectations with
respect to the rate of inflation, exchange rates, interest rates, global and
regional political and economic circumstances and governmental policies. The
demand for and supply of base metals significantly affect base metal prices. The
supply of base metals consists of a combination of new mine production and
existing stocks of fabricated base metals. The demand for copper and zinc
primarily consists of use in building construction, power generation and
transmission, electronic product manufacturing, and production of machinery and
vehicles. Additionally, hedging activities by producers, consumers and
individuals can affect base metal supply and demand. While copper and zinc can
be readily sold on numerous markets throughout the world, its market value
cannot be predicted for any particular time.

Financial Instruments

Our financial instruments are exposed to certain financial
risks, including currency risk, credit risk, liquidity risk, interest risk and
price risk. Our financial instruments consist of cash and cash equivalents,
accounts receivable, deposits, accounts payable and accrued liabilities, and due
to related parties. Our instruments are held in the normal course to meet daily
operating and cash flow needs of the business. The fair value of accounts
payable and accrued liabilities and due to related parties approximates their
carrying value due to the short-term nature of their maturity. All of our
financial instruments are initially measured at fair value and then held at
amortized cost.

Currency risk

Currency risk is the risk of a fluctuation in financial asset
  and liability settlement amounts due to a change in foreign exchange rates. We
  operate in the United States and Canada with some expenses incurred in Canadian
  dollars. Our exposure is limited to cash of CDN$578,000, accounts receivable of
  CDN$72,000 and accounts payable of CDN$1,159,000 at November 30, 2012. Based on
  a 10% change in the US-Canadian exchange rate, assuming all other variables
  remain constant, our net loss for the year ended November 30, 2012 would change
  by approximately $47,000.

Credit risk

Credit risk is the risk of an unexpected loss if a customer or
  third party to a financial instrument fails to meet its contractual obligations.
  Our cash and cash equivalents are all held with Canadian Chartered financial
  institutions and are composed of financial instruments issued by Canadian banks.
  Our accounts receivable consist of HST receivable from the Federal Government of
  Canada, amounts due from related parties and receivables due for camp and
  management services provided to other parties. Our exposure to credit risk is
  equal to the balance of cash and cash equivalents and accounts receivable as
  recorded in the financial statements.

Liquidity risk

Liquidity risk is the risk that NovaCopper will encounter
  difficulties raising funds to meet its financial obligations as they fall due.
  We are in the exploration stage and do not have cash inflows from operations;
  therefore, we manage our liquidity risk through the management of its capital
  structure and financial leverage. We do expect, based on anticipated but not
  committed expenditures on its projects, we are likely to require financing
  within the next twelve to eighteen months. Future financings are expected to be
  obtained through debt financing, equity financing, convertible debt, exercise of
  options, or other means. Continued operations are dependent on its ability to
  obtain additional financing or to generate future cash flows. Our contractually
  obligated cash flow is disclosed under the section titled Liquidity and capital
  resources.

Interest rate risk

Interest rate risk is the risk that the fair value or future
  cash flows of a financial instrument will fluctuate because of changes in market
  interest rates. The Company holds excess cash balances in money market funds
  which limits the risk of loss due to interest rate changes to $nil.

78

---

Price risk

The Company is exposed to price risk with respect to commodity
prices as future profitability and long-term viability will depend, in large
parts on the price of copper, zinc, lead, gold and silver. The market prices for
such metals are volatile and subject to numerous factors beyond Managements
control. Management closely monitors commodity prices to determine the
appropriate course of action to be taken. The Company does not have any hedging
or other commodity-based risks respecting its operations.

As the Company is currently in the exploration phase none of
its financial instruments are exposed to commodity price risk; however, the
Companys ability to obtain long-term financing and its economic viability could
be affected by commodity price volatility.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Supplementary Data

For the required supplementary data, please see the section
heading Item 7. Managements Discussion and Analysis of Financial Condition
and Results of Operations  Summary of Quarterly Results and Fourth Quarter
Results above.

Managements Report on Internal Control
  over Financial Reporting

The management of NovaCopper Inc. is responsible for
  establishing and maintaining adequate internal control over financial reporting
  under Rule 13a-15(f) and 15d-15(f). The Securities Exchange Act of 1934 defines
  this as a process designed by, or under the supervision of, the Companys
  principal executive and principal financial officers and effected by the
  Companys Board of Directors, management and other personnel, to provide
  reasonable assurance regarding the reliability of financial reporting and the
  preparation of financial statements for external purposes in accordance with
  generally accepted accounting principles, and includes those policies and
  procedures that:

- Pertain to the maintenance of records that, in reasonable detail,
    accurately and fairly reflect the transactions and dispositions of the assets
    of the Company;
- Provide reasonable assurance that transactions are recorded as necessary
    to permit preparation of financial statements in accordance with generally
    accepted accounting principles, and that receipts and expenditures of the
    Company are being made only in accordance with authorizations of management
    and directors of the Company; and
- Provide reasonable assurance regarding prevention or timely detection of
    unauthorized acquisition, use or disposition of the Companys assets that may
    have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over
  financial reporting may not prevent or detect misstatements. Projections of any
  evaluation of effectiveness to future periods are subject to risk that controls
  may become inadequate because of changes in conditions, or that the degree of
  compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Companys internal
  control over financial reporting as of November 30, 2012. In making this
  assessment, the Companys management used the criteria set forth by the
  Committee of Sponsoring Organizations of the Treadway Commission in Internal
  Control  Integrated Framework.

Based upon our assessment and those criteria, management
  concluded that the Companys internal control over financial reporting was
  effective as of November 30, 2012.

PricewaterhouseCoopers LLP, an independent registered public
  accounting firm, has issued an audit report on internal control over financial
  reporting for NovaCopper Inc. as of November 30, 2012, which is included
  herein.

|/s/ Rick Van Nieuwenhuyse           | /s/ Elaine Sanders                      
|----------------------------------- | ----------------------------------------
|                                    |                                         
|Rick Van Nieuwenhuyse               | Elaine Sanders                          
|President & Chief Executive Officer | Vice President & Chief Financial Officer
|                                    |                                         
|February 7, 2013                    |                                         

79

---

Report of Independent Registered Public
  Accounting Firm

To the Shareholders of NovaCopper Inc.

We have completed an integrated audit of NovaCopper Inc.s
  (NovaCopper) 2012 consolidated financial statements and its internal control
  over financial reporting as at November 30, 2012.

Our opinions, based on our audits, are presented below.

Report on the consolidated financial statementsWe
  have audited the accompanying consolidated financial statements of NovaCopper
  (an exploration stage company) which comprise the consolidated balance sheets as
  at November 30, 2012 and 2011 and the consolidated statements of loss,
  comprehensive loss and deficit, changes in shareholders equity and cash flows
  for each of the three years in the period ended November 30, 2012 and
  cumulatively for the period from March 22, 2004 (date of inception) to November
  30, 2012 and the related notes, which comprise a summary of significant
  accounting policies and other explanatory information.

Managements responsibility for the consolidated financial
  statementsManagement is responsible for the preparation and fair
  presentation of these consolidated financial statements in accordance with
  accounting principles generally accepted in the United States of America and for
  such internal control as management determines is necessary to enable the
  preparation of consolidated financial statements that are free from material
  misstatement, whether due to fraud or error.

Auditors responsibilityOur responsibility is to
  express an opinion on these consolidated financial statements based on our
  audits. We conducted our audits in accordance with Canadian generally accepted
  auditing standards and the standards of the Public Company Accounting Oversight
  Board (United States). Those standards require that we plan and perform an audit
  to obtain reasonable assurance about whether the consolidated financial
  statements are free from material misstatement. Canadian generally accepted
  auditing standards require that we comply with ethical requirements.

An audit involves performing procedures to obtain audit
  evidence, on a test basis, about the amounts and disclosures in the consolidated
  financial statements. The procedures selected depend on the auditors judgment,
  including the assessment of the risks of material misstatement of the
  consolidated financial statements, whether due to fraud or error. In making
  those risk assessments, the auditor considers internal control relevant to the
  companys preparation and fair presentation of the consolidated financial
  statements in order to design audit procedures that are appropriate in the
  circumstances. An audit also includes evaluating the appropriateness of
  accounting principles and policies used and the reasonableness of accounting
  estimates made by management, as well as evaluating the overall presentation of
  the consolidated financial statements.

We believe that the audit evidence we have obtained in our
  audits is sufficient and appropriate to provide a basis for our audit opinion on
  the consolidated financial statements.

OpinionIn our opinion, the consolidated financial
  statements present fairly, in all material respects, the financial position of
  NovaCopper as at November 30, 2012 and 2011 and its financial performance and
  its cash flows for each of the three years in the period ended November 30, 2012
  and cumulatively for the period from March 22, 2004 (date of inception) to
  November 30, 2012 in accordance with accounting principles generally accepted in
  the United States of America.

Report on internal control over financial reportingWe have also audited NovaCoppers internal control over financial
  reporting as at November 30, 2012, based on the criteria established in Internal
  Control - Integrated Framework, issued by the Committee of Sponsoring
  Organizations of the Treadway Commission (COSO).

80

---

Managements responsibility for internal control over
  financial reportingManagement is responsible for maintaining effective
  internal control over financial reporting and for its assessment of the
  effectiveness of internal control over financial reporting included in the
  accompanying financial statements.

Auditors responsibilityOur responsibility is to
  express an opinion on NovaCoppers internal control over financial reporting
  based on our audit. We conducted our audit of internal control over financial
  reporting in accordance with the standards of the Public Company Accounting
  Oversight Board (United States). Those standards require that we plan and
  perform the audit to obtain reasonable assurance about whether effective
  internal control over financial reporting was maintained in all material
  respects.

An audit of internal control over financial reporting includes
  obtaining an understanding of internal control over financial reporting,
  assessing the risk that a material weakness exists, testing and evaluating the
  design and operating effectiveness of internal control, based on the assessed
  risk, and performing such other procedures as we consider necessary in the
  circumstances.

We believe that our audit provides a reasonable basis for our
  audit opinion on NovaCoppers internal control over financial reporting.

Definition of internal control over financial
  reportingA companys internal control over financial reporting is a
  process designed to provide reasonable assurance regarding the reliability of
  financial reporting and the preparation of financial statements for external
  purposes in accordance with generally accepted accounting principles. A
  companys internal control over financial reporting includes those policies and
  procedures that: (i) pertain to the maintenance of records that, in reasonable
  detail, accurately and fairly reflect the transactions and dispositions of the
  assets of the company; (ii) provide reasonable assurance that transactions are
  recorded as necessary to permit preparation of financial statements in
  accordance with generally accepted accounting principles, and that receipts and
  expenditures of the company are being made only in accordance with
  authorizations of management and directors of the company; and (iii) provide
  reasonable assurance regarding prevention or timely detection of unauthorized
  acquisition, use, or disposition of the companys assets that could have a
  material effect on the financial statements.

Inherent limitationsBecause of its inherent
  limitations, internal control over financial reporting may not prevent or detect
  misstatements. Also, projections of any evaluation of effectiveness to future
  periods are subject to the risk that controls may become inadequate because of
  changes in conditions or that the degree of compliance with the policies or
  procedures may deteriorate.

OpinionIn our opinion, NovaCopper maintained, in all
  material respects, effective internal control over financial reporting as at
  November 30, 2012, based on criteria established in Internal Control -
  Integrated Framework issued by COSO.

/s/ PricewaterhouseCoopers LLP

Chartered AccountantsVancouver, British Columbia
  February 7, 2013

81

---

|NovaCopper Inc.                       
|--------------------------------------
|(An Exploration-Stage Company)        
|Consolidated Balance Sheets           
|As at November 30, 2012 and
      2011

|                                                                                |  | in thousands of dollars |  
|------------------------------------------------------------------------------- |  | ----------------------- | -
|                                                                                |  |                         |  
|                                                                                |  | November 30,
      2012 |  
|                                                                                |  | **$**                   |  
|Assets                                                                          |  |                         |  
|Current assets                                                                  |  |                         |  
|Cash and cash equivalents                                                       |  | 22,244                  |  
|Accounts receivable                                                             |  | 365                     |  
|Deposits and prepaid amounts                                                    |  | 554                     |  
|                                                                                |  | 23,163                  |  
|                                                                                |  |                         |  
|Plant and equipment (note 3)                                                    |  | 1,947                   |  
|Mineral properties and development costs (note
      4)                         |  | 30,586                  |  
|                                                                                |  | 55,696                  |  
|Liabilities                                                                     |  |                         |  
|Current liabilities                                                             |  |                         |  
|Accounts payable and accrued liabilities (note 5)                               |  | 1,846                   |  
|Due to related parties (note 6)                                                 |  | 127                     |  
|                                                                                |  | 1,973                   |  
|Shareholders equity                                                            |  |                         |  
|Share capital (note 7)  unlimited common shares authorized,
      no par value |  |                         |  
|Issued - 46,665,069 (2011  200)                                                |  | 92,168                  |  
|Contributed surplus (note 7(a))                                                 |  | 12,180                  |  
|Contributed surplus  stock-based compensation (note 7(b,c))                    |  | 12,703                  |  
|Deficit accumulated during the exploration
      stage                          |  | (63,328                 | )
|                                                                                |  | 53,723                  |  
|                                                                                |  | 55,696                  |  

Nature of operations, liquidity, structure and plan of
  arrangement(note 1)Commitment(note 7(a))Subsequent
    events(note 11)

(See accompanying notes to the consolidated financial
  statements)

|/s/ Rick Van
      Nieuwenhuyse, Director    |  | /s/
      Terry Krepiakevich, Director
|-------------------------------------------- |  | --------------------------------------
|                                             |  |                                       
|Approved on behalf of the Board of Directors |  |                                       

82

---

|NovaCopper Inc.                                                      
|---------------------------------------------------------------------
|(An Exploration-Stage Company)                                       
|Consolidated Statements of Loss,
      Comprehensive Loss and Deficit
|For the Years Ended November
      30                                

|                                                             |   | in thousands of dollars, except share and per share
      amounts |  
|------------------------------------------------------------ | - | ----------------------------------------------------------------- | -
|                                                             |   |                                                                   |  
|                                                             |   |                                                                   |  
|                                                             |   | 2012                                                              |  
|                                                             |   | **$**                                                             |  
|Expenses                                                     |   |                                                                   |  
|Amortization                                                 |   | 769                                                               |  
|Corporate development                                        |   | 207                                                               |  
|Foreign exchange gain                                        |   | 10                                                                |  
|General and administrative                                   |   | 2,276                                                             |  
|Mineral properties expense (note 4(c))                       |   | 15,327                                                            |  
|Professional fees                                            |   | 646                                                               |  
|Salaries                                                     |   | 2,410                                                             |  
|Salaries  stock-based compensation                          |   | 9,411                                                             |  
|Total expenses                                               |   | 31,056                                                            |  
|Other items                                                  |   |                                                                   |  
|Accretion expense (note 4(a))                                |   | -                                                                 |  
|Loss on disposal of equipment                                |   | 7                                                                 |  
|Interest and other income                                    |   | (45                                                               | )
|Loss and comprehensive loss for the year                     |   | 31,018                                                            |  
|Deficit  beginning of year                                  |   | (32,310                                                           | )
|Deficit  end of year                                        |   | (63,328                                                           | )
|                                                             |   |                                                                   |  
|Basic and diluted loss per common share                      | $ | 0.67                                                              |  
|Weighted average number of common shares outstanding(note 7) |   | 46,627,308                                                        |  

Nature of operations, liquidity, structure and plan of
  arrangement(note 1)

(See accompanying notes to the consolidated financial
  statements)

83

---

|NovaCopper Inc.                                                 
|----------------------------------------------------------------
|(An Exploration-Stage Company)                                  
|Consolidated Statements of Changes
      in Shareholders Equity
|For the Years Ended November
      30                           

|                                                                             |  | in thousands of dollars, except share amounts | 
|---------------------------------------------------------------------------- |  | --------------------------------------------- | 
|                                                                             |  |                                               | 
|                                                                             |  | Number of
      shares                        | 
|                                                                             |  |                                               | 
|Share capital                                                                |  |                                               | 
|Balance  beginning of year                                                  |  | 200                                           | 
|Issued pursuant to Plan of Arrangement (note 1)                              |  | 46,577,878                                    | 
|Issued pursuant to an employment agreement (note 7)                          |  | 76,005                                        | 
|Issued on exercise of options                                                |  | 10,986                                        | 
|Balance  end of year                                                        |  | 46,665,069                                    | 
|Contributed surplus                                                          |  |                                               | 
|Balance  beginning of year                                                  |  |                                               | 
|Funding provided and expenses paid by NovaGold Resources Inc.                |  |                                               | 
|Transfer to share capital on completion of Plan of Arrangement               |  |                                               | 
|Transfer to contributed surplus  stock-based
      compensation             |  |                                               | 
|Balance  end of year                                                        |  |                                               | 
|Contributed surplus  stock-based compensation                               |  |                                               | 
|Balance  beginning of year                                                  |  |                                               | 
|Transfer from contributed surplus on completion of Plan of
      Arrangement |  |                                               | 
|Stock-based compensation                                                     |  |                                               | 
|Exercise of options                                                          |  |                                               | 
|Balance  end of year                                                        |  |                                               | 
|Deficit                                                                      |  |                                               | 
|Balance  beginning of year                                                  |  |                                               | 
|Loss for the year                                                            |  |                                               | 
|Balance  end of year                                                        |  |                                               | 
|Total shareholders equity                                                   |  |                                               | 

|                                                                    |  | in thousands of dollars, except share amounts | 
|------------------------------------------------------------------- |  | --------------------------------------------- | 
|                                                                    |  |                                               | 
|                                                                    |  | Number of shares                              | 
|                                                                    |  |                                               | 
|Share
      capital                                                 |  |                                               | 
|Balance  beginning
      of year                                   |  | -                                             | 
|Issued pursuant to
      incorporation                              |  | 100                                           | 
|Issued pursuant to acquisition of subsidiary                        |  | 100                                           | 
|Balance  end of year                                               |  | 200                                           | 
|Contributed
      surplus                                           |  |                                               | 
|Balance  beginning
      of year                                   |  |                                               | 
|Mineral property -
      stock-based compensation                   |  |                                               | 
|Funding provided
      and expenses paid by NovaGold Resources Inc. |  |                                               | 
|Transfer to share capital                                           |  |                                               | 
|Balance  end of year                                               |  |                                               | 
|Deficit                                                             |  |                                               | 
|Balance  beginning
      of year                                   |  |                                               | 
|Loss for the year                                                   |  |                                               | 
|Balance  end of year                                               |  |                                               | 
|Total shareholders equity                                          |  |                                               | 

84

---

|NovaCopper Inc.                                                 
|----------------------------------------------------------------
|(An Exploration-Stage Company)                                  
|Consolidated Statements of Changes
      in Shareholders Equity
|For the Years Ended November
      30                           

|                                                                    |  | in thousands of dollars, except share amounts | 
|------------------------------------------------------------------- |  | --------------------------------------------- | 
|                                                                    |  |                                               | 
|                                                                    |  | Number of shares                              | 
|                                                                    |  |                                               | 
|Share capital  beginning and end of year                           |  | -                                             | 
|Contributed
      surplus                                           |  |                                               | 
|Balance  beginning
      of year                                   |  |                                               | 
|Shares issued for
      mineral property by NovaGold Resources Inc. |  |                                               | 
|Stock-based
      compensation                                      |  |                                               | 
|Funding provided and expenses paid by NovaGold Resources Inc.       |  |                                               | 
|Balance  end of year                                               |  |                                               | 
|Deficit                                                             |  |                                               | 
|Balance  beginning
      of year                                   |  |                                               | 
|Loss for the year                                                   |  |                                               | 
|Balance  end of year                                               |  |                                               | 
|Total shareholders equity                                          |  |                                               | 

Nature of operations, liquidity, structure and plan of
  arrangement(note 1)

(See accompanying notes to the consolidated financial
  statements)

| |  | 9
| |  | -

85

---

|NovaCopper Inc.                            
|-------------------------------------------
|(An Exploration-Stage Company)             
|Consolidated Statements of Cash
      Flows
|For the Years Ended November
      30      

|                                                                                   |  | in thousands of dollars |  
|---------------------------------------------------------------------------------- |  | ----------------------- | -
|                                                                                   |  |                         |  
|                                                                                   |  |                         |  
|                                                                                   |  | 2012                    |  
|                                                                                   |  | **$**                   |  
|Cash flows used in operating activities                                            |  |                         |  
|Loss for the year                                                                  |  | (31,018                 | )
|Items not affecting cash                                                           |  |                         |  
|Amortization                                                                       |  | 769                     |  
|Accretion                                                                          |  | -                       |  
|Loss on disposal of equipment                                                      |  | 7                       |  
|Issuance of shares as compensation                                                 |  | 316                     |  
|Stock-based compensation                                                           |  | 9,411                   |  
|Net
      change in non-cash working capital                                       |  |                         |  
|Increase in accounts receivable                                                    |  | (365                    | )
|Increase in deposits and prepaid amounts                                           |  | (458                    | )
|Increase in accounts payable,
      accrued liabilities and due to related parties |  | 1,452                   |  
|                                                                                   |  | (19,886                 | )
|Cash flows from financing activities                                               |  |                         |  
|Funding provided by NovaGold on the completion of the Plan of
      Arrangement    |  | 40,000                  |  
|Funding provided and expenses paid by NovaGold                                     |  | 3,763                   |  
|Repayment of notes payable                                                         |  | -                       |  
|                                                                                   |  | 43,763                  |  
|Cash flows used in investing activities                                            |  |                         |  
|Acquisition of plant & equipment                                                   |  | (1,595                  | )
|Acquisition of mineral properties                                                  |  | (39                     | )
|                                                                                   |  | (1,634                  | )
|Increase in cash and cash equivalents                                              |  | 22,243                  |  
|Cash and cash equivalents  beginning of period                                    |  | 1                       |  
|Cash and cash equivalents  end of
      period                                    |  | 22,244                  |  
|                                                                                   |  |                         |  
|                                                                                   |  |                         |  
|Non-cash investing and financing activities                                        |  |                         |  
|Issuance of common shares to NovaGold to acquire NovaCopper US
      Inc.          |  | -                       |  
|Notes payable assumed on acquisition of Ambler                                     |  | -                       |  
|Issuance of common shares by NovaGold to
      acquire Ambler                      |  | -                       |  

Nature of operations, liquidity, structure and plan of
  arrangement(note 1)

(See accompanying notes to the consolidated financial
  statements)

86

---

|NovaCopper Inc.                                     
|----------------------------------------------------
|(An Exploration-Stage Company)                      
|Notes to the Consolidated
      Financial Statements

|1 | Nature of operations, structure and plan of
        arrangement
|- | ---------------------------------------------------------------

NovaCopper Inc. (NovaCopper or the Company) was
  incorporated in British Columbia under the Business Corporations Act (BC)on April 27, 2011. The Company is engaged in the exploration and development
  of mineral properties including the Arctic and Bornite Projects located in
  Northwest Alaska in the United States of America (US).

Structure and plan of arrangement

The Ambler lands comprise the copper-zinc-lead-gold-silver
  Arctic Project and other mineralized targets within a 65 kilometer long
  volcanogenic massive sulfide belt. On January 11, 2010, Alaska Gold Company
  (AGC), a wholly owned subsidiary of NovaGold Resources Inc. (NovaGold),
  purchased 100% of the Ambler lands for consideration of $29 million. The Ambler
  lands were acquired on October 17, 2011 by NovaCopper US Inc. (NovaCopper US)
  through a purchase and sale agreement with AGC. On October 24, 2011, NovaGold
  transferred its ownership of NovaCopper US to NovaCopper, then a wholly owned
  subsidiary of NovaGold, in exchange for 100 shares of NovaCopper, with an
  ascribed value of $27.3 million (note 7).

On October 19, 2011, NovaCopper US acquired the exclusive right
  to explore the Bornite lands and lands deeded to NANA Regional Corporation, Inc.
  (NANA) through the Alaska Native Claims Settlement Act (ANCSA) located
  adjacent to the Ambler lands to create the Upper Kobuk Mineral Projects (UKMP
  Projects).

Where applicable, these consolidated financial statements
  reflect the balance sheet, statements of loss, comprehensive loss and deficit
  and cash flows of the Arctic Project as if NovaCopper had been an independent
  operation from inception. The statements of loss, comprehensive loss and deficit
  for the years ended November 30, 2011 and 2010 include direct general and
  administrative and exploration costs of the Arctic Project and an allocation of
  NovaGolds general and administrative costs incurred in each of these periods.
  NovaGold has historically provided corporate services to the Arctic Project,
  including executive oversight, information technology, technical expertise,
  accounting, tax, treasury, human resources and other services. The allocation of
  general and administrative costs to the Arctic Project was calculated on the
  basis of time committed by NovaGold staff to AGC and the ratio of expenses
  incurred on the Arctic Project in each period presented as compared to all costs
  incurred by AGC in these periods.

The Arctic Projects opening deficit has been calculated by
  applying the same allocation principles described above to the cumulative
  transactions relating to the project from the date of its initial option in 2004
  and includes an allocation of NovaGolds general and administrative expenses
  from the date of acquisition. Prior to the acquisition in 2010, NovaGold held an
  option to earn a 51% interest in the property which was terminated upon entering
  into the purchase and sale agreement. All historical spending prior to April 30,
  2012 was funded by NovaGold.

In April 2012, NovaCopper Inc. was listed on the Toronto Stock
  Exchange and the NYSE-MKT (previously NYSE-AMEX) under the symbol NCQ
  following a positive vote from the shareholders of NovaGold to distribute the
  shares of NovaCopper, a wholly owned subsidiary, to the shareholders of NovaGold
  as a return of capital by way of a Plan of Arrangement (the Plan of
  Arrangement).

Liquidity

These financial statements have been prepared on a going
  concern basis, which assumes that the Company will be able to realize its assets
  and discharge its liabilities in the normal course of business. As at November
  30, 2012, the Company had consolidated cash of $22.2 million and working capital
  of $21.2 million. Based on anticipated but not committed expenditures on its
  projects, the Company is likely to require financing within the next twelve to
  eighteen months. Future financings are anticipated through debt financing,
  equity financing, convertible debt, exercise of options, or other means. The
  continued operations of the Company are dependent on its ability to obtain
  additional financing or to generate future cash flows.

87

---

|NovaCopper Inc.                                     
|----------------------------------------------------
|(An Exploration-Stage Company)                      
|Notes to the Consolidated
      Financial Statements

|2 | Summary of significant accounting
        policies
|- | --------------------------------------------------

Basis of presentation

These consolidated financial statements have been prepared
  using accounting principles generally accepted in the United States (U.S.
  GAAP) and include the accounts of NovaCopper Inc. and its wholly-owned
  subsidiary, NovaCopper US Inc. All significant intercompany transactions are
  eliminated on consolidation. These financial statements were approved by the
  Companys Board of Directors for issue on February 7, 2013.

All figures are in United States dollars unless otherwise
  noted.

Change in accounting principles

Prior to 2012, the Company prepared its annual consolidated
  financial statements using Canadian generally accepted accounting principles
  (Canadian GAAP) with a footnote reconciliation of measurement differences
  between Canadian and U.S. GAAP. There were no measurement differences between
  Canadian GAAP and U.S. GAAP. As of December 1, 2011, the Company changed its
  accounting principles to U.S. GAAP retrospectively.

These financial statements include the historical assets,
  liabilities and expenses directly related to the Arctic Project and allocations
  of NovaGolds general and administrative expenses, as described in note 1, to
  present the financial position, results of operations and cash flows of the
  Arctic Project on a standalone basis. The consolidated financial statements have
  been presented under the continuity of interest basis of accounting whereby the
  amounts are based on the amounts recorded by NovaGold.

The consolidated financial statements may not necessarily
  reflect the financial position, results of operations and changes in cash flows
  of the Company in the future or what they would have been had the Company been a
  separate, stand-alone entity for all of the periods presented.

Cash and cash equivalents

Cash and cash equivalents comprise of highly liquid investments
  maturing less than 90 days from date of initial investment. Cash and cash
  equivalents are designated as loans and receivables.

Plant and equipment

Plant and equipment are recorded at cost and amortization
  begins when the asset is substantially put into service. Amortization is
  calculated on a straight-line basis over the respective assets estimated useful
  lives. Amortization periods by asset class are:

Computer hardware and software
      3 yearsMachinery and equipment
      3 yearsOffice furniture and equipment
      5 yearsVehicles
      3 years


Mineral properties and development costs

All direct costs related to the acquisition of mineral property
  interests are capitalized. Mineral property exploration expenditures are
  expensed when incurred. When it has been established that a mineral deposit is
  commercially mineable, an economic analysis has been completed in accordance
  with SEC Industry Guide 7 and permits are obtained, the costs subsequently
  incurred to develop a mine on the property prior to the start of mining
  operations are capitalized. Capitalized costs will be amortized following
  commencement of commercial production using the unit of production method over
  the estimated life of proven and probable reserves.

The acquisition of title to mineral properties is a complicated
  and uncertain process. The Company has taken steps, in accordance with industry
  standards, to verify the mineral property in which it has an interest. Although
  the Company has made efforts to ensure that legal title to its property is
  properly recorded, there can be no assurance that such title will ultimately be
  secured.

88

---

|NovaCopper Inc.                                     
|----------------------------------------------------
|(An Exploration-Stage Company)                      
|Notes to the Consolidated
      Financial Statements

Impairment of long-lived assets

Management assesses the possibility of impairment in the
  carrying value of its long-lived assets whenever events or circumstances
  indicate that the carrying amounts of the asset or asset group may not be
  recoverable. Management calculates the estimated undiscounted future net cash
  flows relating to the asset or asset group using estimated future prices, proven
  and probable reserves and other mineral resources, and operating, capital and
  reclamation costs. When the carrying value of an asset exceeds the related
  undiscounted cash flows, the asset is written down to its estimated fair value,
  which is usually determined using discounted future cash flows. Managements
  estimates of mineral prices, mineral resources, foreign exchange, production
  levels and operating capital and reclamation costs are subject to risk and
  uncertainties that may affect the determination of the recoverability of the
  long-lived asset. It is possible that material changes could occur that may
  adversely affect Managements estimates.

Income taxes

The liability method of accounting for income taxes is used and
  is based on differences between the accounting and tax bases of assets and
  liabilities. Deferred income tax assets and liabilities are recognized for
  temporary differences between the tax and accounting basis of assets and
  liabilities as well as for the benefit of losses available to be carried forward
  to future years for tax purposes using enacted income tax rates expected to be
  in effect for the period in which the differences are expected to reverse.
  Deferred income tax assets are evaluated and, if realization is not considered
  more likely than not, a valuation allowance is provided.

Uncertainty in income tax positions

The Company recognizes tax benefits from uncertain tax
  positions only if it is at least more likely than not that the tax position will
  be sustained on examination by the taxing authorities, based on the technical
  merits of the position. The tax benefits recognized in the financial statements
  from such a position are measured based on the largest benefit that has a
  greater than 50% likelihood of being realized upon settlement with the taxing
  authorities. Related interest and penalties, if any, are recorded as tax expense
  in the tax provision.

Financial instruments

Held-for-trading financial assets and liabilities are recorded
  at fair value as determined by active market prices and valuation models, as
  appropriate. Valuation models require the use of assumptions concerning the
  amount and timing of estimated future cash flows and discount rates. In
  determining these assumptions, Management uses readily observable market inputs
  where available or, where not available, inputs generated by Management. Changes
  in fair value of held-for-trading financial instruments are recorded in income
  or loss for the period. The Company has no held-for-trading financial assets or
  liabilities.

Available-for-sale financial assets are recorded at fair value
  as determined by active market prices. Unrealized gains and losses on
  available-for-sale investments are recognized in other comprehensive income. If
  a decline in fair value is deemed to be other than temporary, the unrealized
  loss is recognized in net earnings. Investments in equity instruments that do
  not have an active quoted market price are measured at cost. The Company has no
  available-for-sale financial assets.

Loans and receivables are recorded initially at fair value, net
  of transaction costs incurred, and subsequently at amortized cost using the
  effective interest rate method. Loans and receivables consist of cash and cash
  equivalents, and deposits.

Other financial liabilities are recorded initially at fair
  value and subsequently at amortized cost using the effective interest rate
  method. Other financial liabilities include accounts payable and accrued
  liabilities, and due to related parties.

89

---

|NovaCopper Inc.                                     
|----------------------------------------------------
|(An Exploration-Stage Company)                      
|Notes to the Consolidated
      Financial Statements

Translation of foreign currencies

Monetary assets and liabilities are translated at the exchange
  rate in effect at the balance sheet date, and non-monetary assets and
  liabilities at the exchange rate in effect at the time of acquisition or issue.
  Revenues and expenses are translated at rates approximating the exchange rate in
  effect at the time of transactions. Exchange gains or losses arising on
  translation are included in income or loss for the period.

The Companys functional and reporting currency is the United
  States dollar.

Loss per share

Loss per common share is calculated based on the weighted
  average number of common shares outstanding during the year. The Company follows
  the treasury stock method in the calculation of diluted earnings per share.
  Under the treasury stock method, the weighted average number of common shares
  outstanding used for the calculation of diluted loss per share assumes that the
  proceeds to be received on the exercise of dilutive stock options and warrants
  are used to repurchase common shares at the average market price during the
  period. Since the Company has losses, the exercise of outstanding convertible
  securities has not been included in this calculation as it would be
  anti-dilutive.

To complete the spin-out of NovaCopper, a stock split was
  completed to be able to distribute 46,578,078 common shares to the shareholders
  of NovaGold. As a result of the stock split, historical earnings per share have
  been restated for all periods. Under the continuity of interest basis, the
  earnings per share has been presented as if the shares outstanding following the
  stock split had always been outstanding including prior to incorporation of the
  entity.

Stock-based compensation

Compensation expense for options granted to employees,
  directors and certain service providers is determined based on estimated fair
  values of the options at the time of grant using the Black-Scholes option
  pricing model, which takes into account, as of the grant date, the fair market
  value of the shares, expected volatility, expected dividend yield and the
  risk-free interest rate over the expected life of the option. The cost is
  recognized using the graded attribution method over the vesting period of the
  respective options. The expense relating to the fair value of stock options is
  included in expenses and is credited to contributed surplus. Shares are issued
  from treasury in settlement of options exercised.

Use of estimates and measurement uncertainties

The preparation of financial statements in conformity with U.S.
  GAAP requires management to make estimates and assumptions of future events that
  affect the reported amount of assets and liabilities and disclosure of
  contingent liabilities at the date of the financial statements, and the reported
  amounts of expenditures during the reported period. Significant estimates
  include the basis of impairment of mineral properties and income taxes. Actual
  results could differ materially from those reported.

Recent accounting pronouncements

| | i. | Share-based payments and exercise price                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | The Financial Accounting Standards Board (FASB) issued
      accounting standard update (ASU) to Topic 718 which provides guidance on
      whether a share-based payment award with an exercise price denominated in
      the currency of a market in which the underlying equity security trades
      should be classified as a liability when the exercise price is not
      denominated in either a foreign operations functional currency or the
      currency in which an employees pay is denominated. The guidance clarifies
      that if a share-based payment award with an exercise price denominated in
      a currency of a market in which a substantial portion of the entitys
      equity securities trade, it would not be considered to contain a condition
      that is not a market, performance or service condition that would require
      classification as a liability if it otherwise qualifies for equity
      classification. This guidance is effective for interim and annual periods
      beginning after December 15, 2010 and is effective for the Company
      beginning December 1, 2011. Adoption of this guidance had no impact on the
      Companys consolidated financial statements.

90

---

|NovaCopper Inc.                                     
|----------------------------------------------------
|(An Exploration-Stage Company)                      
|Notes to the Consolidated
      Financial Statements

| | ii.  | Presentation of comprehensive income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      | In June 2011, the FASB issued an update to Topic 220,
      Presentation of Comprehensive Income. This ASU provides that an entity
      that reports items of other comprehensive income has the option to present
      comprehensive income in either 1) a single statement that presents the
      components of net income and total net income, the components of other
      comprehensive income and total other comprehensive income, and a total for
      comprehensive income; or 2) a two-statement approach which presents the
      components of net income and total net income in a first statement,
      immediately followed by a financial statement that presents the components
      of other comprehensive income, a total for other comprehensive income, and
      a total for comprehensive income. The option in current U.S. GAAP that
      permits the presentation of other comprehensive income in the statement of
      changes in equity was eliminated. The guidance will be applied
      retrospectively and is effective for annual periods beginning after
      December 15, 2011. Early adoption is permitted. The Company has elected to
      early adopt the guidance effective December 1, 2011. The Companys current
      one-statement approach resulted in no impact to presentation.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | iii. | Comprehensive income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      | In December 2011, the FASB issued Comprehensive Income 
      Deferral of the Effective Date for Amendments to the Presentation of
      Reclassifications of Items out of Accumulated Other Comprehensive Income
      in Accounting Standards Update No. 2011-05 (ASU 2011-12). ASU 2011-12
      defers changes in Update 2011-05 that relate to the presentation of
      reclassification adjustments. ASU 2011-12 is effective for fiscal years,
      and interim periods within those years, beginning after December 15, 2011
      (year ending November 30, 2013 for the Company). We do not expect the
      adoption of ASU 2011-12 to have a material impact on our results of
      operations, financial condition, or cash
      flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

|3 | Plant and
        equipment
|- | ---------------------------

|                        |  | in thousands of dollars | 
|----------------------- |  | ----------------------- | 
|                        |  | November 30, 2012       | 
|                        |  |                         | 
|                        |  | Cost                    | 
|Alaska, USA             |  | **$**                   | 
|                        |  |                         | 
|Machinery and equipment |  | 2,831                   | 
|Vehicles                |  | 201                     | 
|Computer hardware       |  | 31                      | 
|                        |  | 3,063                   | 

|                              |  | in thousands of dollars | 
|----------------------------- |  | ----------------------- | 
|                              |  | November 30, 2011       | 
|                              |  |                         | 
|                              |  | Cost                    | 
|Alaska, USA                   |  | **$**                   | 
|                              |  |                         | 
|Machinery and
      equipment |  | 1,379                   | 
|Vehicles                      |  | 72                      | 
|Computer hardware             |  | 31                      | 
|                              |  | 1,482                   | 

91

---

|NovaCopper Inc.                                     
|----------------------------------------------------
|(An Exploration-Stage Company)                      
|Notes to the Consolidated
      Financial Statements

|4 | Mineral properties and development
        costs
|- | ------------------------------------------------

|            |  | in thousands of dollars | 
|----------- |  | ----------------------- | 
|            |  | November 30,
      2011 | 
|Alaska, USA |  | **$**                   | 
|Ambler (a)  |  | 26,547                  | 
|Bornite (b) |  | 4,000                   | 
|            |  | 30,547                  | 

|            |  | in thousands of dollars | 
|----------- |  | ----------------------- | 
|            |  | November 30, 2010       | 
|Alaska, USA |  | **$**                   | 
|Ambler (a)  |  | 26,547                  | 
|Bornite (b) |  | -                       | 
|            |  | 26,547                  | 

|(a) | Ambler                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | On January 11, 2010, NovaGold, through its wholly-owned
      subsidiary AGC, purchased 100% of the Ambler lands in Northwest Alaska,
      which contains the copper-zinc-lead-gold-silver Arctic Project and other
      mineralized targets within the volcanogenic massive sulfide belt. As
      consideration, NovaGold, issued 931,098 shares with a fair value of $5.0
      million and agreed to make cash payments to the vendor of $12.0 million
      each in January 2011 and January 2012, respectively, for total
      consideration of $29.0 million. The fair value of these cash payments were
      $11.1 million and $10.3 million, respectively, at the transaction date
      valued using a discount rate of approximately 8%. The January 2011 payment
      was made by NovaGold on January 7, 2011 and the January 2012 payment was
      made by NovaGold in advance on August 5, 2011. Total fair value of the
      consideration was $26.5 million, including transaction costs associated
      with the acquisition of $0.1 million. The vendor retained a 1% net smelter
      return royalty that the owner of the property can purchase at any time for
      a one-time payment of $10.0 million.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Accretion expense of $nil for the year ended November 30,
      2012, $1.0 million for the year ended November 30, 2011 and $1.6 million
      for the year ended November 30, 2010 was recognized in regards to the
      discounted cash payments from the original transaction date to the date
      each cash payment was made.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Prior to the acquisition in 2010, NovaGold held an option
      to earn a 51% interest in the property which was terminated upon entering
      into the purchase and sale agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | As discussed in note 1, the property was acquired on
      October 17, 2011 by NovaCopper US through a purchase and sale agreement
      with AGC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | During the third and fourth quarters of 2012, the Company
      staked additional state claims contiguous with the Ambler lands at a cost
      of $39,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(b) | Bornite                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | On October 19, 2011, NovaCopper US acquired the exclusive
      right to explore the Bornite lands and lands deeded to NANA through the
      ANCSA, located adjacent to the Ambler lands in Northwest Alaska. As
      consideration, NovaCopper US paid $4 million to acquire the right to
      explore and develop the combined Upper Kobuk Mineral Projects through an
      Exploration Agreement and Option to Lease with NANA. Upon the decision to
      proceed with development of a mine on the lands, NANA maintains the right
      to purchase between a 16%-25% ownership interest in the mine or retain a
      15% net proceeds royalty which is payable after NovaCopper has recovered
      certain historical costs, capital and cost of capital. Should NANA elect
      to purchase an ownership interest, consideration will be payable equal to
      all historical costs incurred on the properties at the elected percentage
      purchased less $40 million, not to be less than zero. The parties would
      form a joint venture and be responsible for all future costs, including
      capital costs of the mine based on their pro-rata
      share.                                              

92

---

|NovaCopper Inc.                                     
|----------------------------------------------------
|(An Exploration-Stage Company)                      
|Notes to the Consolidated
      Financial Statements

|    | NANA would also be granted a net smelter return royalty
      between 1% and 2.5% upon the execution of a mining lease or a surface use
      agreement, the percent which is determined by the classification of land
      from which production originates.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                               
|(c) | Mineral properties expense                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                               
|    | The following table summarizes mineral properties expense
      for the years ended November 30, 2012, 2011 and
      2010.                                                                                                                                   

|                            |  | in thousands of dollars |  
|--------------------------- |  | ----------------------- | -
|                            |  | November 30,
      2012 |  
|                            |  | **$**                   |  
|Community                   |  | 159                     |  
|Drilling                    |  | 4,685                   |  
|Engineering                 |  | 512                     |  
|Environmental               |  | 243                     |  
|Geochemistry and geophysics |  | 1,182                   |  
|Land and permitting         |  | 81                      |  
|Other income                |  | (82                     | )
|Project support             |  | 4,971                   |  
|Wages and benefits          |  | 3,576                   |  
|Mineral property expense    |  | 15,327                  |  

Mineral property expenses consist of
  direct drilling, personnel, community, resource reporting and other exploration
  expenses as outlined above, as well as indirect project support expenses such as
  fixed wing charters, helicopter support, fuel, and other camp operation costs.
  Cumulative mineral properties expense from the initial earn-in agreement on the
  property in 2004 to November 30, 2012 is $42.4 million.

|5 | Accounts payable and accrued
        liabilities
|- | ------------------------------------------------

|                                         |  | in thousands of dollars | 
|---------------------------------------- |  | ----------------------- | 
|                                         |  | November 30,
      2012 | 
|                                         |  | **$**                   | 
|Trade accounts payable                   |  | 207                     | 
|Accrued liabilities                      |  | 659                     | 
|Accrued salaries and vacation            |  | 980                     | 
|Accounts payable and accrued liabilities |  | 1,846                   | 

|6 | Related parties
|- | ---------------

Expenses to April 30, 2012 were funded by NovaGold and its
  subsidiaries. NovaGold is a company with directors in common. During the year
  ended November 30, 2012, NovaGold and its subsidiaries provided management and
  office services totaling $685,000 to the Company, including rent and a one-time
  set-up fee of $49,000 pursuant to a Services Agreement.

During the year ended November 30, 2012, the Company provided
  exploration and management services in the amount of $83,000 to NovaGold under
  the Services Agreement.

The Company had accounts receivable of $43,000 at November 30,
  2012 due from NovaGold. The Company had payables of $127,000 at November 30,
  2012 and $395,000 at November 30, 2011 due to NovaGold and its subsidiaries. The
  amount due at November 30, 2011 was capitalized as part of NovaGolds funding of
  NovaCopper prior to the Effective Date of the Plan of Arrangement.

93

---

|NovaCopper Inc.                                     
|----------------------------------------------------
|(An Exploration-Stage Company)                      
|Notes to the Consolidated
      Financial Statements

|7 | Share capital
|- | -------------

Authorized:
            unlimited common
  shares, no par value

|                                                |  | in thousands of dollars, except share amounts | 
|----------------------------------------------- |  | --------------------------------------------- | 
|                                                |  | Number of
      shares                        | 
|                                                |  |                                               | 
|November 30, 2010                               |  | -                                             | 
|Issued pursuant to
      incorporation          |  | 100                                           | 
|Issued pursuant to acquisition of subsidiary    |  | 100                                           | 
|November 30, 2011                               |  | 200                                           | 
|Issued pursuant to Plan of Arrangement          |  | 46,577,878                                    | 
|Issued pursuant to employment agreement         |  | 76,005                                        | 
|Issued on exercise of options                   |  | 10,986                                        | 
|November 30, 2012, issued and
      outstanding |  | 46,665,069                                    | 

On March 28, 2012, the shareholders of NovaGold approved the
  Plan of Arrangement in which NovaGold would distribute its interest in
  NovaCopper to its shareholders on the basis that each shareholder would receive
  one share in NovaCopper for every six shares of NovaGold held on the record
  date. As part of the Plan of Arrangement, the Company split its then issued and
  outstanding shares into 46,578,078 common shares. On April 30, 2012 (the
  Effective Date), the Plan of Arrangement became effective and the Company
  distributed a total of 46,578,078 common shares, including the 200 shares held
  by NovaGold, to shareholders of record of NovaGold as at the close of business
  on April 27, 2012. The value of $64.5 million attributed to the common shares
  distributed on the spin-out is the historical value expended by NovaGold on the
  Upper Kobuk Mineral Projects.

Concurrent with completion of the Plan of Arrangement, the
  Company issued 76,005 shares to the CEO as part of his employment agreement
  valued at $0.3 million based on the closing trading price on April 30, 2012.

|(a) | Commitment
|--- | ----------

Under the Plan of Arrangement, NovaCopper has committed to
  issue up to 6,181,352 common shares to satisfy holders of NovaGold warrants,
  performance share units (NovaGold PSUs) and deferred shares units (NovaGold
  DSUs) on record as of the close of business April 27, 2012 on the same basis as
  NovaGold shareholders under the Plan of Arrangement. The amount of $12.2 million
  recorded in contributed surplus represents a pro-rated amount of the historical
  NovaGold investment based on the fully diluted number of common shares at the
  time the Arrangement became effective. When a warrant is exercised or a unit
  becomes vested, NovaCopper has committed to deliver one common share to the
  holder for every six shares of NovaGold the holder is entitled to receive, round
  down to the nearest whole number.

As of the Effective Date and November 30, 2012, there were 36.5
  million NovaGold warrants, 355,800 performance share units of which the NovaGold
  shares that may be issued vary between 0% and 150% of the number of NovaGold
  PSUs granted, and 24,833 NovaGold DSUs outstanding.

Subsequent to year end, as discussed in note 11, 6,102,442
  common shares have been issued under NovaCoppers commitment.

94

---

|NovaCopper Inc.                                     
|----------------------------------------------------
|(An Exploration-Stage Company)                      
|Notes to the Consolidated
      Financial Statements

|(b) | Stock options
|--- | -------------

The Company has a stock option plan providing for the issuance
  of options at a rolling maximum number that shall not be greater than 10% of the
  issued and outstanding common shares of the Company at any given time. The
  Company may grant options to its directors, officers, employees and service
  providers. The exercise price of each option cannot be lower than the greater of
  Market Price or Fair Market Value of the shares (as such terms are defined in
  the plan) at the date of the option grant. The number of shares optioned to any
  single optionee may not exceed 10% of the issued and outstanding shares at the
  date of grant. The options are exercisable for a maximum of five years from the
  date of grant, and may be subject to vesting provisions. The Company recognizes
  compensation cost using the graded attribution method over the respective
  vesting period for the stock options.

On the Effective Date, 950,000 stock options were granted to
  certain of its employees and service providers exercisable for a period of five
  years at a price equal to the volume weighted-average trading price on the
  Toronto Stock Exchange for the five trading days commencing on the sixth trading
  day following the Effective Date, CDN$3.11, with one-third vesting immediately,
  one-third vesting on the first anniversary and one third vesting on the second
  anniversary. 2,850,000 stock options were granted to officers on the same
  pricing and expiry terms as described above, with two-thirds vesting on the
  first anniversary and one third vesting on the second anniversary. An initial
  grant of 2,000,000 options to non-executive directors has been granted and
  vested on the Effective Date exercisable for a period of five years on the same
  pricing terms as described above.

During the remainder of 2012, 510,000 options were granted to
  new employees and officers exercisable for a period of five years with various
  vesting terms between two and three years from the grant date.

The fair value of the stock options recognized in the period
  has been estimated using an option pricing model. Assumptions used in the
  pricing model for the period are as provided below.

|                                |  | November 30, 2012 | 
|------------------------------- |  | ----------------- | 
|Average risk-free interest rate |  | 1.02-1.59%        | 
|Exercise price                  |  | CDN$1.76-3.14     | 
|Expected life                   |  | 3.0  5.0 years   | 
|Expected volatility             |  | 59.0-101.3%       | 
|Expected dividends              |  | Nil               | 

The Black-Scholes and other option pricing models require the
  input of highly subjective assumptions. As NovaCopper has no history of granting
  stock options prior to April 30, 2012, the Company considered historical
  information from NovaGold in estimating the expected life of the options granted
  during the period. Further, volatility was estimated based upon historical price
  observations of NovaGold over the expected term of the options.

For the year ended November 30, 2012, NovaCopper granted a
  total of 6,310,000 stock options at a weighted average fair value of $2.30 and
  recognized a share-based payments charge of $9.2 million for options granted to
  directors ($4.1 million), employees and services providers ($5.1 million), net
  of forfeitures.

As of November 30, 2012, there were 3,730,010 non-vested
  options outstanding with a weighted average exercise price of $3.09; the
  non-vested stock option expense not yet recognized was $4.9 million; and this
  expense is expected to be recognized over the next year.

95

---

|NovaCopper Inc.                                     
|----------------------------------------------------
|(An Exploration-Stage Company)                      
|Notes to the Consolidated
      Financial Statements

A summary of the Companys stock option plan and changes during
  the year ended is as follows:

|                            |  | November 30, 2012 |  
|--------------------------- |  | ----------------- | -
|                            |  |                   |  
|                            |  |                   |  
|                            |  | Number of options |  
|Balance  beginning of year |  | -                 |  
|Granted                     |  | 6,310,000         |  
|Cancelled/forfeited         |  | (245,006          | )
|Balance  end of year       |  | 6,064,994         |  

The following table summarizes information about the stock
  options outstanding at November 30, 2012.

|                 |  |             |  |  | Stock options -
      outstanding |  |  | Stock options -
      exercisable | 
|---------------- |  | ----------- |  |  | --------------------------------- |  |  | --------------------------------- | 
|                 |  |             |  |  |                                   |  |  | Weighted                          | 
|                 |  | Number of   |  |  | Weighted                          |  |  | average                           | 
|                 |  | outstanding |  |  | average years                     |  |  | exercise price                    | 
|Range of price   |  | options     |  |  | to expiry                         |  |  | **$**                             | 
|$ 1.78 to $ 2.99 |  | 100,000     |  |  | 4.68                              |  |  | 1.78                              | 
|$ 3.00 to $ 3.99 |  | 5,964,994   |  |  | 4.42                              |  |  | 3.13                              | 
|                 |  | 6,064,994   |  |  | 4.43                              |  |  | 3.11                              | 

The aggregate intrinsic value of vested share options (the
  market value less the exercise value) at November 30, 2012 was $nil.

|(c) | NovaGold Arrangement Options
|--- | ----------------------------

Under the Plan of Arrangement, holders of NovaGold stock
  options received one option in NovaCopper for every six options held in NovaGold
  (NovaGold Arrangement Options). The exercise price of the options in
  NovaCopper was determined based on the relative fair values of NovaCopper and
  NovaGold based on the volume weighted-average trading prices on the Toronto
  Stock Exchange for the five trading days commencing on the sixth trading day
  following the Effective Date. All other terms of the options remained the same.
  A total of 2,189,040 options to acquire NovaCopper shares were granted under the
  Plan of Arrangement on April 30, 2012. No future stock options granted by
  NovaGold are subject to the Plan of Arrangement.

The fair value of the NovaGold Arrangement Options has been
  estimated using an option pricing model at a weighted average fair value of
  $1.74 and recognized a stock based compensation expense of $0.2 million for the
  year ended November 30, 2012. Assumptions used in the pricing models are as
  provided below.

|                                |  | November 30,
      2012 | 
|------------------------------- |  | ----------------------- | 
|Average risk-free interest rate |  | 1.34-1.44%              | 
|Exercise price                  |  | CDN$0.55-10.67          | 
|Expected life                   |  | 0.1-3.0 years           | 
|Expected volatility             |  | 50.5-61.3%              | 
|Expected dividends              |  | Nil                     | 

96

---

|NovaCopper Inc.                                     
|----------------------------------------------------
|(An Exploration-Stage Company)                      
|Notes to the Consolidated
      Financial Statements

A summary of the NovaGold Arrangement Options and changes
  during the year ended is as follows:

|                                      |  | November 30,
      2012 |  
|------------------------------------- |  | ----------------------- | -
|                                      |  |                         |  
|                                      |  |                         |  
|                                      |  | Number of options       |  
|Balance  beginning of year           |  | -                       |  
|Granted under the Plan of Arrangement |  | 2,189,040               |  
|Exercised                             |  | (37,220                 | )
|Cancelled/forfeited                   |  | (67,758                 | )
|Expired                               |  | (7,521                  | )
|Balance  end of year                 |  | 2,076,541               |  

The following table summarizes information about the NovaGold
  Arrangement Options outstanding at November 30, 2012.

|                 |  |             |  |  | Stock options -
      outstanding |  |  | Stock options -
      exercisable | 
|---------------- |  | ----------- |  |  | --------------------------------- |  |  | --------------------------------- | 
|                 |  |             |  |  |                                   |  |  | Weighted                          | 
|                 |  | Number of   |  |  | Weighted                          |  |  | average                           | 
|                 |  | outstanding |  |  | average years                     |  |  | exercise price                    | 
|Range of price   |  | options     |  |  | to expiry                         |  |  | **$**                             | 
|$ 0.54 to $ 1.99 |  | 351,880     |  |  | 0.93                              |  |  | 1.33                              | 
|$ 2.00 to $ 3.99 |  | 771,834     |  |  | 1.74                              |  |  | 3.11                              | 
|$ 4.00 to $ 5.99 |  | 630,465     |  |  | 3.93                              |  |  | 5.40                              | 
|$ 6.00 to $ 7.99 |  | 292,364     |  |  | 3.12                              |  |  | 7.62                              | 
|$8.00 to $10.60  |  | 29,998      |  |  | 4.47                              |  |  | 8.94                              | 
|                 |  | 2,076,541   |  |  | 2.50                              |  |  | 4.22                              | 

The aggregate intrinsic value of vested NovaGold Arrangement
  Options (the market value less the exercise value) at November 30, 2012 was
  $241,000 and the aggregate intrinsic value of exercised options in 2012 was
  $32,000.

As of November 30, 2012, there were 292,441 non-vested NovaGold
  Arrangement Options outstanding with a weighted average exercise price of
  CDN$5.70; the non-vested stock option expense not yet recognized was $195,000;
  and this expense is expected to be recognized over the next three years.

|8 | Management of capital
        risk
|- | ----------------------------------

The Company relies upon management to manage capital in order
  to accomplish the objectives of safeguarding the Companys ability to continue
  as a going concern in order to pursue the development of its mineral properties
  and maintain a capital structure which optimizes the costs of capital at an
  acceptable risk (note 1 - liquidity). The Companys current capital consists of
  equity funding through capital markets and funding received from its prior
  owner, NovaGold, prior to its public listing.

As the Company is currently in the exploration phase none of
  its financial instruments are exposed to commodity price risk; however, the
  Companys ability to obtain long-term financing and its economic viability may
  be affected by commodity price volatility.

To facilitate the management of its capital requirements, the
  Company prepares annual expenditure budgets that are updated as necessary
  depending on various factors, including successful capital deployment and
  general industry conditions.

97

---

|NovaCopper Inc.                                     
|----------------------------------------------------
|(An Exploration-Stage Company)                      
|Notes to the Consolidated
      Financial Statements

|9 | Financial
        instruments
|- | -----------------------------

The Company is exposed to a variety of risks arising from
  financial instruments. These risks and Managements objectives, policies and
  procedures for managing these risks are disclosed as follows.

The Companys financial instruments consist of cash and cash
  equivalents, accounts receivable, deposits, accounts payable and accrued
  liabilities, and due to related parties. The fair value of accounts payable and
  accrued liabilities and due to related parties approximates their carrying value
  due to the short-term nature of their maturity. All of the Companys financial
  instruments are initially measured at fair value and then held at amortized
  cost.

Financial risk management

The Companys activities expose them to certain financial
  risks, including currency risk, credit risk, liquidity risk, interest risk and
  price risk.

|(a) | Currency risk
|--- | -------------

Currency risk is the risk of a fluctuation in financial asset
  and liability settlement amounts due to a change in foreign exchange rates. The
  Company operates in the United States and Canada with some expenses incurred in
  Canadian dollars. The Companys exposure is limited to cash of CDN$578,000,
  accounts receivable of CDN$72,000 and accounts payable of CDN$1,159,000. Based
  on a 10% change in the US-Canadian exchange rate, assuming all other variables
  remain constant, the Companys net loss would change by approximately
  $47,000.

|(b) | Credit risk
|--- | -----------

Credit risk is the risk of an unexpected loss if a customer or
  third party to a financial instrument fails to meet its contractual obligations.
  The Company holds cash and cash equivalents with Canadian Chartered financial
  institutions which are composed of financial instruments issued by Canadian
  banks. The Companys accounts receivable consist of HST receivable from the
  Federal Government of Canada, amounts due from related parties and receivables
  due for camp and management services provided to other parties. The Companys
  exposure to credit risk is equal to the balance of cash and cash equivalents and
  accounts receivable as recorded in the financial statements.

|(c) | Liquidity risk
|--- | --------------

Liquidity risk is the risk that the Company will encounter
  difficulties raising funds to meet its financial obligations as they fall due.
  The Company is in the exploration stage and does not have cash inflows from
  operations; therefore, the Company manages liquidity risk through the management
  of its capital structure and financial leverage as outlined in notes 1 and 8 to
  the consolidated financial statements.

Contractually obligated cash flow requirements as at November
  30, 2012 are as follows.

|                                         |  | in thousands of dollars | 
|---------------------------------------- |  | ----------------------- | 
|                                         |  | Total                   | 
|                                         |  | **$**                   | 
|Accounts payable and accrued liabilities |  | 1,846                   | 
|Due to related parties                   |  | 127                     | 
|                                         |  | 1,973                   | 

98

---

|NovaCopper Inc.                                     
|----------------------------------------------------
|(An Exploration-Stage Company)                      
|Notes to the Consolidated
      Financial Statements

|(d) | Interest rate risk
|--- | ------------------

Interest rate risk is the risk that the fair value or future
  cash flows of a financial instrument will fluctuate because of changes in market
  interest rates. The Company holds excess cash balances in money market funds
  which limits the risk of loss due to interest rate changes to $nil.

|10 | Income taxes
|-- | ------------

Income tax expense differs from the amount that would result
  from applying the Canadian federal and provincial income tax rates to earnings
  before income taxes. These differences result from the following items:

|                                                   |  | in thousands of dollars |  
|-------------------------------------------------- |  | ----------------------- | -
|                                                   |  | November 30,
      2012 |  
|                                                   |  | **$**                   |  
|Combined federal and provincial statutory tax rate |  | 25.13%                  |  
|Income taxes at statutory rate                     |  | (7,794                  | )
|Difference in foreign tax rates                    |  | (2,652                  | )
|Effect of statutory rate changes                   |  | 6                       |  
|Expiry of net operating losses                     |  | 376                     |  
|Non-deductible expenditures                        |  | 2,498                   |  
|Other                                              |  | (39                     | )
|Valuation allowance                                |  | 7,605                   |  
|Income tax expense                                 |  | -                       |  

Future income taxes arise from temporary differences in the
  recognition of income and expenses for financial reporting and tax purposes. The
  significant components of future income tax assets and liabilities at November
  30, 2012 and 2011 are as follows:

|                                             |  | in thousands of dollars |  
|-------------------------------------------- |  | ----------------------- | -
|                                             |  | November 30,
      2012 |  
|                                             |  | **$**                   |  
|Future income tax assets                     |  |                         |  
|Non-capital losses                           |  | 41,778                  |  
|Mineral property interest                    |  | 13,036                  |  
|Deferred interest                            |  | 9,041                   |  
|Property, plant and equipment                |  | 4                       |  
|Share issuance costs                         |  | 28                      |  
|Other deductible temporary
      differences |  | 235                     |  
|Total future tax assets                      |  | 64,122                  |  
|Valuation allowance                          |  | (64,027                 | )
|Net future income tax assets                 |  | 95                      |  
|Future income tax liabilities                |  |                         |  
|Other taxable temporary
      differences    |  | 95                      |  
|Future income tax liabilities                |  | 95                      |  
|Net future income tax assets                 |  | -                       |  

The Company has loss carry-forwards of approximately $103.2
  million that may be available for tax purposes. Certain of these losses occurred
  prior to the incorporation of the Company and are accounted for in the financial
  statements as if they were incurred by the Company, as described in note 1.
  Prior to the Plan of Arrangement, the Company undertook a tax reorganization
  during the year in order to preserve the future deductibility of these losses
  for the Company, subject to the limitations below. Future tax assets have been
  recognized to the extent of future taxable income and the future taxable amounts
  related to taxable temporary differences for which a future tax liability is
  recognized can be offset. A valuation allowance has been provided against future
  income tax assets where it is not more likely than not that the Company will
  realize those benefits.

99

---

|NovaCopper Inc.                                     
|----------------------------------------------------
|(An Exploration-Stage Company)                      
|Notes to the Consolidated
      Financial Statements

The losses expire as follows in the following jurisdictions:

|           |  | in thousands of dollars  | 
|---------- |  | ------------------------ | 
|           |  | Non-capital
      losses | 
|           |  | Canada                   | 
|           |  | **$**                    | 
|2013       |  | -                        | 
|2014       |  | -                        | 
|2015       |  | -                        | 
|2016       |  | -                        | 
|2017       |  | -                        | 
|Thereafter |  | 3,972                    | 
|           |  | 3,972                    | 

Future use of these U.S. loss carry-forwards is subject to
  certain limitations under provisions of the Internal Revenue Code including
  limitations subject to Section 382, which relates to a 50% change in control
  over a three-year period, and are further dependent upon the Company attaining
  profitable operations. An ownership change under Section 382 occurred on January
  22, 2009 regarding losses incurred by AGC, of which the attributes of those
  losses were transferred to NovaCopper US with the purchase of the mineral
  property in October 2011. Therefore, approximately $42.6 million of the U.S.
  losses above are subject to limitation under Section 382. Accordingly, the
  Companys ability to use these losses may be limited.

An additional change in control could have occurred after
  November 30, 2011 which may further limit the availability of losses prior to
  the date of change in control.

|11 | Subsequent events
|-- | -----------------

On November 29, 2012, the Board of Directors approved a
  Restricted Share Unit (RSU Plan) and a Deferred Share Unit (DSU Plan) to
  provide long-term incentives to employees and directors. The RSU and DSU Plans
  may be settled in cash or shares, subject to shareholder and stock exchange
  approvals, at the Companys election with each Restricted Share Unit (RSU) and
  Deferred Share Unit (DSU) entitling the holder to receive one common share. On
  December 5, 2012, 1,295,500 RSUs were granted to employees vesting equally in
  thirds on June 5, 2013, December 5, 2013, and December 5, 2014. 750,000 DSUs
  were granted to directors vesting immediately to be paid out at the time of
  retirement from NovaCopper.

On December 3, 2012, 220,500 NovaGold PSUs vested at a
  performance rating of 67% of the units granted. Upon the vesting of the NovaGold
  PSUs, NovaCopper issued 14,180 common shares to holders of the units based on
  its commitment under the Plan of Arrangement to deliver one common share in
  NovaCopper for every six shares of NovaGold the holder received.

Between December 31, 2012 and January 18, 2013, 36,529,586
  NovaGold warrants were exercised by various warrants holders, including
  31,337,278 NovaGold warrants by the Companys largest shareholder, Electrum
  Strategic Resources L.P. Under the Plan of Arrangement, NovaCopper issued
  6,088,262 common shares to the warrant holders in satisfaction of its commitment
  to deliver one common share for every six shares of NovaGold the holder was
  entitled to receive. NovaCopper does not receive funds upon the exercise of
  warrants under the terms of the Plan of Arrangement.

100

---

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that
information required to be disclosed in reports filed or submitted by the
Company under U.S. and Canadian securities legislation is recorded, processed,
summarized and reported within the time periods specified in those rules,
including providing reasonable assurance that material information is gathered
and reported to senior management, including the Chief Executive Officer (CEO)
and Chief Financial Officer (CFO), as appropriate, to permit timely decisions
regarding public disclosure. Management, including the CEO and CFO, has
evaluated the effectiveness of the design and operation of the Companys
disclosure controls and procedures, as defined in Rule 13a-15(e) and15d-15(e) of
the US Exchange Act and the rules of Canadian Securities Administration, as at
November 30, 2012. Based on this evaluation, the CEO and CFO have concluded that
the Companys disclosure controls and procedures were effective.

Internal Control over Financial Reporting

Management is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rule 13a-15(f)
and 15d-15(f)of the U.S. Exchange Act and National Instrument 52-109
Certification of Disclosure in Issuers Annual and Interim filings. Any system
of internal control over financial reporting, no matter how well designed, has
inherent limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation. Management has used the Committee of Sponsoring
Organizations of the Treadway Commission framework to evaluate the effectiveness
of the Companys internal control over financial reporting. Based on this
assessment, management has concluded that as at November 30, 2012, the Companys
internal control over financial reporting was effective.

The effectiveness of the Companys internal control over
financial reporting has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, which has expressed its opinion
in its report included with the Companys annual consolidated financial
statements.

Attestation Report of the Registered Public Accounting
Firm

PricewaterhouseCoopers LLPs attestation report on our internal
control over financial reporting is included as part of Item 8. Financial
Statements and Supplementary Data herein.

Changes in Internal Controls

There has been no change in our internal control over financial
reporting during the year ended November 30, 2012 that has materially affected,
or is reasonably likely to materially affect, our internal control over
financial reporting.

Item 9B. OTHER INFORMATION

None.

101

---

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE

Executive Officers of NovaCopper

As of November 30, 2012, we had three executive officers,
namely Rick Van Nieuwenhuyse, Elaine Sanders, and Joseph R. Piekenbrock. The
following information is presented as of November 30, 2012.

|Name and
      Residence                        | Age | Held Office Since   | Business Experience During Past Five Years  
|----------------------------------------------- | --- | ------------------- | --------------------------------------------
|Rick Van Nieuwenhuyse                           | 57  | April 29, 2011(1)   | Chief Executive Officer of the NovaCopper   
|British Columbia, Canada                        |     |                     | (2011  present); Former President and Chief
|Director, President and Chief Executive Officer |     |                     | Executive Officer of NovaGold               
|                                                |     |                     |                                             
|Elaine Sanders                                  | 43  | January 30, 2012(2) | VP and Chief Financial Officer of           
|British Columbia, Canada                        |     |                     | NovaCopper (2012  present); Corporate      
|VP, Chief Financial Officer and Corporate       |     |                     | Secretary of NovaCopper (2011  present);   
|Secretary                                       |     |                     | Vice President, Chief Financial Officer and 
|                                                |     |                     | Corporate Secretary of NovaGold (2011      
|                                                |     |                     | 2012); and Vice President Finance of        
|                                                |     |                     | NovaGold (2006  2011).                     
|                                                |     |                     |                                             
|Joseph R. Piekenbrock                           | 57  | April 29, 2011(3)   | Senior Vice President, Exploration of the   
|Colorado, USA                                   |     |                     | Company (2011 present), Vice President,    
|Senior Vice President, Exploration              |     |                     | Exploration of NovaGold (2002-2012).        

(1)Mr. Van Nieuwenhuyse was appointed President and
Chief Executive Officer on April 29, 2011. He became a full-time employee of the
Company on January 9, 2012.(2)Ms. Sanders was appointed Chief
Financial Officer on January 30, 2012. She became a full-time employee of the
Company on November 13, 2012.(3)Mr. Piekenbrock was appointed
Senior VP, Exploration on April 29, 2011. He became a full-time employee of the
Company on May 1, 2012.

The information responsive to
Items 401, 405, 406 and 407 of Regulation S-K to be included in our definitive
Proxy Statement for our 2013 Annual Meeting of Shareholders, to be filed within
120 days of November 30, 2012, pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the 2013 Proxy Statement), is incorporated
herein by reference.

Item 11. EXECUTIVE COMPENSATION

The information responsive to
Items 402 and 407 of Regulation S-K to be included in our 2013 Proxy Statement
is incorporated herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information responsive to
Items 201(d) and 403 of Regulation S-K to be included in our 2013 Proxy
Statement is incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE

The information responsive to
Items 404 and 407 of Regulation S-K to be included in our 2013 Proxy Statement
is incorporated herein by reference.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information responsive to
Item 9(e) of Schedule 14A to be included in our 2013 Proxy Statement is
incorporated herein by reference.

102

---

PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

|(a) | Documents Filed With This Report
|--- | --------------------------------

| | 1. | FINANCIAL STATEMENTS
| | -- | --------------------

PageReports of Independent Registered Public Accounting Firm
    80Consolidated Balance Sheets
    82Consolidated Statements of Loss, Comprehensive Loss and Deficit
    83Consolidated Statements of Shareholders Equity
    84Consolidated Statements of Cash Flows
    86Notes to Consolidated Financial Statements
    87


| | 2. | FINANCIAL STATEMENT SCHEDULES
| | -- | -----------------------------

None.

| | 3. | EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
| | -- | ---------------------------------------------

NovaCopper Inc. Equity Incentive Plan
identified in exhibit list below.

Employment Agreement between the
Registrant and Rick Van Nieuwenhuyse, dated January 9, 2012, identified in
exhibit list below.

Employment Agreement between the
Registrant and Elaine Sanders, dated November 5, 2012, identified in exhibit
list below.

Employment Agreement between the
Registrant and Joseph Piekenbrock, dated May 1, 2012, identified in exhibit list
below.

2004 Stock Award Plan of NovaGold
Resources Inc. (as amended) identified in exhibit list below.

NovaGold 2009 Performance Share Unit
Plan identified in exhibit list below.

NovaGold 2009 Deferred Share Unit Plan
identified in exhibit list below.

NovaCopper Inc. 2012 Restricted Share
Unit Plan identified in exhibit list below.

NovaCopper Inc. 2012 Deferred Share
Unit Plan identified in exhibit list below.

| | (b) | Exhibits
| | --- | --------

|Exhibit |                                                                                                                                                                                                                                                            
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     | Description                                                                                                                                                                                                                                                
|3.1     | Certificate of Incorporation
      (incorporated by reference Exhibit 99.2 to the Registration Statement on
      Form 40-F as filed on March 1, 2012, File No. 001-35447)                                                                                 
|        |                                                                                                                                                                                                                                                            
|3.2     | Articles of NovaCopper Inc.,
      effective April 27, 2011, as altered March 20, 2011 (incorporated by
      reference to Exhibit 99.3 to Amendment No. 1 to the Registration Statement
      on Form 40-F as filed on April 19, 2012, File No. 001-35447)
|        |                                                                                                                                                                                                                                                            
|10.1    | Commitment Agreement between
      NovaGold Resources Inc. and NovaCopper Inc. dated effective April 19, 2012
    (incorporated by reference to
    Exhibit 99.1 to the Form 6-K dated April 25, 2012)                                                     

103

---

|Exhibit |                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     | Description                                                                                                                                                                                                                                                                                                                                                                                           
|10.2    | Exploration Agreement and
      Option to Lease between NovaCopper US Inc. and NANA Regional Corporation,
      Inc. dated October 19, 2011(incorporated by reference to Exhibit 99.1 to
      the Form 6-K dated April 25, 2012)                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.3    | Net Smelter Returns Royalty
      Agreement among Kenecott Exploration Company, Kennecott Arctic Company,
      Alaska Gold Company, and NovaGold Resources Inc. dated effective January
      7, 2010 (incorporated by reference to Exhibit 99.1 to the Form 6-K dated
      April 25, 2012)                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.4    | Employment Agreement between
      the Registrant and Rick Van Nieuwenhuyse, dated January 9, 2012
      (incorporated by reference to Exhibit 4.4 of the Registrants registration
  statement on Form S-8 as filed on April 27, 2012, File No. 333-181020)                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.5    | Employment Agreement between
      the Registrant and Elaine Sanders, dated November 5, 2012                                                                                                                                                                                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.6    | Employment Agreement between
      the Registrant and Joseph Piekenbrock, dated May 1, 2012                                                                                                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.7    | 2004 Stock Award Plan of
      NovaGold Resources Inc. (as amended) (incorporated by reference to
      Appendix A of Exhibit 99.2 of the Registrants report on Form 6-K as filed
      on April 29, 2009), as amended pursuant to the Plan of Arrangement
      (incorporated by reference to Exhibit 99.1 of the Registrants
      registration statement on Form 40-F as filed on March 1, 2012) 
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.8    | NovaGold 2009 Performance Share
      Unit Plan (incorporated by reference to Appendix C of Exhibit 99.2 of the
      Registrants report on Form 6-K as filed on April 29, 2009), as amended
      pursuant to the Plan of Arrangement (incorporated by reference to Exhibit
      99.1 of the Registrants registration statement on Form 40-F as filed on
      March 1, 2012, File No. 001- 35447)
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.9    | NovaGold 2009 Deferred Share
      Unit Plan (incorporated by reference to Appendix E of Exhibit 99.2 of the
      Registrants report on Form 6-K as filed on April 29, 2009), as amended
      pursuant to the Plan of Arrangement (incorporated by reference to Exhibit
      99.1 of the Registrants registration statement on Form 40-F as filed on
      March 1, 2012, File No. 001-35447)    
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.10   | Form of NovaCopper Inc. Stock
      Option Agreement (incorporated by reference to Exhibit 4.5 of the
      Registrants registration statement on Form S-8 as filed on April 27,
      2012, File No. 333-181020)                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.11   | NovaCopper Inc. 2012 Restricted
      Share Unit Plan                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.12   | NovaCopper Inc. 2012 Deferred
      Share Unit Plan                                                                                                                                                                                                                                                                                                                                                   
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|21.1    | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|23.1    | Consent of
      PricewaterhouseCoopers LLP                                                                                                                                                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|23.2    | Consent of Terry Braun                                                                                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|23.3    | Consent of Bruce Davis                                                                                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|23.4    | Consent of Eric Olin                                                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|23.5    | Consent of Scott Petsel                                                                                                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|23.6    | Consent of Neal Rigby                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|23.7    | Consent of Jeffrey Volk                                                                                                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|23.8    | Consent of Russ White                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|23.9    | Consent of Robert Sim                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|23.10   | Consent of SRK Consulting (US)
      Inc.                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|23.11   | Consent of BD Resource
      Consulting Inc.                                                                                                                                                                                                                                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|31.1    | Certification of the Chief
      Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)                                                                                                                                                                                                                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|31.2    | Certification of the Chief
      Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)                                                                                                                                                                                                                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                                                                       
|32.1    | Certification of the Chief
Executive Officer pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                                                                                                                                       

104

---

|Exhibit |                                                                                      
|------- | -------------------------------------------------------------------------------------
|No.     | Description                                                                          
|32.2    | Certification of the Chief Financial Officer
      pursuant to 18 U.S.C. Section 1350

105

---

SIGNATURES

Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

| | NOVACOPPER INC.
| | ---------------
| |                
| | By:            
| | Name:          
| | Title:         

Date: February 12, 2013

Pursuant to the requirements of
the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated:

|Signature                 |  | Title                                        | Date             
|------------------------- |  | -------------------------------------------- | -----------------
|                          |  |                                              |                  
|                          |  |                                              |                  
|                          |  |                                              |                  
|/s/ Rick Van Nieuwenhuyse |  | President, Chief Executive Officer and       | February 12, 2013
|Rick Van Nieuwenhuyse     |  | Director (Principal Executive Officer)       |                  
|                          |  |                                              |                  
|                          |  |                                              |                  
|                          |  |                                              |                  
|/s/ Elaine Sanders        |  | Chief Financial Officer (Principal Financial | February 12, 2013
|Elaine Sanders            |  | Officer and Principal Accounting Officer)    |                  
|                          |  |                                              |                  
|                          |  |                                              |                  
|                          |  |                                              |                  
|/s/ Clynton Nauman        |  | Lead Director and Authorized US              | February 12, 2013
|Clynton R. Nauman         |  | Representative                               |                  
|                          |  |                                              |                  
|                          |  |                                              |                  
|/s/ Tony Giardini         |  | Director                                     | February 12, 2013
|Tony Giardini             |  |                                              |                  
|                          |  |                                              |                  
|                          |  |                                              |                  
|/s/ Thomas Kaplan         |  | Director                                     | February 12, 2013
|Dr. Thomas S. Kaplan      |  |                                              |                  
|                          |  |                                              |                  
|                          |  |                                              |                  
|/s/ Terry Krepiakevich    |  | Director                                     | February 12, 2013
|Terry Krepiakevich        |  |                                              |                  
|                          |  |                                              |                  
|                          |  |                                              |                  
|/s/ Gregory Lang          |  | Director                                     | February 12, 2013
|Gregory A. Lang           |  |                                              |                  
|                          |  |                                              |                  
|                          |  |                                              |                  
|/s/ Igor Levental         |  | Director                                     | February 12, 2013
|Igor Levental             |  |                                              |                  
|                          |  |                                              |                  
|                          |  |                                              |                  
|/s/ Kalidas Madhavpeddi   |  | Director                                     | February 12, 2013
|Kalidas V. Madhavpeddi    |  |                                              |                  
|                          |  |                                              |                  
|                          |  |                                              |                  
|/s/ Gerald McConnell      |  | Director                                     | February 12, 2013
|Gerald McConnell          |  |                                              |                  
|                          |  |                                              |                  
|                          |  |                                              |                  
|/s/ Walter Segsworth      |  | Director                                     | February 12, 2013
|Walter Segsworth          |  |                                              |                  
|                          |  |                                              |                  
|                          |  |                                              |                  
|/s/ Janice Stairs         |  | Director                                     | February 12, 2013
|Janice Stairs             |  |                                              |                  

106

---