---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C.
20549

FORM 20-F

[   ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
or 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

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

For the fiscal year ended December 31, 2014

OR

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

OR

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

For the transition period from _______________ to
_______________

Commission file number 0-31224



NORTHERN DYNASTY MINERALS LTD.(Exact name of Registrant as specified in its charter)

BRITISH COLUMBIA, CANADA(Jurisdiction of
incorporation or organization)

15th Floor, 1040 West Georgia Street Vancouver,
British Columbia, Canada, V6E 4H1(Address of principal executive
offices)

Marchand Snyman, Chief
Financial Officer Facsimile No.: 604-684-8092 15th Floor, 1040 West
Georgia Street Vancouver, British Columbia, Canada, V6E
4H1     (Name, Telephone, E-mail
and/or Facsimile number and Address of Company Contact Person)

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

|Title of Each Class: Not applicable | Name of each exchange on which registered:
      Not applicable
|----------------------------------- | ---------------------------------------------------------------

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

Common shares with no par value

Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act: NoneIndicate the number of outstanding
shares of each of the issuer's classes of capital or common stock as of the
close of the period covered by the annual report:

95,009,864 common shares as of December 31, 2014

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]

If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934.

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

---

|-2 -
|----
|    

period that 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 (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).

Yes [  
]              
No [   ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of
the Exchange Act. (check one):

Large accelerated filer [   ]
    Accelerated filer [X]
    Non-accelerated filer [  
  ]


Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:

|U.S.GAAP [   ] | International Financial
      Reporting Standards as issued by the International Accounting Standards
      Board [X] | Other [   ]
|-------------- | --------------------------------------------------------------------------------------------------------------------- | -----------

If "Other" has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant
has elected to follow:

Item 17 [  
]              
Item 18 [   ]

If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  
]              
No [X]

---

|-3 -
|----
|    

T A B L E O F C O N T E N T S

|GENERAL                             |                                                                                    | 4 
|----------------------------------- | ---------------------------------------------------------------------------------- | --
|ITEM
      1                        | IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS                        | 9 
|ITEM
      2                        | OFFER
      STATISTICS AND EXPECTED TIMETABLE                                      | 9 
|ITEM
      3                        | KEY
      INFORMATION                                                              | 9 
|ITEM
      4                        | INFORMATION
      ON THE COMPANY                                                   | 14
|ITEM
      4A                       | UNRESOLVED
      STAFF COMMENTS                                                    | 31
|ITEM
      5                        | OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS                                 | 32
|ITEM
      6                        | DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES                                   | 38
|ITEM
      7                        | MAJOR
      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            | 58
|ITEM
      8                        | FINANCIAL
      INFORMATION                                                        | 61
|ITEM
      9                        | THE
      OFFER AND LISTING                                                        | 64
|ITEM
      10                       | ADDITIONAL
      INFORMATION                                                       | 65
|ITEM
      11                       | QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   | 81
|ITEM
      12                       | DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES                       | 82
|ITEM
      13                       | DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES                              | 82
|ITEM
      14                       | MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 82
|ITEM
      15                       | CONTROLS
      AND PROCEDURES                                                      | 82
|ITEM
      16                       | [RESERVED]                                                                         | 83
|ITEM
      16A                      | AUDIT
      COMMITTEE FINANCIAL EXPERT                                             | 83
|ITEM
      16B                      | CODE
      OF ETHICS                                                               | 84
|ITEM
      16C                      | PRINCIPAL
      ACCOUNTANT FEES AND SERVICES                                       | 84
|ITEM
      16D                      | EXEMPTIONS
      FROM LISTING STANDARDS FOR AUDIT COMMITTEES                       | 85
|ITEM
      16E                      | PURCHASES
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS       | 85
|ITEM
      16F                      | CHANGE
      IN REGISTRANT'S CERTIFYING ACCOUNTANT                                 | 85
|ITEM
      16G                      | CORPORATE
      GOVERNANCE                                                         | 85
|ITEM
      16H                      | MINE
      SAFETY DISCLOSURE                                                       | 85
|ITEM
      17                       | FINANCIAL
      STATEMENTS                                                         | 85
|ITEM
      18                       | FINANCIAL
      STATEMENTS                                                         | 85
|ITEM
      19                       | EXHIBITS                                                                           | 86
|INDEX
      TO FINANCIAL STATEMENTS | 88                                                                                

---

|-4 -
|----
|    

GENERAL

In this Annual Report on Form 20-F, all references to "we",
"Northern Dynasty" or the "Company" refer to Northern Dynasty Minerals Ltd.

The Company uses the Canadian Dollar as its reporting currency.
All references in this document to "Dollars" or "$" are expressed in Canadian
Dollars ("CAD", "C$"), unless otherwise indicated. See also Item 3  Key
Information for more detailed currency and conversion information.

Except as noted, the information set forth in this Annual
Report is as of May 11, 2015 and all information included in this document
should only be considered correct as of such date.

GLOSSARY OF TERMS

Certain terms used herein are defined as follows:

Alkalic
    Igneous rock containing a relatively high percentage of
      sodium and potassium feldspar; alteration can also introduce alkali
      minerals.Argillic
    Hydrothermal alteration of wall rock which forms clay
      minerals including kaolinite, smectite, illite and other species.CuEQ
    Copper EquivalentComminution
    Reduction of solid materials from one average particle
      size to a smaller average particle size by crushing, grinding, cutting,
      vibrating, or other means.Deportment
    Assessment of how minerals contribute to grade, as each
      mineral is likely to behave differently to comminution, flotation or
      leaching.Diorite
    Grey to dark-grey igneous intrusive rock of intermediate
      composition, composed principally of plagioclase feldspar along with
      biotite, hornblende and/or pyroxene.Geometallurgy
    Practice of combining geology and/or geostatistics with
      metallurgy.Graben
    Down-dropped block of land bordered by parallel faults.Granodiorite
    Medium- to coarse-grained acid igneous rock with quartz
      (>20%), plagioclase and alkali feldspar, commonly with minor hornblende
      and/or biotite.HDGI
    Is a reference to Hunter Dickinson Group Inc. (now
      renamed 3537137 Canada Inc.) which is the related party corporation which
      originally held the options to the Pebble Project, and which was acquired
      by the Company to become a 100% subsidiary in fiscal 2006.Hypogene
    Processes below the earth's surface which, in mineral
      deposits, result in precipitation of primary minerals like
      sulphides.Hydrothermal mineral deposit
    Any concentration of metallic minerals formed by the
      precipitation of solids from hot waters (hydrothermal solution). The
      solutions may be sourced from a magma or from deeply circulating water
      heated by magma.Intrusion (batholith, dyke, pluton)
    Medium to coarse grained igneous bodies which
      crystallized at depth within the Earth's crust. Large intrusive bodies are
      called batholiths; smaller bodies are plutons and linear bodies are dykes.Leached Cap
    Rock which originally contained mineralization that was
      subsequently removed due to weathering processes.Locked Cycle Test
    A repetitive batch flotation test used in mineral
      processing laboratories while developing a metallurgical flowsheet.Elements
    Au - Gold; Ag - Silver; Al - Aluminum; Cu - Copper; Fe -
      Iron; Mo - Molybdenum; Na - Sodium; O - Oxygen; Pb - Lead; S - Sulphur; Zn
      - Zinc.Monzonite
    Igneous intrusive rock with approximately equal amounts
      of plagioclase and alkali feldspar, and less than 5% quartz by volume.National Instrument 43- 101 ("NI 43-101")
    The Canadian securities rule which establishes disclosure
      standards for mineral projects of Canadian resource companies.Kriging
    A method of estimation of a variable value (such as metal
      grade) at an unmeasured location from measured values, weighted by
      distance and orientation, at nearby locations.


---

|-5 -
|----
|    

Porphyry deposit
    A type of mineral deposit genetically related to igneous
      intrusions in which ore minerals are widely distributed, generally of low
      grade but commonly of large tonnage.Potassic
    Hydrothermal alteration which results in the production
      of potassium- bearing minerals such as biotite, muscovite or sericite,
      and/or orthoclase.Pyrophyllite
    Aluminosilicate hydroxide mineral that forms as a result
      of hydrothermal alteration or low grade metamorphism.Sodic
    In this report, refers to a type of hydrothermal
      alteration that contains sodium-bearing minerals, most commonly albite
      feldspar.Subduction
    Process by which one tectonic plate moves under another
      tectonic plate.Supergene
    Refers to processes which occur relatively near the
      surface of the earth which modify or destroy original (hypogene) minerals
      by oxidation and chemical weathering.Superterrane
    A group of physically connected and related geological
      terranes (group of related rock units).


CURRENCY AND MEASUREMENT

All currency amounts in this Annual Report are stated in
Canadian Dollars unless otherwise indicated. Approximate conversion of metric
units into imperial equivalents is as follows:

Metric Units
    Multiply by
    Imperial Unitshectares
    2.471
    = acresmeters
    3.281
    = feetkilometers
    3281
    = feetkilometers
    0.621
    = milesgrams
    0.032
    = ounces (troy)tonnes
    1.102
    = tons (short) (2,000 lbs)grams/tonne
    0.029
= ounces (troy)/ton


RESOURCE CATEGORY (CLASSIFICATION) DEFINITIONS

The discussion of mineral deposit classifications in this
Annual Report adheres to the mineral resource and mineral reserve definitions
and classification criteria developed by the Canadian Institute of Mining
("CIM") 2014. Estimated mineral resources fall into two broad categories
dependent on whether the economic viability of them has been established and
these are namely "resources" (potential for economic viability) and "reserves"
(viable economic production is feasible). Resources are sub-divided into
categories depending on the confidence level of the estimate based on level of
detail of sampling and geological understanding of the deposit. The categories,
from lowest confidence to highest confidence, are inferred resource, indicated
resource and measured resource. Reserves are similarly sub-divided by order of
confidence into probable (lowest) and proven (highest). These classifications
can be more particularly described as follows:

Mineral Resource
    A concentration or occurrence of solid material of
      economic interest in or on the Earths crust in such form, grade or
      quality and quantity that there are reasonable prospects for eventual
      economic extraction. The location, quantity, grade or quality, continuity
      and other geological characteristics of a Mineral Resource are known,
      estimated or interpreted from specific geological evidence and knowledge,
      including sampling.


---

|-6 -
|----
|    

Inferred Mineral Resource
    That part of a Mineral Resource for which quantity and
      grade or quality are estimated on the basis of limited geological evidence
      and sampling. Geological evidence is sufficient to imply but not verify
      geological and grade or quality continuity. It has a lower level of
      confidence than that applying to an Indicated Mineral Resource and must
      not be converted to a Mineral Reserve. It is reasonably expected that the
      majority of Inferred Mineral Resources could be upgraded to Indicated
      Mineral Resources with continued exploration.Indicated Mineral Resource
    That part of a Mineral Resource for which quantity, grade
      or quality, densities, shape and physical characteristics are estimated
      with sufficient confidence to allow the application of Modifying Factors
      in sufficient detail to support mine planning and evaluation of the
      economic viability of the deposit. Geological evidence is derived from
      adequately detailed and reliable exploration, sampling and testing and is
      sufficient to assume geological and grade or quality continuity between
      points of observation. It has a lower level of confidence than that
      applying to a Measured Mineral Resource and may only be converted to a
      Probable Mineral Reserve.Measured Mineral Resource
    That part of a Mineral Resource for which quantity, grade
      or quality, densities, shape, and physical characteristics are estimated
      with confidence sufficient to allow the application of Modifying Factors
      to support detailed mine planning and final evaluation of the economic
      viability of the deposit. Geological evidence is derived from detailed and
      reliable exploration, sampling and testing and is sufficient to confirm
      geological and grade or quality continuity between points of observation.
      It has a higher level of confidence than that applying to either an
      Indicated Mineral Resource or an Inferred Mineral Resource. It may be
      converted to a Proven Mineral Reserve or to a Probable Mineral Reserve.Mineral Reserve
    The economically mineable part of a Measured and/or
      Indicated Mineral Resource. It includes diluting materials and allowances
      for losses, which may occur when the material is mined or extracted and is
      defined by studies at Pre- Feasibility or Feasibility level as appropriate
      that include application of Modifying Factors, which are considerations
      used to convert Mineral Resources to Mineral Reserves and include, but are
      not restricted to, mining, processing, metallurgical, infrastructure,
      economic, marketing, legal, environmental, social and governmental
      factors. Such studies demonstrate that, at the time of reporting,
      extraction could reasonably be justified. The reference point at which
      Mineral Reserves are defined, usually the point where the ore is delivered
      to the processing plant, must be stated. It is important that, in all
      situations where the reference point is different, such as for a saleable
      product, a clarifying statement is included to ensure that the reader is
      fully informed as to what is being reported. The public disclosure of a
      Mineral Reserve must be demonstrated by a Pre-Feasibility Study or
      Feasibility Study.Probable Mineral Reserve
    The economically mineable part of an Indicated, and in
      some circumstances, a Measured Mineral Resource. The confidence in the
      Modifying Factors applying to a Probable Mineral Reserve is lower than
      that applying to a Proven Mineral Reserve.Proven Mineral Reserve
    The economically mineable part of a Measured Mineral
      Resource. A Proven Mineral Reserve implies a high degree of confidence in
      the Modifying Factors.


CAUTIONARY NOTES TO UNITED STATES INVESTORS CONCERNING
MINERAL RESERVE AND RESOURCE ESTIMATES

This Annual Report on Form 20-F uses terms that comply with
reporting standards in Canada and certain estimates are made in accordance with
Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects
("NI 43-101"). NI 43-101 is a rule developed by the Canadian Securities
Administrators that establishes standards for all public disclosure an issuer
makes of scientific and technical information concerning mineral projects.
Unless otherwise indicated, all resource estimates contained in or incorporated
by reference in this prospectus have been prepared in accordance with NI 43-101.
These standards differ significantly from the requirements of the SEC, and
resource information contained herein and incorporated by reference herein may
not be comparable to similar information disclosed by companies in the United
States (US companies).

In addition, this Annual Report on Form 20-F uses the terms
measured mineral resources, indicated mineral resources and inferred
mineral resources to comply with the reporting standards in Canada.

---

|-7 -
|----
|    

We advise United States investors that while those terms are
recognized and required by Canadian regulations, the SEC does not recognize
them. United States investors are cautioned not to assume that any part or all
of the mineral deposits in these categories will ever be converted into mineral
reserves. These terms have a great amount of uncertainty as to their existence,
and great uncertainty as to their economic and legal feasibility.

Further, inferred resources have a great amount of
uncertainty as to their existence and as to whether they can be mined legally or
economically. Therefore, United States investors are also cautioned not to
assume that all or any part of the inferred resources exist. In accordance with
Canadian rules, estimates of inferred mineral resources cannot form the basis
of feasibility or other economic studies, except in limited circumstances where
permitted under NI 43-101.

It cannot be assumed that all or any part of measured mineral
resources, indicated mineral resources, or inferred mineral resources will
ever be upgraded to a higher category. Investors are cautioned not to assume
that any part of the reported measured mineral resources, indicated mineral
resources, or inferred mineral resources in this prospectus is economically
or legally mineable.

In addition, disclosure of contained ounces is permitted
disclosure under Canadian regulations; however, the SEC only permits issuers to
report mineralization as in place tonnage and grade without reference to unit
measures.

FORWARD LOOKING STATEMENTS

The Annual Report on Form 20-F includes or incorporates by
reference certain statements that constitute forward-looking statements within
the meaning of the United States Private Securities Litigation Reform Act of
1995.

These statements appear in a number of places in this Form 20-F
and include statements regarding our intent, belief or current expectation and
that of our officers and directors. These forward-looking statements involve
known and unknown risks and uncertainties that may cause our actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. When used in this prospectus or in documents incorporated by
reference in this prospectus, words such as believe, anticipate, estimate,
project, intend, expect, may, will, plan, should, would,
contemplate, possible, attempts, seeks and similar expressions are
intended to identify these forward-looking statements. All statements in
documents incorporated herein, other than statements of historical facts that
address future production, permitting, reserve potential, exploration drilling,
exploitation activities and events or developments that the Company expects are
forward-looking statements. These forward-looking statements are based on
various factors and were derived utilizing numerous assumptions that could cause
our actual results to differ materially from those in the forward-looking
statements. Accordingly, you are cautioned not to put undue reliance on these
forward-looking statements. Additional forward-looking statements include, among
others, statements regarding:

| | that we will ultimately be able to demonstrate that a
      mine at the Pebble Project can be developed and operated in an
      environmentally sound and socially responsible manner, meeting all
      relevant federal, state and local regulatory requirements, and to obtain
      required operating permits;
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                     
| | our expected financial performance in future
      periods;                                                                                                                                                                                                                                                         
|  |                                                                                                                                                                                                                                                                                                                     
| | our plan of operations, including our plans to
      carry out exploration and development activities; and                                                                                                                                                                                                          
|  |                                                                                                                                                                                                                                                                                                                     
| | our ability to raise capital for exploration
      and development activities.                                                                                                                                                                                                                                      

Certain of the assumptions we have made include assumptions
regarding, among other things:

| | that we will be ultimately able to obtain
      permitting for a mine at the Pebble Project;                                                                                                                                                                                                                                                                      
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                   
| | that the market prices of copper and gold will
      not decline significantly nor for a lengthy period of time;                                                                                                                                                                                                                                                  
|  |                                                                                                                                                                                                                                                                                                                                                                   
| | that we will be able to secure sufficient working capital
      necessary for the continued environmental assessment and permitting
      activities and engineering work which are preconditions to any potential
      development of the Pebble Project, which would then require engineering
      and financing in order to advance to ultimate construction;
|  |                                                                                                                                                                                                                                                                                                                                                                   
| | that key personnel will continue their
      employment with us;                                                                                                                                                                                                                                                                                                  
|  |                                                                                                                                                                                                                                                                                                                                                                   
| | our ability to obtain the necessary expertise
      in order to carry out our exploration and development activities within
      the planned time periods; and                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                   
| | our ability to obtain adequate financing on
      acceptable terms.                                                                                                                                                                                                                                                                                               

Some of the risks and uncertainties that could cause our actual
results to differ materially from those expressed in our forward-looking
statements include:

---

|-8 -
|----
|    

| | we may never obtain permitting for a mine at
      the Pebble Project for technical, legal or political reasons;                                                            
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                             
| | the existence of concerted opposition to the
      Pebble Project;                                                                                                          
|  |                                                                                                                                                                             
| | our ability to continue to fund our exploration
      and development activities;                                                                                           
|  |                                                                                                                                                                             
| | the costs of development and operation of the
      Pebble Project may be greater than we anticipate;                                                                       
|  |                                                                                                                                                                             
| | the speculative nature of the mineral resource
      exploration business;                                                                                                  
|  |                                                                                                                                                                             
| | the lack of known reserves at the Pebble
      Project;                                                                                                                     
|  |                                                                                                                                                                             
| | our inability to establish that the Pebble
      Project contains commercially viable deposits of ore;                                                                      
|  |                                                                                                                                                                             
| | our ability to continue on a going concern
      basis;                                                                                                                     
|  |                                                                                                                                                                             
| | our ability to recover the financial statement
      carrying values of our Pebble Project if the Company ceases to continue on
      a going concern basis;                
|  |                                                                                                                                                                             
| | our history of financial losses;                                                                                                                                            
|  |                                                                                                                                                                             
| | the volatility of gold, copper and molybdenum
      prices;                                                                                                                 
|  |                                                                                                                                                                             
| | the inherent risk involved in the exploration,
      development and production of minerals;                                                                                
|  |                                                                                                                                                                             
| | changes in, or the introduction of new,
      government regulations relating to mining, including laws and regulations
      relating to the protection of the environment;
|  |                                                                                                                                                                             
| | the presence of unknown environmental hazards
      at the Pebble Project;                                                                                                  
|  |                                                                                                                                                                             
| | our inability to insure our operations against
      all risks;                                                                                                             
|  |                                                                                                                                                                             
| | the highly competitive nature of our business;                                                                                                                              
|  |                                                                                                                                                                             
| | litigation risks and the inherent uncertainty
      of litigation;                                                                                                          
|  |                                                                                                                                                                             
| | the historical volatility in our share price;                                                                                                                               
|  |                                                                                                                                                                             
| | the potential dilution to the Company's
      shareholders resulting from any future equity financings; and                                                                 
|  |                                                                                                                                                                             
| | the potential dilution to the Company's
      shareholders from the exercise of share purchase options to purchase our
      shares.                                        

This list is not exhaustive of the factors that may affect any
of the Companys forward-looking statements or information. Forward-looking
statements or information are statements about the future and are inherently
uncertain, and actual achievements of the Company or other future events or
conditions may differ materially from those reflected in the forward-looking
statements or information due to a variety of risks, uncertainties and other
factors, including, without limitation, the risks and uncertainties described
above.

The Companys forward-looking statements and information are
based on the assumptions, beliefs, expectations and opinions of management as of
the date such statements are made. The Company will update forward-looking
statements and information if and when, and to the extent, required by
applicable securities laws. Readers should not place undue reliance on
forward-looking statements. The forward-looking statements and information
contained herein are expressly qualified by this cautionary statement.

For the above reasons, information contained in this Form on
20-F herein containing descriptions of our mineral deposits may not be
comparable to similar information made public by US companies subject to the
reporting and disclosure requirements under the United States federal securities
laws and the rules and regulations thereunder.

The Company advises you that these cautionary remarks expressly
qualify, in their entirety, all forward-looking statements attributable to
Northern Dynasty or persons acting on the Company's behalf. The Company assumes
no obligation to update the Company's forward-looking statements to reflect
actual results, changes in assumptions or changes in other factors affecting
such statements. You should carefully review the cautionary statements and risk
factors contained in this and other documents that the Company files from time
to time with the Securities and Exchange Commission.

STATUS AS AN EMERGING GROWTH COMPANY

The Company is an "emerging growth company" as defined in
section 3(a) of the Exchange Act, and the Company will continue to qualify as an
"emerging growth company" until the earliest of:

|(a) | the last day of the fiscal year during which the Company
      has total annual gross revenues of US$1,000,000,000 (as such amount is
      indexed for inflation every 5 years by the SEC) or
more;
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|-9 -
|----
|    

|(b) | the last day of the Company's fiscal year following the
      fifth anniversary of the date of the first sale of common equity
      securities pursuant to an effective registration statement under the
      Securities Act;
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                
|(c) | the date on which the Company has, during the previous
      3-year period, issued more than US$1,000,000,000 in non-convertible debt;
      or                                                                                
|    |                                                                                                                                                                                                                                
|(d) | the date on which the Company is deemed to be a "large
      accelerated filer", as defined in Exchange Act Rule
  12b2.                                                                                                      

Northern Dynasty expects to continue to be an emerging growth
company until December 31, 2020.

Generally, a registrant that registers any class of its
securities under section 12 of the Exchange Act is required to include in the
second and all subsequent annual reports filed by it under the Exchange Act, a
management report on internal control over financial reporting and, subject to
an exemption available to registrants that are neither an "accelerated filer" or
a "larger accelerated filer" (as those terms are defined in Exchange Act Rule
12b-2), an auditor attestation report on management's assessment of internal
control over financial reporting. However, for so long as the Company continues
to qualify as an emerging growth company, the Company will be exempt from the
requirement to include an auditor attestation report in its annual reports filed
under the Exchange Act, even if it were to qualify as an "accelerated filer" or
a "larger accelerated filer". In addition, auditors of an emerging growth
company are exempt from the rules of the Public Company Accounting Oversight
Board requiring mandatory audit firm rotation or a supplement to the auditor's
report in which the auditor would be required to provide additional information
about the audit and the financial statements of the registrant (auditor
discussion and analysis).

The Company has irrevocably elected to comply with new or
revised accounting standards even though it is an emerging growth company.

|ITEM 1 | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
      ADVISORS
|------ | -----------------------------------------------------------

Not applicable for an Annual Report.

|ITEM 2 | OFFER STATISTICS AND EXPECTED TIMETABLE
|------ | ---------------------------------------

Not applicable for an Annual Report.

|ITEM 3 | KEY INFORMATION
|------ | ---------------

|A. | SELECTED FINANCIAL DATA
|-- | -----------------------

The following tables summarize selected financial data for
Northern Dynasty derived from the Company's audited financial statements,
expressed in thousands of Canadian Dollars, and which have been prepared in
accordance with and using accounting policies in compliance with International
Financial Reporting Standards ("IFRS") as issued by the International Accounting
Standards Board ("IASB"). This selected financial data should be read in
conjunction with the Company's audited financial statements for the fiscal years
then ended.

Statements of Financial Position Data

($ 000s)
    
    2014
    
    
    2013
    
    
    2012
    
    
    2011
    
    
    2010Mineral property, plant and
      equipment, net
    $
    123,608
    
    $
    108,050
    
    $
    1,055
    
    $
    1,055
    
    $
    1,055Total assets
    
    135,510
    
    
    141,784
    
    
    132,934
    
    
    145,241
    
    
    144,247Total liabilities
    
    7,547
    
    
    7,856
    
    
    4,041
    
    
    3,885
    
    
    4,187Working capital
    
    5,869
    
    
    29,681
    
    
    32,134
    
    
    42,474
    
    
    43,332Share capital
    
    389,227
    
    
    389,227
    
    
    389,189
    
    
    388,987
    
    
    380,570Reserves
    
    84,031
    
    
    58,649
    
    
    51,129
    
    
    48,132
    
    
    35,114Accumulated deficit
    
    (345,295
    )
    
    (313,948
    )
    
    (311,425
    )
    
    (295,763
    )
    
    (275,624
    )Net assets
    
    127,963
    
    
    133,928
    
    
    128,893
    
    
    141,356
    
    
    140,060Shareholders' equity
    
    127,963
    
    
    133,928
    
    
    128,893
    
    
    141,356
    
    
    140,060


---

|-10 -
|-----
|     

Statements of Comprehensive Loss (Income) Data

|($
      000s, except per share amounts and number of shares) |   | 2014       |   |   | 2013       |   |   | 2012       |   |   | 2011       |   |   | 2010       |  
|-------------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | -
|Interest and other income                                      | $ | (281       | ) | $ | (1,136     | ) | $ | (887       | ) | $ | (944       | ) | $ | (544       | )
|General and administrative expenses                            |   | 17,384     |   |   | 6,245      |   |   | 6,780      |   |   | 6,168      |   |   | 4,456      |  
|Exploration expenditures                                       |   | 12,877     |   |   | 1,991      |   |   | 4,461      |   |   | 819        |   |   | 1,800      |  
|Share-based payments                                           |   | 3,877      |   |   | 641        |   |   | 5,225      |   |   | 14,205     |   |   | 8,373      |  
|Other                                                          |   | (221       | ) |   | (340       | ) |   | 83         |   |   | (58        | ) |   |           |  
|Gain on discontinuance of equity method                        |   |           |   |   | (5,062     | ) |   |           |   |   |           |   |   |           |  
|Deferred income
      tax                                      |   | (2,289     | ) |   | 184        |   |   |           |   |   | (51        | ) |   | 30         |  
|Net loss for the year                                          |   | 31,347     |   |   | 2,523      |   |   | 15,662     |   |   | 20,139     |   |   | 14,115     |  
|Other
      comprehensive (income) loss                        |   | (9,953     | ) |   | (6,887     | ) |   | 2,123      |   |   | (2,153     | ) |   | 5,428      |  
|Total
      comprehensive loss (income)                        |   | 21,394     |   |   | (4,364     | ) |   | 17,785     |   |   | 17,986     |   |   | 19,543     |  
|                                                               |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|Basic and diluted net loss per share                           | $ | 0.33       |   | $ | 0.03       |   | $ | 0.16       |   | $ | 0.21       |   | $ | 0.15       |  
|Weighted average
      number of common shares outstanding     |   | 95,009,864 |   |   | 95,007,374 |   |   | 94,993,717 |   |   | 94,851,589 |   |   | 93,778,967 |  

Currency and Exchange Rates

On May 11, 2015, the rate of exchange of the Canadian Dollar,
  based on the daily noon rate in Canada as published by the Bank of Canada, was
  US$1.00 = C$1.2107. Exchange rates published by the Bank of Canada, available on
  its website www.bankofcanada.ca, are nominal quotations  not buying or
  selling rates  and are intended for statistical or analytical purposes.

The following tables set out the exchange rates, based on the
  daily noon rates in Canada as published by the Bank of Canada for the conversion
  of Canadian Dollars into U.S. Dollars.

Year Ended December 31(Canadian Dollars per U.S. Dollar)2014
      2013
      2012
      2011
      2010Rate at end of year
      $ 1.1601
      $ 0.9402
      $ 1.0051
      $ 0.9833
      $ 0.9946Average rate for year
      $ 1.1046
      $ 0.9711
      $ 1.0004
      $ 1.0110
      $ 1.0303High for year
      $ 1.1656
      $ 1.0165
      $ 1.0299
      $ 1.0583
      $ 1.0745Low for year
      $ 1.0639
      $ 0.9342
      $ 0.9599
      $ 0.9430
      $ 0.9946


|Monthly High and Low Exchange Rate (Canadian Dollar per U.S.
      Dollar)
|--------------------------------------------------------------------------
|                                                                          
|May 2015 (to May 11, 2015)                                                
|April 2015                                                                
|March 2015                                                                
|February 2015                                                             
|January 2015                                                              
|December 2014                                                             



|B. | CAPITALIZATION AND
INDEBTEDNESS
|-- | -------------------------------

Not applicable for an Annual Report.

|C. | REASONS FOR THE OFFER AND USE OF
  PROCEEDS
|-- | -------------------------------------------

Not applicable for an Annual Report.

---

|-11 -
|-----
|     

|D. | RISK FACTORS
|-- | ------------

The securities of Northern Dynasty are highly speculative and
subject to a number of risks. A prospective investor or other person reviewing
Northern Dynasty for a prospective investor should not consider an investment in
Northern Dynasty unless the investor is capable of sustaining an economic loss
of their entire investment. The risks associated with Northern Dynastys
business include:

Inability to Achieve Mine Permitting of the Pebble
Project

The principal risk facing the Company is that it will be
ultimately be unable to secure the necessary permits under United States Federal
and Alaskan State laws to build a mine at Pebble. There are prominent and well
organized opponents of the Pebble Project and the Company may be unable, despite
developing solid scientific and technical evidence of risk mitigation, to
overcome such opposition and convince mining regulatory authorities that a mine
should be permitted at Pebble. If we are unable to secure the necessary permits
to build a mine at the Pebble Project, we may be unable to achieve revenues from
operations and/or recover our investment in the Pebble Project.

Negative Operating Cash Flow

The Company currently has a negative operating cash flow and
will continue to have that for the foreseeable future. Accordingly, the Company
will require substantial additional capital in order to fund its future
exploration and development activities. The Company does not have any
arrangements in place for this funding and there is no assurance that such
funding will be achieved when required. Any failure to obtain additional
financing or failure to achieve profitability and positive operating cash flows
will have a material adverse effect on its financial condition and results of
operations.

The Company believes it is likely a "passive foreign
investment company" which may have adverse U.S. federal income tax consequences
for U.S. shareholders.

U.S. shareholders should be aware that the Company believes it
was classified as a passive foreign investment company ("PFIC") during one or
more previous tax years, and may be a PFIC in the current tax year and possibly
in subsequent tax years. If the Company is a PFIC for any tax 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, or 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 or a "mark-to-market" election with respect to the
common shares. A U.S. shareholder who makes a qualified electing fund election
generally must report on a current basis its share of the Company's net capital
gain and ordinary earnings for any tax year in which the Company is a PFIC,
whether or not the Company distributes 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 under the heading "Certain United States
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.

The Pebble Project is Subject to Political and Environmental
Regulatory Opposition

As is typical for a large scale mining project, the Pebble
Project faces concerted opposition from many individuals and organizations who
are motivated to preclude any possible mining in the Bristol Bay Watershed
("BBW"). The BBW is an important wildlife and salmon habitat area. The United
States Environmental Protection Agency has gone so far as to suggest that it may
peremptorily prevent the Pebble Project from proceeding even before a mine
permitting application is filed. Accordingly one of the greatest risks to the
Pebble Project is seen to be political/permitting risk which may ultimately
preclude construction of a mine at Pebble.

Northern Dynasty will require additional funding to meet the
development objectives of the Pebble Project.

Northern Dynasty will need to raise additional financing (share
issuances, debt or asset level partnering) to achieve permitting and development
of the Pebble Project. In addition, a positive production decision at the Pebble
Project would require significant capital for project engineering and
construction. Accordingly, the continuing development of the Pebble Project will
depend upon Northern Dynastys ability to obtain financing through debt
financing, equity financing, the joint venturing of the project, or other means.
There can be no assurance that Northern Dynasty will be successful in obtaining
the required financing, or that it will be able to raise the
funds on terms that do not result in high levels of dilution to shareholders.

---

|-12 -
|-----
|     

The Pebble Partnerships mineral property interests do not
contain any ore reserves or any known body of economic mineralization.

Although there are known bodies of mineralization on the Pebble
Project, and the Pebble Partnership has completed core drilling programs within,
and adjacent to, the deposits to determine measured and indicated resources,
there are currently no known reserves or body of commercially viable ore and the
Pebble Project must be considered an exploration prospect only. Extensive
additional work is required before Northern Dynasty or the Pebble Partnership
can ascertain if any mineralization may be economic and hence constitute
"ore".

Mineral Resources disclosed by Northern Dynasty or the
Pebble Partnership for the Pebble Project are estimates only.

Northern Dynasty has included mineral resource estimates that
have been made in accordance with National Instrument 43-101. These resource
estimates are classified as "measured resources", "indicated resources" and
"inferred resources". Northern Dynasty advises investors that while these terms
are mandated by Canadian securities administrators, the U.S. Securities and
Exchange Commission does not recognize these terms. Investors are cautioned not
to assume that any part or all of mineral deposits classified as "measured
resources" or "indicated resources" will ever be converted into ore reserves.
Further, "inferred resources" have a great amount of uncertainty as to their
existence, and 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, estimates of inferred mineral resources may not
form the basis of feasibility or prefeasibility studies, except in rare cases.
Investors are cautioned not to assume that part or all of an inferred resource
exists, or is economically or legally mineable.

All amounts of mineral resources are estimates only, and
Northern Dynasty cannot be certain that any specified level of recovery of
metals from the mineralized material will in fact be realized or that the Pebble
Project or any other identified mineral deposit will ever qualify as a
commercially mineable (or viable) ore body that can be economically exploited.
Mineralized material which is not mineral reserves does not have demonstrated
economic viability. In addition, the quantity of mineral reserves and mineral
resources may vary depending on, among other things, metal prices and actual
results of mining. There can be no assurance that any future economic or
technical assessments undertaken by the Company with respect to the Pebble
Project will demonstrate positive economics or feasibility.

Northern Dynasty has no history of earnings and no
foreseeable earnings, and may never achieve profitability or pay
dividends.

Northern Dynasty has only had losses since inception and there
can be no assurance that Northern Dynasty will ever be profitable. Northern
Dynasty has paid no dividends on its shares since incorporation. Northern
Dynasty presently has no ability to generate earnings as its mineral properties
are in the pre-development stage.

Northern Dynastys consolidated financial statements have
been prepared assuming Northern Dynasty will continue on a going concern basis.

Northern Dynastys consolidated financial statements have been
prepared on the basis that Northern Dynasty will continue as a going concern. At
December 31, 2014, Northern Dynasty had working capital of approximately $9.4
million. Northern Dynasty has prioritized the allocation of available financial
resources in order to meet key corporate and Pebble Project expenditure
requirements in fiscal 2015. Additional financing will be required to pursue any
material expenditures at the Pebble Project. Northern Dynastys continuing
operations and the underlying value and recoverability of the amounts shown for
mineral property interest are entirely dependent upon the existence of
economically recoverable mineral reserves at the Pebble Project, the ability of
the Company to finance the completion of the exploration and development of the
Pebble Project, the Pebble Partnership obtaining the necessary permits to mine,
and on future profitable production at the Pebble Project. Furthermore, failure
to continue as a going concern would require that Northern Dynasty's assets and
liabilities be restated on a liquidation basis, which would likely differ
significantly from their going concern assumption carrying values.

---

|-13 -
|-----
|     

As the Pebble Project is Northern Dynastys principal
mineral property interest, the failure to establish that the Pebble Project
possesses commercially viable and legally mineable deposits of ore may cause a
significant decline in the trading price of Northern Dynastys common shares and
reduce its ability to obtain new financing.

The Pebble Project is, through the Pebble Partnership, Northern
Dynastys principal mineral property interest. Northern Dynastys principal
business objective is to carry out further exploration and related activities to
establish whether the Pebble Project possesses commercially viable deposits of
ore. If Northern Dynasty is not successful in its plan of operations, Northern
Dynasty may have to seek a new mineral property to explore or acquire an
interest in a new mineral property or project. Northern Dynasty anticipates that
such an outcome would possibly result in further declines in the trading price
of Northern Dynastys common shares. Furthermore, Northern Dynasty anticipates
that its ability to raise additional financing to fund exploration of a new
property or the acquisition of a new property or project would be impaired as a
result of the failure to establish commercial viability of the Pebble Project.

If prices for copper, gold and molybdenum decline, Northern
Dynasty may not be able to raise the additional financing required to fund
expenditures for the Pebble Project.

The ability of Northern Dynasty to raise financing to fund the
Pebble Project, will be significantly affected by changes in the market price of
the metals for which it explores. The prices of copper, gold and molybdenum are
volatile, and are affected by numerous factors beyond Northern Dynastys
control. The level of interest rates, the rate of inflation, the world supplies
of and demands for copper, gold and molybdenum and the stability of exchange
rates can all cause fluctuations in these prices. Such external economic factors
are influenced by changes in international investment patterns and monetary
systems and political developments. The prices of copper, gold and molybdenum
have fluctuated in recent years, and future significant price declines could
cause investors to be unprepared to finance exploration of copper, gold and
molybdenum, with the result that Northern Dynasty may not have sufficient
financing with which to fund its exploration activities

Northern Dynasty competes with larger, better capitalized
competitors in the mining industry.

The mining industry is competitive in all of its phases,
including financing, technical resources, personnel and property acquisition. It
requires significant capital, technical resources, personnel and operational
experience to effectively compete in the mining industry. Because of the high
costs associated with exploration, the expertise required to analyze a projects
potential and the capital required to develop a mine, larger companies with
significant resources may have a competitive advantage over Northern Dynasty.
Northern Dynasty faces strong competition from other mining companies, some with
greater financial resources, operational experience and technical capabilities
than Northern Dynasty possesses. As a result of this competition, Northern
Dynasty may be unable to maintain or acquire financing, personnel, technical
resources or attractive mining properties on terms Northern Dynasty considers
acceptable or at all.

Compliance with environmental requirements will take
considerable resources and changes to these requirements could significantly
increase the costs of developing the Pebble Project and could delay these
activities.

The Pebble Partnership and Northern Dynasty must comply with
stringent environmental legislation in carrying out work on the Pebble Project.
Environmental legislation is evolving in a manner that will require stricter
standards and enforcement, increased fines and penalties for non-compliance,
more stringent environmental assessments of proposed projects and a heightened
degree of responsibility for companies and their officers, directors and
employees. Changes in environmental legislation could increase the cost to the
Pebble Partnership of carrying out its exploration and, if warranted,
development of the Pebble Project. Further, compliance with new or additional
environmental legislation may result in delays to the exploration and, if
warranted, development activities.

Changes in government regulations or the application thereof
and the presence of unknown environmental hazards on Northern Dynastys mineral
properties may result in significant unanticipated compliance and reclamation
costs.

Government regulations relating to mineral rights tenure,
permission to disturb areas and the right to operate can adversely affect
Northern Dynasty. Northern Dynasty and the Pebble Partnership may not be able to
obtain all necessary licenses and permits that may be required to carry out
exploration at our projects. Obtaining the necessary governmental permits is a
complex, time-consuming and costly process. The duration and success of efforts
to obtain permits are contingent upon many variables not within our control.
Obtaining environmental permits may increase costs and cause delays depending on the nature of the activity to be permitted and the
interpretation of applicable requirements implemented by the permitting
authority. There can be no assurance that all necessary approvals and permits
will be obtained and, if obtained, that the costs involved will not exceed those
that we previously estimated. It is possible that the costs and delays
associated with the compliance with such standards and regulations could become
such that we would not proceed with the development or operation of a mine at
the Pebble Project. Refer to further discussion in Item 8 - A3. Legal
Proceedings.

---

|-14 -
|-----
|     

Litigation

The Company is currently and may in future be subject to legal
proceedings in the development of its Pebble Project. Given the uncertain nature
of these actions, the Company cannot reasonably predict the outcome thereof. If
the Company is unable to resolve these matters favorably it may have a material
adverse effect of the Company.

Northern Dynasty is subject to many risks that are not
insurable and, as a result, Northern Dynasty will not be able to recover losses
through insurance should such certain events occur.

Hazards such as unusual or unexpected geological formations and
other conditions are involved in mineral exploration and development. Northern
Dynasty may become subject to liability for pollution, cave-ins or hazards
against which it cannot insure. The payment of such liabilities could result in
increase in Northern Dynastys operating expenses which could, in turn, have a
material adverse effect on Northern Dynastys financial position and its results
of operations. Although Northern Dynasty and the Pebble Partnership maintain
liability insurance in an amount which we consider adequate, the nature of these
risks is such that the liabilities might exceed policy limits, the liabilities
and hazards might not be insurable against, or Northern Dynasty and the Pebble
Partnership might elect not to insure itself against such liabilities due to
high premium costs or other reasons, in which event Northern Dynasty could incur
significant liabilities and costs that could materially increase Northern
Dynastys operating expenses.

The market price of Northern Dynastys common shares is
subject to high volatility and could cause investor loss.

The market price of a publicly traded stock, especially a
resource issuer like Northern Dynasty, is affected by many variables in addition
to those directly related to exploration successes or failures. Such factors
include the general condition of markets for resource stocks, the strength of
the economy generally, the availability and attractiveness of alternative
investments, and the breadth of the public markets for the stock. The effect of
these and other factors on the market price of the Companys common shares
suggests Northern Dynastys shares will continue to be volatile. Therefore,
investors could suffer significant losses if Northern Dynastys shares are
depressed or illiquid when an investor seeks liquidity and needs to sell
Northern Dynasty shares.

If Northern Dynasty loses the services of the key personnel
that it engages to undertake its activities, then Northern Dynastys plan of
operations may be delayed or be more expensive to undertake than anticipated.

Northern Dynastys success depends to a significant extent on
the performance and continued service of certain independent contractors,
including Hunter Dickinson Services Inc. ("HDSI"). The Company has access to the
full resources of HDSI, an experienced exploration and development firm with
in-house geologists, engineers and environmental specialists, to assist in its
technical review of the Pebble Project. There can be no assurance that the
services of all necessary key personnel will be available when required or if
obtained, that the costs involved will not exceed those that we previously
estimated. It is possible that the costs and delays associated with the loss of
services of key personnel could become such that we would not proceed with the
development or operation of a mine at the Pebble Project.

|ITEM 4 | INFORMATION ON THE COMPANY
|------ | --------------------------

|A. | HISTORY AND DEVELOPMENT OF THE
  COMPANY
|-- | ----------------------------------------

Incorporation

Northern Dynasty is a mineral exploration company incorporated
on May 11, 1983 pursuant to the Company Act of the Province of British Columbia
(predecessor statute to the British Columbia Corporations Act in force since
2004), under the name "Dynasty Resources Inc.". On November 30, 1983 the Company changed its name to "Northern Dynasty
Explorations Ltd." and subsequently, on October 11, 1997, changed its name to
Northern Dynasty Minerals Ltd. Northern Dynasty became a reporting company in
the Province of British Columbia on April 10, 1984 and was listed on the
Vancouver Stock Exchange (now the TSX Venture Exchange and herein generally "TSX
Venture") from 1984-1987, listed on the Toronto Stock Exchange from 1987-1993,
and unlisted but continued to comply with its continuous disclosure obligations
from 1993 to 1994, and thereupon listed on TSX Venture from 1994 to October 30,
2007 when it began trading on the Toronto Stock Exchange ("TSX"). In November
2004, the common shares of Northern Dynasty were also listed on the American
Stock Exchange ("AMEX"). AMEX was purchased by the New York Stock Exchange
("NYSE") and the Company now trades on the NYSE MKT Exchange ("NYSE MKT").

---

|-15 -
|-----
|     

Offices

The head office of Northern Dynasty is located at Suite 1500,
1040 West Georgia Street, Vancouver, British Columbia, Canada V6E 4H1, telephone
(604) 684-6365, facsimile (604) 684-8092. The Companys legal registered office
is in care of its Canadian attorneys, McMillan LLP, Barristers & Solicitors,
at Suite 1500, 1055 West Georgia Street, Vancouver, British Columbia, Canada V6E
4N7, telephone (604) 689-9111, facsimile (604) 685-7084.

The Companys Alaska mineral resource exploration business is
operated through an Alaskan registered limited partnership, the Pebble Limited
Partnership (the "Pebble Partnership" or "PLP"), in which the Company (since
December 2013) owns a 100% interest through subsidiary entities. A 100%
subsidiary of the Company, Pebble Mines Corp. is the general partner of the
Pebble Partnership and responsible for its day-to-day operations. The business
address of the Northern Dynasty Partnership is Suite 602, 3201 C Street,
Anchorage, Alaska, USA, 99503.

Company Development

Northern Dynasty is a mineral exploration company focused on
developing the Pebble Project, a copper-gold-molybdenum mineral project. The
Pebble Project is located in southwest Alaska, approximately 200 miles (320
kilometers) southwest of the city of Anchorage.

To December 31, 2014, approximately $797 million (US$744
million)1 in expenditures have been incurred on the Pebble Project.
Of this amount, approximately $595 million (US$573 million) in funding was
provided to the Pebble Partnership by an affiliate of Anglo American plc ("Anglo
American") and expended from 2007 to December 10, 2013 after which time Northern
Dynasty re-acquired Anglo Americans 50% ownership interest in the Pebble
Partnership on the latters withdrawal. Prior to the formation of the Pebble
Partnership in 2007, Northern Dynasty had spent approximately $188 million on
exploration activities and a further $106 million in acquisition costs on the
Pebble Project.

Northern Dynasty does not have any operating revenue, although
currently and historically it has had non-material annual interest revenue as a
consequence of investing its surplus funds.

Significant Acquisitions, Dispositions and Group
Reorganization

Northern Dynasty via 100% owned subsidiaries and other entities
holds indirect interests in mineral claims on State land in southwest Alaska,
USA. These claims (including certain area claims) form what is referred to as
the Pebble Copper-Gold-Molybdenum Project (the "Pebble Project").

Pebble Limited Partnership and Pebble Project

On July 26, 2007, the Company converted a wholly-owned general
partnership that held its Pebble Project interests into a limited partnership,
the Pebble Partnership. The purpose of the Pebble Partnership is to engineer,
permit, construct and operate a modern, long-life mine at the Pebble
Project.

______________________________

1 During the period 2007 to 2013, the Pebble
Partnership expended several hundred million dollars on the Pebble Project, a
major portion of which was spent on exploration programs, resource estimates,
environmental data collection and technical studies, with a significant portion
spent on engineering of various possible mine development models, as well as
related infrastructure, power and transportation systems. As a consequence of
several factors, including the Environmental Protection Agency (the "EPA")
opposition to the Pebble Project, the withdrawal of Anglo American plc from the
project and the passage of time, technical and engineering studies related to
mine-site and infrastructure development are considered to have very uncertain
and perhaps little value at this time. Environmental baseline studies and data
collection remains a significant legacy asset of the Company from this period.

---

|-16 -
|-----
|     

Anglo American through a wholly-owned affiliate subscribed for
50% of the Pebble Partnership's equity effective July 31, 2007. To maintain its
50% interest in the Pebble Partnership, Anglo American was required to commit
staged cash investments into the Pebble Partnership aggregating to US$1.5
billion. On September 15, 2013, Anglo American gave notice to the Company of its
withdrawal from the Pebble Partnership. In December 2013, the Company exercised
its right to acquire Anglo Americans 50% interest and consequently holds a 100%
interest in the Pebble Partnership and Pebble Mines Corp. (the General Partner
of the Pebble Partnership which administers the Pebble Project).

Under the Pebble Partnership Agreement and applicable tax
regulations, neither the Company nor its affiliated general partnership will be
entitled to the benefits for tax purposes of the expenditures incurred by the
Pebble Partnership from Anglo Americans investment, as these benefits accrued
exclusively to Anglo American under the Pebble Partnership Agreement and
applicable tax regulations.

2006 Equity Investment by Rio Tinto Affiliate

In 2006, the Company issued 8,745,845 common shares in
connection with a share purchase agreement with Kennecott Canada Exploration
Inc. ("Kennecott", a subsidiary of Rio Tinto plc) for $10.00 per share for
proceeds of approximately $87 million. In January 2007, Northern Dynasty was
advised by Galahad Gold plc ("Galahad"), a significant shareholder of the
Company that QIT-Fer Et Titane Inc., an affiliate of Rio Tinto, agreed to
purchase 9.4 million shares of Northern Dynasty from Galahad at a price of
$10.00 per share. The share purchase, which closed February 1, 2007, increased
Rio Tintos indirect ownership in Northern Dynasty to approximately 19.8% . In
early 2014, this holding represented approximately 19.1% of Northern Dynastys
outstanding and issued common shares. Rio Tinto plc divested of its shares in
April 2014.

Special Warrant Financing

In late December 2014 and early January 2015, the Company
completed a financing to raise proceeds of $15.5 million through the issuance of
35,962,735 Special Warrants, each convertible into one Common Share without
payment of additional consideration. See Item 10 - C. Material
Contracts.

|B. | THE PEBBLE PROJECT
|-- | ------------------

The Companys business is the exploration and advancement
towards feasibility, permitting and ultimately development of a
copper-gold-molybdenum mineral resource in Alaska, USA known as the "Pebble
Project".

The Pebble Project is Subject to State and Federal
Laws

The Pebble Partnership is required to comply with all Alaska
statutes in connection with the Pebble Project. These statutes govern titles,
operations, environmental, development, operating and generally all aspects of
exploration and development of a mine in Alaska.

Alaska Statute 38.05.185 among others establishes the rights to
mining claims and mineral leases on lands owned by the State of Alaska and open
to mineral entry. This group of statutes also covers annual labor and rental
requirements, and royalties.

Operations on claims or leases on state owned land must be
permitted under a plan of operations as set out in Title 11 of the Alaska
Administrative Code, Chapter 86, Section 800. This regulation generally provides
that the State Division of Mining can be the lead agency in coordinating the
comments of all agencies which must consent to the issuance of a plan of
operations, and sets the requirements for the approval of a plan of operations.

Environmental conditions are controlled by Alaska Statute 46.08
(which prohibits release of oil and hazardous substances), Alaska Statute
46.03.060 (which sets water quality standards), and Alaska Statute 46.14 (which
sets air quality standards).

Once a decision is made to enter permitting, the Pebble Project
will be required to satisfy permitting requirements at three levels: federal,
state and local (borough). The process takes approximately 3-4 years to complete
and involves 11 regulatory agencies, 60+ categories of permits and significant
ongoing opportunities for public involvement. The Alaska Department of Natural
Resources Large Mine Permitting Team is responsible for coordinating permitting
activities for large mine projects.

To satisfy permitting requirements under the National
Environmental Policy Act ("NEPA") and other regulatory statutes, a project must
provide a comprehensive project design and operating plan for mine-site and
infrastructure facilities; documentation of development alternatives
investigated; mitigation and compensation strategies, and identification of
residual effects; and environmental monitoring, reclamation and closure plans.
The first step is to provide the required information for an Environmental
Impact Statement ("EIS") under NEPA, including a Project Description and Environmental Baseline Document Prepared by a third-party
contractor under the direction of a lead federal agency, expected to be the US
Army Corps of Engineers. The EIS will determine whether sufficient evaluation of
the project's environmental effects and development alternatives has been
undertaken. It will also provide the basis for federal, state and local
government agencies to make individual permitting decisions.

---

|-17 -
|-----
|     

Under the U.S. Clean Water Act, Section 404(c), the
Administrator of the Environmental Protection Agency ("EPA") is given the right
to disallow the specification (including the withdrawal of specification) of any
defined area as a disposal site if he or she determines that the release of such
material will have an unacceptable adverse effect on municipal water supplies,
local wildlife, spawning and breeding areas of fisheries, shellfish beds, and/or
recreational areas. Such decisions made by the Administrator require notice and
opportunity for public hearings, and consultation with the Secretary of the Army
Corp of Engineers. The Administrator shall set forth in writing and make public
his or her findings and reasons for making any determination under this
subsection.

Ownership History

In October 2001, Northern Dynasty acquired, through its Alaskan
subsidiary, a two-part Pebble Property purchase option previously secured by
HDGI from an Alaskan subsidiary of Teck Cominco Limited, now Teck Resources
Limited (Teck). In particular, HDGI assigned 80% of this two-part option (the
Teck Option) to Northern Dynasty while retaining 20% thereof. The first part of
the Teck Option permitted Northern Dynasty to purchase (through its Alaskan
subsidiary) 80% of the previously drilled portions of the Pebble Property on
which the majority of the then known copper mineralization occurred (the
Resource Lands Option). Northern Dynasty could exercise the Resource Lands
Option through the payment of cash and shares aggregating US$10 million prior to
November 30, 2004. The second part of the Teck Option permitted Northern Dynasty
to earn a 50% interest in the exploration area outside of the Resource Lands
(the Exploration Lands Option). Northern Dynasty could exercise the
Explorations Lands Option by doing some 60,000 ft (18,200 m) of exploration
drilling by November 30, 2004, which it completed on time. The HDGI assignment
of the Teck Option also allowed Northern Dynasty to purchase the other 20% of
the Teck Option retained by HDGI for its fair value.

In November 2004, Northern Dynasty exercised the Resource Lands
Option and acquired 80% of the Resource Lands. In February 2005, Teck elected to
sell its residual 50% interest in the Exploration Lands to Northern Dynasty for
US$4 million. Teck still retains a 4% pre-payback advance net profits royalty
interest (after debt service) and 5% after-payback net profits interest royalty
in any mine production from the Exploration Lands portion of the Pebble property
as shown on the figure below.



In June 2006, Northern Dynasty acquired, through its Alaska
subsidiaries, the remaining HDGI 20% interest in the Resource Lands and
Exploration Lands by acquiring HDGI from its shareholders and through its
various subsidiaries had thereby acquired an aggregate 100% interest in the
Pebble Property, subject only to the Teck net-profits royalties on the
Exploration Lands. At that time, Northern Dynasty operated the Pebble Property
through anAlaskan general partnership with one of its subsidiaries.

In July 2007, the Pebble Partnership was created and an
indirect wholly-owned subsidiary of Anglo American subscribed for 50% of the
Pebble Partnership's equity effective July 31, 2007. Each of Northern Dynasty
and Anglo American effectively had equal control and management rights in the
Pebble Partnership and its general partner, Pebble Mines Corp., through
respective wholly-owned affiliates. The Pebble Partnership's assets include the
shares of two Alaskan subsidiaries, which hold registered title to the claims. To maintain a 50% interest in
the Pebble Partnership, Anglo American was required to make staged cash
investments into the Pebble Partnership, aggregating $1.5 billion, towards
comprehensive exploration, engineering, environmental and socioeconomic programs
and, if warranted, development of the Pebble Project. On September 15, 2013,
Anglo American gave Northern Dynasty a 60-day notice of withdrawal from the
Pebble Project. In December 2013, Northern Dynasty exercised its right to
acquire Anglo Americans interest in the Pebble Partnership and now holds a 100%
interest in the Pebble Partnership.

---

|-18 -
|-----
|     

On June 29, 2010, Northern Dynasty entered into an agreement
with Liberty Star Uranium and Metals Corp. and its subsidiary, Big Chunk Corp.
(together, "Liberty Star"), pursuant to which Liberty Star sold 23.8 square
miles of claims (the 95 "Purchased Claims") to a U.S. subsidiary of Northern
Dynasty in consideration for both a $1 million cash payment and a secured
convertible loan from Northern Dynasty in the amount of $3 million. The parties
agreed, through various amendments to the original agreement, to increase the
principal amount of the Loan by $730,174. Northern Dynasty later agreed to
accept transfer of 199 claims (the Settlement Claims) located north of the
ground held 100% by the Pebble Partnership in settlement of the Loan. These
claims are now held by Northern Dynastys subsidiary U5 Resources Inc. See
Property Description below for current claim holding.

On January 31, 2012, the Pebble Partnership entered into a
  Limited Liability Company Agreement with Full Metal Minerals (USA) Inc.
  (FMMUSA), a wholly-owned subsidiary of Full Metal Minerals Corp., to form
  Kaskanak Copper LLC (the LLC). Under the agreement, the Pebble Partnership
  could earn a 60% interest in the LLC, which indirectly owned 100% of the
  Kaskanak claims, by incurring exploration expenditures of at least US$3 million
  and making annual payments of $50,000 to FMMUSA over a period ending on December
  31, 2013. On May 8, 2013, the Pebble Partnership purchased FMMUSAs entire
  ownership interest in the LLC for a cash consideration of $750,000. As a result,
  the Pebble Partnership gained a 100% ownership interest in the LLC, the indirect
  owner of a 100% interest in a group of 542 claims located south and west of
  other ground held by the Pebble Partnership. See Property Description below for
current claim holding.

TECHNICAL SUMMARY

The following disclosure is mainly summarized from the 2014
Technical Report on the Pebble Project, Southwest Alaska, USA by J. David
Gaunt, P.Geo., James Lang, P.Geo., Eric Titley, P.Geo., and Ting Lu, P.Eng.,
effective date December 31, 2014 (2014 Technical Report), and updated from
Company files. Additional details can be found in the 2014 Technical Report
which is filed on the Companys profile at www.sedar.com and as a Form
6-K on the Companys profile at www.sec.gov.

Introduction

The Pebble deposit was originally discovered in 1989 and was
acquired by Northern Dynasty in 2001. Since that time, Northern Dynasty and
subsequently the Pebble Limited Partnership (the Pebble Partnership, in which
Northern Dynasty currently owns a 100% interest) have conducted significant
mineral exploration, environmental baseline data collection, and engineering
work on the Pebble Project to advance it towards development.

Work at Pebble has led to an overall expansion of the Pebble
deposit, as well as the discovery of several other mineralized occurrences along
an extensive northeast-trending mineralized system underlying the property. Over
one million feet of drilling has been completed on the property, a large
proportion of which has been focused on the Pebble deposit.

In light of more recent stakeholder and regulatory feedback,
Northern Dynasty initiated a comprehensive review of previous analyses of the
Pebble Project in late 2013 and in 2014 commissioned the 2014 Technical Report
to update information on the mineral resources and metallurgy for the project.

Property Description and Location

The Pebble Project is located in southwest Alaska,
approximately 200 miles southwest of Anchorage, 17 miles northwest of the
village of Iliamna, 160 miles northeast of Bristol Bay, and approximately 60
miles west of Cook Inlet.

---

|-19 -
|-----
|     

Figure 1 Property Location  Pebble Project



Northern Dynasty holds, indirectly through wholly-owned
subsidiaries including the Pebble Partnership, a 100% interest in a contiguous
block of 2,402 mineral claims covering approximately 417 square miles (Figure
2). This includes 1,718 claims covering 248.2 square miles (including the Pebble
deposit) held by Pebble Partnership subsidiaries, Pebble East Claims Corporation
and Pebble West Claims Corporation; 464 claims covering an area of 116 square
miles held by Pebble Partnership indirect subsidiary, Kaskanak LLC1;
and 220 claims covering 52.5 square miles held by Northern Dynasty subsidiary U5
Resources Inc. The details of the mineral claims are provided as Exhibit 15.01.

State mineral claims in Alaska are kept in good standing by
performing annual assessment work or in lieu of assessment work by paying $100
per year per 40 acre (0.06 square mile) mineral claim, and by paying annual
escalating state rentals. All of the assessment work payment obligations come
due annually on August 31. Credit for excess work can be banked for a maximum of
five years afterwards, and can be applied as necessary to continue to hold the
claims in good standing. The Project claims have a variable amount of work
credit available that can be applied in this way and will be applied in
20152. State rentals for 2015 are US$990,390 and are payable no later
than 90 days after the assessment work.

The Pebble Partnership currently does not own surface rights
associated with the mineral claims that comprise the Pebble Property. All lands
are held by the State of Alaska, and surface rights may be acquired from the
state government once areas required for mine development have been determined
and permits awarded. Permits necessary for exploration drilling and other field
programs associated with pre-development assessment of the Pebble Project are
applied for each year. There are no existing material environmental liabilities
associated with the Pebble Project.

______________________________

|1In January 2015, Kaskanak Inc and its
      wholly-owned parent, Kaskanak Copper LLC were merged with Pebble East
      Claims Corporation, with the latter the surviving entity.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                  
|2Annual assessment work obligations for the
      property of some US$667,700 will be covered by banked credits in 2015.                                                          

---

|-20 -
|-----
|     

Figure 2 Mineral Claims  Pebble Project



Accessibility, Climate, Local Resources, Infrastructure and
Physiography

Current access to the property is by helicopter from Iliamna.
There is a modern airfield at Iliamna, with two paved 4,920 ft airstrips, that
services the communities of Iliamna, Newhalen and Nondalton. The runways are
suitable for DC-6 and Hercules cargo aircraft and commercial jet aircraft.

There are paved roads that connect the villages of Iliamna and
Newhalen to the airport and to each other, and a partly paved, partly gravel
road that extends to a proposed Newhalen River crossing near Nondalton. The
property is currently not connected to any of these local communities by road; a
road would be planned as part of the project design.

There is no access road that connects the communities nearest
the Pebble Project to the coast on Cook Inlet. From the coast, at Williamsport
on Iniskin Bay, there is an 18.6 mile state-maintained road that terminates at
the east end of Iliamna Lake, where watercraft and transport barges may be used
to access Iliamna. The route from Williamsport, over land to Pile Bay on Iliamna
Lake, is currently used to transport bulk fuel, equipment and supplies to
communities around the lake during the summer months. Also during summer,
supplies are barged up the Kvichak River, approximately 43.4 miles southwest of
Iliamna, from Kvichak Bay on the North Pacific Ocean.

A small run-of-river hydroelectric installation on the nearby
Tazamina River provides power for the three communities in the summer months.
Supplemental power generation using diesel generators is required during winter
months.

Iliamna and surrounding communities have a combined population
of just over 400 people. As such, there is limited local commercial
infrastructure except that which services seasonal sports fishing and
hunting.

The property is situated at approximately 1,000 ft above mean
sea level in an area described as subarctic tundra. It is characterized by
gently rolling hills and an absence of permafrost. The climate is sufficiently moderate to allow a well-planned mineral
exploration program to be conducted year-round at Pebble.

---

|-21 -
|-----
|     

Geological Setting and Mineralization

Pebble is a porphyry-style copper-gold-molybdenum-silver
  deposit that comprises two adjacent, contiguous, coeval hydrothermal centers
  called the Pebble East and Pebble West zones. Mineralization in the Pebble West
  zone extends from surface to depths of at least 3,000 ft whereas higher grade
  mineralization in the Pebble East zone extends to a depth of at least 5,810 ft
  but is concealed beneath an east-thickening wedge of unmineralized rock types.
  An important exploration target is represented by high-grade, but as yet
  undelineated, mineralization on the far eastern side of the deposit which was
  dropped 1,970 to 2,950 ft by normal faults into the northeast-trending East
Graben.

The Pebble deposit formed about 90 million years ago in
response to intrusion of granodiorite magmas generated by subduction of the
Pacific Plate beneath the Wrangellia Superterrane. The Pebble deposit is hosted
by these granodiorite intrusions and by the sedimentary and volcanic rocks of
Jurassic to Cretaceous age, granodiorite and diorite sills and alkalic monzonite
intrusions and associated breccias which host them.

Mineralization at Pebble is predominantly hypogene, although
the Pebble West zone contains a thin zone of variably developed leached cap and
underlying supergene mineralization. Disseminated and vein-hosted
copper-gold-molybdenum-silver mineralization, dominated by chalcopyrite and
locally accompanied by bornite, is associated with early potassic alteration in
the shallow part of the Pebble East zone and with early sodic-potassic
alteration in the Pebble West zone and deeper parts of the Pebble East zone.
High-grade copper-gold mineralization is associated with younger pyrophyllite-
and sericite-bearing subtypes of advanced argillic alteration in the Pebble East
zone. The deposit is surrounded by weakly mineralized quartz-sericite-pyrite
alteration; in the upper center of the deposit quartz-illite-pyrite alteration
is an illite-altered relict of a mostly eroded quartz-sericite-pyrite cap to the
deposit.

Exploration

Historical

Cominco Alaska, a division of Cominco Ltd. now Teck (Cominco
(Teck)) began reconnaissance exploration in the Pebble region in the mid-1980s
and in 1984 discovered the Sharp Mountain gold prospect near the southern margin
of the current property. Gold was discovered in quartz veins of probable
Tertiary age near the peak of Sharp Mountain. Grab samples of veins in talus
ranged from 0.045 oz/ton Au to 9.32 oz/ton Au and 3.0 oz/ton Ag. In 1987,
examination and sampling of several prominent limonitic and hematitic alteration
zones yielded anomalous gold concentrations from the Sill prospect and the
Pebble discovery outcrop.

Geophysical surveys were conducted on the property between 1988
and 1997. An IP survey in 1989 at Pebble displayed response characteristics of a
large porphyry-copper system. The surveys were dipole-dipole induced
polarization (IP) surveys which defined a chargeability anomaly about 31.1
square miles in extent within Cretaceous age rocks which surround the eastern to
southern margins of the Kaskanak batholith. All known zones of mineralization of
Cretaceous age on the Pebble property occur within the broad IP anomaly.

In 1991, baseline environmental and engineering studies were
initiated and weather stations were established. A preliminary evaluation was
undertaken by Cominco (Teck) in 1991, and updated in 1992. Historical estimates
of the mineral resources for the Pebble deposit were completed by Cominco
(Teck), most recently in 2000.

Northern Dynasty and Pebble Partnership

Between 2001 and 2006, the entire Pebble property was mapped
for rock type, structure and alteration at a scale of 1:10,000, providing an
important geological framework for interpretation of other exploration data. A
geological map of the Pebble deposit was also constructed but, due to a paucity
of outcrop, was based solely on drill hole information. The content and
interpretation of district and deposit scale geological maps have not changed
materially from those presented in 2009 and 2010.

A number of geophysical surveys, including IP, magnetic and
other survey types were completed by Northern Dynasty and the Pebble Partnership
between 2001 and 2010 to test the Pebble deposit and other occurrences on the
Pebble property. Between 2001 and 2003, Northern Dynasty collected 1,026 soil
samples, outlining high-contrast, coincident anomalies in gold, copper,
molybdenum and other metals in an area that measures at least 5.6 miles
north-south by up to 2.5 miles east-west, with strong but smaller anomalies in
several outlying zones. All soil geochemical anomalies lie within the 31.1 square mile IP chargeability anomaly. Limited surficial
geochemical surveys were completed in 2010 and 2011.

---

|-22 -
|-----
|     

Drilling

Extensive drilling totalling 1,042,218 ft has been completed in
  1,355 holes on the Pebble Project. These result from annual drill programs which
took place during 19 of the 26 years from 1988 to 2013.

Northern Dynasty and the Pebble Partnership completed drilling
for exploration, deposit delineation, engineering and environmental purposes
between 2001 and 2013. Highlights from exploration and deposit delineation
drilling since 2001 include:

| | in 2002, drill testing of IP chargeability and
      multi-element geochemical anomalies outside of the Pebble deposit but
      within the larger and broader IP chargeability anomaly discovered the 38
      Zone porphyry copper-gold-molybdenum deposit, the 52 Zone porphyry copper
      occurrence, the 37 Zone gold-copper skarn deposit, the 25 Zone gold
      deposit, and several small occurrences in which gold values exceeded 3.0
      g/t.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | in 2003, drilling took place within and adjacent to the
      Pebble West zone and outside the Pebble deposit to test for extensions and
      new mineralization at four other zones, including the 38 Zone porphyry
      copper-gold-molybdenum deposit and the 37 Zone gold-copper skarn deposit.                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | in 2004, 147 exploration holes were drilled in
      the Pebble deposit; the Pebble East zone is identified; the 308 Zone
      porphyry copper-gold-molybdenum deposit is discovered.                                                                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | in 2005 and 2006, drilling at Pebble East
      confirms its large size and higher grades of copper, gold and molybdenum.                                                                                                                                                                                                                                                                                                                                    
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | in 2007, 34 holes extend Pebble East to the
      northeast, northwest, south and southeast.                                                                                                                                                                                                                                                                                                                                                                 
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | in 2008, 31 delineation and infill holes were
      drilled at Pebble East. FMMUSA drilled seven exploration holes on land
      that is now controlled by the Pebble Partnership.                                                                                                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | in 2009 and 2010, delineation holes were
      drilled at the margins of Pebble West and exploration holes were drilled
      elsewhere on the property.                                                                                                                                                                                                                                                                                                     
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | in 2011 and 2012, holes drilled at the Pebble West zone
      indicate potential for resource expansion laterally and to depth;
      exploration targets were tested on the Kaskanak claims to the northwest
      and south of Pebble, and on the KAS claims further south.                                                                                                                                                                                

Drilling for engineering (metallurgical and geotechnical) and
environmental (hydrological) purposes began in 2004 and continued through
2013.

---

|-23 -
|-----
|     

The spatial distribution and type of holes drilled are
illustrated below.

Figure 3 Location of Drill Holes  Pebble Project



Most of the footage on the Pebble Project was drilled using
diamond core drills. Only 18,716 ft were percussion-drilled from 222 rotary
drill holes. Many of the cored holes were advanced through overburden using a
tricone bit with no core recovery. These overburden lengths are included in the
core drilling total.

Since early 2004, all Pebble drill core has been geotechnically
logged on a drill run basis. Over 69,000 measurements were made for a variety of
geotechnical parameters on 735,000 ft of core drilling. Recovery is generally
very good and averages 98.5% overall; two-thirds of all measured intervals have
100% core recovery. Additionally, all Pebble drill core from the 2001 through
2013 drill programs was photographed in a digital format.

All drill hole collars have been surveyed using a differential
global positioning system. A digital terrain model for the site was generated by
photogrammetric methods in 2004. All post-Cominco (Teck) drill holes have been
surveyed downhole, typically using a single shot magnetic gravimetric tool. A
total of 989 holes were drilled vertically (-90°) and 192 were inclined from
-42° to -85° at various azimuths.

A summary of drilling by various categories (operator, type,
year and area) to the end of the 2013 exploration program are compiled in the
table below. As shown in Figure 3 and Table 1 (East, West, Main), a large
proportion of the drilling has been directed toward the Pebble deposit.

Table 1 Summary of Drill Holes  Pebble Project

No. of Holes
    Feet
    MetresBy OperatorCominco (Teck) 1
    164
    75,741.0
    23,086Northern Dynasty
    578
    495,069.5
    150,897Pebble Partnership 2
    606
    465,957.7
    142,024FMMUSA
    7
    5,450.0
    1,661Total
    1,355
    1,042,218.2
317,668


---

|-24 -
|-----
|     

No. of Holes
    Feet
    MetresBy TypeCore 1,5
    1,132
    1,023,297.6
    311,901Percussion 6
    223
    18,920.6
    5,767Total
    1,355
    1,042,218.2
    317,668By Year1988 1
    26
    7,601.5
    2,3171989 1
    27
    7,422.0
    2,2621990
    25
    10,021.0
    3,0541991
    48
    28,129.0
    8,5741992
    14
    6,609.0
    2,0141993
    4
    1,263.0
    3851997
    20
    14,695.5
    4,4792002
    68
    37,236.8
    11,3502003
    67
    71,226.6
    21,7102004
    267
    165,567.7
    50,4652005
    114
    81,978.5
    24,9872006 3
    48
    72,826.9
    22,1982007 4
    92
    167,666.9
    51,1052008 5
    241
    184,726.4
    56,3052009
    33
    34,947.5
    10,6522010
    66
    57,582.0
    17,5512011
    85
    50,767.7
    15,4742012
    81
    35,760.2
    10,9002013
    29
    6,190.0
    1,887Total
    1,355
    1,042,218.2
    317,668By AreaEast
    141
    446,379.3
    136,056West
    443
    351,986.7
    107,286Main 7
    101
    10,674.7
    3,254NW
    203
    45,948.4
    14,005North
    46
    25,695.9
    7,832NE
    10
    1,097.0
    334South
    98
    50,262.5
    15,32025 Zone
    8
    4,047.0
    1,23437 Zone
    7
    4,252.0
    1,29638 Zone
    20
    14,221.5
    4,33552 Zone
    5
    2,534.0
    772308 Zone
    1
    879.0
    268Eastern
    21
    3,105.0
    946Southern
    153
    60,442.4
    18,423SW
    51
    9,337.8
    2,846Sill
    39
    10,445.5
    3,184Cook Inlet
    8
    909.5
    277Total
    1,355
    1,042,218.2
317,668


Notes to table:

|1. | Includes holes drilled on the Sill prospect.                                                                          
|-- | ----------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                       
|2. | Holes started by Northern Dynasty and finished by the
      Pebble Partnership are included as the Pebble Partnership.
|   |                                                                                                                       
|3. | Drill holes counted in the year in which they were
      completed.                                                   
|   |                                                                                                                       
|4. | Wedged holes are counted as a single hole including full
      length of all wedges drilled.                          
|   |                                                                                                                       
|5. | Includes FMMUSA drill holes; data acquired in
  2010.                                                                 
|   |                                                                                                                       
|6. | Shallow (<15 ft) auger holes not included.                                                                            
|   |                                                                                                                       
|7. | Comprises holes drilled entirely in Tertiary cover rocks
      within the Pebble West and Pebble East areas.          

Some numbers may not sum exactly due to rounding.

---

|-25 -
|-----
|     

Sampling, Analysis and Security of Samples

The Pebble deposit has been explored by extensive core
drilling, with 80,859 samples having been taken from drill core for assay
analysis. Nearly all potentially mineralized Cretaceous core drilled and
recovered has been sampled by halving in 10 ft lengths. Similarly, all core
recovered from the Late Cretaceous to Early Tertiary cover sequence has also
been sampled, typically on 20 ft sample lengths, with some shorter sample
intervals in areas of geologic interest. Unconsolidated overburden material,
where it exists, is generally not recovered by core drilling and therefore not
usually sampled.

Rock chips from the 222 rotary percussion holes were generally
not sampled for assay analysis, as the holes were drilled for monitoring wells
and environmental purposes. Only 35 samples were taken from the drill chips of
26 rotary percussion holes outside the Pebble deposit area, which were drilled
for condemnation purposes.

Analytical work in 2002 and from 2004 to 2013 was completed by
ALS Minerals Laboratories of North Vancouver, an ISO 9002 certified laboratory.
Analytical work for the 2003 drilling program was completed by SGS Canada Inc.
of Toronto, ON, an ISO 9002 registered, ISO 17025 accredited laboratory.

Northern Dynasty maintained an effective Quality
Control/Quality Assurance (QA/QC) program consistent with industry best
practices, which has continued from 2007 to 2013 under the Pebble Partnership.
This program is in addition to the QA/QC procedures used internally by the
analytical laboratories. The QA/QC program has also been subject to independent
review by Analytical Laboratory Consultants Ltd. and Nicholson Analytical
Consulting. The analytical consultants provide ongoing monitoring, including
facility inspection and timely reporting of the performance of standards, blanks
and duplicates in the sampling and analytical program. The results of this
program indicate that analytical results are of a high quality, suitable for use
in detailed modelling and resource evaluation studies. The QA/QC sample types
used in the program are described in the table below.

Table 2 Summary of Quality Control/Quality Assurance Sampling
 Pebble Project

QC Code
    Sample Type
    Description
    % of TotalMS
    Regular Mainstream
    Regular samples submitted for preparation and
      analysis at the primary laboratory.
    90%ST
    Standard (Certified
      Reference Material)
    Mineralized material in pulverized
      form with a known concentration and distribution of element(s) of
      interest. Randomly inserted using pre-numbered sample tags.
    5% or 1 in 20DP
    Duplicate or Replicate
    An additional split taken from the
      remaining pulp reject, coarse reject, 1⁄4 core or 1⁄2 core remainder.
      Random selection using pre-numbered sample tags.
    5% or 1 in 20SD
    Standard Duplicate
    Standard reference sample submitted with
      duplicates and replicates to the check laboratory.
    <1%BL
    Blank
    Sample containing negligible or
      background amounts of elements of interest, to test for contamination.
    1%


Core was boxed at the rig and transported daily by helicopter
to the secure logging facility in Iliamna. Half cores remaining after sampling
were replaced in the original core boxes and stored at Iliamna, AK in a secure
compound. Crushed reject samples from the 2006 through 2013 analytical programs
are stored in locked containers at Delta Junction, AK. Drill core assay pulps
from the 1989 through 2013 programs are stored at a secure warehouse in Langley,
BC.

Mineral Resources

The current estimate of the mineral resources in the Pebble
deposit is based on approximately 59,000 assays obtained from 699 drill holes
completed to the end of 2013. The resource tabulated below was estimated using
ordinary kriging by David Gaunt, P.Geo., a qualified person who is not
independent of Northern Dynasty.

The tabulation is based on copper equivalency that incorporates
the contribution of copper, gold and molybdenum. Although the estimate includes
silver, it was not used as part of the copper equivalency calculation in order
to facilitate comparison with previous estimates which did not consider the
silver content or its potential economic contribution. A base case cut-off of
0.3% CuEq is highlighted.

---

|-26 -
|-----
|     

Cautionary Note to Investors Concerning Estimates of Measured and
      Indicated Resources
      This section uses the terms, "measured resources" and "indicated
      resources". The Company advises investors that while those terms are
      recognized and required by Canadian regulations, the U.S. Securities and
      Exchange Commission (the "SEC") does not recognize them. Investors are
      cautioned not to assume that all or any part of mineral deposits in
      these categories will ever be converted into reserves.


Table 3 2014 Estimate of Mineral Resources  Pebble Deposit
Measured and Indicated Categories

Threshold CuEq %
    CuEq%
    Tonnes
    Cu (%)
    Au (g/t)
    Mo (ppm)
    Ag (g/t)Measured0.3
    0.65
    527,000,000
    0.33
    0.35
    178
    1.660.4
    0.66
    508,000,000
    0.34
    0.36
    180
    1.680.6
    0.77
    279,000,000
    0.40
    0.42
    203
    1.841.0
    1.16
    28,000,000
    0.62
    0.62
    302
    2.27Indicated0.3
    0.77
    5,912,000,000
    0.41
    0.34
    245
    1.660.4
    0.82
    5,173,000,000
    0.45
    0.35
    260
    1.750.6
    0.99
    3,450,000,000
    0.55
    0.41
    299
    1.991.0
    1.29
    1,411,000,000
    0.77
    0.51
    343
    2.42Measured + Indicated0.3
    0.76
    6,439,000,000
    0.40
    0.34
    240
    1.660.4
    0.81
    5,681,000,000
    0.44
    0.35
    253
    1.750.6
    0.97
    3,729,000,000
    0.54
    0.41
    291
    1.981.0
    1.29
    1,439,000,000
    0.76
    0.51
    342
    2.42


Cautionary Note to Investors Concerning Estimates of Inferred Resources
      This section also uses the term "inferred mineral resources". The
      Company advises investors that while this term is recognized and required
      by Canadian regulations, the SEC does not recognize it. "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 a mineral resource will ever be upgraded
      to a higher category. Under Canadian rules, estimates of Inferred Mineral
      Resources may not form the basis of economic studies, except in rare
      cases. Investors are cautioned not to assume that all or any part of an
      inferred resource exists, or is economically or legally
      mineable.


Table 4 2014 Estimate of Mineral Resources  Pebble Deposit
Inferred Category

Threshold CuEq %
    CuEq%
    Tonnes
    Cu (%)
    Au (g/t)
    Mo (ppm)
    Ag (g/t)Inferred0.3
    0.54
    4,460,000,000
    0.25
    0.26
    222
    1.190.4
    0.68
    2,630,000,000
    0.33
    0.30
    266
    1.390.6
    0.89
    1,290,000,000
    0.48
    0.37
    291
    1.791.0
    1.20
    360,000,000
    0.69
    0.45
    377
    2.27


The tabulated mineral resources are subject to the notes below:

These resource estimates have been prepared in accordance with
NI 43-101 and the CIM Definition Standards. Inferred resources have a great
amount of uncertainty as to their existence and whether they can be mined
legally or economically. It cannot be assumed that all or any part of the
Inferred resources will ever be upgraded to a higher category.

Copper equivalent calculations use metal prices of $1.85/lb for
copper, $902/oz for gold and $12.50/lb for molybdenum, and recoveries of 85% for
copper 69.6% for gold, and 77.8% for molybdenum in the Pebble West zone and
89.3% for copper, 76.8% for gold, and 83.7% for molybdenum in the Pebble East
zone.

A 0.30% CuEQ cut-off is considered to be comparable to that
used for porphyry deposit open pit mining operations in the Americas.

The resource estimate is constrained by a conceptual pit that
was developed using a Lerchs-Grossman algorithm and is based on the parameters
set out below:

---

|-27 -
|-----
|     

Parameter
    Units
    Cost ($)
    ValueMetal Price
    Gold
    $/oz
    -
    1540.00Copper
    $/lb
    -
    3.63Molybdenum
    $/lb
    -
    12.36Metal Recovery
    Copper
    %
    -
    89Gold
    %
    -
    72Molybdenum
    %
    -
    82Operating Cost
    Mining (mineralized material or waste)
    $/ton mined
    1.01
    -Added haul lift from depth
    $/ton/bench
    0.03
    -Process Process cost adjusted by total crushing
      energy
    $/ton milled
    4.40
    - Transportation
    $/ton milled
    0.46
    - Environmental
    $/ton milled
    0.70
    - G&A
    $/ton milled
    1.18
    -Block Model
    Current block model
    ft
    -
    75 x 75 x 50Density
    Mineralized material and waste rock
    -
    -
    Block modelPit Slope Angles
    
    degrees
    -
42


These mineral resource estimates may ultimately be affected by
a broad range of environmental, permitting, legal, title, socioeconomic,
marketing and political factors commensurate with the specific characteristics
of the Pebble deposit (including its scale, location, orientation and
poly-metallic nature) as well as its setting (from a natural, social,
jurisdictional and political perspective).

Mineral Processing and Metallurgical Testing

Metallurgical testwork for the Pebble Project was initiated by
Northern Dynasty in 2003 and continued under the direction of Northern Dynasty
until 2008. From 2008 to 2013, metallurgical testwork progressed under the
direction of the Pebble Partnership.

Geometallurgical studies were initiated by the Pebble
Partnership in 2008, and continued through 2012. The principal objective of this
work was to quantify significant differences in metal deportment that may result
in variations in metal recoveries during mineral processing. The results of the
geometallurgical studies indicate that the deposit comprises several
geometallurgical (or material type) domains. These domains are defined by
distinct, internally consistent copper and gold deportment characteristics that
correspond spatially with changes in silicate alteration mineralogy.

The first major distinction between domains is characterized by
hypogene and supergene mineralization. Hypogene mineralization reflects the
copper-, gold- and molybdenum-bearing minerals which precipitated from hot
hydrothermal solutions when the deposit initially formed in the Cretaceous
Period. In contrast, supergene mineralization represents modifications, mostly
to the Cu-bearing minerals present in the near-surface parts of the Pebble West
zone, during a much more recent weathering phase of the deposit when it became
exposed for a time at the surface of the earth. The second critical influence on
metallurgical recoveries is related directly to different alteration assemblages
that formed over time in different parts of the Pebble deposit.

These alteration assemblages as listed in Table 5 include sodic
potassic, illite-pyrite (described as quartz-illite-pyrite in Geological
Setting and Mineralization above), K-silicate (potassic in Geological
Setting and Mineralization), QSP (quartz-sericite-pyrite in Geological
Setting and Mineralization), QP (pyrophyllite in Geological Setting and
Mineralization) and sericite types. Each of these assemblages contains a
distinct suite of minerals that precipitated from hydrothermal fluids under
different conditions of temperature, pressure and chemical composition, and
including, in some cases, differences in the types of copper- and gold-bearing
minerals.

Recognition of the relationships between metallurgical behavior
and mineralization styles and alteration assemblages provides significant
technical advantages to further testwork on the Pebble Project. The samples
selected for the comminution, copper-gold-molybdenum bulk flotation, and copper
molybdenum separation testing were representative of the various types and
styles of mineralization present at the Pebble deposit.

Metallurgical testwork and associated analytical procedures
were performed by recognized testing facilities with extensive experience with
this analysis, with this type of deposit, and with the Pebble Project.

The test results on variability samples derived from the 103
lock cycle flotation tests indicate that marketable copper and molybdenum
concentrates can be produced with gold and silver contents that meet or exceed
payable levels in representative smelter contracts. Metal recoveries projected
in the 2014 Technical Report and in the table below are based on the
locked-cycle test (LCT) results of the variability samples, and associated gold leach testwork. The
table below provides projected overall recoveries, which include the flotation
and gold plant recoveries.

---

|-28 -
|-----
|     

Table 5 Projected Metallurgical
Recoveries1 Pebble Project

Domain
    Flotation
      Recovery to Concentrate2
    Gold
      Plant Recovery3
    Overall
    RecoveryCu Con
    Mo Con
    SART
    DoreCu
      %
    Au
      g/t
    Ag
      g/t
    Mo
      %
    Cu
      %
    Au
      g/t
    Ag
      g/t
    Cu
      %
    Au
      g/t
    Ag
      g/t
    Mo
    %Supergene:Sodic Potassic
    74.7
    60.4
    64.1
    51.2
    1.5
    16.0
    6.0
    76.2
    76.4
    70.2
    51.2Illite Pyrite
    68.1
    43.9
    64.1
    62.6
    3.9
    26.8
    6.0
    72.1
    70.7
    70.2
    62.6Hypogene:Illite Pyrite
    86.4
    43.9
    64.1
    73.2
    1.9
    26.1
    6.0
    88.3
    70
    70.2
    73.2Sodic Potassic
    86.2
    60.4
    64.1
    76.6
    1.4
    16.7
    6.0
    87.6
    77.1
    70.2
    76.6K Silicate
    90.3
    61.3
    64.1
    82.3
    0.7
    13.8
    6.0
    91
    75.1
    70.2
    82.3QP
    94.3
    65.0
    64.1
    80.1
    1.4
    14.4
    6.0
    95.6
    79.4
    70.2
    80.1Sericite
    86.4
    39.2
    64.1
    73.2
    1.9
    26.7
    6.0
    88.3
    65.8
    70.2
    73.2QSP
    86
    31.6
    64.1
    82.5
    2.1
    32.1
    6.0
    88.1
    63.7
    70.2
82.5


Notes to table:

|1. | Silver recovery projection based on a dataset of 10 LCT
      samples                                                                                                                                                                               
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                     
|2. | Flotation recovery to concentrate refers to metal
      recoveries to copper concentrate (Cu Con) and to molybdenum concentrate
      (Mo Con).                                                                                                     
|   |                                                                                                                                                                                                                                                     
|3. | Gold plant recovery refers to copper recovery to SART 
      sulphidization, acidification, recycling, and thickening process tests to
      recover copper from leaching circuit residue, as well as gold and silver
      recoveries to dore bar.

Environmental and Socioeconomic

The Pebble deposit is located on state land that has been
specifically designated for mineral exploration and development. The project
area has been the subject of two comprehensive land-use planning exercises
conducted by the Alaska Department of Natural Resources (the ADNR), the first
in the 1980s and the second completed in 2005. The ADNR identified five land
parcels (including Pebble) within the Bristol Bay planning area as having
significant mineral potential, and where the planning intent is to accommodate
mineral exploration and development. These parcels total 2.7% of the total
planning area (ADNR, 2005).

Environmental standards and permitting requirements in Alaska
are stable, objective, rigorous and science-driven. These features are an asset
to projects like Pebble that are being designed to meet U.S. and international
best practice standards of design and performance.

Environmental Baseline Studies

Northern Dynasty began an extensive field study program in 2004
to characterize the existing physical, chemical, biological, and social
environments in the Bristol Bay and Cook Inlet areas where the Pebble Project
might occur. The Pebble Partnership compiled the data for the 2004-2008 study
period into a multi-volume Environmental Baseline Document1. These
studies have been designed to:

| | Fully characterize the existing biophysical and
      socioeconomic environment;                                                     
|- | -------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                      
| | Support environmental analyses required for
      effective input into Project design;                                               
|  |                                                                                                                                      
| | Provide a strong foundation for internal
      environmental and social impact assessment to support corporate
      decision-making;
|  |                                                                                                                                      
| | Provide the information required for
      stakeholder consultation and eventual mine permitting in Alaska; and,                     

1Baseline data collecting and monitoring has
continued since that time. The program data from 2009 to 2014 is being
integrated with environmental baseline data reports from 2004 to 2008 so that
this information can also be shared with state/federal agencies and the public
as part of the future permitting process under NEPA.

---

|-29 -
|-----
|     

| | Provide a baseline for long-term monitoring of
      potential changes associated with mine development.
|- | --------------------------------------------------------------------------------------------------------

The baseline study program includes:

surface water
    wildlifegroundwater
    air qualitysurface and groundwater quality
    cultural resourcesgeochemistry
    subsistencesnow surveys
    land usefish and aquatic resources
    recreationnoise
    socioeconomicswetlands
    visual aestheticstrace elements
    climate and meteorologyfish habitat  stream flow modeling
    Iliamna Lakemarine


Potential Environmental Effects and Proposed Mitigation
Measures

The application of sound engineering, environmental planning
and best management practices, including compliance with existing U.S. federal
and state environmental laws, regulations and guidelines, will ensure that all
of the environmental issues associated with the development and operation of the
Pebble Project can be effectively addressed and managed.

The major environmental components include air, water and
terrestrial resources. During the preliminary stages of the Pebble Project,
Northern Dynasty identified key environmental issues and design drivers that
have formed the basis of baseline data collection, environmental and social
analysis and continuing stakeholder consultations influencing the Pebble Project
design. The effects assessment has confirmed these as important issues and
design drivers, and has identified mitigation measures for each. The key
mitigation strategies for these drivers include:

| | Water: development of a water management plan that
      maximizes the collection and diversion of groundwater, snowmelt and direct
      precipitation away from the mine site;                                                                                                                                                                          
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                           
| | Wetlands: avoidance and minimization of project effects
      on wetlands and implementation of a water management plan (in accordance
      with US Army Corp of Engineers guidelines and regulations) to reduce
      wetland impacts;                                                                                                                  
|  |                                                                                                                                                                                                                                                                                                                                                           
| | Aquatic habitats: development of a water management plan
      and habitat mitigation measures that includes strategies to effectively
      manage the release of treated water in compliance with anticipated
      regulatory requirements to sustain necessary downstream flows and to
      protect downstream fish habitat and aquatic environments;
|  |                                                                                                                                                                                                                                                                                                                                                           
| | Air quality: implementation of air emissions
      and dust suppression strategies;                                                                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                           
| | Marine environment: minimize the port
      facilitys footprint in the intertidal zone, particularly in soft sediment
      intertidal areas; and                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                           
| | Compensatory mitigation measures to ensure
      compliance with the Clean Water Act.                                                                                                                                                                                                                                                                     

Direct integration of these and other appropriate measures into
the Pebble Project design and operational strategies are expected to effectively
mitigate possible environmental effects and minimize residual environmental
effects associated with the construction, operation and eventual closure of any
proposed mine at the Pebble Project.

Community Consultation and Stakeholder Relations

Since 2004, the Company has undertaken a comprehensive
stakeholder relations and community outreach program. In addition to ensuring
that relevant stakeholder groups and individuals receive early notification of
all work programs, the objectives of the Pebble Partnerships stakeholder and
community relations program are:

| | To provide regular progress updates on
      project-related activities, opportunities and planning;                     
|- | -------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                          
| | To seek input on stakeholder priorities, issues
      and concerns, and provide feedback on how they are being addressed;
|  |                                                                                                                          
| | To educate stakeholders on responsible resource
      development and modern mining principles and practices;            

---

|-30 -
|-----
|     

| | To maximize economic and community benefits associated
      with the Pebble Project, both in the exploration and development phase and
      during mine operations; and,
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                           
| | To provide opportunities for two-way dialogue
      and the development of long-term, respectful and mutually beneficial
      relationships.                             

The Pebble Partnership has developed a dedicated and
knowledgeable stakeholder relations team to implement this program. In addition
to stakeholder relations staff in Anchorage, the team includes two
representatives living in Bristol Bay communities. The Pebble Partnership has
provided ongoing training for all of its community relations personnel.

Status of Project Engineering and Previous Mine Planning
Work

During the period 2007 to 2011, the Pebble Partnership expended
several hundred million dollars on the Pebble Project, a major portion of which
was spent on exploration programs, resource estimates, environmental data
collection and technical studies involving engineering of various possible mine
development models, as well as related infrastructure, power and transportation
systems. During this period, the Pebble Partnership was funded by the
international mining company Anglo American through an affiliate which had
acquired a 50% interest in the limited partnership which owns the Pebble Project
contingent on the provision of $1.5 billion in funding for project costs. These
studies informed a preliminary assessment of the project released by the Company
in 2011. As a consequence of several factors, including EPA opposition to the
Pebble Project discussed under Item 8  A3. Legal Proceedings, the
withdrawal of Anglo American from the project and the passage of time, technical
and engineering studies related to mine-site and infrastructure development are
considered to have very uncertain and perhaps little value at this time.
Environmental baseline studies and data collection remains a significant legacy
asset of the Company from this period. The 2014 Technical Report does not
attempt to build on this previous engineering work given that, unless and until
there is some visibility in the litigation with the EPA in regards to the
possibility of permitting any kind of mine at Pebble, it is not appropriate for
the technical report authors to use or build upon previously posited mine models
or to make large dollar recommendations in furtherance of assessing the
technical or economic feasibility of a potential mine at Pebble.

Plans for 2015

| | Advance a multi-dimensional strategy to address the EPAs
      pre-emptive regulatory process under Section 404(c) of the Clean Water Act
      to ensure the Pebble Project can initiate federal and state permitting
      under NEPA unencumbered by any extraordinary development restrictions
      imposed by the EPA. This includes litigation related to the EPAs
      statutory authority to act pre-emptively under the Clean Water Act,
      potential violations of the Federal Advisory Committee Act and Freedom of
      Information Act, as well as facilitation of various third-party
      investigations of EPA actions with respect to the Pebble Project,
      including by the independent Office of the EPA Inspector General.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Maintain an active corporate presence in Alaska to
      advance relationships with political and regulatory offices of government,
      Alaska Native partners and broader stakeholder relationships.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Maintain the Pebble Project and Pebble claims in good
      standing and continue environmental monitoring as per the Recommended
      Program from the 2014 Technical Report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Continue general and administration costs to
      maintain the Company in good standing and advance a potential partner(s)
      transaction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|C. | ORGANIZATIONAL STRUCTURE
|-- | ------------------------

Structure as at December 31, 2014:

---

|-31 -
|-----
|     



In January 2015, Kaskanak Inc and Kaskanak Copper LLC were
merged with Pebble East Claims Corporation, with the latter the surviving
entity.

|D. | PROPERTY, PLANT AND
EQUIPMENT
|-- | -----------------------------

The Companys principal property is the Pebble Project, as
discussed above in Item 4.B.

The Company has approximately $972,000 in plant and equipment
primarily at the Pebble Project site located in Iliamna.

The Company, through the Pebble Partnership, has leased
premises in Anchorage and at the Pebble Project site and as result the Company
has lease commitments which have been disclosed under Item 5  F.
Tabular Disclosure of Contractual Obligations.

|ITEM 4A | UNRESOLVED STAFF COMMENTS
|------- | -------------------------

There are none.

---

|-32 -
|-----
|     

|ITEM 5 | OPERATING AND FINANCIAL REVIEW AND
      PROSPECTS
|------ | --------------------------------------------------

OVERVIEW

Northern Dynasty is a mineral exploration company which, via
its subsidiaries, holds a 100% interest in mining claims on State of Alaska land
in southwest Alaska, USA ("US") that are part of or in the vicinity of the
Pebble Copper-Gold-Molybdenum Project (the "Pebble Project" or Pebble).

None of the Company's properties have any mineral reserves or
have been proven to host mineralized material which can be said to be "ore" or
feasibly economic at current metals prices. The Company incurs significant
exploration expenditures as it carries out its business strategy. As Northern
Dynasty is an exploration stage company, it does not have any revenues from its
operations to offset its exploration expenditures. Accordingly, the Company's
ability to continue exploration of its properties will be contingent upon the
availability of additional financing.

Northern Dynasty's financial statements are prepared on the
basis that it will continue as a going concern. The Company has incurred losses
since inception and the ability of the Company to continue as a going concern
depends upon its ability to continue to raise adequate financing and to develop
profitable operations. Northern Dynasty's financial statements do not reflect
adjustments, which could be material, to the carrying values of assets and
liabilities, which may be required should the Company be unable to continue as a
going concern.

The following discussion should be read in conjunction with the
audited annual financial statements for the years ended December 31, 2014, 2013,
and 2012, and the related notes accompanying this Annual Report ("2014 Financial
Statements"). The Company prepares and presents its financial statements in
accordance with International Financial Reporting Standards ("IFRS"), as issued
by the International Accounting Standards Board.

Critical Accounting Policies and Estimates

The preparation of the 2014 Financial Statements requires
management to make estimates, judgments and assumptions that affect the reported
amounts of assets and liabilities at the end of the reporting period presented
and reported amounts of expenses during said reporting period. Actual outcomes
may differ from these estimates.

Areas where significant estimates exist include:

|i.   | the inputs into the Black Scholes calculation for the
      estimation of the fair value of share purchase options granted,
|---- | ---------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                            
|ii.  | the value of the Settlement Claims (refer to note 5 of
      the 2014 Financial Statements),                               
|     |                                                                                                                            
|iii. | assumptions used in the determination of the provision
      for deferred income tax expense (recovery).                   

Areas where significant judgments exist include:

|i.   | assessing the indicators for testing the Company's
      mineral property interest ("MPI") for impairment,        
|---- | ------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                   
|ii.  | determining the functional currencies of the Company and
      its subsidiaries,                                  
|     |                                                                                                                   
|iii. | concluding that going concern was an appropriate basis
      for the preparation of the 2014 Financial
Statements.

Further discussion can be found in note 2 of the 2014 Financial
Statements which form Item 18 of this Annual Report.

Financial Instruments and Other Instruments

The Company has no derivative financial assets or liabilities.

|A. | RESULTS OF OPERATIONS
|-- | ---------------------

The following selected annual information is from the audited
consolidated financial statements which have been prepared in accordance with
IFRS. The 2013 figures include the Pebble Partnership on a consolidated basis
with effect from December 10, 2013. Unless otherwise stated, all monetary
amounts are expressed in thousands of Canadian dollars except per share amounts,
which are expressed in Canadian dollars.

---

|-33 -
|-----
|     

|                                                          |   | December 31 |  |   | December 31 |  |   | December 31 | 
|--------------------------------------------------------- | - | ----------- |  | - | ----------- |  | - | ----------- | 
|Excerpts from Statements of Financial Position            |   | 2014        |  |   | 2013        |  |   | 2012        | 
|Total assets                                              | $ | 135,510     |  | $ | 141,784     |  | $ | 132,934     | 
|Total non-current other liabilities
      (non-financial) |   | 1,515       |  |   | 3,803       |  |   | 3,632       | 
|Total current liabilities                                 |   | 6,033       |  |   | 4,053       |  |   | 409         | 

|                                                             |   | Year ended  |   |   | Year ended  |   |   | Year ended  |  
|------------------------------------------------------------ | - | ----------- | - | - | ----------- | - | - | ----------- | -
|                                                             |   | December 31 |   |   | December 31 |   |   | December 31 |  
|Excerpts from Statements of Comprehensive Loss (Income)      |   | 2014        |   |   | 2013        |   |   | 2012        |  
|Exploration and evaluation                                   | $ | 12,877      |   | $ | 1,991       |   | $ | 4,461       |  
|General and administrative                                   |   | 17,384      |   |   | 6,245       |   |   | 6,780       |  
|Share-based compensation                                     |   | 3,877       |   |   | 641         |   |   | 5,225       |  
|Other items (i)                                              |   | (2,791      | ) |   | (1,292      | ) |   | (804        | )
|Gain
      on discontinuance of equity method (ii)           |   |            |   |   | (5,062      | ) |   |            |  
|Loss
      for the year                                      | $ | 31,347      |   | $ | 2,523       |   | $ | 15,662      |  
|                                                             |   |             |   |   |             |   |   |             |  
|Basic and diluted loss per common share                      | $ | 0.33        |   | $ | 0.03        |   | $ | 0.16        |  
|Weighted average number of common shares outstanding (000) |   | 95,009      |   |   | 95,007      |   |   | 94,995      |  

|(i)  | Other items include interest income, exchange gain and
      loss and deferred income tax.                                                                                                        
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                   
|(ii) | Represents a gain recorded upon discontinuance of equity
      method for accounting for the investment in the Pebble Limited Partnership
      when the Company reacquired control in Q4 of 2013.

Year Ended December 31, 2014 versus Year Ended December 31,
2013

The Company recorded an increase in loss of $29.4 million due
primarily to the increase in Exploration and Evaluation expenses ("E&E"),
general and administrative expenses ("G&A") and share-based compensation
("SBC"). In 2013, the Company recorded a $5.1 million gain on the discontinuance
of the equity method in accounting for the Pebble Partnership.

E&E increased by $10.9 million as the Company funded all
exploration and evaluation work on the Pebble Project and included the updating
of information on mineral resources (discussed under Item 4  Technical
Summary), other technical studies, site activities including payment of
annual fees for claims, site leases and land access agreements, environmental
monitoring and Native community engagement. E&E comprised mainly of the
following for the year as compared to 2013, expressed in thousands of
dollars:

|Exploration and evaluation expenses ("E&E") |   | 2014   |  |   | 2013  | 
|------------------------------------------- | - | ------ |  | - | ----- | 
|Engineering                                 | $ | 1,440  |  | $ | 853   | 
|Environmental planning and testing          |   | 2,322  |  |   | 270   | 
|Site activities                             |   | 4,297  |  |   | 401   | 
|Socio-economic                              |   | 4,324  |  |   | 26    | 
|Other activities and travel                 |   | 494    |  |   | 441   | 
|                                            | $ | 12,877 |  | $ | 1,991 | 

Until December 10, 2013, the Pebble Project was under joint
control with Anglo American with the latter funding exploration and evaluation
work on the Pebble Project. Pursuant to the agreement with Anglo American, the
distribution of losses funded by Anglo American were to be allocated 100% to
Anglo American until satisfaction of Anglo Americans earn-in expenditures, and
as a result Northern Dynasty did not recognize any share of the losses.

G&A increased to $17.4 million from $6.2 million in 2013
due to the inclusion of the Pebble Partnerships management, administration, and
office expenses for the full year and increased legal costs which were incurred
in response to the EPAs activities during the year (see Item 8  A3. Legal
Proceedings).

The following table provides a breakdown of G&A incurred in
the year as compared to 2013, expressed in thousands of dollars:

---

|-34 -
|-----
|     

|General and administrative expenses ("G&A") |   | 2014   |  |   | 2013  | 
|------------------------------------------- | - | ------ |  | - | ----- | 
|Conference and travel                       | $ | 323    |  | $ | 340   | 
|Consulting                                  |   | 782    |  |   | 836   | 
|Insurance                                   |   | 384    |  |   | 342   | 
|Legal, accounting and audit                 |   | 8,326  |  |   | 275   | 
|Office costs                                |   | 1,963  |  |   | 670   | 
|Management and administration               |   | 4,610  |  |   | 2,572 | 
|Shareholder communication                   |   | 772    |  |   | 983   | 
|Trust and filing                            |   | 224    |  |   | 227   | 
|Total                                       | $ | 17,384 |  | $ | 6,245 | 

SBC increased to $3.9 million from $0.6 million in 2013 as the
Company granted 5.9 million share purchase options in the current year (2013 
no options were granted).

The Company recognized an exchange gain on translation of
subsidiaries which have a U.S. Dollar functional currency of $9.9 million (2013
 $6.9 million) in other comprehensive income with the result that the Company
recorded comprehensive loss for the year of $21.4 million as compared to a
comprehensive gain of $4.4 million in 2013.

Cash Flows for the Year Ended December 31, 2014 versus 2013

Net cash used in operations increased to $27.8 million in 2014
from $7.8 million in 2013, due to the increase in the Companys operating
activities as discussed above. The source of cash and cash equivalents during
2014 included the Companys cash resources and cash received from the issue of
special warrants in a private placement late in December 2014.

Financial position as at December 31, 2014 versus December
31, 2013

Total assets decreased by $6.3 million to $135.5 million. This
decrease was due mainly to the utilization of the Companys cash and cash
equivalents in its operating activities.

Year Ended December 31, 2013 versus Year Ended December 31,
2012

The Company recorded a decrease in loss of $13.1 million due
mainly to the decrease in E&E, SBC and a gain recognized on discontinuance
of the equity method for accounting for the investment in the Pebble
Partnership.

E&E decreased by $2.5 million as the Companys work on
technical studies wound down.

G&A decreased to $6.2 million from $6.8 million in 2012 due
mainly to a reduction in consulting fees paid and conference and travel costs.
In 2012, in response to EPAs initiatives such as the Bristol Bay Watershed
Assessment, the Company retained US political and scientific representatives and
consultants to assist, consult and represent the Company; such costs were lower
in 2013. This was offset by increased shareholder communication in 2013 as the
Company focused more resources in the area of investor relations and shareholder
communication.

The following table provides a breakdown of G&A incurred in
the year as compared to 2012, expressed in thousands of dollars:

|G&A                           |   | 2013  |  |   | 2012  | 
|----------------------------- | - | ----- |  | - | ----- | 
|Conference and travel         | $ | 340   |  | $ | 566   | 
|Consulting                    |   | 836   |  |   | 1,761 | 
|Insurance                     |   | 342   |  |   | 343   | 
|Legal, accounting and audit   |   | 275   |  |   | 255   | 
|Office costs                  |   | 670   |  |   | 702   | 
|Management and administration |   | 2,572 |  |   | 2,095 | 
|Shareholder communication     |   | 983   |  |   | 830   | 
|Trust and filing              |   | 227   |  |   | 228   | 
|Total                         | $ | 6,245 |  | $ | 6,780 | 

SBC decreased to $0.6 million from $5.2 million in 2012 due
mainly to the Company not granting share purchase options in 2013. In 2012 the
Company granted 2.2 million options and recognized an additional $0.5 million
expense for options that were cancelled voluntarily. Although over 2.0 million
options were cancelled voluntarily in 2013, they were fully
vested, and there was no impact on SBC as the Company had previously recognized
SBC thereon.

---

|-35 -
|-----
|     

The Company recognized an exchange gain on translation of the
Pebble Partnership, which has a US dollar functional currency, of $6.9 million
(2012  loss of $2.2 million) in other comprehensive income, with the result
that the Company recorded comprehensive income for 2013 of $4.4 million as
compared to a comprehensive loss of $17.8 million in 2012.

Cash Flows for the Year Ended December 31, 2013 versus 2012

Net cash used in operations decreased by $2.7 million to $7.8
million in 2013 due mainly to the decrease in Company corporate activities.

The Company contributed a further $1.0 million to the Pebble
Partnership before the change in control of the Pebble Partnership on December
10, 2013. On assumption of control, the Companys cash resources increased by
$6.5 million.

The Company received $0.6 million in interest on cash balances
as compared to $0.4 million in 2012 as the Companys funds were invested at
higher rates. For the 2013 year, the Company had a net decrease in cash of $1.7
million (2012  $9.9 million).

Financial position as at December 31, 2013 versus December
31, 2012

The Companys total assets increased by $8.9 million to $141.8
million. The increase was mainly the result of consolidating the assets and
liabilities of the Pebble Partnership as a result of assuming control thereof.
In respect to non-current assets, the Company recognized the Pebble mineral
property and plant and equipment as it discontinued the equity method of
accounting for the Pebble Partnership, which including a foreign exchange gain
on translation amounted to an increase of $7.7 million. Current assets increased
by $1.2 million as the Company consolidated amounts receivable and prepaid
expenses, certain restricted cash ($1.2 million) and cash and cash equivalents
from the Pebble Partnership. The additional cash and cash equivalents reduced
the decrease in cash and cash equivalents utilized for the year to $1.7 million.
Other changes included the change in value of the amounts receivable due to
accrued interest ($0.3 million) and foreign exchange gain on translation ($0.5
million).

The Pebble Partnership under Joint Venture

Until the change of control on December 10, 2013, the Company
accounted for its investment in the Pebble Partnership under the equity
method.

Expenditures incurred by the Pebble Partnership on the Pebble
Project were funded by Anglo American in order to retain its 50% interest in the
Pebble Project. Anglo Americans total contributions from inception of the
Pebble Partnership to December 31, 2013 total $594.9 million (US$573.2 million).
For the period ended January 1 to December 10, 2013, the Pebble Partnership
incurred losses of $68.8 million (December 31, 2012  $102.9 million). E&E
costs decreased to $58.5 million from $93.3 million in the previous year as the
Pebble Partnership focused on various programs to advance the completion of a
prefeasibility study for the Pebble Project and the completion of a Project
Description to support the permit application under NEPA. In Q1 of 2012, the
Pebble Partnership released the 27,000-page Environmental Baseline Document.

The main E&E costs during the period ended January 1 to
December 10, 2013, were:

| | engineering (2013  $10.6 million; December 31,
      2012  $19.1 million);                       
|- | ---------------------------------------------------------------------------------------------------
|  |                                                                                                    
| | environmental planning and testing (2013 
      $13.9 million; December 31, 2012  $20.0 million);
|  |                                                                                                    
| | site activities (2013  $18.8 million; December
      31, 2012  $36.6 million);                   
|  |                                                                                                    
| | corporate affairs (2013  $13.7 million;
      December 31, 2012  $16.5 million); and             
|  |                                                                                                    
| | business development (2013  $1.5 million;
      December 31, 2012  $1.1 million).                

|B. | LIQUIDITY AND CAPITAL RESOURCES
|-- | -------------------------------

Liquidity

The Company's major sources of funding has been the issuance of
equity securities for cash, primarily through private placements to
sophisticated investors and institutions and the issue of common shares pursuant
to the exercise of share purchase options. The Company's access to financing is
always uncertain. There can be no assurance of continued access to significant
equity funding.

---

|-36 -
|-----
|     

As at December 31, 2014, the Companys cash and cash
equivalents were $9.4 million, down from $25.8 million at December 31, 2013 as
the Company used $27.9 million of its cash in its operating activities and
raised net $11.3 million from the issuance of 27,622,642 special warrants at a
price of $0.431 per special warrant in a private placement. In January 2015, the
Company completed the private placement of a further 8,340,093 special warrants
for gross proceeds of $3.6 million (see Item 10  C. Material Contracts).
The Company has prioritized the allocation of available financial resources in
order to meet key corporate and Pebble Project expenditure requirements in the
near term. Additional financing will be required to pursue any material work
programs at the Pebble Project. There can be no assurances that the Company will
be successful in obtaining additional financing. If the Company is unable to
raise the necessary capital resources to meet obligations as they come due, the
Company will have to reduce or curtail its operations.

At December 31, 2014, the Company had working capital of
approximately $5.9 million as compared to $29.7 million at December 31, 2013.
The Company has no long term debt, capital lease obligations, operating leases
or any other long term obligations other than those disclosed below (refer F.
Tabular Disclosure of Contractual Obligations).

The Company has no "Purchase Obligations", defined as any
agreement to purchase goods or services that is enforceable and legally binding
on the Company that specifies all significant terms, including: fixed or minimum
quantities to be purchased; fixed, minimum or variable price provisions; and the
approximate timing of the transaction. The Company is responsible for
maintenance payments on the Pebble Project claims and other claims and routine
office leases.

Capital Resources

The Companys capital resources consist of its cash reserves.
As of December 31, 2014, the Company had no long term debt or commitments for
material capital expenditures other than what has been disclosed in below in
F. Tabular Disclosure of Contractual Obligations.

The Company has no lines of credit or other sources of
financing which have been arranged or utilized.

Requirement of Financing

North Dynasty does not earn any revenues and has historically
had, and will continue to have for the foreseeable future, negative cash flows.
Historically, Northern Dynasty's sole source of funding has been provided by the
sale of equity securities for cash, primarily through private placements to
sophisticated investors and institutions. Like all exploration stage companies,
Northern Dynasty will need to raise additional financing to pursue any material
work programs at the Pebble Project and to meet its business objectives.

Financial Instruments

The Company has no derivative financial assets or liabilities
and has the following non-derivative financial assets and liabilities.

| | Marketable securities              
|- | -----------------------------------
|  |                                    
| | Amounts receivable                 
|  |                                    
| | Cash and cash equivalents          
|  |                                    
| | Trade and other payables, and      
|  |                                    
| | Amounts payable to a related party.

The Company keeps its financial instruments denominated in US
and Canadian Dollars, depending on expected needs in each currency. The Company
does not engage in any hedging operations with respect to currency or in-situ
minerals. Funds which are excess to Northern Dynasty's current needs are
invested in short-term near-cash investments.

Northern Dynasty does not have any material, legally
enforceable obligations requiring it to make capital expenditures and
accordingly, can remain relatively flexible in gearing its activities to the
availability of funds.

|C. | RESEARCH EXPENDITURES
|-- | ---------------------

Northern Dynasty does not carry out any research or development
activities. Please refer to Item 3 and Item 4 above for a discussion of the
exploration expenditures that the Company has incurred in connection with the
exploration of its mineral properties.

---

|-37 -
|-----
|     

|D. | TREND INFORMATION
|-- | -----------------

Copper prices increased from early 2009 until late 2011. From
that time, prices have been variable and weakened overall. The recent closing
price is US$2.89/lb.

The average annual gold price steadily increased from 2008 to
2012. Gold prices trended lower in 2013, and have been variable but weakened
overall in 2014 and 2015. The recent closing price is US$1,189/oz.

Molybdenum prices were variable, but improving in 2010 and
2011, variable in 2013, and then began an uptrend that extended through the end
of June 2014. Prices have been on a downtrend since that time with a recent
closing price of US$7.76/lb.

An upward trend in silver prices began in 2010, and continued
to late September 2011; prices reached as high as $43/oz in 2011, resulting in
the highest average annual price since 2008. Prices ranged between $26/oz and
$35/oz between October 2011 and December 2012. Prices trended downward in 2013.
They have been variable in 2014 and 2015, with an overall decrease in the
average price. The recent closing price is US$16.39/oz.

Average annual prices since 2010 as well as the average prices
so far in 2015 for copper, gold, molybdenum and silver are shown in the table
below:

|                                     |  |        |  |  | Average
      Prices |  |  |            | 
|------------------------------------ |  | ------ |  |  | -------------------- |  |  | ---------- | 
|                                     |  | Copper |  |  | Gold                 |  |  | Molybdenum | 
|Year or Period                       |  | US$/lb |  |  | US$/oz               |  |  | US$/lb     | 
|2010                                 |  | 3.42   |  |  | 1,228                |  |  | 15.87      | 
|2011                                 |  | 4.00   |  |  | 1,572                |  |  | 15.41      | 
|2012                                 |  | 3.61   |  |  | 1,669                |  |  | 12.81      | 
|2013                                 |  | 3.32   |  |  | 1,410                |  |  | 10.40      | 
|2014                                 |  | 3.14   |  |  | 1,276                |  |  | 11.91      | 
|2015
      (to the date of this 20F) |  | 2.68   |  |  | 1,212                |  |  | 8.31       | 

Source: LME Official Cash Price as provided at
www.metalprices.com

|E. | OFF-BALANCE SHEET
ARRANGEMENTS
|-- | ------------------------------

Northern Dynasty has no off-balance sheet arrangements.

|F. | TABULAR DISCLOSURE OF CONTRACTUAL
    OBLIGATIONS
|-- | -------------------------------------------------

The following commitments and payables (expressed in thousands)
existed at December 31, 2014:

|                           |   |       |  |   | Payments due by period | 
|-------------------------- | - | ----- |  | - | ---------------------- | 
|                           |   | Total |  |   | ≤ 1 year               | 
|Trade and other payables   | $ | 5,650 |  | $ | 5,650                  | 
|Payable to related parties |   | 383   |  |   | 383                    | 
|Lease commitments          |   | 1,424 |  |   | 952                    | 
|Total                      | $ | 7,457 |  | $ | 6,985                  | 

The Company had no long-term debt obligations, no capital
(finance) lease obligations, no operating lease obligations (other than noted
above), no purchase obligations, or other long-term liabilities.

|G. | SAFE HARBOR
|-- | -----------

The safe harbor provided in Section 27A of the Securities Act
and Section 21E of the Exchange Act applies to forward-looking information
provided pursuant to Item 5.E and Item 5.F above.

---

|-38 -
|-----
|     

|ITEM 6 | DIRECTORS, SENIOR MANAGEMENT AND
      EMPLOYEES
|------ | ------------------------------------------------

|A. | DIRECTORS AND SENIOR
MANAGEMENT
|-- | -------------------------------

The names and municipalities of residence of the directors and
officers of the Company, their principal occupations during the past five years,
and the period of time they have served as directors or officers of Northern
Dynasty are presented in the table below. Except where indicated, each director
and senior officer of Northern Dynasty has held the same or similar principal
occupation with the organization indicated or a predecessor thereof for the last
five years.

Name
    Year born
    Position
    Director or Officer SinceScott D. Cousens Vancouver, BC, Canada
    1964
    Director
    June 1996Robert A. Dickinson Lions Bay, BC, Canada
    1948
    Chairman of the Board and Director
    June 1995Gordon J. Fretwell West Vancouver, BC, Canada
    1953
    Director
    July 2004Russell E. Hallbauer West Vancouver, BC,
      Canada
    1954
    Director
    April 2008Wayne Kirk Orcas Island, WA, USA
    1943
    Director
    July 2004Peter Mitchell Chicago, IL, USA
    1955
    Director
    May 2011Ken Pickering Chemainus, BC, Canada
    1947
    Director
    September 2013Marchand Snyman West Vancouver, BC, Canada
    1967
    Chief Financial Officer and Director
    August 2008Ronald W. Thiessen West Vancouver, BC, Canada
    1952
    President, CEO and Director
    November 1995Trevor Thomas Vancouver, BC, Canada
    1967
    Secretary
    February 2008Bruce Jenkins Vancouver, BC, Canada
    1950
    Senior Vice President, Corporate
      Development
    June 2004Stephen Hodgson Vancouver, BC, Canada
    1954
    Vice President Engineering
    March 2005Sean Magee North Vancouver, BC, Canada
    1966
    Vice President Public Affairs
    October 2006Doug Allen Vancouver, BC, Canada
    1958
    Vice President Corporate
      Communications
    June 2012


|(1) | To the best of the Company's knowledge, none of such
      persons has any family relationship with any other and none were elected
      as a director or appointed as an officer as a result of an arrangement or
      understanding with a major shareholder, customer, supplier, or any other
      party.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following is biographical information on each of the
persons listed above. Where indicated in the reference to "CEO" refers to Chief
Executive Officer and CFO to Chief Financial Officer:

Scott D. Cousens  Director

Scott Cousens provides management, technical and financial
services to a number of publicly traded companies. Mr. Cousens focus since 1991
has been the development of relationships within the international investment
community. Through substantial financings and subsequent corporate success, Mr.
Cousens has established strong ties with North American, European and Asian
investors. Mr. Cousens is a director of HDI and HDSI.

Mr. Cousens is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Name of Market
    Positions Held
    From
    ToNorthern Dynasty Minerals Ltd.
    TSX, NYSE MKT
    Director
    June 1996
    PresentAmarc Resources Ltd.
    TSX-V, OTCBB
    Director
    September 1995
    PresentContinental Minerals Corporation
    TSX-V, OTCBB
    Director
    June 1994
April 2011


---

|-39 -
|-----
|     

Company
    Name of Market
    Positions Held
    From
    ToHeatherdale Resources Ltd.
    TSX-V
    Director and
      Chairman
    November 2009
    PresentNorthcliff Resources Ltd.
    TSX
    Director
    June 2011
    February 2012Director
    May 2012
    PresentQuartz Mountain Resources Ltd.
    TSX-V, OTCBB
    Director and
      Chairman
    November 2012
    PresentRathdowney Resources Ltd.
    TSX-V
    Director
    March 2011
    PresentTaseko Mines Limited
    TSX, NYSE MKT
    Director
    October 1992
    July 2014


Robert A. Dickinson, B.Sc., M.Sc.  Chairman of the Board
and Director

Mr. Dickinson is an economic geologist who has been actively
involved in mineral exploration and mine development for over 45 years. He is
Chairman of HDI and HDSI as well as a director and member of the management team
of a number of the public companies associated with Hunter Dickinson Inc. He is
also President and Director of United Mineral Services Ltd., a private resource
company. He also serves as a Director of the Britannia Mine Museum and a Trustee
of the BC Mineral Resources Education Program. Mr. Dickinson is, or was within
the past five years, an officer and/or director of the following public
companies:

Company
    Name of Market
    Positions Held
    From
    ToNorthern Dynasty Minerals Ltd.
    TSX, NYSE MKT
    Director
    June 1994
    PresentChairman
    April 2004
    PresentAmarc Resources Ltd.
    TSX-V, OTCBB
    Director
    April 1993
    PresentChairman
    April 2004
    PresentContinental Minerals Corporation
    TSX-V, OTCBB
    Director
    June 2004
    April 2011Curis Resources Ltd.
    TSX
    Director
    November 2010
    November 2012Chairman
    November 2010
    December 2010Heatherdale Resources Ltd.
    TSX-V
    Director
    November 2009
    PresentNorthcliff Resources Ltd.
    TSX
    Director
    June 2011
    PresentChairman
    June 2011
    January 2013Rathdowney Resources Ltd.
    TSX-V
    Director and
    March 2011
    December 2011ChairmanQuartz Mountain Resources Ltd.
    TSX-V
    Director
    December 2011
    PresentChairman
    December 2011
    November 2012Taseko Mines Limited
    TSX, NYSE MKT
    Director
    January 1991
    Present


Gordon J. Fretwell, B.Comm. LLB.  Director

Gordon Fretwell holds a Bachelor of Commerce degree and
graduated from the University of British Columbia in 1979 with his Bachelor of
Law degree. Formerly a partner in a large Vancouver law firm, Mr. Fretwell has,
since 1991, been a self-employed solicitor (Gordon J. Fretwell Law Corporation)
in Vancouver practicing primarily in the areas of corporate and securities law.

Mr. Fretwell is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Name of Market
    Positions Held
    From
    ToAsanko Gold Corp. (formerly Keegan Resources
      Inc.)
    TSX-V, AMEX
    Director
    February 2004
    PresentAuryn Resources Inc.
    TSX-V
    Director
    October 2013
    PresentBell Copper Corporation
    TSX-V
    Secretary
    March 2001
    May 2011Director
    June 2001
    April 2011Benton Capital Corp. (formerly
      Benton Resources Corp.)
    TSX-V
    Director
    July 2003
    July 2013Secretary
    December 2003
    PresentBenton Resources Inc.
    TSX-V
    Director
    November 2011
    March 2014Secretary
    November 2011
    PresentCanada Rare Earth Corp.
    TSX-V
    Secretary
    June 2009
    Present


---

|-40 -
|-----
|     

Company
    Name of Market
    Positions Held
    From
    ToCuris Resources Ltd.
    TSX
    Director
    January 2011
    November 2014Coro Mining Corp.
    TSX
    Director
    January 2009
    PresentICN Resources Ltd.
    TSX-V
    Director
    July 2004
    August 2010Lignol Energy Corporation
    TSX-V
    Director
    January 2007
    PresentMeritus Minerals Ltd.
    TSX-V
    Director
    June 2007
    November 2012Secretary
    August 2009
    PresentNorthern Dynasty Minerals Ltd.
    TSX, NYSE MKT
    Director
    June 2004
    PresentSokoman Iron Corp. (formerly Golden Dory
      Resources Corp.)
    TSX-V
    Secretary
    August 2008
    PresentQuartz Mountain Resources Ltd.
    TSX-V, OTCBB
    Director
    January 2003
    PresentSecretary
    January 2003
    December 2011Rockwell Diamonds Inc.
    TSX-V, OTCBB, JSE
    Secretary
    September 2012
    Present


Russell E. Hallbauer, P.Eng.  Director

Mr. Hallbauer graduated from the Colorado School of Mines with
a B.Sc. in Mining Engineering in 1979. He is a Registered Professional Engineer
with the Association of Professional Engineers of British Columbia. He has been
a member of the Canadian Institute of Mining and Metallurgy since 1975 and is a
director and former chairman of the Mining Association of B.C. Mr. Hallbauer is
currently the President and Chief Executive Officer of Taseko Mines Limited.

In 1983, he joined Teck Corporations Bullmoose mine, advancing
through Engineering and Supervisory positions to become Mine Superintendent in
1987, and in 1992, became General Manager of Quintette. In 1995, he assumed new
responsibilities in Vancouver when he was appointed General Manager, Coal
Operations, overseeing Tecks three operating coal mines in British Columbia. In
2002, he was appointed General Manager, Base Metal Joint Ventures, responsible
for Teck Comincos interests in Highland Valley Copper, Antamina in Peru, and
Louvicourt in Quebec. Mr. Hallbauer is a director of HDI and HDSI.

Mr. Hallbauer is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Name of Market
    Positions Held
    From
    ToNorthern Dynasty Minerals Ltd.
    TSX, NYSE MKT
    Director
    April 2008
    PresentCuris Resources Ltd.
    TSX
    Director
    November 2010
    November 2014Chairman
    December 2010
    September 2012Co-Chairman
    September 2012
    November 2014Taseko Mines Limited
    TSX, NYSE MKT
    Director, President and CEO
    July 2005
    Present


Wayne Kirk, LLB  Director

Wayne Kirk is a retired attorney and consultant. With over 35
years of professional experience, Mr. Kirk also has over 9 years of senior
executive experience in the mining industry.

Mr. Kirk is a citizen of the United States and is a resident of
the state of Washington. A Harvard University graduate, Mr. Kirk received his
law degree in 1968. From 1992 to 2001 Mr. Kirk was the Vice President, General
Counsel and Corporate Secretary of Homestake Mining Company. Prior to his
retirement in June 2004 he spent two years as Special Counsel for the law firm,
Thelen Reid & Priest, in San Francisco.

Mr. Kirk is, or was within the past five years, a director of
the following public companies:

Company
    Name of Market
    Positions Held
    From
    ToNorthern Dynasty Minerals Ltd.
    TSX, NYSE MKT
    Director
    July 2004
    PresentAtlatsa Resources Corporation
    TSX-V, NYSE MKT, JSE
    Director
    July 2005
    September 2011Gabriel Resources Ltd.
    TSX
    Director
    June 2008
    PresentGreat Basin Gold Ltd.
    TSX, NYSE MKT, JSE
    Director
    July 2004
    January 2012Luna Gold Corp.
    TSX, OTCQX
    Director
    May 2012
    Present


---

|-41 -
|-----
|     

Company
    Name of Market
    Positions Held
    From
    ToTaseko Mines Limited
    TSX, NYSE MKT
    Director
    July 2004
    June 2014


Peter Mitchell, CA  Director

Mr. Mitchell is currently the Senior Vice President and Chief
Financial Officer of Coeur Mining, Inc. in Chicago, Illinois. He is a graduate
of the University of Western Ontario with a Bachelor of Arts in Economics as
well as a graduate of the MBA program of the University of British Columbia. Mr.
Mitchell is a Chartered Accountant and worked most recently as the Chief
Financial Officer of Taseko Mines Limited. Prior to that he held senior roles in
three private equity portfolio companies including President of Florida Career
College based in Fort Lauderdale, Florida, President and CEO of Vatterott
Education Centers in St Louis, Missouri and Vice Chairman and CFO of Von
Hoffmann Corporation, also based in St Louis, Missouri.

Mr. Mitchell is, or was within the past five years, an officer
and or director of the following public companies:

Company
    Name of Market
    Positions Held
    From
    ToNorthern Dynasty Minerals Ltd.
    TSX, NYSE MKT
    Director
    May 2011
    PresentCoeur Mining, Inc.
    NYSE, TSX
    Senior Vice President and CFO
    June 2013
    PresentNorthcliff Resources Ltd.
    TSX
    Director
    June 2011
    PresentTaseko Mines Limited
    TSX, NYSE MKT
    CFO
    September 2008
    May 2013


Ken Pickering  Director

Mr. Pickering is a Professional Engineer and mining executive
with 40 years of experience in a variety of capacities in the natural resources
industry. He has led the development, construction and operation of world-class
mining projects in Canada, Chile, Australia, Peru and the United States,
focusing on operations, executive responsibilities and country
accountabilities.

Mr. Pickering is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Name of Market
    Positions Held
    From
    ToNorthern Dynasty Minerals Ltd.
    TSX, NYSE MKT
    Director
    September 2013
    PresentEndeavour Silver Corp.
    TSX, NYSE
    Director
    August 2012
    PresentTHEMAC Resources Group Limited
    TSX-V
    Director
    March 2011
    PresentPan Aust Minerals
    ASX
    Director
    October 2011
    PresentEnaex Chile
    IPSA
    Director
    May 2011
    Present


Marchand Snyman, CA (SA), CA (Aust.)  Director, Chief
Financial Officer

Marchand Snyman is a member of the Institute of Chartered
Accountants in Australia and of the South African Institute of Chartered
Accountants. He is a director and Chief Operating Officer of HDI and a director
of HDSI.

With over 17 years of progressive experience in the mining
sector, Mr. Snyman was a director of Muratie Investments Pty Limited between
2003 and 2006, an Australian mining consultant providing advisory services to
businesses in Australia, China, South Africa and the USA. Mr. Snyman was General
Manager Corporate Finance and Development for Anglo Platinum Limited, the
world's premier platinum producer from 1999  2002, responsible for managing
diverse projects including joint venture negotiations, corporate tax structures
and offshore corporate operations, having joined Anglo Platinum in 1996 as
Corporate Finance Manager. Prior to that, he was a senior financial advisor for
a multi-modal transportation company in South Africa.

---

|-42 -
|-----
|     

Mr. Snyman is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Name of
      Market
    Positions Held
    From
    ToNorthern Dynasty Minerals Ltd.
    TSX, NYSE MKT
    Director
    August 2008
    PresentCFO
    August 2008
    PresentContinental Minerals Corporation
    TSX-V, OTCBB
    CFO
    January 2008
    April 2011Heatherdale Resources Ltd.
    TSX-V
    CFO
    November 2009
    April 2012Northcliff Resources Ltd.
    TSX
    Director and Chairman
    January 2013
    Present


Ronald W. Thiessen, CA  Director, President and Chief
Executive Officer

Ronald Thiessen is a Chartered Accountant with professional
experience in finance, taxation, mergers, acquisitions and re-organizations.
Since 1986, Mr. Thiessen has been involved in the acquisition and financing of
mining and mineral exploration companies. Mr. Thiessen is a director of HDI and
HDSI, a company providing management and administrative services to several
publicly-traded companies and focuses on directing corporate development and
financing activities.

Mr. Thiessen is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Name of Market
    Positions Held
    From
    ToNorthern Dynasty Minerals Ltd.
    TSX, NYSE MKT
    Director
    November 1995
    PresentPresident and CEO
    November 2001
    PresentAmarc Resources Ltd.
    TSX-V, OTCBB
    Director
    September 1995
    PresentCEO
    September 2000
    PresentPresident
    September 2000
    November 2014Atlatsa Resources Corporation
    TSX-V, JSE NYSE MKT
    Director
    April 1996
    June 2011Continental Minerals Corporation
    TSX-V, OTCBB
    Director
    November 1995
    April 2011Co-Chairman
    January 2006
    April 2011Detour Gold Corporation
    TSX
    Director
    July 2006
    May 2012Farallon Mining Ltd.
    TSX
    Director
    August 1994
    January 2011Chairman
    December 2005
    January 2011Great Basin Gold Ltd.
    TSX, NYSE MKT,
      JSE
    Director
    October 1993
    June 2013Chairman
    November 2006
    June 2013Quartz Mountain Resources Ltd.
    TSX-V
    President, CEO and
      Director
    December 2011
    PresentTaseko Mines Limited
    TSX, NYSE MKT
    Director
    October 1993
    PresentChairman
    May 2006
    Present


Trevor Thomas, LLB  Secretary

Trevor Thomas has practiced in the areas of corporate
commercial, corporate finance, securities and mining law since 1995, both in
private practice environment as well as in house positions and is currently
general counsel for HDI. HDI, he served as in-house legal counsel with Placer
Dome Inc. Mr. Thomas is, or was within the past five years, an officer of the
following public companies:

Company
    Name of Market
    Positions Held
    From
    ToNorthern Dynasty Minerals Ltd.
    TSX, NYSE MKT
    Secretary
    February 2008
    PresentAmarc Resources Ltd.
    TSX-V, OTCBB
    Secretary
    February 2008
    PresentAtlatsa Resources Corporation
    TSX-V, JSE, NYSE MKT
    Assistant Secretary
    November 2007
    March 2011Continental Minerals Corporation
    TSX-V, OTCBB
    Secretary
    February 2008
    April 2011Curis Resources Ltd.
    TSX
    Secretary
    June 2013
November 2014


---

|-43 -
|-----
|     

Company
    Name of
      Market
    Positions Held
    From
    ToFarallon Mining Ltd.
    TSX
    Secretary
    December 2007
    January 2011Heatherdale Resources
      Ltd.
    TSX-V
    Secretary
    November 2009
    September 2010June 2013
    PresentNorthcliff Resources Ltd.
    TSX
    Secretary
    June 2011
    PresentQuartz Mountain Resources Ltd.
    TSX-V
    Secretary
    June 2013
    PresentRathdowney Resources Ltd.
    TSX-V
    Secretary
    March 2011
    PresentRockwell Diamonds Inc.
    TSX, OTCBB, JSE
    Secretary
    February 2008
    September 2012Taseko Mines Limited
    TSX, NYSE MKT
    Secretary
    July 2008
    Present


Bruce Jenkins  Senior Vice President, Corporate Development

Bruce Jenkins is an environmental and government relations
executive with more than 40 years of experience in project and corporate
management. He supports the Pebble Partnership and helps guide environmental
studies, mitigation planning and permitting activities. Mr. Jenkins is also
Executive Vice President of Environment and Sustainability for Hunter Dickinson
Inc.

Stephen Hodgson  Vice President, Engineering

Stephen Hodgson is a professional engineer with over 35 years
of experience in mine operations, mine development and project engineering. He
is also Executive Vice President of Engineering for Hunter Dickinson Inc.

Mr. Hodgson is, or was within the past five years, an officer
of the following public companies:

Company
    Name of Market
    Positions Held
    From
    ToRathdowney Resources Ltd.
    TSX-V
    Director
    December 2011
August 2014


Sean Magee  Vice President, Public Affairs

Sean Magee is a former journalist and speech writer with more
than 20 years of natural resource industry communications experience. Mr. Magee
has had a working relationship with Hunter Dickinson Inc. for more than 15 years
and is currently HDI's Executive Vice President of Strategic Communications and
Public Affairs.

Doug Allen  Vice President, Corporate Communications

Doug Allen is an asset management industry specialist with more
than 30 years of experience on both the sell-side and the buy-side of the
investment industry. His experience includes extensive investment work in the
mining industry. Mr. Allen serves as the primary liaison between the
broker-dealer and asset management industries and the Company.

|B. | COMPENSATION
|-- | ------------

Named Executive Officers

In this section Named Executive Officer (or "NEO") means each
of the following individuals:

| | the Chief Executive Officer ("CEO");                                                                                                                                                                                                                                                                                                                 
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                      
| | the Chief Financial Officer ("CFO");                                                                                                                                                                                                                                                                                                                 
|  |                                                                                                                                                                                                                                                                                                                                                      
| | each of the three most highly compensated executive
      officers, or the three most highly compensated individuals acting in a
      similar capacity, other than the CEO and CFO, at the end of the most
      recently completed financial year whose total compensation was,
      individually, more than $150,000 for that financial year; and

---

|-44 -
|-----
|     

| | each individual who would be an NEO under
      paragraph (c) but for the fact that the individual was neither an
      executive officer of the company, nor acting in a similar capacity, at
      December 31, 2014.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following disclosure sets out the compensation that the
Board intended to pay, make payable, award, grant, give or otherwise provide to
each NEO and director for the financial year ended December 31, 2014.

The compensation paid to the NEOs during the Companys three
most recently completed financial years ended December 31 is as set out below
and expressed in Canadian dollars unless otherwise noted:

Name and principal
      position
    Year
    Salary
      ($)
    Option-
      based awards ($)
    Non-equity
      incentive plan compensation ($)
    Pension
      value ($)
    All other
      compens- ation ($)
    Total
    compens- ation ($)Annual
      incentive plans ($)
    Long-term
    incentive plans ($)Ronald Thiessen(2)(3)President & CEO
    2014 2013 2012
    500,500 460,500 371,750
    427,200(4)Nil
      Nil
    Nil Nil Nil
    Nil Nil Nil
    Nil Nil Nil
    Nil Nil Nil
    927,700 460,500 371,750Marchand Snyman(2)(3)CFO
    2014 2013 2012
    240,500 198,000 186,750
    427,200(4)Nil
      Nil
    Nil Nil Nil
    Nil Nil Nil
    Nil Nil Nil
    Nil Nil Nil
    667,700 198,000 186,750Thomas C. Collier PLP CEO
    2014 2013
      2012
    568,408(1)Nil Nil
    352,500(5)Nil Nil
    Nil Nil Nil
    Nil Nil Nil
    Nil Nil Nil
    17,231(10)Nil Nil
    938,140 Nil
      NilPeter Robertson(8)PLP Senior VP Corporate Affairs
    2014 2013
      2012
    458,409(1)Nil Nil
    58,750(5)Nil Nil
    Nil Nil Nil
    Nil Nil Nil
    Nil Nil Nil
    17,231(10)Nil Nil
    534,390 Nil
      NilSean Magee(9)VP
      Public Affairs
    2014 2013
      2012
    272,748 192,989
      162,989
    167,000(4)(6)Nil 119,000
    Nil Nil Nil
    Nil Nil Nil
    Nil Nil Nil
    Nil Nil Nil
    439,748 192,989
      281,988


Notes:

|1. | Salaries except for Messrs. Collier and Robertson are
      paid in Canadian dollars. An annual average exchange rate of Cdn$1.00 =
      US$0.9053 has been applied for the period of January 1, 2014 to December
      31, 2014 for figures reported for Messrs. Collier and Robertson                                                                                                                                                                                                                                                                            
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|2. | Salary for Messrs. Thiessen, Snyman and Magee is paid
      through HDSI. The compensation amount shown is the amount paid by HDSI
      directly to Messrs. Thiessen, Snyman and Magee based on the estimated
      amount of time spent providing services to the Company, including the
      Pebble Partnership.                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|3. | Messrs. Thiessen and Snyman do not serve the Company
      solely on a full time basis, and their salary from the Company is
      allocated based on the estimated amount of time spent providing services
      to the Company. For 2014, Mr. Thiessen spent 78% (2013-78%, 2012-41%), and
      Mr. Snyman spent 54% (2013-54%, 2012-38%) of their estimated amount of
      time on providing services to the Company.                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4. | The options were granted in February 2014 pursuant to the
      Corporations share option plan. For compensation purposes, the
      Black-Scholes option valuation model has been used to determine the fair
      value on the date of grant using the following assumptions: expected life
      of 5 years, expected volatility of 65.79%, expected dividend yield of 0%,
      and risk-free interest rate of 1.62%. The Black-Scholes grant date fair
      value for these awards was Cdn$0.89 per option which was 50% of the option
      exercise price. 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|5. | The options were granted in April 2014 pursuant to the
      Corporations share option plan. For compensation purposes, the
      Black-Scholes option valuation model has been used to determine the fair
      value on the date of grant using the following assumptions: expected life
      of 5 years, expected volatility of 67.44%, expected dividend yield of 0%,
      and risk- free interest rate of 1.64%. The Black-Scholes grant date fair
      value for these awards was Cdn$0.47 per option which was 53% of the option
      exercise price.   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|6. | The options were granted in September 2014 pursuant to
      the Corporations share option plan. For compensation purposes, the
      Black-Scholes option valuation model has been used to determine the fair
      value on the date of grant using the following assumptions: expected life
      of 5 years, expected volatility of 67.42%, expected dividend yield of 0%,
      and risk-free interest rate of 1.69%. The Black-Scholes grant date fair
      value for these awards was Cdn$0.39 per option which was 54% of the option
      exercise price.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|7. | Mr. Collier was appointed to the position of CEO of the
      Pebble Limited Partnership on February 1, 2014. Mr. Collier is employed
      and paid through a subsidiary of the Company.                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|8. | Mr. Robertson holds the position of Senior Vice President
      of Corporate Affairs of the Pebble Limited Partnership. Mr. Robertson is
      employed and paid through a subsidiary of the Company.                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|9. | Mr. Magee does not serve the Company solely on a
      full-time basis, and his salary from the Company is allocated based on the
      estimated amount of time (93%) (2013-80%, 2012-63%) spent providing
      services to the Company and the Pebble Partnership. In 2014, 100% of the
      total base salary shown for Mr. Magee was paid for by the Company. In 2013
      and 2012 the total base salary shown was paid as follows: a) by the
      Company (2013-54%, 2012-66%) and b) by the Pebble Partnership (2013-46%,
      2012-34%).               

---

|-45 -
|-----
|     

|10. | A subsidiary of the Company has a 401(k) retirement
      savings plan for U.S. employees whereby employees are able to contribute a
      portion of their pay and receive a dollar for dollar Company match up to
      6% of their pay, subject to IRS limitations.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Incentive Plan Awards

Outstanding Share-based Awards and Option-based Awards

The Company currently only has an option-based awards plan and
does not have any share based awards plan. The following table sets out the
option-based awards outstanding as at December 31, 2014, for each NEO:

Option-based AwardsName
    Number ofsecuritiesunderlyingunexercised options(#)
    Option
      exerciseprice($)
    Option
      expirationdatem  d  y
    Value ofunexercised in-the-money options(1)($)Ronald Thiessen President and
      CEO
    480,000
    1.77
    Feb-26-2019(2)
    NilMarchand Snyman CFO
    480,000
    1.77
    Feb-26-2019(2)
    NilThomas C. Collier CEO PLP
    750,000
    0.89
    Apr-16-2019(2)
    NilPeter Robertson Senior VP
      Corporate Affairs
    125,000
    0.89
    Apr-16-2019(2)
    NilSean Magee VP Public Affairs
    200,000 100,000
      100,000
    0.72 1.77
      3.00
    Sep-15-2019(2)Feb-26-2019(2)Jun-29-2017
    Nil Nil Nil


Notes:

|1. | The value is the difference between the closing price of
      $1.40 per Common Share on the TSX at December 31, 2014 and the exercise
      price of options.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                               
|2. | Options were granted during the year ended December 31,
      2014.                                                                                           

During the most recently completed financial year, the Company
awarded an aggregate of 5,874,600 options. The following is a summary of the
options awarded during the most recently completed financial year:

|1. | On February 26, 2014, the Company granted 4,494,600
      options with an exercise price of $1.77 per Common Share to directors,
      employees (including HDSI employees who are seconded to the Company) and
      consultants of the Company. Of the options granted, an aggregate of
      3,050,000 options were awarded to directors and officers of the Company.
      The options have either a three or five year term and vest in two equal
      tranches: one half vested on date of grant, the remaining half will vest
      in 12 months from the grant date.                                                                                                                                                                                                      
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|2. | On April 16, 2014 the Company granted 1,125,000 options
      with an exercise price of $0.89 per Common Share and a five year term to
      employees of the Pebble Partnership, which is now a wholly owned
      subsidiary of the Company. Of the options granted, 1,000,000 options vest
      in three equal tranches: one third vested on date of grant, one third vest
      in 12 months from the date of the grant and the remaining one third vests
      24 months following the date of the grant. The remaining 125,000 options
      vest in five equal tranches: one fifth vested on date of grant, one fifth
      vest on February 1, 2015, one fifth vest on February 1, 2016, one fifth
      vest on February 1, 2017, and one fifth vest on February 1,
2018.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3. | On April 24, 2014 the Company granted 55,500 options with
      an exercise price of $0.89 per Common Share and a three year term to
      employees of the Pebble Partnership. The options vest in three equal
      tranches: one third vested on date of grant, one third vests 12 months
      from the grant date and one third vests 24 months following the grant
      date.                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4. | On September 15, 2014, the Company granted 200,000
      options with an exercise price of $0.72 per Common Share to an officer of
      the Company. The options have a five year term and vest in three equal
      tranches: one third vested on date of grant, one third vests 12 months
      from the grant date and one third vests 24 months following the grant
      date.                                                                                                                                                                                                                                                                                                                                                                                               

---

|-46 -
|-----
|     

Incentive Plan Awards  Value Vested or Earned During the
Year

The following table sets out all incentive plans (value vested
or earned) during the year ended December 31, 2014, for each NEO:

Name
    Option-based awards  Value vested during the
      year(1) ($)
    Non-equity
      incentive plan compensation  Value earned during the year
    ($)Ronald Thiessen President and
      CEO
    Nil
    NilMarchand Snyman CFO
    Nil
    NilThomas C. Collier CEO PLP
    Nil
    NilPeter Robertson Senior VP
      Corporate Affairs
    Nil
    NilSean Magee VP Public Affairs
    Nil
    Nil


Note:

|1. | Represents the aggregate dollar value that would have
      been realized if options under the option-based award had been exercised
      on the 2014 vesting date determined by taking the difference between the
      market price of the shares subject to the option at date of vesting and
      the exercise price of the option.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Compensation

Philosophy and Objectives

The main objective of director compensation is to attract and
retain directors with the relevant skills, knowledge and abilities to carry out
the Boards mandate.

Director Compensation Table

The compensation provided to the directors, excluding a
director who is included in disclosure for an NEO, for the Companys most
recently completed financial year of December 31, 2014 is:

Name
    Fees
      earned ($)
    Share
      option- based awards ($)(4)
    Non-equity incentive plan
      compensatio n ($)
    Pension
      value ($)
    All
      other compensation ($)
    Total
    ($)Scott Cousens(2)
    40,500
    186,900
    Nil
    Nil
    Nil
    227,400Robert Dickinson(2)
    165,000
    427,200
    Nil
    Nil
    Nil
    592,200Gordon Fretwell(1)
    44,000
    133,500
    Nil
    Nil
    Nil
    177,500Russell Hallbauer(2)
    40,500
    186,900
    Nil
    Nil
    Nil
    227,400Wayne Kirk(1)(3)
    84,500
    240,300
    Nil
    Nil
    Nil
    324,800Peter Mitchell(1)
    49,200
    133,500
    Nil
    Nil
    Nil
    182,700Ken Pickering
    40,500
    133,500
    Nil
    Nil
    Nil
    174,000Stephen Scott(5)
    Nil
    Nil
    Nil
    Nil
    Nil
Nil


Notes:

|1. | Messrs. Fretwell, Kirk, Mitchell and Pickering provided
      services independently of HDSI. Each director of the Company who provided
      service independently of HDSI, and who is not an executive officer, was
      paid an annual directors fee of: a) $40,500 Base Fee; b) $8,700 for
      Chairman of the Audit and Risk Committee; and c) $3,500 for the Chairman
      of the Compensation Committee and the Chairman of the NG
  Committee.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2. | Fees for Messrs. Cousens, Dickinson and Hallbauer are
      paid through HDSI. The fee amounts shown are the amounts paid by HDSI
      directly to Messrs. Cousens, Dickinson and Hallbauer based on the
      estimated time spent on the Companys activities. For 2014, Mr. Cousens
      spent 12%, Mr. Dickinson spent 48% and Mr. Hallbauer spent 6% of their
      estimated amount of time on providing services to the
  Company.               

---

|-47 -
|-----
|     

|3. | Mr. Kirk is sole member and Chairman of the Pebble
      Partnership Oversight Committee which is authorized to oversee the
      Companys interest in the Pebble Partnership. The Pebble Partnership
      Oversight Committee Chairman received an annual fee of $40,500.                                                                                                                                                                                                                                                                                       
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4. | The options were granted in February 2014 pursuant to the
      Corporations share option plan. For compensation purposes, the
      Black-Scholes option valuation model has been used to determine the fair
      value on the date of grant using the following assumptions: expected life
      of 5 years, expected volatility of 65.79%, expected dividend yield of 0%,
      and risk-free interest rate of 1.62%. The Black-Scholes grant date fair
      value for these awards was Cdn$0.89 per option which was 50% of the option
      exercise price.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|5. | Mr. Scott resigned from the Board on February 20,
      2014.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

Outstanding Share-based Awards and Option-based
Awards

The following table sets out all option-based awards
outstanding as at December 31, 2014 (as mentioned previously the Company does
not have a share-based awards plan) for each director, excluding a director who
is already set out in disclosure for an NEO for the Company:

Option-based AwardsName
    Number of
      securities underlying unexercised options
      (#)
    Option
      exercise price ($)
    Option
      expiration date m  d  y
    Value of
      unexercised in- the-money options(1)
      ($)Scott Cousens
    210,000
    1.77
    Feb-26-2019(3)
    NilRobert Dickinson
    480,000
    1.77
    Feb-26-2019(3)
    NilGordon Fretwell
    150,000
    1.77
    Feb-26-2019(3)
    NilRussell Hallbauer
    210,000
    1.77
    Feb-26-2019(3)
    NilWayne Kirk
    270,000
    1.77
    Feb-26-2019(3)
    NilPeter Mitchell
    150,000
    1.77
    Feb-26-2019(3)
    NilKen Pickering
    150,000
    1.77
    Feb-26-2019(3)
    NilStephen Scott (2)
    Nil
    Nil
    Nil
    Nil


Notes:

|1. | The value is the difference between the closing price of
      $1.40 per Common Share on the TSX at December 31, 2014 and the exercise
      price of options.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                               
|2. | Mr. Scott resigned from the Board on February 20,
      2014.                                                                                                 
|   |                                                                                                                                                               
|3. | Options were granted during the year ended December 31,
      2014.                                                                                           

Incentive Plan Awards  Value Vested or Earned During the
Year

The following table sets out all incentive plans (value vested
or earned) during the year ended December 31, 2014, for each director, excluding
a director who is already set out in disclosure for an NEO for the Company:

Name
    Option-based awards  Value vested during the year(1) ($)
    Non-equity
      incentive plan compensation  Value earned during the year
    ($)Scott Cousens
    Nil
    NilRobert Dickinson
    Nil
    NilGordon Fretwell
    Nil
    NilRussell Hallbauer
    Nil
    NilWayne Kirk
    Nil
    NilPeter Mitchell
    Nil
    NilKen Pickering
    Nil
    NilStephen Scott (2)
    Nil
Nil


Notes:

|1. | Represents the aggregate dollar value that would have
      been realized if options under the option-based award had been exercised
      on the vesting date, determined by taking the difference between the
      market price of the shares subject to the share option at date of vesting
      and the exercise price of the share option.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                  
|2. | Mr. Scott resigned from the Board on February 20,
      2014.                                                                                                                                                                                                                                                                                    

---

|-48 -
|-----
|     

COMPENSATION ACTIONS, DECISIONS OR POLICIES MADE AFTER
DECEMBER 31, 2014

Given the evolving nature of the Corporations business, the
Board continues to review and redesign the overall compensation plan for senior
management so as to continue to address the objectives identified above.

CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS

No director or officer of Northern Dynasty is, as of the date
of this Annual Report, or has been within the ten years before the date of this
Annual Report, a director or officer of any company that while that person was
acting in that capacity, was the subject of a cease trade order, penalties,
sanctions or bankruptcy, during the time the individual was a director or within
a one year period thereafter, or was a director or officer of a company during
the time in which an event occurred which led to a cease trade order, penalties,
sanctions or bankruptcy subsequent to the individual ceasing to act as a
director or officer. This information has been provided by each director or
officer, as the Company is unable to verify these statements independently.

As publicly disclosed at www.sedar.com in September,
2012, Great Basin Gold Ltd. ("GBG"), a company for which Mr. Thiessen was at the
time a director, and for which Mr. Wayne Kirk was at that time a former
director, having resigned as a director in January 2012, filed for creditor
protection under the Companies Creditors Arrangement Act ("CCAA") in Canada,
and as well, GBGs principal South African subsidiary Southgold Exploration
(Pty) Ltd. ("Southgold"), filed for protection under the South African Companies
Act business rescue procedures. These companies continued to be subject to the
insolvency proceedings at the time that Mr. Thiessen resigned.

Pine Valley Mining Corporation became subject to an order under
CCAA in October 2006 during the year following Mr. Fretwells resignation as a
director of that company.

On August 22, 2014, as publicly disclosed at
www.sedar.com, Lignol Energy Corporation, a company for which Mr.
Fretwell is a director, was placed into receivership.

|C. | BOARD PRACTICES
|-- | ---------------

All of the Company's directors were elected at the annual
general meeting of shareholders held on June 19, 2014. All directors have a term
of office expiring at the next annual general meeting of the Company's
shareholders. All officers have a term of office lasting until their removal or
replacement by the board of directors (the "Board").

Except as disclosed above in Item 6.B, there were no
arrangements, standard or otherwise, pursuant to which directors were
compensated by Northern Dynasty or its subsidiaries for their services in their
capacity as directors, or for committee participation, involvement in special
assignments or for services as consultants or experts during the most recently
completed financial year.

Mandate of the Board of Directors

The Board has a formal mandate as outlined in the Corporate
Governance Policies and Procedures Manual (the "Manual"), dated December 1,
2014. The Manual mandates the Board to: (i) assume responsibility for the
overall stewardship and development of the Company and monitoring of its
business decisions, (ii) identify the principal risks and opportunities of the
Companys business and ensure the implementation of appropriate systems to
manage these risks, (iii) oversee ethical management and succession planning,
including appointing, training and monitoring of senior management and
directors, and (iv) oversee the integrity of the Companys internal financial
controls and management information systems. The Manual also includes written
charters for each committee and it contains a code of ethics, policies dealing
with issuance of news releases and disclosure documents, as well as share
trading black-out periods. Further, in the Manual the Board encourages but does
not require continuing education for all the Companys directors. A copy of the
Manual is available for review on the Companys website under Corporate
Governance at www.northerndynastyminerals.com.

---

|-49 -
|-----
|     

Composition of the Board of Directors

Applicable governance policies require that a listed issuers
board of directors determine the status of each director as independent or not,
based on each directors interest in or other relationship with, the Company.
Applicable governance policies recommend that a board of directors be
constituted with a majority of directors who qualify as independent directors
(as defined below). A board of directors should also examine its size with a
view to determining the impact of the number of directors upon the effectiveness
of the board of directors, and the board of directors should implement a system
which enables an individual director to engage an outside advisor at the expense
of the corporation in appropriate circumstances. The Companys policies allow
for retention of independent advisors for members of the board of directors when
they consider it advisable.

Under the policies, an "independent" director is one who "has
no direct or indirect material relationship" with the Company. Generally
speaking, a director is independent if he or she is free from any employment,
business or other relationship which could, or could reasonably be expected to
materially interfere with the exercise of the directors independent judgment. A
material relationship includes having been (or having a family member who has
been) within the last three years an employee or executive of the Company or
employed by the Companys external auditor. An individual who (or whose family
member) is or has been within the last three years, an executive officer of an
entity where any of the Companys executive officers served at the same time on
that entitys Compensation Committee is deemed to have a material relationship
as is any individual who (or whose family members or partners) received directly
or indirectly, any consulting, advisory, accounting or legal fee or investment
banking compensation from the Company (other than compensation for acting as a
director or as a part time chairman or vice-chairman).

The Board has nine (9) directors, four (4) of whom can be
considered "independent" directors. The "independent" directors are Peter
Mitchell, Wayne Kirk, Gordon Fretwell and Ken Pickering. These directors are
considered independent by virtue of not being executive officers of the Company
and having received no compensation other than in their role as directors. The
non-independent directors (and the reasons for that status) are: Scott Cousens
(provides capital finance and investor communications services), Robert
Dickinson (Chairman of the Board and geological consultant for the Company),
Russell Hallbauer (provides engineering services), Marchand Snyman (Chief
Financial Officer), and Ronald Thiessen (President and Chief Executive
Officer).

All directors other than Mr. Pickering and Mr. Kirk serve
together on boards of directors of other publicly traded companies associated
with Hunter Dickinson Inc. ("HDI"), a private company. Messrs. Cousens,
Dickinson, Hallbauer, Snyman and Thiessen are directors of HDI. As described in
Item 7 below, HDI is the parent company of HDSI, which provides geological,
corporate development, administrative and management services to, and incurs
third party costs on behalf of, the Company. HDSI employs members of the
executive management of some of these public companies (of which the Company is
one) and in turn invoices those companies for their share of these services,
pursuant to annually set rates.

The Boards Nominating and Governance Committee (the "NG
Committee") formalizes the process of ensuring high caliber directors and proper
director succession planning. The NG Committee considered and recommended
re-election of the current Board. The NG Committee currently consists of Wayne
Kirk (Chair), Gordon Fretwell, and Ken Pickering, all of whom are independent
(discussed above). The Board monitors the activities of the senior management
through regular meetings and discussions amongst the Board and between the Board
and senior management. The Board is of the view that its communication policy
between senior management, members of the Board and shareholders is good.
Meetings of independent directors are not held on a regular scheduled basis but
communications among this group occurs on an ongoing basis and as needs arise
from regularly scheduled meetings of the Board or otherwise. The number of these
meetings has not been recorded but it would be less than five in the financial
year that commenced on January 1, 2014. The Board also encourages independent
directors to bring up and discuss any issues or concerns and the Board is
advised of and addresses any such issues or concerns raised thereby. The Board
has appointed Gordon Fretwell as Lead Director, and as such, Mr. Fretwells
mandate includes ensuring that the Board carries out its responsibilities
effectively and independent from management.

The Board believes that adequate structures and processes are
in place to facilitate the functioning of the Board with a sufficient level of
independence from the Companys management. The Board is satisfied with the
integrity of the Companys internal control and financial management information
systems.

Committees of the Board of Directors

Applicable regulatory governance policies require that (i) the
Boards Audit and Risk Committee be composed only of independent directors, and
the role of the Audit and Risk Committee be specifically defined and include the
responsibility for overseeing managements system of internal controls, (ii) the
Audit and Risk Committee have direct access to the Companys external auditor,
(iii) other committees of the Board be composed of at least a majority of independent
directors (iv) the Board expressly assume responsibility, or assign to a
committee of directors responsibility, for the development of the Companys
approach to governance issues, and (v) the Board appoint a committee, composed
of a majority of independent directors, with the responsibility for proposing
new nominees to the Board and for assessing directors on an ongoing basis. The
Audit and Risk Committee currently consists of Gordon Fretwell, Wayne Kirk and
Peter Mitchell.

---

|-50 -
|-----
|     

As well as an Audit and Risk Committee, the Board also has a
Compensation Committee, a Nominating and Governance Committee and a Pebble
Partnership Oversight Committee. For information concerning the Audit and Risk
Committee please see the Company's website at
www.northerndynastyminerals.com.

Compensation Committee

The Boards Compensation Committee currently consists of Gordon
Fretwell (Chair), Ken Pickering and Peter Mitchell.

The Compensation Committee recommends compensation for the
directors and executive officers of the Company. See further disclosure under
the heading, Statement of Executive Compensation. The Compensation Committee
charter is included in the Manual and is available for viewing at or can be
downloaded from the Companys website under Corporate Governance, at
www.northerndynastyminerals.com.

The function of the Compensation Committee includes review, on
an annual basis, of the compensation paid to the Companys executive officers
and directors, review of the performance of the Companys executive officers and
making recommendations on compensation to the Board.

The Compensation Committee administers the Companys share
option plan and periodically considers the grant of share options. Share options
have been granted to the executive officers and directors and certain other
service providers, taking into account competitive compensation factors and the
belief that share options help align the interests of executive officers,
directors and service providers with the interests of shareholders.

Nominating and Governance Committee ("NG Committee")

The Boards NG Committee currently consists of Wayne Kirk,
(Chair), Gordon Fretwell, and Ken Pickering. The charter for the NG Committee is
included in the Manual and is available for viewing at or can be downloaded from
the Companys website under Corporate Governance, at
www.northerndynastyminerals.com.

The NG Committee has been given the responsibility of
developing and recommending to the Board the Companys approach to corporate
governance and of assisting members of the Board in carrying out their duties.
The NG Committee also reviews with the Board the rules and policies applicable
to governance of the Company to assure that the Company remains in full
compliance with proper governance practices.

The nominating function of the NG Committee is to evaluate and
recommend to the Board the size of the Board and persons as nominees for the
position of director of the Company. The Company has formal procedures for
assessing the effectiveness of Board committees as well as the Board as a whole.
This function is carried out annually under the direction of the NG Committee
and those assessments are then provided to the Board.

Pebble Partnership Oversight Committee

The Board has a Pebble Partnership Oversight Committee, the
sole member of which is currently Wayne Kirk. This committees function is to
oversee the operations of the Pebble Limited Partnership on behalf of the
Board.

Board of Directors Decisions

Good governance policies require the Board of a listed
corporation, together with its chief executive officer, to develop position
descriptions for the Board and for the chief executive officer, including the
definition of limits to managements responsibilities. Any responsibility which
is not delegated to senior management or to a Board committee remains with the
full Board. The Board has approved written position descriptions for the
Chairman of the Board and the Chairmen of the Board Committees.

---

|-51 -
|-----
|     

Recruitment of New Directors and Assessment of Board of
Directors Performance

Good governance policies require that (i) the board of
directors of every listed corporation implement a process for assessing the
effectiveness of the Board and its committees, and the contribution of
individual directors, (ii) every corporation provide an orientation and
education program for new directors, and (iii) every board of directors review
the adequacy and form of compensation of directors and ensure that the
compensation realistically reflects the responsibilities and risks involved in
being an effective director.

Please see the discussion concerning the Nominating and
Governance Committee above under the heading, Committees of the Board of
Directors.

The following table sets forth the record of attendance of
Board, Audit and Risk, Compensation and NG Committee meetings by Directors for
the 12 month period ended December 31, 2014:

Director
    Board of
      Directors Meetings
    Audit and
      Risk Committee Meetings
    NG
      Committee Meetings
    Compensation Committee MeetingsScott D. Cousens
    3 of 3Robert A. Dickinson
    3 of 3Gordon Fretwell (1)
    3 of 3
    4 of 4
    2 of 2
    N/AWayne Kirk (2)
    3 of 3
    4 of 4
    2 of 2
    N/ARussell Hallbauer
    3 of 3Ken Pickering
    3 of 3
    
    2 of 2Marchand Snyman
    3 of 3Ronald W. Thiessen
    3 of 3Peter C. Mitchell (3)
    3 of 3
    4 of 4
    
    N/AStephen Scott (4)
    N/A


Notes:

|1. | Current Compensation Committee Chairman.                     
|-- | -------------------------------------------------------------
|   |                                                              
|2. | Current NG Committee Chairman.                               
|   |                                                              
|3. | Current Audit and Risk Committee Chairman.                   
|   |                                                              
|4. | Mr. Scott resigned from the Board on February 20,
      2014.

Orientation and Continuing Education

The Company has traditionally retained experienced mining
people as directors and hence the orientation needed is minimized. When new
directors are appointed, they generally are acquainted with the Companys
mineral project(s) and the expectations of directors, or they would receive
orientation commensurate with their previous experience on the Companys
properties, business, technology and industry and the responsibilities of
directors. Board meetings generally include presentations by the Companys
senior management and project staff in order to give the directors full insight
into the Companys operations.

To enable each director to better perform his or her duties and
to recognize and deal appropriately with issues that arise, the Company will
provide the directors with appropriate education programs and/or suggestions to
undertake continuing director education, the cost of which will be borne by the
Company.

Ethical Business Conduct

The Board has a formal ethics policy which is contained in the
Manual and which is available for download from the Companys website under
Corporate Governance at www.northendynastyminerals.com. In addition, the
Board has implemented an annual procedure whereby directors and officers sign
off on and ratify that they have read and understand the Companys code of
ethics and that they are unaware of any violations thereof. The Board has found
that the fiduciary duties placed on individual directors by the Companys
governing corporate legislation and the common law and the restrictions placed
by applicable corporate legislation on an individual directors participation in
decisions of the Board in which the director has an interest have been
sufficient to ensure that the Board operates independently of management and in
the best interests of the Company.

---

|-52 -
|-----
|     

Nomination of Directors

The Board considers its size each year when it considers the
number of directors to recommend to the shareholders for election at the annual
meeting of shareholders, taking into account the number required to carry out
the Boards duties effectively and to maintain a diversity of views and
experience. The NG Committee recommended to the Board the nine directors as
nominees for election in 2014. See the description of the NG Committee above
under the heading, Committees of the Board of Directors.

Assessments

The Board monitors the adequacy of information given to
directors, communication between the Board and management and the strategic
direction and processes of the Board and its committees. The NG Committee
oversees an annual formal assessment of the Board and its three main committees
namely the Audit and Risk Committee, Compensation Committee and NG Committee.
The Board is satisfied with the overall project and corporate achievements of
the Company and believes this reflects well on the Board and its practices.

Audit Committee

Audit and Risk Committee ("Audit Committee") Charter

The Audit Committee has adopted a charter that sets out its
mandate and responsibilities. A copy of the Audit and Risk Committee Charter,
which is included as part of the Companys Governance Policies and Procedures
Manual, is available for download from the Companys website at
www.northerndynastyminerals.com.

Composition of the Audit Committee

The Audit Committee currently consists of Peter Mitchell
(Chair), Wayne Kirk, and Gordon Fretwell. Mr. Mitchell is the Chairman of the
Audit Committee. The Committee reviews all financial statements of the Company
prior to their publication, reviews audits performed, considers the adequacy of
audit procedures, recommends the appointment of independent auditors, reviews
and approves the professional services to be rendered by them and reviews fees
for audit services. The Audit Committee Charter has set criteria for membership
which all members of the Audit Committee are required to meet consistent with
National Instrument 52-110 and other applicable regulatory requirements. The
Audit Committee, as needed, meets separately (without management present) with
the Companys auditors to discuss the various aspects of the Companys financial
statements and the independent audit.

Each Audit Committee member is an independent director and is
financially literate. Both Mr. Kirk and Mr. Fretwell are experienced securities
lawyers. Mr. Mitchell, the Audit Committee Chairman is a Chartered Accountant
and is a financial expert.

Relevant Education and Experience

As a result of their education and experience, each member of
the Audit Committee has familiarity with, an understanding of, or experience
in:

| | the accounting principles used by the Company to prepare
      its financial statements, and the ability to assess the general
      application of those principles in connection with estimates, accruals and
      reserves;                                                                 
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | reviewing or evaluating financial statements that present
      a breadth and level of complexity of accounting issues that are generally
      comparable to the breadth and complexity of issues that can reasonably be
      expected to be raised by the Company's financial statements, and
| | an understanding of internal controls and
      procedures for financial reporting.                                                                                                                                                                                                             

See disclosure regarding biographical information in Item 6.

Reliance on Certain Exemptions Available in NI 52-110

The Companys auditor, Deloitte LLP, has not provided any
material non-audit services during the most recently completed fiscal year.

---

|-53 -
|-----
|     

Pre-Approval Policies and Procedures

The Company has procedures for the review and pre-approval of
any services performed by its auditor. The procedures require that all proposed
engagements of its auditor for audit and non-audit services be submitted to the
Audit Committee for approval prior to the beginning of any such services. The
Audit Committee considers such requests and, if acceptable to a majority of the
Audit Committee members, pre-approves such audit and non-audit services by a
resolution authorizing management to engage the Companys auditor for such audit
and non-audit services, with set maximum dollar amounts for each itemized
service. During such deliberations, the Audit Committee assesses, among other
factors, whether the services requested would be considered "prohibited
services" as contemplated by the regulations of the US Securities and Exchange
Commission, and whether the services requested and the fees related to such
services could impair the independence of the auditors.

Principal Accountant Fees and Services

The Audit Committee has reviewed the nature and amount of the
audit and non-audit services provided by Deloitte LLP to the Company to ensure
auditor independence. Disclosure of fees incurred with Deloitte LLP for audit
and non-audit services in the last two fiscal years are outlined in Item 16.C.

From time to time, management of the Company recommends to and
requests approval from the audit committee for audit and non-audit services to
be provided by the Company's auditors. The audit committee routinely considers
such requests at committee meetings, and if acceptable to a majority of the
audit committee members, pre-approves such audit and non-audit services by a
resolution authorizing management to engage the Company's auditors for such
non-audit services, with set maximum dollar amounts for each itemized service.
During such deliberations, the audit committee assesses, among other factors,
whether the non-audit services requested would be considered "prohibited
services" as contemplated by the US Securities and Exchange Commission, and
whether the non-audit services requested and the fees related to such services
could impair the independence of the auditors.

Code of Ethics

The Company has adopted a code of ethics that applies to all
directors, officers and employees of the Company. A copy of the Code of Ethics,
which is included as part of the Companys Governance Policies and Procedures
Manual, is available for download from the Companys website at
www.northerndynastyminerals.com and under the Companys profile on SEDAR
at www.sedar.com.

Potential Conflicts of Interest

Directors of Northern Dynasty also serve as directors of other
similar companies involved in natural resource development. Accordingly, it may
occur that properties will be offered to such other companies. Furthermore,
those other companies may participate in the same properties as those in which
Northern Dynasty has an interest. As a result there may be situations which
involve a potential conflict of interest or issues in connection with the
doctrine of "corporate opportunity". In that event, a financially interested
director would not be entitled to vote at meetings of directors in respect of a
transaction involving the Company if it evokes any such conflict. The directors
will attempt to avoid dealing with such other companies in situations where
conflicts or corporate opportunity issues might arise and will at all times use
their best efforts to act in the best interests of Northern Dynasty.

|D. | EMPLOYEES
|-- | ---------

At December 31, 2014, the Company and its subsidiaries had 13
full time employees. Employees of HDSI are seconded to Northern Dynasty on an
as-needed and as-requested basis (seeItem 7 - Major Shareholders and Related
Party Transactions).

|E. | SHARE OWNERSHIP
|-- | ---------------

Security Holdings of Directors and Senior Management

As at May 11, 2015, the directors and officers of Northern
Dynasty, and their respective affiliates, directly and indirectly, own or
control as a group an aggregate of 7,463,561 common shares (7.11%), or
12,123,561 (11.05%) on a diluted basis.

---

|-54 -
|-----
|     

As at May 11, 2015, the Company's directors and senior
management beneficially owned the following number of the Company's common
shares:

Name of Insider
    Number of common Shares
      Beneficially Owned or Controlled(1)
    As a % of the outstanding
    common sharesScott D. Cousens
    6,000
    0.01%Robert A. Dickinson (2)
    4,070,083
    3.88%Gordon J. Fretwell
    Nil
    -Russell E. Hallbauer
    106,600
    0.10%Wayne Kirk
    130,000
    0.12%Peter Mitchell
    Nil (3)
    -Ken Pickering
    116,000
    0.11%Marchand Snyman
    120,000 (4)
    0.11%Ronald W. Thiessen
    2,578,878
    2.63%Trevor Thomas
    10,000
    0.01%Bruce Jenkins
    10,000
    0.01%Stephen Hodgson
    136,000
    0.13%Sean Magee
    Nil
    -Doug Allen
    Nil
    -Thomas C. Collier
    Nil
    -Peter Robertson
    Nil
-


Notes:

|(1) | The information as to the number of Common Shares
      beneficially owned or controlled is not within the knowledge of management
      of the Company and has been furnished by the respective nominees as filed
      on SEDI.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                  
|(2) | Certain of these common shares are beneficially owned
      through a private company controlled by Mr. Dickinson, and a Registered
      Retirement Saving Plan (RRSP) owned by Mr. Dickinson.                                  
|    |                                                                                                                                                                                                                                  
|(3) | Mr. Mitchell has 60,000 Special Warrants that will
      convert into common shares on a one for one basis.                                                                                                                      
|    |                                                                                                                                                                                                                                  
|(4) | Certain of these common shares are beneficially owned
      through a Registered Retirement Saving Plan and a Tax Free Savings Account
      owned by Mr. Snyman.                                                                

---

|-55 -
|-----
|     

As at May 11, 2015, the Company's directors and senior
management beneficially held the following number of share purchase options
(options). All share purchase options relate to the Company's common
shares:

Name of Insider
    Number of options
    Exercise price
    Expiry dateScott D. Cousens
    210,000
    $1.77
    Feb-26,2019Robert A. Dickinson
    480,000
    $1.77
    Feb-26,2019Gordon J. Fretwell
    150,000
    $1.77
    Feb-26,2019Russell E. Hallbauer
    210,000
    $1.77
    Feb-26,2019Wayne Kirk
    270,000
    $1.77
    Feb-26,2019Peter Mitchell
    150,000
    $1.77
    Feb-26,2019Ken Pickering
    150,000
    $1.77
    Feb-26,2019Marchand Snyman
    480,000
    $1.77
    Feb-26,2019Ronald W. Thiessen
    480,000
    $1.77
    Feb-26,2019Trevor Thomas
    75,000 70,000
    $3.00 $1.77
    Jun-29-2017
      Feb-26,2019Bruce Jenkins
    100,000 100,000
    $3.00 $1.77
    Jun-29-2017
      Feb-26,2019Stephen Hodgson
    100,000 100,000
    $3.00 $1.77
    Jun-29-2017
      Feb-26,2019Sean Magee
    100,000 100,000
      200,000
    $3.00 $1.77
      $0.72
    Jun-29-2017
      Feb-26,2019 Sep-15-2019Doug Allen
    100,000 100,000
    $3.00 $1.77
    Jun-29-2017
      Feb-26,2019Thomas C. Collier
    750,000
    $0.89
    Apr-16-2019Peter Robertson
    125,000
    $0.89
    Apr-16-2019


Share Option Plan

In order to provide incentive to directors, officers,
employees, management and others who provide services to the Company to act in
the best interests of the Company the Company has adopted a Share Option Plan
(the Plan). At May 11, 2015, 7,567,200 options were outstanding pursuant to
the Plan, described below, and an aggregate of 2,934,645 common shares remained
available for issuance pursuant to the Plan. A description of the Plan is
provided below.

Under the Plan, options may be granted in an amount up to 10%
of the outstanding shares. As outstanding share options are exercised,
additional share options may be granted to replace the exercised options. In
addition, as the number of issued and outstanding Common Shares of the Company
increases, the number of share options available for granting to eligible
optionees will increase. As at the date hereof there are share options
outstanding to purchase an aggregate of 7,567,200 Common Shares representing
approximately 7% of Common Shares outstanding.

The following is a summary of the material terms of the
Plan:

|(a) | Persons who are directors, officers, employees, or
      consultants to the Company or its affiliates, or who are employees of a
      management company providing services to the Company are eligible to
      receive grants of options under the Plan.                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(b) | Options may be granted only to an individual or to a
      company that is owned by individuals eligible for an option grant. If the
      option is granted to a company, the company must undertake that it will
      not permit any transfer of its shares, nor issue further shares, to any
      other individual or entity as long as the incentive stock option remains
      in effect without the consent of the TSX.                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(c) | All options granted under the Plan may be exercisable
      only by the Optionee to whom they have been granted and the options are
      non-assignable and non-transferable, except that in the case of the death
      of an Optionee, any vested option held by the deceased Optionee at the
      date of death will become exercisable by the Optionees lawful personal
      representatives, heirs or executors until the earlier of (1) one year
      after the date of death of such Optionee and (2) the date of expiration of
      the term otherwise applicable to such Option.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(d) | Vesting of options is determined by the Board and subject
      to the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| |  | where an Optionee has left the Companys employ/office or
      has been advised his or her services are no longer required or his or her
      service contract has expired, subject to other provisions set out in the
      Plan, vested options expire on the earlier of the expiry date of the
      option or 90 days after the date the Optionee ceases to be employed by,
      provide services to, or be a director or officer of, the Company, and all
      unvested options immediately terminate without right to exercise same;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|-56 -
|-----
|     

| |  | in the case of the death of an Optionee, any vested
      Option held at the date of death will become exercisable by the Optionees
      lawful personal representatives, heirs or executors until the earlier of
      one year after the date of death of such Optionee and the date of
      expiration of the term otherwise applicable to such Option;                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | in the case of an Optionee being dismissed from
      employment or service for cause, such Optionees options, whether or not
      vested at the date of dismissal, immediately terminate without right to
      exercise same;                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | in the event of a change of control occurring, options
      granted to directors and officers which are subject to vesting provisions
      are deemed to have immediately vested upon the occurrence of the change of
      control; and                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | in the event of a director not being nominated for
      re-election as a director of the Company, although consenting to act and
      being under no legal incapacity which would prevent the director from
      being a member of the Board, options granted which are subject to a
      vesting provision are deemed to have vested on the date of Meeting upon
      which the director is not re-elected;

|(e) | All options granted under the Plan are exercisable for a
      period of up to 5 years and will vest at the discretion of the Board,
      provided that the term of such options may be extended in circumstances
      where the expiry date otherwise falls during a black-out period (defined
      below) as determined in accordance with the Companys policies or
      applicable securities legislation, and subject
to:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (i)  | the Optionee remaining employed by or continuing to
      provide services to the Company or any of its subsidiaries and affiliates
      as well as, at the discretion of the Board, achieving certain milestones
      which may be defined by the Board from time to time or receiving a
      satisfactory performance review by the Company or its subsidiary or
      affiliate during the vesting period; or
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (ii) | remaining as a director of the Company or any of its
      subsidiaries or affiliates during the vesting
period.                                                                                                                                                                                                                                                                                                   

A blackout period is any period of
time during which a participant in the Plan is unable to trade securities of the
Company as a consequence of the implementation of a general restriction on
trading by an authorized Officer or Director pursuant to the Companys
governance policies that authorize general and/or specific restrictions on
trading by service providers in circumstances where there may exist undisclosed
material changes or undisclosed material facts in connection with the Companys
affairs. The term of an option will expire on its Expiry Date as defined in the
Plan unless the Expiry Date occurs during a blackout period or within five
business days after the expiry of the blackout period, in which case the Expiry
Date for that Option will be the date that is the tenth business day after the
date the blackout period expires.

|(f) | The exercise price of the option is established by the
      Board at the time the option is granted, provided that the minimum
      exercise price shall not be less than the weighted average trading price
      of the Companys shares on the TSX for the five trading days preceding the
      date of the grant.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                         
|(g) | The number of common shares that may be issuable to
      directors who are independent directors of the Company, when combined with
      all of the Companys other share compensation arrangements currently in
      effect for their benefit, may not exceed 1% of the Companys outstanding
      common shares.  
|    |                                                                                                                                                                                                                                                                                                                         
|(h) | Subject to the policies of the TSX, the Plan may be
      amended by the Board without further shareholder approval
  to:                                                                                                                                                                                               

| | (i)   | make amendments which are of a typographical, grammatical
      or clerical nature;                                                                                                                                       
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                           
| | (ii)  | change the vesting provisions of an option granted under
      the Plan;                                                                                                                                                  
| |       |                                                                                                                                                                                                                           
| | (iii) | change the termination provision of an option granted
      under the Plan, if it does not entail an extension beyond the original
      expiry date of such option;                                                      
| |       |                                                                                                                                                                                                                           
| | (iv)  | add a cashless exercise feature payable in cash or Common
      Shares;                                                                                                                                                   
| |       |                                                                                                                                                                                                                           
| | (v)   | make amendments necessary as a result in changes in
      securities laws applicable to the Company;                                                                                                                      
| |       |                                                                                                                                                                                                                           
| | (vi)  | make such amendments as may be required by the policies
      of such senior stock exchange or stock market if the Company becomes
      listed or quoted on a stock exchange or stock market senior to the TSX;
      and
| |       |                                                                                                                                                                                                                           
| | (vii) | make such amendments as reduce, and do not increase, the
      benefits of the Plan to Optionees.                                                                                                                         

|(i) | The Plan has the following additional
  restrictions:
|--- | -----------------------------------------------------

---

|-57 -
|-----
|     

| | (i)   | Common Shares to be issued to Insiders under the Plan,
      when combined with all of the Companys other share compensation
      arrangements, may not exceed 10% of the outstanding Common Shares in any
      12 month period;                                              
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                  
| | (ii)  | Common Shares being issuable to independent directors
      under the Plan, when combined with all of the Companys other share
      compensation arrangements, may not exceed 1% of the outstanding Common
      Shares of the Company from time to time; and                  
| |       |                                                                                                                                                                                                                                                                                  
| | (iii) | a reduction in the exercise price of an option granted
      hereunder to an Insider or an extension of the term of an option granted
      hereunder benefiting an Insider, would require the approval of the
      disinterested shareholders (defined below) of the
  Company.

Disinterested Shareholder approval shall be required in respect
of:

| | a. | any amendment which reduces the Exercise Price of an
      Option;                                          
| | -- | ------------------------------------------------------------------------------------------------------------
| |    |                                                                                                             
| | b. | any amendment to extend the term of an option granted to
      an Insider;                                  
| |    |                                                                                                             
| | c. | amendments to increase any of the limits on the number of
      Options that may be granted;                
| |    |                                                                                                             
| | d. | any amendment that may permit an increase to the proposed
      limit on independent director participation;
| |    |                                                                                                             
| | e. | any amendment relating to the transferability or
      assignability of an Option; and                      
| |    |                                                                                                             
| | f. | any amendments required to be approved by shareholders
      under applicable law.                          

The Plan provides for the granting of Options that meet the
definition of Incentive Stock Options under the United States Internal Revenue
Code. The Plan provides that, subject to adjustment for general changes to the
Common Shares, the total number of Common Shares which may be issued pursuant to
such Incentive Stock Options is limited to 5,000,000 Common Shares.

Definitions:

A "disinterested shareholder" means a shareholder that is not
an Insider eligible to receive options under the Plan, and who is not an
Associate of an Insider.

An "Insider" is a director or an officer of the Company, a
director or an officer of a company that is itself an Insider or a subsidiary of
an Insider, or a person that has beneficial ownership of and/or control or
direction, either directly or indirectly, over, securities of the Company
carrying more than 10% of the voting rights attached to all the Companys
outstanding voting securities.

The following table sets out equity compensation plan
information as at the end of the financial year ended December 31, 2014.

Equity Compensation Plan Information

Number of shares to
      be issued upon exercise of outstanding share
      options, warrants and rights (1)
    Weighted-average
      exercise price of outstanding share options,
      warrants and rights
    Number of securities
      remaining available for future issuance under
      equity compensation plans (excluding securities
    reflected in column (a))Plan Category
    (a)
    (b)
    (c)Equity compensation
      plan        approved by
      security holders        (the
      Share Option Plan)
    7,687,000
    $1.95
    1,813,986Equity compensation plans
      not        approved by
      security holders
    
    
    Total
    7,687,000
    $1.95
1,813,986


Notes:

|1. | The Company has only share options issued and
      outstanding. No warrants or rights have been issued by the Company under
      the plan.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------

---

|-58 -
|-----
|     

|ITEM 7 | MAJOR SHAREHOLDERS AND RELATED PARTY
      TRANSACTIONS
|------ | -------------------------------------------------------

|A. | MAJOR SHAREHOLDERS
|-- | ------------------

Major Shareholders

Northern Dynasty is a publicly-held corporation, with its
shares held by residents of Canada, the United States of America and other
countries. To the best of Northern Dynasty's knowledge, other than as noted
below, no person, corporation or other entity beneficially owns, directly or
indirectly, or controls more than 5% of the common shares of Northern Dynasty,
the only class of securities with voting rights. For these purposes, "beneficial
ownership" means the sole or shared power to vote or direct the voting or to
dispose or direct the disposition of any security.

Name
    Number of common Shares
      Beneficially Owned or Controlled
    As a % of the outstanding
    common shares1Kopernik Global Investors, LLC2
    6,519,135
    6.21%Mackenzie Financial Corporation
    6,757,300
    6.43%Stirling Global Value Fund Inc.3
    12,900,000
12.28%


Notes:

|1. | Based on shares outstanding as of March 25, 2015. See
      below.                                                                                                                                                                                  
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                     
|2. | Kopernik Global Investors holds 18,714,146 special
      warrants issued pursuant to the financing discussed under Item10  C.
      Material Contractswhich can be converted into common shares on a
      one-for-one basis at no additional cost.
|   |                                                                                                                                                                                                                                                     
|3. | Stirling Global Value Fund holds 7,180,000 special
      warrants issued pursuant to the financing discussed under Item10  C.
      Material Contractswhich can be converted into common shares on a
      one-for-one basis at no additional cost.

As at May 11, 2015, Northern Dynasty had authorized unlimited
common shares without par value, of which 105,018,453 were issued and
outstanding. Northern Dynasty has 25,954,146 special warrants outstanding which
are exercisable on a one-for one basis into common shares at no additional cost
to the holder.

All of the common shares have the same voting rights.

Geographic Breakdown of Shareholders

As of May 11, 2015, Northern Dynasty's register of shareholders
indicates that Northern Dynasty's common shares are held as follows:

Location
    Number of
      registered shareholders of record
    Number of
      shares
    Percentage
    of total sharesCanada
    87
    99,126,939
    94.4%United States
    179
    5,607,143
    5.3%Other
    25
    284,371
    0.3%TOTALS
    291
    105,018,453
100.0%


Shares registered in intermediaries were assumed to be held by
residents of the same country in which the clearing house was located.

Northern Dynasty's securities are recorded on the books of its
transfer agent, Computershare Investor Services Inc., located at 510 Burrard
Street, Vancouver, Canada (604) 661-9400 in registered form. However, the
majority of such shares are registered in the name of intermediaries such as
brokerage houses and clearing houses (on behalf of their respective brokerage
clients). Northern Dynasty does not have knowledge or access to the identities
of the beneficial owners of such shares registered through intermediaries.

Control

Northern Dynasty is not directly or indirectly owned or
controlled by any other corporation, by any foreign government or by any other
natural or legal person, severally or jointly, other than as noted above under
Major Shareholders. There are no arrangements known to Northern Dynasty which,
at a subsequent date, may result in a change in control of Northern Dynasty.

---

|-59 -
|-----
|     

Insider Reports under the Securities Acts of British
Columbia and Alberta and Ontario

Since the Company is a reporting issuer under the Securities
Acts of British Columbia and Alberta and Ontario, under National Instrument
55-104  Insider Reporting Requirements and Exemptions, as adopted by the CSA ,
certain "insiders" of the Company (including its directors, certain executive
officers, and persons who directly or indirectly beneficially own, control or
direct more than 10% of its common shares) are generally required to file
insider reports of changes in their ownership of Northern Dynasty's common
shares within five days following the trade. Copies of such reports are
available for public inspection at the offices of the British Columbia
Securities Commission, 9th Floor, 701 West Georgia Street, Vancouver, British
Columbia V7Y 1L2, (604) 899-6500 or at the British Columbia Securities
Commission web site, www.bcsc.bc.ca. In British Columbia, all insider
reports must be filed electronically within five days following the date of the
trade at www.sedi.ca. The public is able to access these reports at
www.sedi.ca.

|B. | RELATED PARTY TRANSACTIONS
|-- | --------------------------

Except as disclosed below, Northern Dynasty has not, since
April 1, 2012, and does not at this time propose to:

|(1) | enter into any transactions which are material to
      Northern Dynasty or a related party or any transactions unusual in their
      nature or conditions involving goods, services or tangible or intangible
      assets to which Northern Dynasty or any of its former subsidiaries was a
      party;
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                            
|(2) | make any loans or guarantees directly or through any of
      its former subsidiaries to or for the benefit of any of the following
      persons:                                                                                                                                                         

| | (a) | enterprises directly or indirectly through one or more
      intermediaries, controlling or controlled by or under common control with
      Northern Dynasty;                                                                                                                                        
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                       
| | (b) | associates of Northern Dynasty (unconsolidated
      enterprises in which Northern Dynasty has significant influence or which
      has significant influence over Northern Dynasty) including shareholders
      beneficially owning 10% or more of the outstanding shares of Northern
      Dynasty;
| |     |                                                                                                                                                                                                                                                                                                       
| | (c) | individuals owning, directly or indirectly, shares of
      Northern Dynasty that gives them significant influence over Northern
      Dynasty and close members of such individuals families;                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                       
| | (d) | key management personnel (persons having authority in
      responsibility for planning, directing and controlling the activities of
      Northern Dynasty including directors and senior management and close
      members of such directors and senior management); or                            
| |     |                                                                                                                                                                                                                                                                                                       
| | (e) | enterprises in which a substantial voting interest is
      owned, directly or indirectly, by any person described in (c) or (d) or
      over which such a person is able to exercise significant
  influence.                                                                                       

Hunter Dickinson Services Inc. ("HDSI")

Hunter Dickinson Inc. ("HDI") and its wholly owned subsidiary,
HDSI, are private companies established by a group of mining professionals
engaged in advancing and developing mineral properties for a number of private
and publicly-listed exploration companies, one of which is the Company.

A number of the current directors of the Company, namely Scott
Cousens, Robert Dickinson, Russell Hallbauer, Marchand Snyman and Ron Thiessen
are active members of the HDI Board of Directors. Other key management personnel
of the Company  Doug Allen, Stephen Hodgson, Bruce Jenkins, Sean Magee and
Trevor Thomas  are members of HDIs senior management team.

The business purpose of the related party relationship

HDSI provides technical, geological, corporate communications,
regulatory compliance, administrative and management services to the Company, on
an as-needed and as-requested basis from the Company.

HDSI also incurs third party costs on behalf of the Company.
Such third party costs include, for example, directors and officers insurance,
travel, conferences, and technology services.

As a result of this relationship with HDSI, the Company has
ready access to a range of diverse and specialized expertise on a regular basis,
without having to engage or hire full-time experts. The Company benefits from
the economies of scale created by HDSI.

The measurement basis used

The Company procures services from HDSI pursuant to an
agreement (the "Services Agreement") dated July 2, 2010 whereby HDSI agreed to
provide technical, geological, corporate communications, administrative and management services to the Company. A copy
of the Services Agreement is publicly available under the Companys profile at
www.sedar.com.

---

|-60 -
|-----
|     

Services from HDSI are provided on a non-exclusive basis as
required and as requested by the Company. The Company is not obligated to
acquire any minimum amount of services from HDSI. The fees for services is
determined based on an agreed upon charge-out rate for each employee performing
the service and the time spent by the employee. The charge-out rate also
includes overhead costs such as office rent, information technology services and
administrative support. Such charge-out rates are agreed and set annually in
advance.

Third party expenses are billed at cost, without any markup.

Ongoing contractual or other commitments resulting from the
related party relationship

There are no ongoing contractual or other commitments resulting
from the Companys transactions with HDSI, other than the payment for services
already rendered and billed. The agreement may be terminated upon 60 days
notice from either the Company or HDSI.

Transactions
    
    2014
    
    
    2013Services rendered by HDSITechnical
    $
    1,745
    
    $
    1,241Engineering
    
    540
    
    
    612Environmental
    
    686
    
    
    383Socioeconomic
    
    277
    
    
    85Other technical services
    
    242
    
    
    161General and administrative
    
    3,181
    
    
    2,940Management, financial
      & administration
    
    2,542
    
    
    2,245Shareholder communication
    
    639
    
    
    695Services rendered by HDSI
    $
    4,926
    
    $
    4,181Reimbursement of third party expenses
    
    779
    
    
    828Conferences and travel
    
    196
    
    
    234Insurance
    
    71
    
    
    57Office supplies and other
    
    512
    
    
    537Total paid by the Company
    $
    5,705
    
    $
    5,009


Key Management Personnel

The required disclosure for the remuneration of the Companys
key management personnel is provided in note 8(a) of the notes to the Financial
Statements which accompany this Annual Report and which are available under the
Companys profile at www.sedar.com.

|C. | INTERESTS OF EXPERTS AND
COUNSEL
|-- | --------------------------------

J. David Gaunt, P.Geo., James Lang, P.Geo., Eric Titley,
P.Geo., of Hunter Dickinson Services Inc., and Ting Lu, P.Eng., Tetra Tech are
persons:

(a)      who are named as in a report
described in a filing, or referred to in a filing, made under National
Instrument 51-102 by the Company during, or relating to, the Companys most
recently completed financial year; and

(b)      whose profession or business
gives authority to the report made by each of them.

Messrs. Gaunt, Lang and Titley hold interests in the common
shares of the Company, directly or indirectly, or through share purchase
options, representing less than 1% of the Company's outstanding share capital.
Ms. Lu holds no interest in the Company.

---

|-61 -
|-----
|     

|ITEM 8 | FINANCIAL INFORMATION
|------ | ---------------------

|A1. | FINANCIAL STATEMENTS AND OTHER FINANCIAL
      INFORMATION
|--- | ----------------------------------------------------------

Item 18 of this Form 20-F contains Northern Dynasty's audited
annual financial statements as at and for the years ended December 31, 2014,
2013 and 2012. These financial statements have been prepared in accordance with
IFRS, as issued by the IASB.

|A2. | DIVIDEND POLICY
|--- | ---------------

The Company has not paid any dividends on its outstanding
common shares since its incorporation and does not anticipate that it will do so
in the foreseeable future. All funds of Northern Dynasty are being retained for
exploration of its projects.

|A3. | LEGAL PROCEEDINGS                                                         
|--- | --------------------------------------------------------------------------
|    |                                                                           
|(i) | Environmental Protection Agency and Bristol
      Bay Watershed Assessment

In February 2011, the EPA announced it would undertake a
Bristol Bay Watershed Assessment study focusing on the potential effects of
large-scale mine development in Bristol Bay and, specifically the Nushagak and
Kvichak area drainages. This process was ostensibly initiated in response to
calls from persons and groups opposing the Pebble Project for the EPA to
pre-emptively use its asserted authority under Section 404(c) of the US Clean
Water Act to prohibit discharges of dredged or fill material in waters of the US
within these drainages; however, evidence exists that EPA may have been
considering a Section 404(c) veto of the Pebble Project at least as far back as
2008  two years before it received a petition from several Alaska Native
tribes.

The EPAs first draft Bristol Bay Watershed Assessment ("BBWA")
report was released on May 18, 2012. In the Companys opinion after review with
its consultants, the draft report is a fundamentally flawed document. By the
EPAs own admission, it evaluated the effects of a "hypothetical project" that
has neither been defined nor proposed by the Pebble Partnership, and for which
key environmental mitigation strategies have not yet been developed and, hence
would not yet be known. It is believed by the Company that the assessment was
rushed because it is based on studies conducted over only one year in an area of
20,000 square miles. In comparison, the Pebble Project has studied the
ecological and social environment surrounding Pebble for nearly a decade. The
EPA also failed to adequately consider the comprehensive and detailed data that
the Pebble Partnership provided as part of its 27,000-page Environmental
Baseline Document.

The EPA called for public comment on the quality and
sufficiency of scientific information presented in the draft BBWA report. In
response, the Pebble Partnership and Northern Dynasty made submissions on the
draft report. Northern Dynasty made a presentation highlighting these
shortcomings at public hearings held in Seattle, Washington, on May 31, 2012 and
in Anchorage, Alaska, on August 7, 2012. In July 2012, the Company also
submitted a 635-page critique of the draft report in response to the EPAs call
for public comment, and has called upon the EPA to cease such unwarranted
actions until such time as a definitive proposal for the development of the
Pebble deposit is submitted into the rigorous National Environmental Policy Act
("NEPA") permitting process.

Concerns about the reasonableness of the basis of risk
assessment in the draft EPA report were stated by many of the independent
experts on the peer review panel assembled to review the BBWA, as summarized in
a report entitled "External Peer Review of EPA's Draft Document: An Assessment
of Potential Mining Impacts on Salmon Ecosystems of Bristol Bay, Alaska"
released in November 2012. In a wide-ranging critique of the draft report's
methodology and findings, many peer review panelists called the EPA's effort to
evaluate the effects of a "hypothetical mining scenario" on the water, fish,
wildlife and cultural resources of Southwest Alaska "inadequate", "premature",
"unreasonable", suspect" and "misleading".

On April 26, 2013, the EPA released a revised draft of the BBWA
report and announced another public comment and Peer Review period. The Pebble
Partnership and Northern Dynasty made submissions on the revised draft. In late
May 2013, Northern Dynasty filed a 205-page submission which describes the same
major shortcomings as the original report published in May 2012.

In mid-January 2014, the EPA released the final version of its
BBWA. The report still reflects many of the same fundamental shortcomings as
previous drafts.

On February 28, 2014, the EPA announced the initiation of a
regulatory process under Section 404(c) of the Clean Water Act to consider
restriction or a prohibition on mining activities associated with the Pebble
deposit in order to protect aquatic resources in southwest Alaska. In late April
2014, the Pebble Partnership submitted a comprehensive response to the EPAs
February 28, 2014 notification letter.

---

|-62 -
|-----
|     

In late May 2014, the Pebble Partnership filed suit in the U.S.
District Court for Alaska and sought an injunction to halt the regulatory
process initiated by the EPA under the Clean Water Act, asserting that, in the
absence of a permit application, the process exceeds the federal agencys
statutory authority and violates the Alaska Statehood Act among other federal
laws. The State of Alaska and Alaska Peninsula Corporation, an Alaska Native
village corporation with extensive land holdings in the Pebble Project area,
later joined in the Pebble Partnerships lawsuit against the EPA as
co-plaintiffs. On September 26, 2014, U.S. federal court in Alaska granted EPAs
motion to dismiss the case. This ruling did not judge the merits of the
statutory authority case, it only deferred that hearing and judgment until after
a final Section 404(c) determination has been made by the EPA. If or when the
EPA action is deemed "final", the Pebble Partnership will pursue the underlying
case. The Company has also appealed the decision to grant the motion to dismiss
to the 9th Circuit Court of Appeals. The 9th Circuit Court of Appeals has agreed
to an expedited hearing of the Pebble Partnerships appeal.

On July 18, 2014, EPA Region 10 announced a Proposed
Determination to restrict the discharge of dredged or fill material associated
with mining the Pebble deposit in a 268 square mile area should that disposal
result in any of the following: loss of five or more miles of streams with
documented salmon occurrence; loss of 19 or more miles of streams where salmon
are not documented but that are tributaries of streams with documented salmon
occurrence; the loss of 1,100 or more acres of wetlands, lakes, and ponds that
connect with streams with documented salmon occurrence or tributaries of those
streams; and stream flow alterations greater than 20 percent of daily flow in
nine or more linear miles of streams with documented salmon occurrence. Northern
Dynasty management does not accept that EPA has the statutory authority to
impose conditions on development at Pebble, or any development project anywhere
in Alaska or the US, prior to the submission of a detailed development plan and
its thorough review by federal and state agencies including development of an
Environmental Impact Statement ("EIS") and review under NEPA.

On September 19, 2014, the Pebble Partnership submitted a
comprehensive legal and technical response to EPA Region 10s Proposed
Determination. Northern Dynasty and the Pebble Partnership believe the Proposed
Determination is unsupported by the administrative record as established by the
Bristol Bay Watershed Assessment, and is therefore arbitrary and capricious.

On September 3, 2014, the Pebble Partnership initiated a second
action against EPA in federal district court in Alaska charging that EPA
violated the Federal Advisory Committee Act ("FACA ") due to its close
interactions with, and the undue influence of Environmental Non-Governmental
Organizations ("ENGOs") and anti-mining activists in developing the Bristol Bay
Watershed Assessment, and with respect to its unprecedented pre-emptive 404c
regulatory process under the Clean Water Act. On September 24, 2014, the U.S.
federal court judge in Alaska released an order recognizing that EPA agreed not
to take the next step to advance its 404c regulatory process with respect to
southwest Alaskas Pebble Project until at least January 2, 2015.

On November 24, 2014, the U.S. federal court judge in Alaska
granted the Pebble Partnerships request for a Preliminary Injunction ("PI") in
relation to the FACA case. While the PI does not resolve the Pebble
Partnerships claims that EPA actions with respect to the Bristol Bay Watershed
Assessment and subsequent 404c regulatory process violated FACA, the decision
permits the further discovery process of the underlying facts to enable the
court to issue a final decision on the merits of the FACA case. Northern Dynasty
expects it will take several months for the case to run its course.

The Pebble Partnership will now have an opportunity for
extensive depositions and discovery into alleged EPA misconduct. That the
Preliminary Injunction was granted also reflects the US federal court judges
view that the claimant has a likelihood of success on the merits. Should
Pebble Partnership prevail in its FACA litigation against the EPA, the federal
agency may be unable to rely upon the Bristol Bay Watershed Assessment as part
of the administrative record for any regulatory action at the Pebble Project.

Northern Dynasty has submitted numerous letters to the
independent Office of the EPA Inspector General ("IG") since January 2014
raising concerns of bias, process irregularities and undue influence by
environmental organizations in the EPA's preparation of the Bristol Bay
Watershed Assessment. In response to Congressional and other requests, on May 2,
2014, the IGs office announced that it would investigate the EPAs conduct in
preparing An Assessment of Potential Mining Impacts on Salmon Ecosystems of
Bristol Bay, Alaska. A team of IG investigators is now in place and a full
investigation is underway "to determine whether the EPA adhered to laws,
regulations, policies and procedures in developing its assessment of potential
mining impacts in Bristol Bay, Alaska." The Pebble Partnership is advancing a
multi-dimensional strategy to address the EPAs pre-emptive regulatory process
under Section 404(c) of the Clean Water Act, and is working to position the
Pebble Project to initiate federal and state permitting under NEPA unencumbered
by any extraordinary development restrictions imposed by the EPA. This strategy
includes three discrete pieces of litigation against the EPA as set below:

| | challenging the EPAs statutory authority to
      pre-emptively impose development restrictions at the Pebble Project under
      Section 404(c) of the Clean Water Act prior to the Pebble Partnership
      submitting a proposed development plan for the project or the development
      of an EIS under NEPA;
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|-63 -
|-----
|     

| | alleging that the EPA violated FACA in the course of
      undertaking the Bristol Bay Watershed Assessment and subsequent Section
      404(c) of the Clean Water Act regulatory process; and
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                               
| | alleging that the EPA is unlawfully withholding relevant
      documentation and other information sought by the Pebble Partnership under
      the Freedom of Information Act ("FOIA").      

The Pebble Partnerships strategy to address the EPAs Section
404(c) of the Clean Water Act regulatory process also includes undertaking
research, including technical and legal investigations, to facilitate various
investigations of EPA actions with respect to the Pebble Project, including one
by the EPA Inspector General.

On March 24, 2015, it was announced that former Defense
Secretary William S. Cohen and his firm, The Cohen Group, assisted by law firm
DLA Piper, had been retained by the Pebble Partnership to conduct an independent
review of whether the EPA acted fairly in connection with its evaluation of
potential mining in the Bristol Bay, Alaska watershed. Secretary Cohen will
evaluate the fairness of EPA's actions and decisions in this matter based upon a
thorough assessment of the facts and relying on his experience as Secretary of
Defense as well as his 24 years as a member of the US House of Representatives
and Senate. He will have full discretion as to the means and manner of carrying
out this review to ensure that it is thorough and unbiased.

While the litigation process is inherently uncertain, and it is
difficult to predict with confidence the length of time that each of the legal
initiatives described above will take to advance to specific milestone events or
final conclusion, Northern Dynasty expects the following to occur in 2015:

| | the 9th Circuit Court of Appeals is expected to fully
      hear and issue a decision in 2015 on the Pebble Partnerships appeal of a
      lower courts decision that its statutory authority case is not ripe and
      cannot be heard until such time as the EPA has taken final regulatory
      action under Section 404(c) of the Clean Water Act. If the Pebble
      Partnership prevails, the case will be returned to federal court in Alaska
      for a final determination on its merits; if the EPA prevails, the
      statutory authority case will be heard at a later date should the federal
      agency proceed to issue a final regulatory decision under Section 404(c)
      of the Clean Water Act;
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | a final decision by a federal court judge in
      Alaska on the Pebble Partnerships FACA case is expected in the latter
      half of the year;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | a decision in the Pebble Partnerships FOIA
      litigation against EPA is expected in the latter half of the year; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | the independent Office of the EPA Inspector General is
      expected to complete its investigation and publish a final report on EPA
      actions with respect to the Bristol Bay Watershed Assessment and the EPAs
      subsequent Section 404(c) of the Clean Water Act regulatory process in the
      second or third quarter of 2015.                                                                                                                                                                                                                                                                                                                                                                                  

Northern Dynasty cannot predict the outcome of its various
challenges to what it sees as improper, preemptory attempts by the EPA to
prevent or otherwise restrict mineral development at Pebble. If these challenges
all fail and the EPA continues to oppose the Pebble Project by all legal means,
it may have a material adverse effect on the Company.

|(ii) | Nunamta Aulukestai
|---- | ------------------

In October 2011, a lawsuit filed in July 2009 by the Trustees
for Alaska (an environmental law firm) on behalf of Nunamta Aulukestai  an
organization established and funded to oppose development of the Pebble Project
- was rejected by the Anchorage Superior Court. The lawsuit alleged that the
Alaska Department of Natural Resources had violated the state constitution by
granting exploration and temporary water use permits to the Pebble Partnership,
and exploration activities had caused harm to vegetation, water, fish and
wildlife. The Pebble Partnership actively participated in the trial proceedings
after being granted intervener status. Superior Court Judge Aarseth denied each
of the allegations made by Nunamta Aulukestai, and ruled that no evidence of
environmental harm was presented. The plaintiffs have filed an appeal that is
now pending before the Alaska Supreme Court.

|(iii) | Lake and Peninsula Borough
|----- | --------------------------

In November 2011, by a narrow 280  246 margin, voters in
southwest Alaskas Lake & Peninsula Borough approved a ballot measure
sponsored by anti-Pebble activists that proposed to restrict future development
that affects more than one square mile of land within the 31,000 square mile
borough. The initiative was opposed by a broad spectrum of Alaska interests,
including a group of four Alaska Native village corporations representing seven
Lake & Peninsula Borough communities whose private land holdings would be
affected by the ordinance, the State of Alaska and the Pebble Partnership. It
was also opposed by the Resource Development Council for Alaska, the Alaska
State Chamber of Commerce, the Alaska Miners Association, Council of Alaska
Producers, the Alaska Oil and Gas Association and the Alaska Industry Support
Alliance, among others.

---

|-64 -
|-----
|     

The Pebble Partnership and the State of Alaska filed legal
challenges to the ballot initiative in the Alaska Superior Court, and on March
19, 2014 the court issued a permanent injunction barring the law from going into
effect. The court ruled in favor of the Pebble Partnership, agreeing that the
Alaska constitution and Alaska statutes preempted local governments from
interfering with resource development on State lands. The ballot sponsors have
appealed to the Alaska Supreme Court.

|B. | SIGNIFICANT CHANGES
|-- | -------------------

There have been no significant changes to Northern Dynastys
affairs as disclosed in the accompanying financial statements since December 31,
2014, except as disclosed in this Annual Report on Form 20-F.

|ITEM 9 | THE OFFER AND LISTING
|------ | ---------------------

|A. | OFFER AND LISTING DETAILS
|-- | -------------------------

Trading Markets

Northern Dynasty's common shares have been listed in Canada on
the Toronto Stock Exchange since October 2007, under the symbol NDM, and prior
to that on the TSX Venture Exchange ("TSX-V") since December 1994.

The Company's common shares have been traded in the U.S. on
NYSE MKT (formerly known as the American Stock Exchange "AMEX"), since November
2004, under the symbol NAK.

The following tables set forth for the periods indicated the
price history of the Company's common shares on the TSX and on the NYSE MKT.

Trading under the symbol
      NDM
    Trading under the symbol
    NAKon the TSX
    on the NYSE MKTAverage daily
    
    
    Average dailyFiscal Year Ended
    High
    Low
    trading
    High
    Low
    tradingDecember 31,
    ($)
    ($)
    volume
    (US$)
    (US$)
    volume2014
    1.85
    0.38
    56,803
    1.70
    0.32
    204,5622013
    4.19
    1.07
    75,913
    4.26
    1.00
    271,5102012
    8.13
    2.23
    116,593
    8.19
    2.20
    269,0422011
    21.50
    5.16
    252,154
    21.76
    4.87
    612,2242010
    14.45
    6.50
    113,821
    14.45
    6.00
294,358


Trading under the symbol NDM
    Trading under the symbol
    NAKon the TSX
    on the NYSE MKTAverage daily
    
    
    Average dailyFiscal Quarter
    High
    Low
    trading
    High
    Low
    trading($)
    ($)
    volume
    (US$)
    (US$)
    volumeQ1 2015
    0.83
    0.45
    85,840
    0.72
    0.36
    102,643Q4 2014
    0.65
    0.38
    54,644
    0.59
    0.32
    173,261Q3 2014
    0.95
    0.55
    63,193
    0.89
    0.52
    121,700Q2 2014
    1.13
    0.67
    54,719
    1.01
    0.61
    170,652Q1 2014
    1.85
    0.90
    54,726
    1.70
    0.80
    359,362Q4 2013
    1.98
    1.07
    66,846
    1.93
    1.00
    321,525Q3 2013
    2.84
    1.35
    64,799
    2.73
    1.31
    248,384Q2 2013
    3.28
    1.94
    75,546
    3.17
    1.85
    251,034Q1 2013
    4.19
    2.75
    97,143
    4.26
    2.67
264,668


---

|-65 -
|-----
|     

Trading under the symbol NDM
    Trading under the symbol NAKon the TSX
    on the NYSE MKTAverage daily
    
    
    Average dailyLast six months
    High
    Low
    trading
    High
    Low
    trading($)
    ($)
    volume
    (US$)
    (US$)
    volumeApril 2015
    0.53
    0.44
    21,900
    0.43
    0.36
    69,400March 2015
    0.63
    0.46
    33,100
    0.51
    0.36
    109,900February 2015
    0.83
    0.53
    27,800
    0.72
    0.43
    113,100January 2015
    0.57
    0.45
    194,200
    0.45
    0.38
    92,900December 2014
    0.57
    0.39
    51,900
    0.50
    0.33
    257,400November 2014
    0.52
    0.40
    69,100
    0.47
    0.35
167,100


Northern Dynasty share trading information is also available
through free internet search services (for example, refer to
www.yahoo.com, enter NDM.TO (for TSX) or NAK (for NYSE MKT)).

|B. | PLAN OF DISTRIBUTION
|-- | --------------------

Not applicable.

|C. | MARKETS
|-- | -------

The shares of Northern Dynasty have traded in Canada on the TSX
since October 2007, and prior to that on the TSX-V since December 1994, under
the trading symbol NDM. Northern Dynasty's shares have traded on the NYSE MKT
under the symbol NAK, since November 2004.

|D. | SELLING SHAREHOLDERS
|-- | --------------------

Not applicable.

|E. | DILUTION
|-- | --------

Not applicable.

|F. | EXPENSES OF THE ISSUE
|-- | ---------------------

Not applicable.

|ITEM 10 | ADDITIONAL INFORMATION
|------- | ----------------------

|A. | SHARE CAPITAL
|-- | -------------

Not required in an Annual Report.

|B. | MEMORANDUM AND ARTICLES OF
  ASSOCIATION
|-- | ----------------------------------------

The Company was originally incorporated on May 11, 1983
pursuant to the Company Act of the Province of British Columbia
(predecessor statute to the British Columbia Corporations Act in force since
2004), under the name "Dynasty Resources Inc.". On November 30, 1983 the Company
changed its name to "Northern Dynasty Explorations Ltd." and subsequently, on
October 11, 1997, changed its name to Northern Dynasty Minerals Ltd.

The Companys current Notice of Articles is dated August 15,
2014 and is attached to this Annual report on Form 20-F as Exhibit 19.1. The
Companys Articles dated June 10, 2010, as amended on June 19, 2013, are
attached to this annual report on Form 20-F as Exhibit 19.1.

---

|-66 -
|-----
|     

The following is a summary of certain material provisions of
(i) Northern Dynastys Notice of Articles and Articles, and (ii) certain
provisions of the British Columbia Business Corporations Act (the
Business Corporations Act) applicable to Northern Dynasty:

|1. | Objects and Purposes
|-- | --------------------

Northern Dynasty's Notice of Articles and Articles do not
specify objects or purposes. Northern Dynasty is entitled under the Business
Corporations Act to carry on all lawful businesses which can be carried on
by a natural person.

|2. | Directors
|-- | ---------

Directors power to vote on a proposal, arrangement or
contract in which the director is interested.

According to the Business Corporations Act, a director
holds a disclosable interest in a contract or transaction if:

|1. | the contract or transaction is material to the
      company;                             
|-- | ------------------------------------------------------------------------------------------
|   |                                                                                           
|2. | the company has entered, or proposes to enter, into the
      contract or transaction, and
|   |                                                                                           
|3. | either of the following applies to the
  director:                                        

| | a. | the director has a material interest in the contract or
      transaction;                                                                                      
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                 
| | b. | the director is a director or senior officer of, or has a
      material interest in, a person who has a material interest in the contract
      or transaction.

However, the Business Corporations Act also provides
that in the following circumstances, a director does not hold a disclosable
interest in a contract or transaction if:

| | 1. | the situation that would otherwise constitute a
      disclosable interest arose before the coming into force of the Business
      Corporations Actor, if the company was recognized under the
      Business Corporations Act, before that recognition, and was
      disclosed and approved under, or was not required to be disclosed under,
      the legislation that:
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a. | applied to the company on or after the date on which the
      situation arose; and        
| | -- | -------------------------------------------------------------------------------------------
| |    |                                                                                            
| | b. | is comparable in scope and intent to the provisions of
      the Business Corporations Act;

| | 2. | both the company and the other party to the contract or
      transaction are wholly owned subsidiaries of the same
  corporation;                            
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                               
| | 3. | the company is a wholly owned subsidiary of the other
      party to the contract or transaction;                                                             
| |    |                                                                                                                                                               
| | 4. | the other party to the contract or transaction is a
      wholly owned subsidiary of the company; or                                                          
| |    |                                                                                                                                                               
| | 5. | where the director or senior officer is the sole
      shareholder of the company or of a corporation of which the company is a
      wholly owned subsidiary.

The Business Corporations Act further provides that a
director of a company does not hold a disclosable interest in a contract or
transaction merely because:

| | 1. | the contract or transaction is an arrangement by way of
      security granted by the company for money loaned to, or obligations
      undertaken by, the director or senior officer, or a person in whom the
      director or senior officer has a material interest, for the benefit of the
      company or an affiliate of the company;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                              
| | 2. | the contract or transaction relates to an indemnity or
      insurance;                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                              
| | 3. | the contract or transaction relates to the remuneration
      of the director or senior officer in that person's capacity as director,
      officer, employee or agent of the company or of an affiliate of the
      company;                                                                                                              

---

|-67 -
|-----
|     

| | 4. | the contract or transaction relates to a loan to the
      company, and the director or senior officer, or a person in whom the
      director or senior officer has a material interest, is or is to be a
      guarantor of some or all of the loan; or                           
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                     
| | 5. | the contract or transaction has been or will be made with
      or for the benefit of a corporation that is affiliated with the company
      and the director or senior officer is also a director or senior officer of
      that corporation or an affiliate of that
corporation.

Under Northern Dynastys Articles, a director or senior officer
who holds a disclosable interest (as that term is used in the Business
Corporations Act) in a contract or transaction into which Northern Dynasty
has entered or proposes to enter:

|1. | is liable to account to Northern Dynasty for any profit
      that accrues to the director or senior officer under or as a result of the
      contract or transaction only if and to the extent provided in the
    Act;                                                     
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                               
|2. | is not entitled to vote on any directors resolution to
      approve that contract or transaction, unless all the directors have a
      disclosable interest in that contract or transaction, in which case any or
      all of those directors may vote on such resolution;
|   |                                                                                                                                                                                                                                                                               
|3. | and who is present at the meeting of directors at which
      the contract or transaction is considered for approval may be counted in
      the quorum at the meeting whether or not the director votes on any or all
      of the resolutions considered at the meeting.    

A director or senior officer who holds any office or possesses
any property, right or interest that could result, directly or indirectly, in
the creation of a duty or interest that materially conflicts with that
individuals duty or interest as a director or senior officer, must disclose the
nature and extent of the conflict as required by the Business Corporations
Act. No director or intended director is disqualified by his or her office
from contracting with Northern Dynasty either with regard to the holding of any
office or place of profit the director holds with Northern Dynasty or as vendor,
purchaser or otherwise, and no contract or transaction entered into by or on
behalf of Northern Dynasty in which a director is in any way interested is
liable to be voided for that reason.

Directors' power, in the absence of an independent
quorum, to vote compensation to themselves or any members of their
body.

The compensation of the directors is decided by the directors
unless the board of directors requests approval to the compensation from the
shareholders by ordinary resolution. The Business Corporations Act
provides that a director of a company does not hold a disclosable interest in a
contract or transaction merely because the contract or transaction relates to
the remuneration of the director or senior officer in that person's capacity as
director, officer, employee or agent of Northern Dynasty or of an affiliate of
Northern Dynasty.

Borrowing powers exercisable by the directors.

Under the Articles, the directors may, on behalf of Northern
Dynasty:

|1. | borrow money in such manner and amount, on such security,
      from such sources and upon such terms, and conditions as they consider
      appropriate;                                                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                       
|2. | issue bonds, debentures, and other debt obligations
      either outright or as a security for any liability or obligation of
      Northern Dynasty or any other person and at such discounts or premiums and
      on such other terms as they consider appropriate;
|   |                                                                                                                                                                                                                                                                       
|3. | guarantee the repayment of money by any other person or
      the performance of any obligation of any other person; and                                                                                                                                              
|   |                                                                                                                                                                                                                                                                       
|4. | mortgage, charge, whether by way of specific or floating
      charge, grant a security interest in, or give other security on, the whole
      or any part of the present and future assets and undertaking of Northern
      Dynasty.                               

Retirement and non-retirement of directors under an age
limit requirement.

There are no such provisions applicable to Northern Dynasty
under its Memorandum or its Articles or the Business Corporations Act.

---

|-68 -
|-----
|     

Number of shares required for a directors
qualification.

Directors need not own any shares of Northern Dynasty in order
to qualify as directors.

|3. | Rights, Preferences and Restrictions Attaching to Each
      Class of Shares
|-- | ----------------------------------------------------------------------------

Authorized Capital

The Companys authorized capital consists of an unlimited
number of common shares.

Common Shares

The rights, preferences and restrictions attached to the
Companys common shares are summarized as follows:

Dividends

Subject the provisions of the Business Corporations Act,
the directors may from time to time declare and authorized payments of dividends
out of available assets. Any dividends must be declared and paid according to
the number of shares held. Under the Business Corporations Act, no
dividend may be paid if Northern Dynasty is, or would as a result of payment of
the dividend become, insolvent.

Voting Rights

Each common share is entitled to one vote on matters to which
common shares ordinarily vote including the annual election of directors,
appointment of auditors and approval of corporate changes. Directors are elected
to hold office at each annual meeting and hold office until the ensuing annual
meeting. Directors automatically retire at each annual meeting. There are no
staggered directorships among Northern Dynastys directors. There are no
cumulative voting rights applicable to Northern Dynasty.

Rights to Profits and Liquidation Rights

All common shares of Northern Dynasty participate ratably in
any net profit or loss of Northern Dynasty and participate ratably as to any
distribution of assets in the event of a winding up or other liquidation.

Redemption

The common shares are not subject to any rights of
redemption.

Sinking Fund Provisions

Northern Dynasty has no sinking fund provisions or similar
obligations relating to the common shares.

Shares Fully Paid

All common shares of Northern Dynasty must, under the
Business Corporations Act, be issued as fully paid for cash, property or
services. They are therefore non-assessable and not subject to further calls for
payment.

Pre-emptive Rights

Holders of common shares of Northern Dynasty are not entitled
to any pre-emptive rights which provide a right to any holder to participate in
any further offerings of the Companys equity or other securities.

|4. | Changes to Rights and Restrictions to
  Shares
|-- | ----------------------------------------------

The Articles provide that, subject to the Business
Corporations Act, the Company may, by special resolution:

| |  | create special rights or restrictions for, and attach
      those special rights or restrictions to, the shares of any class or series
      of shares, whether or not any or all of those shares have been issued; or
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                       
| |  | vary or delete any special rights or restrictions
      attached to the shares of any class or series of shares, whether or not
      any or all of those shares have been issued.                                    

---

|-69 -
|-----
|     

Subject to the Business Corporations Act, the Company may by
directors resolution subdivide or consolidate all or any of its unissued, or
fully paid issued, shares and, if applicable, alter its Notice of Articles, and,
if applicable, its Articles.

The Articles provide that the Company may be directors
resolution authorize an alteration of its Notice of Articles in order to change
its name or adopt or change any translation of that name.

The Companys Articles provide that, subject to the Business
Corporations Act, the Company may by ordinary resolution of shareholders (or
a resolution of the directors in the case of §(c) or §(f) below):

|(a) | create one or more classes or series of shares;                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                    
|(b) | increase, reduce or eliminate the maximum number of
      shares that Northern Dynasty is authorized to issue out of any class or
      series of shares or establish a maximum number of shares that Northern
      Dynasty is authorized to issue out of any class or series of shares for
      which no maximum is established;
|    |                                                                                                                                                                                                                                                                                                                                    
|(c) | subdivide or consolidate all or any of its unissued, or
      fully paid issued, shares;                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                    
|(d) | if the Company is authorized to issue shares of a class
      of shares with par value:                                                                                                                                                                                                                                            

| | o | decrease the par value of those shares; or                                                                         
| | - | -------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                    
| | o | if none of the shares of that class of shares
      are allotted or issued, increase the par value of those shares;

|(e) | change all or any of its unissued, or fully paid issued,
      shares with par value into shares without par value or any of its unissued
      shares without par value into shares with par value;
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                     
|(f) | alter the identifying name of any of its shares;
  or                                                                                                                                               
|    |                                                                                                                                                                                                     
|(g) | otherwise alter its shares or authorized share structure
      when required or permitted to do so by the Act where it does not specify a
      special resolution.                                 

The Articles provide that a special resolution is a resolution
of shareholders that is approved by two thirds (66 2/3%) of those votes cast at
a properly constituted meeting of shareholders. An ordinary resolution is a
resolution of shareholders that is approved by a majority of those votes cast at
a properly constituted meeting of shareholders. Quorum pursuant to the Articles
is two shareholders holding at least 33 1/3% of issued shares.

If special rights and restrictions are altered and any right or
special right attached to issued shares is prejudiced or interfered with, then
the consent of the holders of shares of that class or series by a special
separate resolution will be required.

The Business Corporations Act also provides that a
company may reduce its capital if it is authorized to do so by a court order,
or, if the capital is reduced to an amount that is not less than the realizable
value of the company's assets less its liabilities, by a special resolution or
court order.

Generally, there are no significant differences between British
Columbia and United States law with respect to changing the rights of
shareholders as most state corporation statutes require shareholder approval
(usually a majority) for any such changes that affect the rights of
shareholders.

|5. | Meetings of Shareholders
|-- | ------------------------

The Articles provide that the Company must hold its annual
general meeting once in every calendar year (being not more than 15 months from
the last annual general meeting) at such time and place to be determined by the
directors of Northern Dynasty. Shareholders meetings are governed by the
Articles of Northern Dynasty but many important shareholder protections are also
contained in the Canadian provincial securities laws that are applicable to
Northern Dynasty as a reporting issuer in the Canadian provinces of British
Columbia, Alberta, and Ontario (Canadian Securities Laws) and the
British Columbia Corporations Act. The Articles provide that Northern
Dynasty will provide at least 21 days' advance written notice of any meeting of
shareholders and will provide for certain procedural matters and rules of order
with respect to conduct of the meeting. The directors may fix in advance a date,
which is no fewer than 21 days prior to the date of the meeting for the purpose
of determining shareholders entitled to receive notice of and to attend and vote
at a general meeting.

Canadian Securities Law and the British Columbia
Corporations Actsuperimpose requirements that generally provide that
shareholders meetings require not less than a 60 day notice period from initial
public notice and that Northern Dynasty makes a thorough advanced search of
intermediary and brokerage registered shareholdings to facilitate communication
with beneficial shareholders so that meeting proxy and information materials can be sent via the
brokerages to unregistered but beneficial shareholders. The form and content of
information circulars and proxies and like matters are governed by Canadian
Securities Lawsand the British Columbia Corporations Act. This
legislation specifies the disclosure requirements for the proxy materials and
various corporate actions, background information on the nominees for election
for director, executive compensation paid in the previous year and full details
of any unusual matters or related party transactions. Northern Dynasty must hold
an annual shareholders meeting open to all shareholders for personal attendance
or by proxy at each shareholder's determination.

---

|-70 -
|-----
|     

Most state corporation statutes require a public company to
hold an annual meeting for the election of directors and for the consideration
of other appropriate matters. The state statutes also include general provisions
relating to shareholder voting and meetings. Apart from the timing of when an
annual Meeting must be held and the percentage of shareholders required to call
an annual Meeting or an extraordinary meeting, there are generally no material
differences between Canadian and United States law respecting annual meetings
and extraordinary meetings.

|6. | Rights to Own Securities
|-- | ------------------------

There are no limitations under Northern Dynasty's Articles or
in the Business Corporations Act on the right of persons who are not
citizens of Canada to hold or vote common shares.

|7. | Restrictions on Changes in Control, Mergers,
      Acquisitions or Corporate Restructuring of the
  Company
|-- | -----------------------------------------------------------------------------------------------------------

The Companys Articles do not contain any provisions that would
have the effect of delaying, deferring or preventing a change of control of the
Company. The Company has implemented a shareholders' rights plan dated effective
May 17, 2013 which was approved by the Board on May 17, 2013 and ratified by the
Company's shareholders in June 2013. A copy is attached as Exhibit 4.04 hereto.
There are no adopted provisions in the Companys Articles triggered by or
affected by a change in outstanding shares which gives rise to a change in
control.

|8. | Ownership Threshold Requiring Public
    Disclosure
|-- | ---------------------------------------------------

The Articles of Northern Dynasty do not require disclosure of
share ownership. Share ownership of director nominees must be reported annually
in proxy materials sent to Northern Dynasty's shareholders. There are no
requirements under British Columbia corporate law to report ownership of shares
of Northern Dynasty but Canadian Securities Law requires disclosure of trading
by insiders (generally officers, directors and holders of 10% of voting shares)
within 5 days of the trade. In addition, Canadian Securities Laws require
disclosure of acquisition of more than 10% of the issued and outstanding shares
of the Company by press release and filing of an early warning report within 2
business days of the acquisition. Canadian Securities Laws also require that we
disclose in our annual general meeting proxy statement, holders who beneficially
own more than 10% of our issued and outstanding shares, and United States
federal securities laws require the disclosure in our annual report on Form 20-F
of holders who own more than 5% of our issued and outstanding shares.

Most state corporation statutes do not contain provisions
governing the threshold above which shareholder ownership must be disclosed.
United States federal securities laws require a company that is subject to the
reporting requirements of the Securities Exchange Act of 1934 to disclose, in
its annual reports filed with the Securities and Exchange Commission those
shareholders who own more than 5% of a corporations issued and outstanding
shares.

|9. | Differences in Law between the US and British
      Columbia
|-- | ------------------------------------------------------------

Differences in the law between United States and British
Columbia, where applicable, have been explained above within each category.

|10. | Changes in the Capital of the
  Company
|--- | ---------------------------------------

There are no conditions imposed by Northern Dynastys Notice of
Articles or Articles which are more stringent than those required by the
Business Corporations Act.

|C. | MATERIAL CONTRACTS
|-- | ------------------

Northern Dynasty's only material contracts as of May 11, 2015
are:

|1. | Corporate Services Agreement between Northern Dynasty and
      Hunter Dickinson Services Inc. dated July 2, 2010. See Item
    7.B.
|-- | ------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                     
|2. | Special Warrant Certificate dated effective December 31,
      2014;                                                                

---

|-71 -
|-----
|     

|3. | Registration Rights Agreement dated effective December
      31, 2014.
|-- | ----------------------------------------------------------------------

In late December 2014 and early January 2015, the Company
completed a financing to raise proceeds of $15.5 million through the issuance of
35,962,735 special warrants (the Special Warrants) Each special warrant
entitles the holder thereof to receive one common share (Common Share) of the
Company (an Underlying Share) without payment of additional consideration.

The Company agreed with the investors to use reasonable best
efforts to clear resale restrictions that are or may be applicable to the
Underlying Shares by (i) seeking to clear a final Prospectus in Canada
qualifying the distribution of the Underlying Shares for resale in Canada, and
(ii) concurrently filing a U.S. Registration Statement with the SEC to seek to
qualify the resale of such Underlying Shares in the United States. The Company
further agreed to use reasonable best efforts to cause the U.S. Registration
Statement to be declared effective by the SEC by not later than 90 days after
the Closing Date and to cause such U.S. Registration Statement to remain
continuously effective until the Resale Filing Termination Date. The Company
further agreed to use reasonable best efforts to cause the Prospectus to remain
effective and current until the earlier of: (i) 90 days following the issuance
of a receipt for the Prospectus; and (ii) the expiry of the Canadian hold period
on the Special Warrants.

The TSX and the NYSE MKT have conditionally approved the
listing of the Underlying Shares to be issued by the Company under this
Prospectus. Listing is subject to the Company fulfilling all of the requirements
of the TSX and the NYSE MKT.

The Special Warrants were issued pursuant to and are governed
by and subject to the terms and conditions of the Special Warrant Certificates
which are all dated as of December 31, 2014. The Special Warrant Certificates
provide, among other things, that the holders of Special Warrants will be
entitled to receive, upon exercise or deemed exercise of the Special Warrants,
without payment of any additional consideration and subject to adjustment in
certain circumstances, one Underlying Share for each Special Warrant held, at
any time prior to the Expiry.

The Special Warrant Certificates generally provide that for
holders who are not U.S. Persons they will be automatically exercised into
Underlying Shares upon a receipt being issued for the final Prospectus subject
to a limitation for any holder that the number of Underlying Shares when
aggregated with other Common Shares beneficially owned will not exceed 19.99% of
issued Common Shares (only one non-U.S. Person holder is potentially affected by
this limitation). Therefore, on issuance of a final receipt for this Prospectus,
17,123,589 Underlying Shares will be issued on exercise and cancellation of
17,123,589 Special Warrants of the 35,962,735 Special Warrants which were
issued, subject to the 19.99% limitation noted above. A total of 18,839,146
Special Warrants were issued to U.S. Persons and may be exercised until December
31, 2016 and will be subject to the U.S. Registration Statement.

The Company cleared the distribution of the underlying shares
in Canada and the United States on February 24, 2015. A total of 10,008,589
Special Warrants shares have been converted to date.

The Special Warrant Certificates provide that the Special
Warrants do not confer on a holder of Special Warrants any right or interest
whatsoever as a shareholder of the Company, including but not limited to any
right to vote at, to receive notice of, or to attend, any meeting of
shareholders or any other proceedings of the company or any right to receive any
dividend or other distribution. No fractional Underlying Shares will be issued
upon the exercise or deemed exercise of the Special Warrants and holders of the
Special Warrants will not have any rights as shareholders of the Company.

In addition, the Special Warrant Certificates provide for and
contains adjustment provisions designed to keep the holders of the Special
Warrants unaffected by the possible occurrence of certain events, including any
subdivision, redivision, change, reduction, combination, consolidation, stock
dividend or reclassification of the common shares, the amalgamation, merger or
corporate reorganization of the Company. The Special Warrant Certificates
provides that in each such event the number of Underlying Shares issuable upon
the exercise of deemed exercise of the Special Warrants will be adjusted
immediately after the effective date of such subdivision, redivision, change,
reduction, combination, consolidation, or stock dividend of the common shares,
the amalgamation, merger or corporate reorganization of the Company.

The rights of holders of Special Warrants may be modified by
agreement between the Company and the holders of the Special Warrants. The
Special Warrant Certificates provides for meetings by holders of Special
Warrants and the passing of resolutions and extraordinary resolutions by such
holders which are binding on all holders of Special Warrants. Certain amendments
to the Special Warrant Certificates may only be made by extraordinary
resolution, which is defined in the Special Warrant Certificates as a
resolution passed by the affirmative vote of Special Warrant holders entitled to
acquire not less than 66% of the aggregate number of Underlying Shares which may
be acquired pursuant to all the then outstanding Special Warrants represented at
the meeting and voted on the poll on such resolution.

The foregoing is a summary description of certain material
provisions of the Special Warrant Certificates, it does not purport to be a
comprehensive summary and is qualified in its entirety by reference to the more
detailed provisions of the Special Warrant Certificates.

Other agreements are in the normal course of business.

---

|-72 -
|-----
|     

|D. | EXCHANGE CONTROLS
|-- | -----------------

Northern Dynasty is incorporated pursuant to the laws of the
Province of British Columbia, Canada. There is no law or governmental decree or
regulation in Canada that restricts the export or import of capital, or affects
the remittance of dividends, interest or other payments to a non-resident holder
of Common Shares, other than withholding tax requirements. Any such remittances
to United States residents are generally subject to withholding tax, however no
such remittances are likely in the foreseeable future. See "Taxation",
below.

There is no limitation imposed by Canadian law or by the
charter or other constituent documents of the Company on the right of a
non-resident to hold or vote Common Shares of the Company. However, the
Investment Canada Act (Canada) (the "Investment Act") has rules regarding
certain acquisitions of shares by non-Canadians, along with other requirements
under that legislation.

The following discussion summarizes the principal features of
the Investment Act for a non-Canadian who proposes to acquire Common Shares of
the Company. The discussion is general only; it is not a substitute for
independent legal advice from an investor's own advisor; and, except where
expressly noted, it does not anticipate statutory or regulatory amendments.

The Investment Act is a federal statute of broad application
regulating the establishment and acquisition of Canadian businesses by
non-Canadians, including individuals, governments or agencies thereof,
corporations, partnerships, trusts or joint ventures, Investments by
non-Canadians to acquire control over existing Canadian businesses or to
establish new ones are either reviewable or notifiable under the Investment Act.
If an investment by a non-Canadian to acquire control over an existing Canadian
business is reviewable under the Investment Act, the Investment Act generally
prohibits implementation of the investment unless, after review, the Minister of
Industry (or the Minister of Canadian Heritage and Official Languages for
investments in a Canadian business engaged in any of the activities of a
"cultural business"), is satisfied that the investment is likely to be of net
benefit to Canada.

A non-Canadian would acquire control of the Company for the
purposes of the Investment Act through the acquisition of Common Shares if the
non-Canadian acquired a majority of the Common Shares of the Company.

Further, the acquisition of less than a majority but one-third
or more of the Common Shares of the Company would be presumed to be an
acquisition of control of the Company unless it could be established that, on
the acquisition, the Company was not controlled in fact by the acquirer through
the ownership of Common Shares.

To determine whether an investment is reviewable under the
Investment Act it is necessary to consider whether the investor (or the vendor)
is a WTO investor (i.e. controlled by persons who are citizens of countries
that are members of the World Trade Organization ("WTO"); there are currently
160 WTO members); the book value of the assets of the Canadian business being
acquired; and whether the Canadian business being acquired engages in cultural
activities.

Where a WTO investor is involved, and if the Canadian business is being acquired directly and is not engaged in cultural activities, an investment will be reviewable only if the Canadian operating business being acquired has an enterprise value in excess of C$600 million for 2015.

If the acquisition by a WTO investor is indirect (i.e., the
acquisition of shares of a foreign corporation that controls a Canadian
business) the transaction is not reviewable. Where the Canadian business engages
in any of the activities of a cultural business, or if neither the investor
nor the vendor are WTO investors, the applicable thresholds for direct and
indirect investments are assets with a book value of C$5 million or C$50
million, respectively. (The acquisition of a Canadian business that is a
"cultural business" is subject to lower review thresholds under the Investment
Act because of the perceived sensitivity of the cultural sector.)

An acquisition of control of a Canadian business by a
non-Canadian that falls below the thresholds for review under the Investment Act
does not require the filing of an application for review. However, even where an
investment falls below the thresholds, it must still be notified by way of a
two-page form to the Investment Review Division of the Department of Industry
(or the Department of Canadian Heritage for cultural cases). Notifications may
be submitted by the investor any time before or up to 30 days after
implementation of the investment.

In 2009, amendments were enacted to the Investment Act
concerning investments that may be considered injurious to national security. If
the Minister of Industry has reasonable grounds to believe that an investment by
a non-Canadian "could be injurious to national security," the Minister of
Industry may send the non-Canadian a notice indicating that an order for review
of the investment may be made.

---

|-73 -
|-----
|     

The review of an investment on the grounds of national security
may occur whether or not an investment is otherwise subject to review on the
basis of net benefit to Canada or otherwise subject to notification under the
Investment Canada Act. To date, there is neither legislation nor guidelines
published, or anticipated to be published, on the meaning of "injurious to
national security." Discussions with government officials suggest that very few
investment proposals will cause a review under these new sections.

Certain transactions, except those to which the national
security provisions of the Investment Act may apply, relating to Common Shares
of the Company are exempt from the Investment Act, including

(a)      acquisition of Common Shares
of the Company by a person in the ordinary course of that person's business as a
trader or dealer in securities,

(b)      acquisition of control of the
Company in connection with the realization of security granted for a loan or
other financial assistance and not for a purpose related to the provisions on
the Investment Act, and

(c)      acquisition of control of the
Company by reason of an amalgamation, merger, consolidation or corporate
reorganization following which the ultimate direct or indirect control in fact
of the Company, through the ownership of Common Shares, remained unchanged.

|E. | TAXATION
|-- | --------

Certain Canadian Federal Income Tax Information for United
States Residents

The following summarizes the principal Canadian federal income
tax considerations generally applicable to the holding and disposition of common
shares of the Company by a holder who (a), for the purposes of the Income Tax
Act (Canada) (the "Tax Act") and at all relevant times, (i) is not
resident in Canada or deemed to be resident in Canada, (ii) deals at arm's
length and is not affiliated with the Company, (iii) holds the common shares as
capital property and does not use or hold the common shares in the course of
carrying on, or otherwise in connection with, a business in Canada, and (b) who,
for the purposes of the Canada-United States Income Tax Convention (the
"Treaty") at all relevant times, is a resident solely of the United
States, has never been a resident of Canada, has not held or used (and does not
hold or use) common shares in connection with a permanent establishment or fixed
base in Canada, and who qualifies for the full benefits of the Treaty. The
Canada Revenue Agency ("CRA") has introduced special forms to be used in order
to substantiate eligibility for Treaty benefits, and affected holders should
consult with their own advisors with respect to these forms and all relevant
compliance matters.

Holders who meet all such criteria in clauses (a) and (b) above
are referred to herein as a "U.S. Holder" or "U.S. Holders", and
this summary only addresses such U.S. Holders. The summary does not deal with
special situations, such as particular circumstances of traders or dealers in
securities, limited liability companies, tax-exempt entities, insurers,
financial institutions (including those to which the mark-to-market provisions
of the Tax Act apply), specified financial institutions, or entities considered
fiscally transparent under applicable law, or otherwise.

This summary is based on the current provisions of the Tax Act
and the regulations thereunder, all proposed amendments to the Tax Act and
regulations publicly announced by the Minister of Finance (Canada) to the date
hereof, the current provisions of the Treaty and our understanding of the
current administrative practices of the CRA. It has been assumed that all
currently proposed amendments to the Tax Act and regulations will be enacted as
proposed and that there will be no other relevant change in any governing law,
the Treaty or administrative policy, although no assurance can be given in these
respects. This summary does not take into account Canadian provincial, U.S. or
other foreign income tax considerations, which may differ significantly from
those discussed herein.

This summary is not exhaustive of all possible Canadian income
tax consequences. It is not intended as legal or tax advice to any particular
U.S. Holder and should not be so construed. The tax consequences to a U.S.
Holder will depend on that U.S. Holder's particular circumstances. Accordingly,
all U.S. Holders or prospective U.S. Holders should consult their own tax
advisors with respect to the tax consequences applicable to them having regard
to their own particular circumstances. The discussion below is qualified
accordingly.

Dividends

Dividends paid or credited or deemed to be paid or credited by
the Company to a U.S. Holder are subject to Canadian withholding tax. Under the
Treaty, the rate of withholding tax on dividends paid to a U.S. Holder is
generally limited to 15% of the gross dividend (or 5% in the case of a U.S.
holder that is a corporate shareholder owning at least 10% of the Company's
voting shares), provided the U.S. Holder can establish entitlement to the
benefits of the Treaty. We will be required to withhold the applicable
withholding tax from any dividend and remit it to the Canadian government for
the U.S. Holders account.

---

|-74 -
|-----
|     

Disposition

A U.S. Holder is generally not subject to tax under the Tax Act
in respect of a capital gain realized on the disposition of a common share in
the open market, unless the share is "taxable Canadian property" to the holder
thereof and the U.S. Holder is not entitled to relief under the Treaty.

Provided that the Company's common shares are listed on a
"designated stock exchange" for purposes of the Tax Act (which currently
includes the TSX) at the time of disposition, a common share will generally not
constitute taxable Canadian property to a U.S. Holder unless, at any time during
the 60 month period preceding the disposition, (i) the U.S. Holder or persons
with whom the U.S. Holder did not deal at arm's length (or the U.S. Holder
together with such persons) owned 25% or more of the issued shares of any class
or series of the Company AND (ii) more than 50% of the fair market value of the
share was derived directly or indirectly from certain types of assets, including
real or immoveable property situated in Canada, Canadian resource properties or
timber resource properties, and options, interests or rights in respect of any
of the foregoing. Common shares may also be deemed to be taxable Canadian
property under the Tax Act in certain specific circumstances, including in
certain circumstances where shares were acquired for other securities in a
tax-deferred transaction for Canadian tax purposes.

If the Companys shares constitute taxable Canadian property to
the U.S. Holder, the U.S. Holder will (unless relieved under the Treaty) be
subject to Canadian income tax on any gain. The taxpayers capital gain or loss
from a disposition of the share is the amount, if any, by which the proceeds of
disposition exceed (or are exceeded by) the aggregate of the adjusted cost base
of the share and reasonable expenses of disposition. One-half of a capital gain
("taxable capital gain") from the disposition of taxable Canadian property
(other than treaty protected properties) is included in computing the income of
a U.S. Holder and one-half of a capital loss ("allowable capital loss) is
deductible from taxable capital gains from dispositions of taxable Canadian
property realized in the same year. Unused allowable capital losses from
previous taxation years generally may be carried back three taxation years or
forward indefinitely and applied to reduce net taxable capital gains realized in
those years by a U.S. Holder from the disposition of a taxable Canadian
property.

A U.S. Holder holding Common shares as taxable Canadian
property should consult with the U.S. Holder's own tax advisors in advance of
any disposition of Common shares or deemed disposition under the Tax Act in
order to determine whether any relief from tax under the Tax Act may be
available by virtue of the Treaty, and any related compliance procedures.

Certain United States Federal Income Tax Considerations

The following is a general summary of certain material 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 the
Companys 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 arising from and
relating to the acquisition, ownership, and disposition of common shares. In
addition, 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 consequences to such U.S. Holder, including specific tax consequences
to a U.S. Holder under an applicable tax treaty. 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 particular U.S. Holder. This summary does not
address the U.S. federal alternative minimum, U.S. federal estate and gift, U.S.
Medicare contribution, U.S. state and local, or non-U.S. tax consequences to
U.S. Holders of the acquisition, ownership, and disposition of common shares.
Except as specifically set forth below, this summary does not discuss applicable
tax reporting requirements. Each U.S. Holder should consult its own tax advisor
regarding all U.S. federal, U.S. state and local, and non-U.S. tax consequences
relating to the acquisition, ownership and disposition of common shares.

No opinion from U.S. legal counsel or ruling from the Internal
Revenue Service (the "IRS") has been requested, or will be obtained, regarding
the U.S. federal income tax consequences of the acquisition, ownership, and
disposition of common shares. 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, any position 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.

---

|-75 -
|-----
|     

Scope of this Summary

Authorities

This summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations (whether final, temporary, or
proposed), published rulings of the IRS, published administrative positions of
the IRS, the Convention Between Canada and the United States of America with
Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended
(the "Canada-U.S. Tax Convention"), and U.S. court decisions that are applicable
and, in each case, as in effect and available, 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 or prospective basis.

U.S. Holders

For purposes of this summary, the term "U.S. Holder" means a
beneficial owner of common shares that is for U.S. federal income tax
purposes:

| | an individual who is a citizen or resident of
      the U.S.;                                                                                                                                                                                                                            
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a corporation (or other entity taxable as a corporation
      for U.S. federal income tax purposes) created or organized in or under the
      laws of the U.S., any state thereof or the District of Columbia;                                                                          
| | an estate the income of which is subject to
      U.S. federal income taxation regardless of its source; or                                                                                                                                                                              
| | a trust that (1) is subject to the primary supervision of
      a court within the U.S. and the control of one or more U.S. persons for
      all substantial decisions or (2) has a valid election in effect under
      applicable Treasury Regulations to be treated as a U.S. person.

Non-U.S. Holders

For purposes of this summary, a "non-U.S. Holder" is a
beneficial owner of common shares that is not a partnership (or other
pass-through entity) for U.S. federal income tax purposes and is not a U.S.
Holder. This summary does not address the U.S. federal income tax consequences
to non-U.S. Holders arising from and relating to the acquisition, ownership, and
disposition of common shares. Accordingly, a non-U.S. Holder should consult its
own tax advisor regarding all U.S. federal, U.S. state and local, and non-U.S.
tax consequences (including the potential application of and operation of any
income 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, but not limited to, the following: (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; (c) U.S. Holders that are
broker-dealers, dealers, or traders in securities or currencies that elect to
apply a mark-to-market accounting method; (d) U.S. Holders that have a
"functional currency" other than the U.S. Dollar; (e) 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; (f) U.S. Holders that acquired common shares in connection with the
exercise of employee stock options or otherwise as compensation for services;
(g) U.S. Holders that hold common shares other than as a capital asset within
the meaning of Section 1221 of the Code (generally, property held for investment
purposes); or (h) U.S. Holders that own or have owned (directly, indirectly, or
by attribution) 10% or more of the total combined voting power of the
outstanding shares of the Company. This summary also does not address the U.S.
federal income tax considerations applicable to U.S. Holders who are: (a) U.S.
expatriates or former long-term residents of the U.S.; (b) persons that have
been, are, or will be a resident or deemed to be a resident in Canada for
purposes of the Income Tax Act (Canada) (the "Tax Act"); (c) persons that use or
hold, will use or hold, or that are or will be deemed to use or hold common
shares in connection with carrying on a business in Canada; (d) persons whose
common shares constitute "taxable Canadian property" under the Tax Act; or (e)
persons that have a permanent establishment in Canada for the purposes of the
Canada-U.S. Tax Convention. U.S. Holders that are subject to special provisions
under the Code, including, but not limited to, U.S. Holders described
immediately above, should consult their own tax advisors regarding all U.S. federal, U.S. state and
local, and non-U.S. tax consequences relating to the acquisition, ownership and
disposition of common shares.

---

|-76 -
|-----
|     

If an entity or arrangement 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 to such entity and the
partners (or other owners) of such entity of the ownership and disposition of
common shares generally will depend on the activities of the entity and the
status of such partners (or other owners). This summary does not address the
U.S. federal income tax consequences to any such entity or its owners. Partners
(or other owners) of entities or arrangements that are classified as
partnerships (or other "pass-through" entities) for U.S. federal income tax
purposes should consult their own tax advisors regarding the U.S. federal income
tax consequences arising from and relating to the acquisition, ownership, and
disposition of common shares.

Passive Foreign Investment Company Rules

If the Company were to constitute a "passive foreign investment
company" within the meaning of Section 1297 of the Code (a "PFIC", as defined
below) for any tax year during a U.S. Holder's holding period, then certain
potentially adverse rules will affect the U.S. federal income tax consequences
to such U.S. Holder resulting from the acquisition, ownership and disposition of
common shares. The Company believes it was a PFIC during one or more prior
years, and, based on current business plans and financial projections, expects
to be a PFIC in the current tax year and possibly in subsequent tax years. The
determination of whether any corporation 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 any
corporation will be a PFIC for any tax year depends on the assets and income of
such corporation over the course of each such tax year and, as a result, cannot
be predicted with certainty before the close of the tax year in question.
Accordingly, there can be no assurance that the Company will or will not be
determined to be a PFIC for the current or any prior or future tax year, or that
the IRS will not challenge any determination made by the Company (or any
subsidiary of the Company) concerning its PFIC status. Each U.S. Holder should
consult its own tax advisor regarding the PFIC status of the Company and any
subsidiary of the Company.

In addition, in any year in which the Company is a PFIC, a U.S.
Holder would be required to file an annual report with the IRS containing such
information as Treasury Regulations and/or other IRS guidance may require. In
addition to penalties, the failure to satisfy such reporting requirements may
result in an extension of the time period during which the IRS can assess a tax.
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.

PFIC Status of the Company

The Company generally will be a PFIC for a tax year, if (a) 75%
or more of its gross income is passive income (as defined for U.S. federal
income tax purposes) (the "income test") or (b) 50% or more (by value) of its
assets either produce passive income or are held for the production of passive
income, based on the quarterly average of the fair market value of such assets
(the "asset test"). For purposes of the PFIC provisions, "gross income"
generally includes all sales revenues less the cost of goods sold, plus income
from investments and from incidental or outside operations or sources, and
"passive income" generally includes 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 will be excluded from passive income if substantially all (85% or
more) of the Company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, and assuming certain other requirements are met,
"passive income" does not include certain interest, dividends, rents, or
royalties that are received or accrued by the Company from certain "related
persons" (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 generally be deemed to own their proportionate share of the
Company's direct or indirect equity interest in any company that is also a PFIC
(a ''Subsidiary PFIC''), and will be subject to U.S. federal income tax on their
proportionate share of (a) any "excess distributions," as described below, on
the stock of a Subsidiary PFIC and (b) a disposition or deemed disposition of
the stock of a Subsidiary PFIC by the Company or another Subsidiary PFIC, both
as if such U.S. Holders directly held the shares of such Subsidiary PFIC. In
addition, U.S. Holders may be subject to U.S. federal income
tax on any indirect gain realized on the stock of a Subsidiary PFIC on the sale
or disposition of common shares. Accordingly, U.S. Holders should be aware that
they could be subject to tax even if no distributions are received and no
redemptions or other dispositions of the Companys common shares are made.

---

|-77 -
|-----
|     

Default PFIC Rules Under Section 1291 of the Code

If the Company meets the income test or the asset test for any
  tax year during which a U.S. Holder owns common shares, the U.S. federal income
  tax consequences to such U.S. Holder of the acquisition, ownership, and
  disposition of common shares will depend on whether and when such U.S. Holder
  makes an election to treat the Company and each Subsidiary PFIC, if any, as a
  "qualified electing fund" or "QEF" under Section 1295 of the Code (a "QEF
  Election") or makes a mark-to-market election under Section 1296 of the Code (a
  "Mark-to-Market Election"). 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."

A Non-Electing U.S. Holder will be subject to the default rules
of Section 1291 of the Code (described below) with respect to (a) any gain
realized on the sale or other disposition (including dispositions and certain
other events that would not otherwise be treated as taxable events) of common
shares and (b) any "excess distribution" received 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 relevant tax
year) exceeds 125% of the average annual distribution received during the three
preceding tax years (or during a U.S. Holder's holding period for the common
shares, if shorter).

Under the default rules of Section 1291 of the Code, any gain
realized on the sale or other disposition of common shares (including an
indirect disposition of the stock of any Subsidiary PFIC), and any "excess
distribution" received on common shares or with respect to the stock of a
Subsidiary PFIC, must be ratably allocated to each day in a Non-Electing U.S.
Holder's holding period for the respective common shares. The amount of any such
gain or excess distribution allocated to the tax year of disposition or
distribution of the excess distribution and to tax years before the entity
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 rate applicable to ordinary income in each such year, and an interest charge
would be imposed on the resulting tax liability for each such year, calculated
as if such tax liability had been due in each such tax 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. Any loss realized on the disposition of
common shares would not be recognized.

If the Company meets the income test or the asset test 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 meets the income test or the
asset test in one or more subsequent tax years. A Non-Electing U.S. Holder may
terminate this deemed PFIC status by electing to recognize gain (which will be
taxed under the default rules of Section 1291 of the Code discussed above), but
not loss, as if such common shares were sold on the last day of the last tax
year for which the Company was a PFIC.

QEF Election

A U.S. Holder that makes a timely and effective QEF Election
for the first tax year in which its holding period of its common shares begins
generally will not be subject to the default rules of Section 1291 of the Code,
discussed above, with respect to its common shares. Instead, such a U.S. Holder
will be required to include currently in gross income for each tax year in which
the Company is a PFIC, such U.S. Holders pro rata share of the Companys net
capital gain and ordinary earnings, if any, regardless of whether such gain or
earnings are actually distributed. If a U.S. Holder that made a timely and
effective QEF Election has an income inclusion, such U.S. Holder 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 timely and effective QEF Election
with respect to the Company generally (a) may receive tax-free distributions
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 such QEF
Election is made for the first tax year in the U.S. Holder's holding period for
the common shares in which the Company was meets the income test or asset test.
A U.S. Holder may make a QEF Election for a tax year by filing the appropriate
QEF Election documents at the time such U.S. Holder files a U.S. federal income tax return for such tax
year. If a U.S. Holder does not make a timely and effective QEF Election for the
first year in the U.S. Holder's holding period for the common shares, the U.S.
Holder may still be able to make a timely and effective QEF Election in a
subsequent year if such U.S. Holder meets certain requirements and makes a
"purging" election to recognize gain (which will be taxed under the default
rules of Section 1291 of the Code discussed above) as if such common shares were
sold for their fair market value on the day the QEF Election is effective. If a
U.S. Holder owns PFIC stock indirectly through another PFIC, separate QEF
Elections must be made for the PFIC in which the U.S. Holder is a direct
shareholder and the Subsidiary PFIC for the QEF rules to apply to both PFICs.

---

|-78 -
|-----
|     

A QEF Election will apply to the tax year for which it is
timely made and to all subsequent tax years, unless such QEF Election is
invalidated or terminated or the IRS consents to its revocation. 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). Accordingly, if the Company becomes a PFIC in another subsequent
tax year, the QEF Election will be effective and the U.S. Holder will be subject
to the QEF rules described above during any subsequent tax year in which the
Company qualifies as a PFIC.

In light of the adverse tax consequences of the Company being a
  PFIC and the uncertainty as to the Companys PFIC status, the Company will
  provide to any U.S. Holder, upon written request, the information necessary for
  U.S. income tax reporting purposes for such U.S. Holder to make a QEF Election
  with respect to the Company. The Company may elect to provide such information
  on its website. Each U.S. Holder should consult its own tax advisor regarding
  the availability and desirability of, and procedure for making, a QEF Election.

Mark-to-Market Election

A U.S. Holder may make a Mark-to-Market Election only if the
common shares are "regularly traded" on a qualified exchange or other market
(within the meaning of the Code and applicable Treasury Regulations), which
include a national securities exchange that is registered with the Securities
and Exchange Commission, the national market system established pursuant to
section 11A of the Securities and Exchange Act of 1934, and certain foreign
securities exchanges that are regulated or supervised by a governmental
authority of the country in which the market is located. 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. There is no assurance that the common shares will be or remain
"regularly traded" for this purpose.

A U.S. Holder that makes a Mark-to-Market Election with respect
to its common shares generally will not be subject to the default rules of
Section 1291 of the Code, discussed above, with respect to such common shares.
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 the common shares or
such U.S. Holder has not made a timely QEF Election, the default 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 (a) such U.S.
Holder's adjusted tax basis in the common shares, as of the close of such tax
year, over (b) 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).

A U.S. Holder that makes a Mark-to-Market Election generally
also will adjust such U.S. Holder's 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 ordinary 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). Losses that exceed this
limitation are treated as capital losses. Deductions for capital losses are
subject to significant limitations under the Code.

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 eligible for such election or the IRS consents to
revocation of such election. Each U.S. Holder should consult its own tax advisor
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 the 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. Hence, the Mark-to-Market Election
will not be effective to eliminate the application of the default rules of
Section 1291 of the Code described above with respect to deemed dispositions of Subsidiary PFIC stock or
excess distributions with respect to a Subsidiary PFIC.

---

|-79 -
|-----
|     

The PFIC rules are complex, and each U.S. Holder should consult
its own tax advisor regarding the PFIC rules and how the PFIC rules may affect
the U.S. federal income tax consequences of the acquisition, ownership, and
disposition of common shares.

Ownership and Disposition of Common Shares

The following discussion is subject to the rules described
above under the heading "Passive Foreign Investment Company Rules."

Distributions on Common Shares

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 gain from
the sale or exchange of such common shares. (See "Sale or Other Taxable
Disposition of Common Shares" below). However, the Company may not 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 a dividend.
Dividends received on common shares generally will not be eligible for the
"dividends received deduction" available to U.S. corporate shareholders
receiving dividends for U.S. corporations. If the Company is eligible for the
benefits of the Canada-U.S. Tax Convention, dividends paid by the Company to
non-corporate U.S. Holders generally will be eligible for preferential tax rates
applicable to long-term capital gains, provided certain holding period and other
conditions are satisfied, including that the Company not be classified as a PFIC
in the tax year of distribution or in the preceding tax year. 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

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 the amount of cash received plus the fair market value of
any property received and such U.S. Holder's tax basis in such common shares
sold or otherwise disposed of. A U.S. Holder's tax basis in common shares
generally will be such U.S. Holder's U.S. Dollar cost for such common shares.
Gain or loss recognized on such sale or other disposition generally will be
long-term capital gain or loss if, at the time of the sale or other taxable
disposition, the common shares have been held for more than one year.

Preferential tax rates currently apply to long-term capital
gain of a U.S. Holder that is an individual, estate, or trust. There are
currently no preferential tax rates for long-term capital gain of a U.S. Holder
that is a corporation. Deductions for capital losses are subject to significant
limitations under the Code.

Receipt of Foreign Currency

The amount of any distribution paid to a U.S. Holder in
connection with the ownership of common shares, or on the sale 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
receipt (regardless of whether such foreign currency is converted into U.S.
Dollars at that time). A U.S. Holder will have a basis in the foreign currency
equal to its U.S. Dollar value on the date of receipt. Any U.S. Holder who
converts or otherwise disposes of the foreign currency after the date of receipt
may have a foreign currency exchange gain or loss that would be treated as
ordinary income or loss, and generally will be U.S. source income or loss for
foreign tax credit purposes. Different rules apply to U.S. Holders who use the
accrual method with respect to foreign currency received upon the sale, exchange
or other taxable disposition of the common shares. Each U.S. Holder should
consult its own tax advisor regarding the U.S. federal income tax consequences
of receiving, owning, and disposing of foreign currency.

Foreign Tax Credit

Subject to the PFIC rules discussed above, a U.S. Holder that
pays (whether directly or through withholding) Canadian income tax in connection
with the ownership or disposition of common shares generally will be entitled,
at the election of such U.S. Holder, to receive either a deduction or a credit
for such Canadian income tax. Generally, a credit will reduce a
U.S. Holder's U.S. federal income tax liability on a Dollar-for-Dollar basis,
whereas a deduction will reduce a U.S. Holder's income subject to U.S. federal
income tax. This election is made on a year-by-year basis and applies to all
creditable foreign taxes paid (whether directly or through withholding) by a
U.S. Holder during a year.

---

|-80 -
|-----
|     

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." Generally, dividends paid by a non-U.S. corporation should be
treated as foreign source for this purpose, and gains recognized on the sale of
stock of a non-U.S. corporation by a U.S. Holder should be treated as U.S.
source for this purpose, except as otherwise provided in an applicable income
tax treaty, and if an election is properly made under the Code. However, the
amount of a distribution with respect to the common shares that is treated as a
"dividend" may be lower for U.S. federal income tax purposes than it is for
Canadian federal income tax purposes, resulting in a reduced foreign tax credit
allowance to a U.S. Holder. In addition, this limitation is calculated
separately with respect to specific categories of income. The foreign tax credit
rules are complex, and each U.S. Holder should consult its own U.S. tax advisor
regarding the foreign tax credit rules.

Special rules apply to the amount of foreign tax credit that a
  U.S. Holder may claim on a distribution from a PFIC. Subject to such special
  rules, foreign taxes paid with respect to any distribution in respect of stock
  in a PFIC are generally eligible for the foreign tax credit. The rules relating
  to distributions by a PFIC and their eligibility for the foreign tax credit are
  complicated, and a U.S. Holder should consult with its own tax advisor regarding
  the availability of the foreign tax credit with respect to distributions by a
PFIC.

Information Reporting and Backup Withholding

Under U.S. federal income tax law, certain categories of U.S.
Holders must file information returns with respect to their investment in, or
involvement in, a non-U.S. corporation. For example, U.S. return disclosure
obligations (and related penalties) are imposed on individuals who are U.S.
Holders that hold certain specified foreign financial assets in excess of
certain threshold amounts. The definition of specified foreign financial assets
includes not only financial accounts maintained in foreign financial
institutions, but also, if held for investment and not in an account maintained
by certain financial institutions, any stock or security issued by a non-U.S.
person, any financial instrument or contract that has an issuer or counterparty
other than a U.S. person and any interest in a non-U.S. entity. U.S. Holders may
be subject to these reporting requirements unless their common shares are held
in an account at certain financial institutions. Penalties for failure to file
certain of these information returns are substantial. U.S. Holders should
consult with their own tax advisors regarding the requirements of filing
information returns, including the requirement to file an IRS Form 8938.

Payments made within the U.S. or by a U.S. payor or U.S.
middleman, of dividends on, and proceeds arising from the sale or other taxable
disposition of, common shares will generally be subject to information
reporting. In addition, backup withholding, currently, at a rate of 28%, may
apply to such payments if a U.S. Holder (a) fails to furnish such U.S. Holder's
correct U.S. taxpayer identification number (generally on IRS 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 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. Certain exempt persons generally are excluded
from these information reporting and backup withholding rules. Backup
withholding is not an additional tax. Any amounts withheld under the U.S. backup
withholding 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
furnishes required information to the IRS in a timely manner. Each U.S. Holder
should consult its own tax advisor regarding the information reporting and
backup withholding rules.

|F. | DIVIDENDS AND PAYING
AGENTS
|-- | ---------------------------

Not applicable.

|G. | STATEMENT BY EXPERTS
|-- | --------------------

Not applicable.

---

|-81 -
|-----
|     

|H. | DOCUMENTS ON DISPLAY
|-- | --------------------

Exhibits attached to this Form 20-F are also available for
viewing on EDGAR, or at the offices of Northern Dynasty, Suite 1500  1040 West
Georgia Street, Vancouver, British Columbia V6E 4H1 or on request of Northern
Dynasty at 604-684-6365, attention: Corporate Secretary. Copies of Northern
Dynasty's financial statements and other continuous disclosure documents
required under the British Columbia Securities Act are available for viewing on
the internet at www.sedar.com.

|I. | SUBSIDIARY INFORMATION
|-- | ----------------------

Not applicable.

|ITEM 11 | QUANTITATIVE AND QUALITATIVE DISCLOSURES
      ABOUT MARKET RISK
|------- | ----------------------------------------------------------------

|A. | TRANSACTION RISK AND CURRENCY RISK
    MANAGEMENT
|-- | -------------------------------------------------

Northern Dynasty's operations do not employ financial
instruments or derivatives which are market sensitive.

|B. | EXCHANGE RATE SENSITIVITY
|-- | -------------------------

Northern Dynasty's administrative operations are in Canada. The
Company typically holds most of its funds in US and Canadian Dollars and
typically acquires foreign currency on an as-needed basis.

The Company is subject to both currency transaction risk and
currency translation risk: the Pebble Partnership and U5 Resources Inc. both
have the US dollar as functional currency; and certain of the Companys
corporate expenses are incurred in US dollars. As the Companys functional and
presentation currency is the Canadian dollar, the fluctuation of the US dollar
in relation to the Canadian dollar will consequently have an impact upon the
losses incurred by the Company as well as the value of the Companys assets and
total shareholders equity. The Company has not entered into any agreements or
purchased any instruments to hedge possible currency risks at this time.

There has been no change in the Companys objectives and
policies for managing this risk, except for the changes in the carrying amounts
of the financial assets exposed to foreign exchange risk, and there was no
significant change to the Companys exposure to foreign exchange risk during the
year ended December 31, 2014.

The exposure of the Company's financial assets to foreign
exchange risk is as follows:

|Currency                        |   | December 31, 2014 |   |   | December 31, 2013 | 
|------------------------------- | - | ----------------- | - | - | ----------------- | 
|                                |   | US dollar amount  |   |   | Amount in         | 
|US dollars  Financial assets   |   | (000s             | ) |   | Canadian dollars  | 
|Amounts receivable              | $ | 547               |   | $ | 635               | 
|Cash
      and cash equivalents |   | 1,515             |   |   | 1,758             | 
|Total exposed to currency risk  | $ | 2,062             |   | $ | 2,393             | 

The exposure of the Company's financial liabilities to foreign
exchange risk is as follows:

|Currency                           |   | December 31, 2014 |   |   | December 31, 2013  | 
|---------------------------------- | - | ----------------- | - | - | ------------------ | 
|                                   |   |                   |   |   |                    | 
|                                   |   | US dollar         |   |   | Amount in Canadian | 
|US dollars  Financial liabilities |   | amount (000s      | ) |   | dollars            | 
|Trade and other payables           | $ | 4,504             |   | $ | 5,225              | 
|Total exposed to currency risk     | $ | 4,504             |   | $ | 5,225              | 

A 10% depreciation of the Canadian dollar relative to the
United States dollar at December 31, 2014 would result in a loss of $283,000
(2013 - $983,000 gain). This analysis assumes that all other variables, in
particular interest rates, remain constant.

The Company currently does not engage in foreign currency
hedging.

---

|-82 -
|-----
|     

|C. | INTEREST RATE RISK AND EQUITY PRICE
  RISK
|-- | ------------------------------------------

The Company is subject to interest rate risk with respect to
its investments in cash and cash equivalents. There has been no change in the
Companys objectives and policies for managing this risk and no significant
change to the Companys exposure to interest rate risk during the year ended
December 31, 2014.

Assuming that all variables remain constant, a 100 basis points
change in a decrease or increase in interest rates would have resulted in a
decrease or increase in interest income of approximately $176,000 (2013 -
$267,000).

|D. | COMMODITY PRICE RISK
|-- | --------------------

While the value of the Companys core mineral resource
property, held through its interest in the Pebble Partnership, is related to the
price of gold, copper and molybdenum and the outlook for these minerals, the
Company currently does not have any operating mines and hence does not have any
hedging or other commodity based risks in respect of its operational
activities.

Gold, copper, and molybdenum prices have fluctuated widely
historically and are affected by numerous factors outside of the Company's
control, including, but not limited to, industrial and retail demand, central
bank lending, forward sales by producers and speculators, levels of worldwide
production, short-term changes in supply and demand because of speculative
hedging activities, and certain other factors related specifically to gold.

|ITEM 12 | DESCRIPTION OF SECURITIES OTHER THAN EQUITY
      SECURITIES
|------- | ------------------------------------------------------------

Not applicable.

|ITEM 13 | DEFAULTS, DIVIDEND ARREARAGES AND
      DELINQUENCIES
|------- | -----------------------------------------------------

Not applicable.

|ITEM 14 | MATERIAL MODIFICATIONS TO THE RIGHTS OF
      SECURITY HOLDERS AND USE OF PROCEEDS
|------- | ----------------------------------------------------------------------------------

Not applicable.

|ITEM 15 | CONTROLS AND PROCEDURES
|------- | -----------------------

DISCLOSURE CONTROLS AND PROCEDURES

At the end of the period covered by this annual report on Form
20-F, an evaluation was carried out with the participation of the Company's
management, including the President and Chief Executive Officer ("CEO") and the
Chief Financial Officer ("CFO"), of the effectiveness of the Company's
disclosure controls and procedures (as defined in Rules 13a  15(e) and 15d
15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")). Based on that evaluation, the President and CEO and the CFO have
concluded that as of the end of the period covered by this annual report on Form
20-F, the Company's disclosure controls and procedures are designed to provide
reasonable assurance of achieving their objectives and are effective at that
reasonable assurance level in providing: (i) information required to be
disclosed by the Company in reports that it files or submits to the SEC under
the Exchange Act was recorded, processed, summarized and reported within the
time periods specified in applicable rules and forms, and (ii) material
information required to be disclosed in the Company's reports filed under the
Exchange Act was accumulated and communicated to the Company's management,
including the President and CEO and the CFO, as appropriate, to allow for
accurate and timely decisions regarding required disclosure.

---

|-83 -
|-----
|     

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING

The Company's management, including the President and CEO and
CFO, is responsible for establishing and maintaining adequate internal control
over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act. The Company's internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation and fair presentation of financial
statements for external purposes in accordance with IFRS. The Company's internal
control over financial reporting 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 IFRS, 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 could have a material effect on the financial
      statements.                                                                                                 

With the participation of the President and CEO and CFO,
management conducted an evaluation of the design and operation of the Company's
internal control over financial reporting as of December 31, 2014, based on the
criteria set forth in Internal Control  Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission. This
evaluation included review of the documentation of controls, evaluation of the
design effectiveness of controls, testing of the operating effectiveness of
controls and a conclusion on this evaluation. Based on this evaluation,
management concluded in its report that the Company's internal control over
financial reporting was effective as of December 31, 2014.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

During the period covered by this annual report on Form 20-F,
no changes occurred in the Company's internal control over financial reporting
that have materially affected, or are reasonably likely to materially affect,
the Company's internal control over financial reporting.

LIMITATIONS OF CONTROLS AND PROCEDURES

The Company's management, including its President and CEO and
CFO, does not expect that its disclosure controls and procedures or internal
controls and procedures will prevent all errors and all fraud. A control system,
no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs.

Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision-making can
be faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
controls. The design of any system of controls is also based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions; over time, controls may become inadequate because
of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.

|ITEM 16  | [RESERVED]                      
|-------- | --------------------------------
|         |                                 
|ITEM 16A | AUDIT COMMITTEE FINANCIAL EXPERT

The members of the Audit and Risk committee are Gordon
Fretwell, Wayne Kirk and Peter Mitchell. The board of directors has determined
that Mr. Mitchell qualifies as a "financial expert" under the rules of the SEC,
based on his education and experience. Each audit and risk committee member is
independent, as the term is defined in section 803 of the NYSE/MKT Company
Guide.

---

|-84 -
|-----
|     

Each audit committee member is able to read and understand
fundamental financial statements.

|ITEM 16B | CODE OF ETHICS
|-------- | --------------

The Company's board of directors has adopted a Code of Ethics
governing directors, officers, employees and contractors. The Code of Ethics
sets forth written standards that are designed to deter wrongdoing and to
promote:

|(a) | honest and ethical conduct, including the ethical
      handling of actual or apparent conflicts of interest between personal and
      professional relationships;                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                 
|(b) | full, fair, accurate, timely, and understandable
      disclosure in reports and documents that the Company files with, or
      submits to, securities regulators and in other public communications made
      by the Company;
|    |                                                                                                                                                                                                                                 
|(c) | compliance with applicable laws, rules and
      regulations;                                                                                                                                                                   
|    |                                                                                                                                                                                                                                 
|(d) | the prompt internal reporting of violations of the Code
      of Ethics to an appropriate person or persons identified in the Code;
      and                                                                                   
|    |                                                                                                                                                                                                                                 
|(e) | accountability for adherence to the Code of
  Ethics.                                                                                                                                                                           

The board of directors monitors compliance with the Code of
Ethics by ensuring that all Company personnel have read and understood the Code
of Ethics, and by charging management with bringing to the attention of the
board of directors any issues that arise with respect to the Code of Ethics.

The Company's Code of Ethics is included in the Manual which is
available for download at the Companys website under Corporate Governance at
www.northerndynastyminerals.com. The Company will also provide a copy of the
Code of Ethics to any person without charge, upon request. Requests can be sent
by mail to: 15th floor, 1040 West Georgia Street, Vancouver, British Columbia
V6E 4H1 or on request of the Company at 604-684-6365, attention: Investor
Relations Department.

During the most recently completed fiscal year, the Company has
neither: (a) materially amended its Code of Ethics; nor (b) granted any waiver
(including any implicit waiver) form any provision of its Code of Ethics.

|ITEM 16C | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------

The following table discloses the aggregate fees billed for
each of the last two fiscal years for professional services rendered by the
Company's audit firm, Deloitte LLP for various services.

Services:
    Description of services
    Year ended
    December 312014
    2013Audit Fees
    Includes fees
      necessary to perform the annual audit and
      quarterly        reviews of
      the Company's financial statements. Audit
      Fees        include fees for
      review of tax provisions and for
      accounting        consultations
      on matters reflected in the financial
      statements.        Audit Fees
      also include audit or other attest services required
      by        legislation or
      regulation, such as comfort letters,
      consents,        reviews of
      securities filings and statutory audits.
    $197,000
    $199,500Audit-related Fees
    Includes services
      that are traditionally performed by the
      auditor.        These
      audit-related services include employee benefit
      audits,        due diligence
      assistance, accounting consultations on
      proposed        transactions,
      internal control reviews and audit or attest
      services        not required
      by legislation or regulation.
    Nil
    NilTax Fees
    Includes
      fees for all tax services other than those included in
      "Audit        Fees" and
      "Audit-related Fees". This category includes fees
      for        tax compliance, tax
      planning and tax advice. Tax planning
      and        tax advice includes
      assistance with tax audits and appeals,
      tax        advice related to
      mergers and acquisitions, and requests
      for        rulings or
      technical advice from tax authorities.
    Nil
    NilAll Other Fees
    Includes all other
      non-audit services.
    Nil
    NilTotal
    
    $197,000
    $199,500


From time to time, management of the Company recommends to and
requests approval from the audit committee for non-audit services to be provided
by the Company's auditors. The audit committee routinely considers such requests
at committee meetings, and if acceptable to a majority of the audit committee members, pre-approves such non-audit services by a
resolution authorizing management to engage the Company's auditors for such
non-audit services, with set maximum Dollar amounts for each itemized service.
During such deliberations, the audit committee assesses, among other factors,
whether the services requested would be considered "prohibited services" as
contemplated by the SEC, and whether the services requested and the fees related
to such services could impair the independence of the auditors. No material
non-audit services were provided by the Company's auditors during the year ended
December 31, 2014.

---

|-85 -
|-----
|     

|ITEM 16D | EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT
      COMMITTEES
|-------- | ------------------------------------------------------------

Not applicable.

|ITEM 16E | PURCHASES OF EQUITY SECURITIES BY THE ISSUER
      AND AFFILIATED PURCHASERS
|-------- | ----------------------------------------------------------------------------

In the year ended December 31, 2014, the Company did not
purchase any of its issued and outstanding Common Shares pursuant to any
repurchase program or otherwise.

|ITEM 16F | CHANGE IN REGISTRANT'S CERTIFYING
      ACCOUNTANT
|-------- | --------------------------------------------------

None.

|ITEM 16G | CORPORATE GOVERNANCE
|-------- | --------------------

Not applicable.

|ITEM 16H | MINE SAFETY DISCLOSURE
|-------- | ----------------------

Not applicable.

|ITEM 17 | FINANCIAL STATEMENTS
|------- | --------------------

We have elected to provide financial statements for the fiscal
year ended December 31, 2014 and the related information pursuant to Item
18.

|ITEM 18 | FINANCIAL STATEMENTS
|------- | --------------------

The financial statements appear in this annual report on Form
20-F beginning on page 88. The report of the independent registered public
accounting firm appears on page 89.

---

|-86 -
|-----
|     

|ITEM 19 | EXHIBITS
|------- | --------

The following exhibits are included with this Annual Report on
Form 20-F:

|Exhibit |                                                                                                                                                                                                     
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  | Description of Exhibit                                                                                                                                                                              
|        |                                                                                                                                                                                                     
|1.01    | Articles Dated June 10, 2010                                                                                                                                                                        
|        |                                                                                                                                                                                                     
|4.01    | Special Warrant Certificate
      Dated Effective December 31, 2014 (1)                                                                                                                             
|        |                                                                                                                                                                                                     
|4.02    | Registration Rights Agreement
      Dated Effective December 31, 2014 (1)                                                                                                                           
|        |                                                                                                                                                                                                     
|4.03    | Share Option Plan Dated May 16,
      2014                                                                                                                                                          
|        |                                                                                                                                                                                                     
|4.04    | Shareholder Rights Plan Dated
      Effective May 17, 2013                                                                                                                                          
|        |                                                                                                                                                                                                     
|12.01   | Certification of Chief Executive Officer pursuant to Rule
      13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002                           
|        |                                                                                                                                                                                                     
|12.02   | Certification of Chief Financial Officer pursuant to Rule
      13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002                           
|        |                                                                                                                                                                                                     
|13.01   | Certification of Chief Executive Officer pursuant to Rule
      13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|        |                                                                                                                                                                                                     
|13.02   | Certification of Chief Financial Officer pursuant to Rule
      13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|        |                                                                                                                                                                                                     
|14.01   | Consent of Independent Registered Public Accounting Firm                                                                                                                                            
|        |                                                                                                                                                                                                     
|14.02   | Consent of Independent Auditors                                                                                                                                                                     
|        |                                                                                                                                                                                                     
|15.01   | Pebble Property List of Property
      Claims                                                                                                                                                       
|        |                                                                                                                                                                                                     
|15.02   | Consent of Expert (David Gaunt)                                                                                                                                                                     
|        |                                                                                                                                                                                                     
|15.03   | Consent of Expert (James Lang)                                                                                                                                                                      
|        |                                                                                                                                                                                                     
|15.04   | Consent of Expert (Eric Titley)                                                                                                                                                                     
|        |                                                                                                                                                                                                     
|15.05   | Consent of Expert (Ting Lu)                                                                                                                                                                         

Notes

(1): Incorporated by reference to the Companys Form F-3 filed
on February 13, 2015.

---

|-87 -
|-----
|     

SIGNATURES

The registrant hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this Annual Report on its behalf.

NORTHERN DYNASTY MINERALS LTD.

/s/ Marchand SnymanChief Financial Officer
DATED: May 15, 2015

---

|-88 -
|-----
|     

INDEX TO FINANCIAL STATEMENTS

|                                                                                                                                                       | Page
|------------------------------------------------------------------------------------------------------------------------------------------------------ | ----
|Northern Dynasty Minerals Ltd.                                                                                                                         |     
|Report of the
      Company's Independent Registered Public Accounting Firm, Deloitte LLP,
      dated March 30, 2015                                  | 89  
|Consolidated
      statements of financial position as at December 31, 2014 and December 31,
      2013                                                | 91  
|Consolidated
      statements of comprehensive loss for the years ended December 31, 2014
      2013 and 2012                                          | 92  
|Consolidated
      statements of cash flows for the years ended December 31, 2014, 2013 and
      2012                                                 | 93  
|Consolidated
      statements of changes in equity for the years ended December 31, 2014,
      2013 and 2012                                          | 94  
|Notes to the
      consolidated annual financial statements                                                                                            | 96  
|                                                                                                                                                       |     
|Pebble Limited Partnership                                                                                                                             |     
|Independent
      Auditors Report                                                                                                                     | 116 
|Consolidated
      statements of loss and comprehensive loss for the period from January 1 to
      December 10, 2013 and year ended December 31, 2012 | 118 
|Consolidated
      statements of changes in equity for the period from January 1 to December
      10, 2013 and year ended December 31, 2012           | 119 
|Consolidated
      statements of financial position as at December 10, 2013 and December 31,
      2012                                                | 120 
|Consolidated
      statements of cash flows for the period from January 1 to December 10,
      2013 and year ended December 31, 2012                  | 121 
|Notes to the
      consolidated annual financial statements                                                                                            | 122 

---

|-89 -
|-----
|     

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Northern Dynasty
Minerals Ltd.

We have audited the accompanying consolidated financial
statements of Northern Dynasty Minerals Ltd., and subsidiaries (the Company),
which comprise the consolidated statements of financial position as at December
31, 2014 and December 31, 2013, and consolidated statements of comprehensive
loss, changes in equity, and cash flows for each of the years in the three-year
period ended December 31, 2014, and a summary of significant accounting policies
and other explanatory information.

Management's Responsibility for the Consolidated Financial
Statements

Management is responsible for the preparation and fair
presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards as issued by the International
Accounting Standards Board, 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 Responsibility

Our 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 comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit
evidence 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 entity'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 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.

Opinion

In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of Northern Dynasty
Minerals Ltd. and subsidiaries as at December 31, 2014 and December 31, 2013,
and their financial performance and their cash flows for each of the years in
the three-year period ended December 31, 2014 in accordance with International
Financial Reporting Standards as issued by the International Accounting
Standards Board.

Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 1 of
the financial statements which indicates that the Company incurred a net loss of
$21,394,000 during the year ended December 31, 2014. This condition, along with
other matters as set forth in Note 1, indicates the existence of a material
uncertainty that casts substantial doubt about the Companys ability to continue
as a going concern.

Other Matter

We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the Companys
internal control over financial reporting as of December 31, 2014, based on the
criteria established in Internal Control  Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated March 30, 2015 expressed an unqualified opinion on the
Companys internal control over financial reporting.

/s/ Deloitte LLP

Chartered Accountants Vancouver, Canada March 30, 2015

---

|-90 -
|-----
|     

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Northern Dynasty
Minerals Ltd.

We have audited the internal control over financial reporting
of Northern Dynasty Minerals Ltd. and subsidiaries (the Company) as of
December 31, 2014, based on the criteria established in Internal
ControlIntegrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Company's management 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 Managements Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the
Company's internal control over financial reporting based on our audit.

We conducted our audit 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. Our audit included 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 considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a
process designed by, or under the supervision of, the company's principal
executive and principal financial officers, or persons performing similar
functions, 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 International Financial Reporting Standards as
issued by the International Accounting Standards Board. A company's internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with International
Financial Reporting Standards as issued by the International Accounting
Standards Board, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the
company; and (3) 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.

Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud
may not be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31,
2014, based on the criteria established in Internal Control  Integrated
Framework (2013)issued by the Committee of Sponsoring Organizations of the
Treadway Commission.

We have also audited, in accordance with Canadian generally
accepted auditing standards and the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements as of and
for the year ended December 31, 2014 of the Company and our report dated March
30, 2015 expressed an unmodified opinion on those financial statements and
included an emphasis of matter paragraph regarding the ability of the Company to
continue as a going concern.

/s/ Deloitte LLP

Chartered Accountants Vancouver, Canada March 30, 2015

---

|-91 -
|-----
|     

Consolidated Statements of Financial Position(Expressed in thousands of Canadian Dollars)

|                                              |  |       |  |   | December 31 |   |   | December 31 |  
|--------------------------------------------- |  | ----- |  | - | ----------- | - | - | ----------- | -
|                                              |  | Notes |  |   | 2014        |   |   | 2013        |  
|                                              |  |       |  |   |             |   |   |             |  
|ASSETS                                        |  |       |  |   |             |   |   |             |  
|                                              |  |       |  |   |             |   |   |             |  
|Non-current assets                            |  |       |  |   |             |   |   |             |  
|Mineral property, plant and equipment         |  | 3     |  | $ | 123,608     |   | $ | 108,050     |  
|Total non-current assets                      |  |       |  |   | 123,608     |   |   | 108,050     |  
|                                              |  |       |  |   |             |   |   |             |  
|Current assets                                |  |       |  |   |             |   |   |             |  
|Available-for-sale financial
      assets     |  | 4     |  |   | 287         |   |   |            |  
|Amounts receivable and prepaid
      expenses |  | 5     |  |   | 962         |   |   | 6,663       |  
|Restricted cash                               |  | 6     |  |   | 1,206       |   |   | 1,276       |  
|Cash and cash equivalents                     |  | 6     |  |   | 9,447       |   |   | 25,795      |  
|Total current assets                          |  |       |  |   | 11,902      |   |   | 33,734      |  
|                                              |  |       |  |   |             |   |   |             |  
|                                              |  |       |  |   |             |   |   |             |  
|Total Assets                                  |  |       |  | $ | 135,510     |   | $ | 141,784     |  
|                                              |  |       |  |   |             |   |   |             |  
|EQUITY                                        |  |       |  |   |             |   |   |             |  
|                                              |  |       |  |   |             |   |   |             |  
|Capital and reserves                          |  |       |  |   |             |   |   |             |  
|Share capital                                 |  | 7     |  | $ | 389,227     |   | $ | 389,227     |  
|Reserves                                      |  |       |  |   | 84,031      |   |   | 58,649      |  
|Deficit                                       |  |       |  |   | (345,295    | ) |   | (313,948    | )
|Total Equity                                  |  |       |  |   | 127,963     |   |   | 133,928     |  
|                                              |  |       |  |   |             |   |   |             |  
|LIABILITIES                                   |  |       |  |   |             |   |   |             |  
|                                              |  |       |  |   |             |   |   |             |  
|Non-current liabilities                       |  |       |  |   |             |   |   |             |  
|Deferred income taxes                         |  | 12    |  |   | 1,514       |   |   | 3,803       |  
|Total non-current liabilities                 |  |       |  |   | 1,514       |   |   | 3,803       |  
|                                              |  |       |  |   |             |   |   |             |  
|Current liabilities                           |  |       |  |   |             |   |   |             |  
|Payable to a related party                    |  | 8     |  |   | 383         |   |   | 459         |  
|Trade and other payables                      |  | 9     |  |   | 5,650       |   |   | 3,594       |  
|Total current liabilities                     |  |       |  |   | 6,033       |   |   | 4,053       |  
|                                              |  |       |  |   |             |   |   |             |  
|Total Liabilities                             |  |       |  |   | 7,547       |   |   | 7,856       |  
|                                              |  |       |  |   |             |   |   |             |  
|                                              |  |       |  |   |             |   |   |             |  
|Total Equity and Liabilities                  |  |       |  | $ | 135,510     |   | $ | 141,784     |  

Events after the reporting date (note 7(b)) Commitments
(note 14)

The accompanying notes are an integral part of these
consolidated financial statements.

---

|-92 -
|-----
|     

Consolidated Statements of Comprehensive Loss (Income)(Expressed in thousands of Canadian Dollars, except for share
information)

|                                                                |  |         |  |   | Year ended
      December 31 |  
|--------------------------------------------------------------- |  | ------- |  | - | ---------------------------- | -
|                                                                |  | Notes   |  |   | 2014                         |  
|                                                                |  |         |  |   |                              |  
|Expenses                                                        |  |         |  |   |                              |  
|Exploration and evaluation
      expenses                       |  | 3, 11   |  | $ | 12,877                       |  
|General and administrative
      expenses                       |  | 11      |  |   | 17,384                       |  
|Share-based compensation                                        |  | 7(c)    |  |   | 3,877                        |  
|Loss from operating activities                                  |  |         |  |   | 34,138                       |  
|Foreign exchange (gain) loss                                    |  |         |  |   | (221                         | )
|Interest income                                                 |  |         |  |   | (281                         | )
|Gain on discontinuance of equity method                         |  | 3(a)    |  |   |                             |  
|Loss before tax                                                 |  |         |  |   | 33,636                       |  
|Deferred Income tax                                             |  | 12      |  |   | (2,289                       | )
|Loss for the year                                               |  |         |  | $ | 31,347                       |  
|                                                                |  |         |  |   |                              |  
|Other comprehensive (income) loss                               |  |         |  |   |                              |  
|Items that may be reclassified
      subsequently to loss       |  |         |  |   |                              |  
|Foreign exchange translation difference                         |  | 3, 7(d) |  |   | (9,945                       | )
|Deferred income tax on investment in a
      foreign subsidiary |  | 7(d)    |  |   |                             |  
|Reversal of deferred income tax on investment                   |  | 7(d)    |  |   |                             |  
|Increase in fair value of available-for-sale financial assets   |  | 4       |  |   | (8                           | )
|Other comprehensive (income) loss for the year                  |  |         |  | $ | (9,953                       | )
|                                                                |  |         |  |   |                              |  
|Total comprehensive loss (income) for the year                  |  |         |  | $ | 21,394                       |  
|                                                                |  |         |  |   |                              |  
|Basic and diluted loss per common share                         |  | 10      |  | $ | 0.33                         |  

The accompanying notes are an integral part of these
consolidated financial statements.

---

|-93 -
|-----
|     

Consolidated Statements of Cash Flows(Expressed in
thousands of Canadian Dollars)

|                                                                                                                                                                                                                                                                                                                     |  |       |  |   | Year ended December 31 |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----- |  | - | ---------------------- | -
|                                                                                                                                                                                                                                                                                                                     |  | Notes |  |   | 2014                   |  
|                                                                                                                                                                                                                                                                                                                     |  |       |  |   |                        |  
|Cash flows from operating activities                                                                                                                                                                                                                                                                                 |  |       |  |   |                        |  
|Loss for the year                                                                                                                                                                                                                                                                                                    |  |       |  | $ | (31,347                | )
|Adjustments for items not affecting cash or
      operating activities:                                                                                                                                                                                                                                              |  |       |  |   |                        |  
|Deferred
      income tax recovery                                                                                                                                                                                                                                                                                   |  | 12    |  |   | (2,289                 | )
|Depreciation                                                                                                                                                                                                                                                                                                         |  |       |  |   | 282                    |  
|Loss on
      disposal of equipment                                                                                                                                                                                                                                                                                  |  |       |  |   | 13                     |  
|Interest
      received on cash held                                                                                                                                                                                                                                                                                 |  |       |  |   | (149                   | )
|Interest
      receivable on loan                                                                                                                                                                                                                                                                                    |  | 5     |  |   | (131                   | )
|Gain on
      discontinuance of equity method                                                                                                                                                                                                                                                                        |  | 3     |  |   |                       |  
|Share-based
      compensation                                                                                                                                                                                                                                                                                       |  |       |  |   | 3,877                  |  
|Unrealized
      exchange (gain) loss                                                                                                                                                                                                                                                                                |  |       |  |   | (211                   | )
|                                                                                                                                                                                                                                                                                                                     |  |       |  |   | 1,392                  |  
|Changes in working capital items                                                                                                                                                                                                                                                                                     |  |       |  |   |                        |  
|Restricted
      cash                                                                                                                                                                                                                                                                                                |  | 6(b)  |  |   | 171                    |  
|Amounts
      receivable and prepaid expenses                                                                                                                                                                                                                                                                        |  |       |  |   | 303                    |  
|Amounts
      receivable from a related party                                                                                                                                                                                                                                                                        |  |       |  |   |                       |  
|Trade and
      other payables                                                                                                                                                                                                                                                                                       |  |       |  |   | 1,747                  |  
|Payable to
      related party                                                                                                                                                                                                                                                                                       |  |       |  |   | (76                    | )
|                                                                                                                                                                                                                                                                                                                     |  |       |  |   | 2,145                  |  
|                                                                                                                                                                                                                                                                                                                     |  |       |  |   |                        |  
|Net
      cash used in operating activities                                                                                                                                                                                                                                                                          |  |       |  |   | (27,810                | )
|                                                                                                                                                                                                                                                                                                                     |  |       |  |   |                        |  
|Cash flows from investing activities                                                                                                                                                                                                                                                                                 |  |       |  |   |                        |  
|Cash contribution to the Pebble Limited
      Partnership                                                                                                                                                                                                                                                            |  | 3(a)  |  |   |                       |  
|Net cash received on assuming control of the
      Pebble Limited Partnership                                                                                                                                                                                                                                        |  | 3(a)  |  |   |                       |  
|Proceeds from disposal of equipment                                                                                                                                                                                                                                                                                  |  |       |  |   | 50                     |  
|Interest received on cash held                                                                                                                                                                                                                                                                                       |  |       |  |   | 149                    |  
|Net
      cash from investing activities                                                                                                                                                                                                                                                                             |  |       |  |   | 199                    |  
|                                                                                                                                                                                                                                                                                                                     |  |       |  |   |                        |  
|Cash flows from financing activities                                                                                                                                                                                                                                                                                 |  |       |  |   |                        |  
|Special warrants issued, net of issuance cost                                                                                                                                                                                                                                                                        |  | 7(b)  |  |   | 11,273                 |  
|Common shares issued for cash on exercise of share purchase
      options                                                                                                                                                                                                                                            |  | 7(c)  |  |   |                       |  
|Net
      cash from financing activities                                                                                                                                                                                                                                                                             |  |       |  |   | 11,273                 |  
|                                                                                                                                                                                                                                                                                                                     |  |       |  |   |                        |  
|Net decrease in cash and cash
      equivalents                                                                                                                                                                                                                                                                      |  |       |  |   | (16,338                | )
|Effect of exchange rate fluctuations on cash
      held                                                                                                                                                                                                                                                              |  |       |  |   | (10                    | )
|Cash
      and cash equivalents at beginning of the year                                                                                                                                                                                                                                                             |  |       |  |   | 25,795                 |  
|                                                                                                                                                                                                                                                                                                                     |  |       |  |   |                        |  
|Cash and cash equivalents at end of the year                                                                                                                                                                                                                                                                         |  | 6     |  | $ | 9,447                  |  
|                                                                                                                                                                                                                                                                                                                     |  |       |  |   |                        |  
|Non-cash investing and financing
      activities:                                                                                                                                                                                                                                                                   |  |       |  |   |                        |  
|The
      Company received available-for-sale financial assets in payment for
      650,000 Special warrants issued (note 7(b)) Assets and liabilities held in
      the Pebble Limited Partnership upon discontinuance of equity method and
      consolidation in these consolidated financial statements (note 3) |  |       |  |   |                        |  

The accompanying notes are an integral part of these
consolidated financial statements.

---

|-94 -
|-----
|     

Consolidated Statements of
 Changes in Equity(Expressed in thousands of
Canadian Dollars, except for share information)

|                                                                   |  | Notes |  |  | Share
      capital |  |   |         |  |   | Reserves    |   |   |             |      |   |             |   |   |          | 
|------------------------------------------------------------------ |  | ----- |  |  | ------------------- |  | - | ------- |  | - | ----------- | - | - | ----------- | ---- | - | ----------- | - | - | -------- | 
|                                                                   |  |       |  |  |                     |  |   |         |  |   | Equity      |   |   | Foreign     |      |   |             |   |   |          | 
|                                                                   |  |       |  |  |                     |  |   |         |  |   | settled     |   |   | currency    |      |   |             |   |   |          | 
|                                                                   |  |       |  |  |                     |  |   |         |  |   | share-based |   |   | translation |      |   | Investment  |   |   |          | 
|                                                                   |  |       |  |  | Number of           |  |   |         |  |   | payments    |   |   | reserve     |      |   | revaluation |   |   | Special  | 
|                                                                   |  |       |  |  | shares              |  |   | Amount  |  |   | reserve     |   |   | (note 7     | (d)) |   | reserve     |   |   | Warrants | 
|                                                                   |  |       |  |  |                     |  |   |         |  |   |             |   |   |             |      |   |             |   |   |          | 
|Balance at January 1, 2012                                         |  |       |  |  | 94,978,764          |  | $ | 388,987 |  | $ | 45,664      |   | $ | 2,470       |      | $ | (2          | ) | $ |         | 
|Shares issued for cash on exercise of share
      purchase options |  |       |  |  | 21,000              |  |   | 97      |  |   |            |   |   |            |      |   |            |   |   |         | 
|Fair value of options allocated to shares
      issued on exercise |  |       |  |  |                    |  |   | 105     |  |   | (105        | ) |   |            |      |   |            |   |   |         | 
|Share-based compensation                                           |  |       |  |  |                    |  |   |        |  |   | 5,225       |   |   |            |      |   |            |   |   |         | 
|Loss
      for the year                                            |  |       |  |  |                    |  |   |        |  |   |            |   |   |            |      |   |            |   |   |         | 
|Other comprehensive loss for the year net of tax                   |  |       |  |  |                    |  |   |        |  |   |            |   |   | (2,123      | )    |   |            |   |   |         | 
|Total comprehensive loss for the year                              |  |       |  |  |                     |  |   |         |  |   |             |   |   |             |      |   |             |   |   |          | 
|                                                                   |  |       |  |  |                     |  |   |         |  |   |             |   |   |             |      |   |             |   |   |          | 
|Balance at December 31, 2012                                       |  |       |  |  | 94,999,764          |  | $ | 389,189 |  | $ | 50,784      |   | $ | 347         |      | $ | (2          | ) | $ |         | 
|                                                                   |  |       |  |  |                     |  |   |         |  |   |             |   |   |             |      |   |             |   |   |          | 
|Balance at January 1, 2013                                         |  |       |  |  | 94,999,764          |  | $ | 389,189 |  | $ | 50,784      |   | $ | 347         |      | $ | (2          | ) | $ |         | 
|Fair value of options allocated to shares
      issued on exercise |  |       |  |  |                    |  |   | 8       |  |   | (8          | ) |   |            |      |   |            |   |   |         | 
|Shares issued for cash on exercise of share
      purchase options |  |       |  |  | 10,100              |  |   | 30      |  |   |            |   |   |            |      |   |            |   |   |         | 
|Share-based compensation                                           |  |       |  |  |                    |  |   |        |  |   | 641         |   |   |            |      |   |            |   |   |         | 
|Loss
      for the year                                            |  |       |  |  |                    |  |   |        |  |   |            |   |   |            |      |   |            |   |   |         | 
|Other comprehensive income for the year net of
      tax           |  |       |  |  |                    |  |   |        |  |   |            |   |   | 6,887       |      |   |            |   |   |         | 
|Total comprehensive income for the year                            |  |       |  |  |                     |  |   |         |  |   |             |   |   |             |      |   |             |   |   |          | 
|                                                                   |  |       |  |  |                     |  |   |         |  |   |             |   |   |             |      |   |             |   |   |          | 
|Balance at December 31, 2013                                       |  |       |  |  | 95,009,864          |  | $ | 389,227 |  | $ | 51,417      |   | $ | 7,234       |      | $ | (2          | ) | $ |         | 

---

|-95 -
|-----
|     

ConsolidatedStatementsofChangesinEquity(Expressed in thousands of
Canadian Dollars, except for share information)

|                                                         |  | Notes |     |  | Share
      capital |  |   |         |  |   | Reserves    |  |   |             |      |   |             |   |   |          | 
|-------------------------------------------------------- |  | ----- | --- |  | ------------------- |  | - | ------- |  | - | ----------- |  | - | ----------- | ---- | - | ----------- | - | - | -------- | 
|                                                         |  |       |     |  |                     |  |   |         |  |   | Equity      |  |   | Foreign     |      |   |             |   |   |          | 
|                                                         |  |       |     |  |                     |  |   |         |  |   | settled     |  |   | currency    |      |   |             |   |   |          | 
|                                                         |  |       |     |  |                     |  |   |         |  |   | share-based |  |   | translation |      |   | Investment  |   |   |          | 
|                                                         |  |       |     |  | Number of           |  |   |         |  |   | payments    |  |   | reserve     |      |   | revaluation |   |   | Special  | 
|                                                         |  |       |     |  | shares              |  |   | Amount  |  |   | reserve     |  |   | (note 7     | (d)) |   | reserve     |   |   | Warrants | 
|                                                         |  |       |     |  |                     |  |   |         |  |   |             |  |   |             |      |   |             |   |   |          | 
|Balance at January 1, 2014                               |  |       |     |  | 95,009,864          |  | $ | 389,227 |  | $ | 51,417      |  | $ | 7,234       |      | $ | (2          | ) | $ |         | 
|Special warrants issued net of transaction
      costs   |  | 7     | (b) |  |                    |  |   |        |  |   |            |  |   |            |      |   |            |   |   | 11,552   | 
|Share-based compensation                                 |  |       |     |  |                    |  |   |        |  |   | 3,877       |  |   |            |      |   |            |   |   |         | 
|Loss
      for the year                                  |  |       |     |  |                    |  |   |        |  |   |            |  |   |            |      |   |            |   |   |         | 
|Other comprehensive income for the year net of
      tax |  |       |     |  |                    |  |   |        |  |   |            |  |   | 9,945       |      |   | 8           |   |   |         | 
|Total comprehensive loss for the year                    |  |       |     |  |                     |  |   |         |  |   |             |  |   |             |      |   |             |   |   |          | 
|                                                         |  |       |     |  |                     |  |   |         |  |   |             |  |   |             |      |   |             |   |   |          | 
|Balance at December 31, 2014                             |  |       |     |  | 95,009,864          |  | $ | 389,227 |  | $ | 55,294      |  | $ | 17,179      |      | $ | 6           |   | $ | 11,552   | 

Theaccompanyingnotes are anintegralpart of theseconsolidatedfinancialstatements.

---

|-96 -
|-----
|     

|1. | NATURE AND CONTINUANCE OF
  OPERATIONS
|-- | --------------------------------------

Northern Dynasty Minerals Ltd. (the
"Company") is incorporated under the laws of the Province of British Columbia,
Canada, and its principal business activity is the exploration of mineral
properties. The Company is listed on the Toronto Stock Exchange ("TSX") under
the symbol "NDM" and on the New York Stock Exchange-MKT ("NYSE-MKT") under the
symbol "NAK". The Companys corporate office is located at 1040 West Georgia
Street, 15th floor, Vancouver, British Columbia.

The consolidated financial statements
("Financial Statements") of the Company as at and for the year ended December
31, 2014, include financial information for the Company and its subsidiaries
(note 2(c)) (together referred to as the "Group" and individually as "Group
entities"). The Company is the ultimate parent. The Groups core mineral
property interest is the Pebble Copper-Gold-Molybdenum Project (the "Pebble
Project") located in Alaska, United States of America ("USA" or "US").

The Group is in the process of
exploring and developing the Pebble Project and has not yet determined whether
the Pebble Project contains mineral reserves that are economically recoverable.
The Groups continuing operations and the underlying value and recoverability of
the amounts shown for the Groups mineral property interests, is entirely
dependent upon the existence of economically recoverable mineral reserves; the
ability of the Group to obtain financing to complete the exploration and
development of the Pebble Project; the Group obtaining the necessary permits to
mine; and future profitable production or proceeds from the disposition of the
Pebble Project.

During the year ended December 31,
2014, the Company arranged a private placement of special warrants for gross
proceeds of $15,500 (note 7(b)).

As at December 31, 2014, the Group has
$9.4 million in cash and cash equivalents for its operating requirements. The
Group has prioritized the allocation of available financial resources in order
to meet key corporate and Pebble Project expenditure requirements in the near
term. Additional financing will be required in order to progress any material
expenditures at the Pebble Project. Additional financing may include any of or a
combination of debt equity and/or contributions from possible new Pebble Project
participants. There can be no assurances that the Group will be successful in
obtaining additional financing. If the Group is unable to raise the necessary
capital resources and generate sufficient cash flows to meet obligations as they
come due, the Group may, at some point, consider reducing or curtailing its
operations. As such there is material uncertainty that casts substantial doubt
about the Companys ability to continue as a going concern.

In July 2014, the United States
Environmental Protection Agency (the "EPA") announced a proposal under Section
404(c) of the Clean Water Act to restrict and impose limitations on all
discharge of dredged or fill material ("EPA Action") associated with mining the
Pebble deposit. The Company believes that the EPA does not have the statutory
authority to impose conditions on the development at Pebble prior to the
submission of a detailed development plan and its thorough review by federal and
state agencies including review under the National Environmental Protection Act
("NEPA"). The Pebble Limited Partnership (the Pebble Partnership), a
wholly-owned subsidiary of the Company, along with the State of Alaska and the
Alaska Peninsula Corporation, an Alaska Native village corporation with
extensive land holdings in the Pebble Project area, filed for an injunction to
stop the EPA Action with the US Federal Court in Alaska (the "Court"). However,
the Court has deferred judgment thereon until the EPA has issued a final
determination. The Company has appealed the Courts decision to the
9th Circuit Court of Appeals. In September 2014, the Pebble
Partnership initiated a second action against the EPA in federal district court
in Alaska charging that the EPA violated the Federal Advisory Committee Act
("FACA"). In November 2014, the U.S. federal court judge in Alaska granted, in
relation to the FACA case, the Pebble Partnerships request for a preliminary
injunction, which, although considered by the Company as a significant
procedural milestone in the litigation, does not resolve the Pebble
Partnerships claims that the EPA Actions with respect to the Bristol Bay
Assessment and subsequent 404(c) regulatory process violated FACA. The Company
expects its legal rights will be upheld by the Court and that the Company will
ultimately be able to apply for the necessary permits under NEPA.

|2.    | SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|*(a)* | Statement of Compliance                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|      | These Financial Statements have been prepared in
      accordance with International Financial Reporting Standards ("IFRS") as
      issued by the International Accounting Standards Board ("IASB") and
      interpretations issued by the IFRS Interpretations Committee ("IFRIC"s)
      that are effective for the Groups reporting year ended December 31, 2014.
      These Financial Statements were authorized for issue by the Board of
      Directors on March 30, 2015.

---

|-97 -
|-----
|     

|(b) | Basis of Preparation                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | These Financial Statements have been prepared on a
      historical cost basis using the accrual basis of accounting, except for
      cash flow information and for financial instruments classified as
      available-for- sale, which are stated at their fair value (note 2 (f) and
      note 4). The accounting policies set out below have been applied
      consistently to all periods presented in these Financial
  Statements.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(c) | Basis of Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | These Financial Statements incorporate the financial
      statements of the Company, the Companys subsidiaries, and entities
      controlled by the Company and its subsidiaries listed
  below:                                                                                                                                                                                                                                         

| |                                  | Place of                 |  |                                                                                    |                
| | -------------------------------- | ------------------------ |  | ---------------------------------------------------------------------------------- | ---------------
| | Name of Subsidiary               | Incorporation            |  | Principal Activity                                                                 | Ownership      
| | U5 Resources Inc.1               | Nevada, USA              |  | Holding Company. Wholly- owned
      subsidiary of the Company.                    | 100%           
| | 0796412 BC Ltd.                  | British Columbia, Canada |  | Not active. Wholly-owned
      subsidiary of the Company.                          | 100%           
| | 3537137 Canada Inc.2             | Canada                   |  | Holding Company. Wholly- owned
      subsidiary of the Company.                    | 100%           
| | Pebble Services Inc.             | Nevada, USA              |  | Management and services company.
      Wholly-owned subsidiary of the Company.     | 100%           
| | Northern Dynasty Partnership     | Alaska, USA              |  | Holds 99.9% of the Pebble Limited
      Partnership and 100% of Pebble Mines Corp. | 100% (indirect)
| | Pebble Limited Partnership       | Alaska, USA              |  | Holding Company and Exploration
      of the Pebble Project.                       | 100% (indirect)
| | Pebble Mines Corp.               | Delaware, USA            |  | General Partner. Holds 0.1% of
      PLP.                                          | 100% (indirect)
| | Pebble West Claims Corporation 3 | Alaska, USA              |  | Holding Company. Subsidiary of
      the Pebble Limited Partnership.               | 100% (indirect)
| | Pebble East Claims Corporation 3 | Alaska, USA              |  | Holding Company. Subsidiary of
      the Pebble Limited Partnership.               | 100% (indirect)
| | Kaskanak Copper LLC 5            | Delaware, USA            |  | Holds 100% of Kaskanak Inc.
      Subsidiary of the Pebble Limited Partnership.    | 100% (indirect)
| | Kaskanak Inc. 4,5                | Alaska, USA              |  | Holding Company.                                                                   | 100% (indirect)

Notes to the table above:

| | 1  | Holds the claims acquired from Liberty Star (note 3
      (b)).                                            
| | -- | -----------------------------------------------------------------------------------------------------------
| |    |                                                                                                            
| | 2. | Holds 20% interest in the Northern Dynasty Partnership.
      The Company holds the remaining 80% interest.
| |    |                                                                                                            
| | 3. | Holds the Pebble Project claims.                                                                           
| |    |                                                                                                            
| | 4. | Holds claims located south and west of the Pebble Project
      claims.                                    
| |    |                                                                                                            
| | 5. | In January 2015, these entities were merged with Pebble
      East Claims Corporation.                     

Control is achieved when the Group is
exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power over the
investee. Specifically, the Group controls an investee if, and only if, the
Company has power over the investee (i.e. existing rights that give it the
current ability to direct the relevant activities of the investee); exposure, or
rights, to variable returns from its involvement with the investee; and the
ability to use its power over the investee to affect its returns.

Intra-Group balances and transactions,
including any unrealized income and expenses arising from intra-Group
transactions, are eliminated in preparing the Financial Statements. Unrealized
gains arising from transactions with equity accounted investees are eliminated
against the investment to the extent of the Groups interest in the investee.
Unrealized losses are eliminated in the same way as unrealized gains, but only
to the extent that there is no evidence of impairment.

---

|-98 -
|-----
|     

|(d) | Investment in Joint
Ventures
|--- | ----------------------------

A joint venture is a joint arrangement
whereby the parties that have joint control of the arrangement have rights to
the net assets of the joint arrangement. Joint control is the contractually
agreed sharing of control of an arrangement, which exists only when decisions
about the relevant activities require unanimous consent of the parties sharing
control.

An investment in a joint venture is
accounted for using the equity method. Under the equity method, an investment in
a joint venture is initially recognized in the consolidated statement of
financial position at cost and adjusted thereafter to recognize the Groups
share of changes in net assets of the joint venture attributable to the Group.
An investment is accounted for using the equity method from the date on which
the investee becomes a joint venture.

|(e) | Foreign Currencies
|--- | ------------------

The functional currency is the currency
of the primary economic environment in which the entity operates and has been
determined for each entity within the Group. The functional currency of U5
Resources Inc., Pebble Mines Corp., the Pebble Partnership and its subsidiaries,
is the US dollar and for all other entities within the Group, the functional
currency is the Canadian dollar. The functional currency determinations were
conducted through an analysis of the factors for consideration identified in IAS
21, The Effects of Changes in Foreign Exchange Rates.

Transactions in currencies other than
the functional currency are recorded at the rates of exchange prevailing on
dates of transactions. At the end of each reporting period, monetary assets and
liabilities that are denominated in foreign currencies are translated at the
rates prevailing at that date. Non-monetary assets and liabilities carried at
fair value that are denominated in foreign currencies are translated at rates
prevailing at the date when the fair value was determined. Non-monetary items
that are measured in terms of historical cost in a foreign currency are not
retranslated.

Before assuming control of the Pebble
Partnership in 2013, the Groups investment in the Pebble Partnership under
joint venture (note 3(a)) was translated at the end of each reporting period and
exchange differences arising on translation of the US denominated investment
were recognized directly in the foreign currency translation reserve through
other comprehensive income or loss (note 7(d)).

The results and financial position of
entities within the Group which have a functional currency that differs from
that of the Group are translated into Canadian dollars as follows:- (i) assets
and liabilities for each statement of financial position are translated at the
closing exchange rate at that date; (ii) income and expenses for each income
statement are translated at average exchange rates for the period; and (iii) the
resulting exchange differences are included in the foreign currency translation
reserve within equity.

|(f) | Financial Instruments
|--- | ---------------------

Non-derivative financial
assets:

The Group has the following
non-derivative financial assets: available-for-sale financial assets (note 4)
and loans and receivables.

Available-for-sale financial assets

Available-for-sale ("AFS") financial
assets are non-derivatives that are either designated as AFS or are not
classified as (i) loans and receivables, (ii) held-to-maturity investments or
(iii) financial assets at fair value through profit or loss. The Groups
investments in marketable securities are classified as AFS financial assets.
Subsequent to initial recognition, they are measured at fair value and changes
therein, other than impairment losses, are recognized in other comprehensive
income or loss and accumulated in the investment revaluation reserve within
equity. When an investment is derecognized, the cumulative gain or loss in the
investment revaluation reserve is transferred to profit or loss.

---

|-99 -
|-----
|     

The fair value of AFS monetary assets
denominated in a foreign currency is determined in that foreign currency and
translated at the spot rate at the end of the reporting period. The change in
fair value attributable to translation differences that result from the
amortized cost of the monetary asset is recognized within other comprehensive
income or loss. The change in fair value of AFS equity investments is recognized
in other comprehensive income or loss.

Loans and receivables

Loans and receivables are financial
assets with fixed or determinable payments that are not quoted in an active
market. Such assets are initially recognized at fair value plus any directly
attributable transaction costs. Subsequent to initial recognition, loans and
receivables are measured at amortized cost using the effective interest method,
less any impairment losses.

Loans and receivables consist of cash
and cash equivalents, restricted cash (note 6), and amounts receivable (note 5).

Cash and cash equivalents and
restricted cash

Cash and cash equivalents and
restricted cash in the statements of financial position are comprised of cash
and highly liquid investments having maturity dates of three months or less from
the date of purchase, which are readily convertible into known amounts of cash.

The Groups cash and cash equivalents
and restricted cash are invested in business and savings accounts and guaranteed
investment certificates at major financial institutions and are available on
demand by the Group for its programs and, as such, are subject to an
insignificant risk of change in value.

Non-derivative financial
liabilities:

The Groups non-derivative financial
liabilities comprise trade and other payables (note 9) and a payable to a
related party (note 8).

All financial liabilities fall within
the classification of other financial liabilities versus financial liabilities
through profit or loss, and are recognized initially at fair value net of any
directly attributable transaction costs. Subsequent to initial recognition these
financial liabilities are measured at amortized cost using the effective
interest method.

Impairment of financial
assets:

When an AFS financial asset is
considered to be impaired, cumulative gains or losses previously recognized in
other comprehensive income or loss are reclassified to profit or loss in the
period. Financial assets are assessed for indicators of impairment at the end of
each reporting period. Financial assets are impaired when there is objective
evidence that, as a result of one or more events that occurred after the initial
recognition of the financial assets, the estimated future cash flows of the
investments have been impacted. For marketable securities classified as AFS, a
significant or prolonged decline in the fair value of the securities below their
cost is considered to be objective evidence of impairment.

For all other financial assets,
objective evidence of impairment could include:

| |  | significant financial difficulty of the issuer
      or counterparty; or                        
| | - | ------------------------------------------------------------------------------------------------
| |   |                                                                                                 
| |  | default or delinquency in interest or principal
      payments; or                              
| |   |                                                                                                 
| |  | it becoming probable that the borrower will
      enter bankruptcy or financial re-organization.

For certain categories of financial
assets, such as amounts receivable, assets that are assessed not to be impaired
individually are subsequently assessed for impairment on a collective basis. The
carrying amount of financial assets is reduced by the impairment loss directly
for all financial assets with the exception of amounts receivable, where the
carrying amount is reduced through the use of an allowance account. When an
amount receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts
previously written off are credited against the allowance account. Changes in
the carrying amount of the allowance account are recognized in profit or
loss.

---

|-100 -
|------
|      

With the exception of AFS equity
instruments, if, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event occurring
after the impairment was recognized, the previously recognized impairment loss
is reversed through profit or loss to the extent that the carrying amount of the
investment at the date the impairment is reversed does not exceed what the
amortized cost would have been had the impairment not been recognized. In
respect of AFS equity securities, impairment losses previously recognized
through profit or loss are not reversed through profit or loss. Any increase in
fair value subsequent to an impairment loss is recognized directly in
equity.

When an AFS financial asset is
considered to be impaired, cumulative gains or losses previously recognized in
other comprehensive income are reclassified to profit or loss in the period.

Derivative financial assets and
liabilities:

The Group has no derivative financial
assets or liabilities.

|(g) | Exploration and Evaluation
  Expenditure
|--- | ----------------------------------------

Exploration and evaluation expenditures
include the costs of acquiring licenses, costs associated with exploration and
evaluation activity, and the acquisition date fair value of exploration and
evaluation assets acquired in a business combination or an asset acquisition.
Exploration and evaluation expenditures are expensed as incurred except for
expenditures associated with the acquisition of exploration and evaluation
assets through a business combination or an asset acquisition. Costs incurred
before the Group has obtained the legal rights to explore an area are
expensed.

Acquisition costs, including general
and administrative costs, are only capitalized to the extent that these costs
can be related directly to operational activities in the relevant area of
interest where it is considered likely to be recoverable by future exploitation
or sale or where the activities have not reached a stage which permits a
reasonable assessment of the existence of reserves.

Exploration and evaluation ("E&E")
assets are assessed for impairment only when facts and circumstances suggest
that the carrying amount of an E&E asset may exceed its recoverable amount
and when the Group has sufficient information to reach a conclusion about
technical feasibility and commercial viability.

Industry-specific indicators for an
impairment review arise typically when one of the following circumstances
applies:

| |  | Substantive expenditure on further exploration
      and evaluation activities is neither budgeted nor planned;
| | - | ---------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                
| |  | title to the asset is compromised;                                                                             
| |   |                                                                                                                
| |  | adverse changes in the taxation and regulatory
      environment;                                              
| |   |                                                                                                                
| |  | adverse changes in variations in commodity
      prices and markets; and                                       
| |   |                                                                                                                
| |  | variations in the exchange rate for the
      currency of operation.                                           

Once the technical feasibility and
commercial viability of the extraction of mineral resources in an area of
interest are demonstrable, exploration and evaluation assets attributable to
that area of interest are first tested for impairment and then reclassified to
mining property and development assets within property, plant and equipment.

Recoverability of the carrying amount
of any exploration and evaluation assets is dependent on successful development
and commercial exploitation, or alternatively, sale of the respective assets.

---

|-101 -
|------
|      

|(h) | Mineral property, plant and
  equipment
|--- | ---------------------------------------

Mineral property, plant and equipment
are carried at cost, less accumulated depreciation and accumulated impairment
losses.

The cost of mineral property, plant and
equipment consists of the acquisition costs transferred from E&E assets, any
costs directly attributable to bringing the asset to the location and condition
necessary for its intended use, including costs to further delineate the ore
body, development and construction costs, removal of overburden to initially
expose the ore body, an initial estimate of the costs of dismantling, removing
the item and restoring the site on which it is located and, if applicable,
borrowing costs.

Mineral property acquisition and
development costs are not currently depreciated as the Pebble Project is still
in the development stage and no saleable minerals are being produced.

The cost of an item of plant and
equipment consists of the purchase price, any costs directly attributable to
bringing the asset to the location and condition necessary for its intended use,
and an initial estimate of the costs of dismantling and removing the item and
restoring the site on which it is located.

Depreciation is provided at rates
calculated to write off the cost of plant and equipment, less their estimated
residual value, using the declining balance method at various rates ranging from
20% to 30% per annum.

An item of equipment is derecognized
upon disposal or when no future economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising on disposal of the asset,
determined as the difference between the net disposal proceeds and the carrying
amount of the asset, is recognized in profit or loss.

Where an item of equipment consists of
major components with different useful lives, the components are accounted for
as separate items of equipment. Expenditures incurred to replace a component of
an item of equipment that is accounted for separately, including major
inspection and overhaul expenditures, are capitalized.

Residual values and estimated useful
lives are reviewed at least annually.

|(i) | Impairment of Non-Financial
  Assets
|--- | ------------------------------------

At the end of each reporting period the
carrying amounts of the Groups non-financial assets are reviewed to determine
whether there is any indication that these assets are impaired. If any such
indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss, if any. Where it is not possible to
estimate the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs. The
recoverable amount is the higher of fair value less costs to sell and value in
use. Fair value is determined as the amount that would be obtained from the sale
of the asset in an arms length transaction between knowledgeable and willing
parties. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to
the asset. If the recoverable amount of an asset is estimated to be less than
its carrying amount, the carrying amount of the asset is reduced to its
recoverable amount and the impairment loss is recognized in profit or loss for
the period. For an asset that does not generate largely independent cash
inflows, the recoverable amount is determined for the cash generating unit to
which the asset belongs.

Where an impairment loss subsequently
reverses, the carrying amount of the asset (or cash-generating unit) is
increased to the revised estimate of its recoverable amount. This increase in
the carrying amount is limited to the carrying amount that would have been
determined had no impairment loss been recognized for the asset (or
cash-generating unit) in prior years. A reversal of an impairment loss is
recognized immediately in profit or loss.

The Group has not recorded any
impairment charges in the years presented.

|(j) | Share Capital and Special
  Warrants
|--- | ------------------------------------

Common shares and special warrants
(note 7(b)) are classified as equity. Transaction costs directly attributable to
the issue of common shares, share purchase options and special warrants are
recognized as a deduction from equity, net of any tax effects. Upon conversion
of the special warrants into common shares, the carrying amount of the special
warrants, net of a pro rata share of the transaction costs, is transferred to
common share capital.

---

|-102 -
|------
|      

|(k) | Share-based Payment
Transactions
|--- | --------------------------------

Equity-settled share-based
payments

The Group operates an equity-settled
share-based option plan for its employees and service providers (note 7(c)). The
fair value of share purchase options granted is recognized as an employee or
consultant expense with a corresponding increase in the equity-settled
share-based payments reserve in equity. An individual is classified as an
employee when the individual is an employee for legal or tax purposes ("direct
employee") or provides services similar to those performed by a direct
employee.

The fair value is measured at grant
date for each tranche, which is expensed on a straight line basis over the
vesting period, with a corresponding increase in the equity-settled
share-based payments reserve in equity. The fair value of the share purchase
options granted is measured using the Black-Scholes option pricing model, taking
into account the terms and conditions upon which the share purchase options were
granted and forfeiture rates as appropriate. At the end of each reporting
period, the amount recognized as an expense is adjusted to reflect the actual
number of share purchase options that are expected to vest.

|(l) | Income Taxes
|--- | ------------

Income tax on the profit or loss for
the years presented comprises current and deferred tax. Income tax is recognized
in profit or loss except to the extent that it relates to items recognized in
other comprehensive income or loss or directly in equity, in which case it is
recognized in other comprehensive income or loss or equity.

Current tax expense is the expected tax
payable on the taxable income for the year, using tax rates enacted or
substantively enacted at year end, adjusted for amendments to tax payable with
regard to previous years.

Deferred tax is provided using the
balance sheet liability method, providing for unused tax loss carry forwards and
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. The
following temporary differences are not provided for: goodwill not deductible
for tax purposes; the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit; and differences relating to investments
in subsidiaries, associates, and joint ventures to the extent that they will
probably not reverse in the foreseeable future. The amount of deferred tax
provided is based on the expected manner of realization or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or
substantively enacted at the end of the reporting period applicable to the
period of expected realization or settlement.

A deferred tax asset is recognized only
to the extent that it is probable that future taxable profits will be available
against which the asset can be utilized.

Additional income taxes that arise from
the distribution of dividends are recognized at the same time as the liability
to pay the related dividend.

Deferred tax assets and liabilities are
offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by
the same taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.

|(m) | Restoration, Rehabilitation, and Environmental
      Obligations
|--- | ----------------------------------------------------------------

An obligation to incur restoration,
rehabilitation and environmental costs arises when environmental disturbance is
caused by the exploration or development of a mineral property interest. Such
costs arising from the decommissioning of plant and other site preparation work,
discounted to their net present value, are provided for and capitalized at the
start of each project to the carrying amount of the asset, along with a
corresponding liability as soon as the obligation to incur such costs arises.
The timing of the actual rehabilitation expenditure is dependent on a number of
factors such as the life and nature of the asset, the operating license
conditions and, when applicable, the environment in which the mine operates.

Discount rates using a pre-tax rate
that reflects the time value of money are used to calculate the net present
value. These costs are charged against profit or loss over the economic life of
the related asset, through amortization using either the unit-of-production or
the straight line method. The corresponding liability is progressively increased
as the effect of discounting unwinds, creating an expense recognized in profit
or loss.

Decommissioning costs are also adjusted
for changes in estimates. Those adjustments are accounted for as a change in the
corresponding capitalized cost, except where a reduction in costs is greater
than the unamortized capitalized cost of the related assets, in
which case the capitalized cost is reduced to nil and the remaining adjustment
is recognized in profit or loss.

---

|-103 -
|------
|      

The operations of the Group have been,
and may in the future be, affected from time to time in varying degree by
changes in environmental regulations, including those for site restoration
costs. Both the likelihood of new regulations and their overall effect upon the
Group are not predictable.

The Group has no material restoration,
rehabilitation and environmental obligations as the disturbance to date is
immaterial.

|(n) | Loss per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | The Group presents basic and diluted loss per share data
      for its common shares, calculated by dividing the loss attributable to
      common shareholders of the Group by the weighted average number of common
      shares outstanding during the year. Diluted loss per share does not adjust
      the loss attributable to common shareholders or the weighted average
      number of common shares outstanding when the effect is
    anti-dilutive.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(o) | Segment Reporting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | The Group operates in a single reportable operating
      segment  the acquisition, exploration and development of mineral
      properties. The Groups core asset is the Pebble Project, which is located
      in Alaska, USA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(p) | Significant Accounting Estimates and
    Judgments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | The preparation of these Financial Statements requires
      management to make certain estimates, judgments and assumptions that
      affect the reported amounts of assets and liabilities at the date of the
      Financial Statements and reported amounts of expenses during the reporting
      period. Actual outcomes could differ from these estimates. These Financial
      Statements include estimates which, by their nature, are uncertain. The
      impacts of such estimates are pervasive throughout the Financial
      Statements, and may require accounting adjustments based on future
      occurrences. Revisions to accounting estimates are recognized in the
      period in which the estimate is revised and future periods if the revision
      affects both current and future periods. These estimates are based on
      historical experience, current and future economic conditions and other
      factors, including expectations of future events that are believed to be
      reasonable under the circumstances.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Sources of estimation uncertainty                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Significant assumptions about the future and other
      sources of estimation uncertainty that management has made at the end of
      the reporting period, that could result in a material adjustment to the
      carrying amounts of assets and liabilities, in the event that actual
      results differ from assumptions made, relate to, but are not limited to,
      the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| | i.   | The Group uses the Black-Scholes Option Pricing Model to
      calculate the fair value of share purchase options granted for determining
      share-based compensation included in the loss for the year. Inputs used in
      this model require subjective assumptions, including the expected price
      volatility from three to five years. Changes in the subjective input
      assumptions can affect the fair value estimate, and therefore the existing
      models do not necessarily provide a reliable single measure of the fair
      value of the Groups share purchase options. The weighted average
      assumptions applied are disclosed in Note 7(c).
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ii.  | The Group received clear title to certain mineral claims
      (the Settlement Claims) as a result of the release of all liens thereon
      in payment of the loan receivable by the debtor (refer note 5). The Group
      has recognized the Settlement Claims in mineral property interest at the
      carrying value of the outstanding loan receivable on the date the mutual
      release was signed by the Group.                                                                                                                                                                                                                                                   
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | iii. | Significant assumptions about the future and other
      sources of estimation uncertainty are made in determining the provision
      for any deferred income tax expense included in the loss for the year and
      the composition of deferred income tax liabilities included in the
      Statement of Financial Position.                                                                                                                                                                                                                                                                                                                                                

---

|-104 -
|------
|      

Critical accounting judgments

These include:

| | i.   | In terms of IFRS 6, Exploration and Evaluation of
      Mineral Resources,management identified indicators that required
      testing the Groups mineral property interest ("MPI") for impairment. The
      Group used judgment in determining from an analysis of facts and
      circumstances that no impairment of the MPI was necessary.                                                                                                                                                                                                                                                                                                                                                      
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ii.  | IAS 21, The Effects of Changes in Foreign Exchange
      Rates("IAS 21") defines the functional currency as the currency of
      the primary economic environment in which an entity operates. IAS 21
      requires the determination of functional currency to be performed on an
      entity by entity basis, based on various primary and secondary factors. In
      identifying the functional currency of the parent and its subsidiaries,
      management considered the currency in which financing activities are
      denominated and the currency that mainly influences the cost of
      undertaking the business activities in each jurisdiction in which the
      Group operates.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | iii. | The Group has employed judgement that going concern was
      an appropriate basis for the preparation of the Financial Statements, as
      the Group has prioritized the allocation of available financial resources
      to meet key corporate Pebble Project expenditure requirements in the near
      term (refer note 1).                                                                                                                                                                                                                                                                                                                                                                     

|(q) | Amendments, Interpretations, Revised and New Standards
      Adopted by the Group                                   
|--- | --------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                     
|    | Effective January 1, 2014 the Group adopted several new
      and revised standards, which are described as
follows:

| |  | Amendments to IAS 32, Financial Instruments:
      Presentation. The amendments clarify existing application issues
      relating to the offset of financial assets and financial liabilities
      requirements. Specifically, the amendments clarify the meaning of
      "currently has a legal enforceable right of set- off" and "simultaneous
      realization and settlement".                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Amendments to IAS 36, Impairment of
      Assets. The amendments clarify the recoverable amount disclosures for
      non-financial assets, including additional disclosures about the
      measurement of the recoverable amount of impaired assets when the
      recoverable amount was based on fair value less costs of disposal. The
      amendments apply retrospectively.                                                                                                                                                                                                                                                                                                                   
| |  | IFRIC 21, Levies("IFRIC 21"), provides
      guidance on accounting for levies in accordance with the requirements of
      IAS 37, Provisions, Contingent Liabilities and Contingent Assets.
      The Interpretation defines a levy as an outflow from an entity imposed by
      a government in accordance with legislation, and explicitly excludes from
      its scope outflows related to IAS 12, Income Taxes, fines and
      penalties and liabilities arising from emission trading schemes. IFRIC 21
      clarifies that a liability is recognized only when the triggering event
      specified in the legislature occurs and not before. IFRIC 21 is effective
      retrospectively.

These amendments and interpretation did
not impact the preparation of these Financial Statements given 1) the Group does
not employ the use of financial instruments as contemplated; 2) the Group has
not impaired non-financial assets; and 3) the Group is not currently subject to
levies as defined in IFRIC 21.

|(r) | Accounting Standards, Amendments and Revised Standards
      Not Yet Effective
|--- | ------------------------------------------------------------------------------

Effective for the Groups financial
year commencing on January 1, 2016

| |  | Amendments to IAS 1, Presentation of
      Financial Statements
| | - | ---------------------------------------------------------------
| |  | Amendments to IAS 16, Property, Plant and
      Equipment      
| |  | Amendments to IAS 27, Separate Financial
      Statements      
| |  | Amendments to IAS 28, Investments in
      Associates          
| |  | Amendments to IAS 38, Intangible Assets                        
| |  | Amendments to IFRS 10, Consolidated
      Financial Statements 
| |  | Amendments to IFRS 11, Joint
      Arrangements                

The Group has not early adopted these
revised standards and is currently assessing the impact, if any, that these
amendments will have on the Groups Financial Statements.

Effective for annual periods
commencing on or after July 1, 2016

| |  | Annual improvements to IFRS 2012  2014
      Cycle ("AIP 2012-2014")
| | - | ---------------------------------------------------------------------

The Group anticipates that AIP
2012-2014, which has amendments to five standards, will have no material effect
on the Groups consolidated financial statements.

---

|-105 -
|------
|      

Effective for annual periods
commencing on or after January 1, 2017

| |  | IFRS 15, Revenue from Contracts with Customers("IFRS 15"), which was issued by the IASB in May 2014, supersedes IAS
      11, Construction Contracts, IAS 18, Revenue, IFRIC 13,
      Customer Loyalty Programmes, IFRIC 15, Agreements for the
      Construction of Real Estate, IFRIC 18, Transfers of Assets
      from Customers,and SIC 31, Revenue Barter Transactions
      involving Advertising Services. IFRS 15 establishes a single five-step
      model framework for determining the nature, amount, timing and certainty
      of revenue and cash flows arising from a contract with a customer. IFRS 15
      is effective for annual periods beginning on or after January 1, 2017,
      with early adoption permitted.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Group is currently evaluating the
impact that IFRS 15 may have on its financial statements.

Effective for annual periods
commencing on or after January 1, 2018

| |  | IFRS 9, Financial Instruments("IFRS 9"), replaces
      IAS 39, Financial Instruments: Recognition and Measurement,
      in its entirety. The standard incorporates a number of improvements: a)
      includes a logical model for classification and measurement (IFRS 9
      provides for principle-based approach to classification which is driven by
      cash flow characteristics and the business model in which an asset is
      held); b) includes a single, forward-looking "expected loss" impairment
      model (IFRS 9 will require entities to account for expected credit losses
      from when financial instruments are first recognized and to recognize full
      lifetime expected losses on a timely basis); and c) includes a
      substantially-reformed model for hedge accounting with enhanced
      disclosures about risk management activity (IFRS 9s new model aligns the
      accounting treatment with risk management activities). IFRS 9 is effective
      for annual periods beginning on or after 1 January 2018 with early
      adoption permitted.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Group anticipates that the adoption of IFRS 9 will have no
material impact on its financial statements given the extent of its current use
of financial instruments in the ordinary course of business.

|3. | MINERAL PROPERTY, PLANT AND
  EQUIPMENT
|-- | ---------------------------------------

The Groups exploration and evaluation
assets are comprised of the following:

| | Year ended December 31,
      2014      |   | Mineral Property |  |   | Plant and |   |   | Total   |  
| | --------------------------------------- | - | ---------------- |  | - | --------- | - | - | ------- | -
| |                                         |   | interest         |  |   | equipment |   |   |         |  
| | Cost                                    |   |                  |  |   |           |   |   |         |  
| | Beginning balance                       | $ | 106,697          |  | $ | 1,222     |   | $ | 107,919 |  
| | Additions during the year (note 3(b))   |   | 5,844            |  |   |          |   |   | 5,844   |  
| | Dispositions during the year            |   |                 |  |   | (67       | ) |   | (67     | )
| | Ending balance                          | $ | 112,541          |  | $ | 1,155     |   | $ | 113,696 |  
| |                                         |   |                  |  |   |           |   |   |         |  
| | Accumulated depreciation                |   |                  |  |   |           |   |   |         |  
| | Beginning balance                       | $ |                 |  | $ |          |   | $ |        |  
| |                                         |   |                  |  |   |           |   |   |         |  
| | Charge for the year(1)                  |   |                 |  |   | (282      | ) |   | (282    | )
| | Eliminated on disposal                  |   |                 |  |   | 4         |   |   | 4       |  
| | Ending balance                          | $ |                 |  | $ | (278      | ) | $ | (278    | )
| |                                         |   |                  |  |   |           |   |   |         |  
| | Foreign currency translation difference |   | 10,095           |  |   | 95        |   |   | 10,190  |  
| |                                         |   |                  |  |   |           |   |   |         |  
| | Net carrying value  Ending balance     | $ | 122,636          |  | $ | 972       |   | $ | 123,608 |  

---

|-106 -
|------
|      

| | Year ended December 31, 2013            |   | Mineral Property |  |   | Plant and |  |   | Total   | 
| | --------------------------------------- | - | ---------------- |  | - | --------- |  | - | ------- | 
| |                                         |   | interest         |  |   | equipment |  |   |         | 
| | Cost                                    |   |                  |  |   |           |  |   |         | 
| | Beginning balance (note 3(b))           | $ | 1,055            |  | $ |          |  | $ | 1,055   | 
| | Additions during the year (note 3(a))   |   | 105,642          |  |   | 1,222     |  |   | 106,864 | 
| | Ending balance                          | $ | 106,697          |  | $ | 1,222     |  | $ | 107,919 | 
| |                                         |   |                  |  |   |           |  |   |         | 
| | Accumulated depreciation                |   |                  |  |   |           |  |   |         | 
| | Beginning balance                       | $ |                 |  | $ |          |  | $ |        | 
| | Charge for the year(1)                  |   |                 |  |   |          |  |   |        | 
| | Eliminated on disposal                  |   |                 |  |   |          |  |   |        | 
| | Ending balance                          | $ |                 |  | $ |          |  | $ |        | 
| |                                         |   |                  |  |   |           |  |   |         | 
| | Foreign currency translation difference |   | 130              |  |   | 1         |  |   | 131     | 
| |                                         |   |                  |  |   |           |  |   |         | 
| | Net carrying value  Ending balance     | $ | 106,827          |  | $ | 1,223     |  | $ | 108,050 | 

| | (1) | Depreciation has been included in the loss for the year
      and has been classified as exploration and evaluation
  expenses.
| | --- | -------------------------------------------------------------------------------------------------------------------------------

Mineral Property Interest

| | (a) | Pebble Project
| | --- | --------------

The Pebble Project is located in
southwest Alaska, 19 miles (30 kilometers) from the villages of Iliamna and
Newhalen, and approximately 200 miles (320 kilometers) southwest of the city of
Anchorage. Mineral rights were acquired by the Group in 2001. In July 2007, the
Group established the Pebble Limited Partnership (the "Pebble Partnership") to
advance the Pebble Project toward the feasibility stage. The Groups
contribution to the Pebble Partnership was the Pebble Project. A wholly-owned
subsidiary of Anglo American plc participated in the Pebble Partnership and
provided approximately $595 million (US$573 million) in funding until its
withdrawal in December 2013, when the Group re-acquired a 100% interest in the
Pebble Partnership and control of the Pebble Project.

The functional currency of the Pebble
Partnership is the US dollar. Exchange differences arising from the translation
of the investment in the Pebble Partnership are recognized directly in the
foreign currency translation reserve through other comprehensive income or loss
(note 7(d)). The following summarizes the movement in the carrying value of the
investment in the Pebble Partnership under joint venture:

| | Investment in the Pebble
      Partnership                                               |   | December 31 |   |   | Decembe |  
| | ---------------------------------------------------------------------------------------- | - | ----------- | - | - | ------- | -
| |                                                                                          |   | 2013        |   |   | 2012    |  
| | Carrying value at the beginning of the year                                              | $ | 99,336      |   | $ | 101,542 |  
| | Cash contribution to Pebble
      Partnership                                            |   | 1,055       |   |   |        |  
| | Gain on increase in net assets
      of Pebble Partnership                               |   | 5,062       |   |   |        |  
| | Exchange difference on
      translation of investment in Pebble Partnership (note 7(d)) |   | 6,736       |   |   | (2,206  | )
| | Discontinuance of equity method                                                          |   | (112,189    | ) |   |        |  
| | Carrying value at the end of the year                                                    | $ |            |   | $ | 99,336  |  

| | (b) | Other Claims
| | --- | ------------

The Group acquired mineral claims
located to the west of the Pebble Project in 2010 for a cash payment of
US$1,000,000 ($1,055) from Liberty Star Uranium & Metals Corp. and its
subsidiary, Big Chunk Corp. (together, "Liberty Star"). During the year, the
Group received further claims from Liberty Star in settlement for amounts
advanced to Liberty Star (note 5).

|4. | AVAILABLE-FOR-SALE FINANCIAL
  ASSETS
|-- | -------------------------------------

The Groups available-for-sale
financial asset is comprised of investments in marketable securities of Canadian
publicly listed companies.

| |                       |   | December 31 |  |   | December 31 | 
| | --------------------- | - | ----------- |  | - | ----------- | 
| |                       |   | 2014        |  |   | 2013        | 
| | Marketable securities | $ | 287         |  | $ |            | 

---

|-107 -
|------
|      

|5. | AMOUNTS RECEIVABLE AND PREPAID
  EXPENSES
|-- | -----------------------------------------

| |                             |   | December 31 |  |   | December 31 | 
| | --------------------------- | - | ----------- |  | - | ----------- | 
| |                             |   | 2014        |  |   | 2013        | 
| | Sales tax receivable        | $ | 70          |  | $ | 94          | 
| | Amounts receivable          |   | 143         |  |   | 217         | 
| | Loan receivable (note 5(a)) |   |            |  |   | 5,479       | 
| | Prepaid expenses            |   | 749         |  |   | 873         | 
| | Total                       | $ | 962         |  | $ | 6,663       | 

|(a) | Loan Receivable
|--- | ---------------

The loan receivable at December 31,
2013 comprised the amount advanced to Liberty Star in cash and expenditures
incurred by the Group in relation to Liberty Stars mineral claims in Alaska and
interest accrued thereon (together, the "Loan") pursuant to a letter agreement
dated June 2010 and subsequent amendments thereof (together, the "Letter
Agreement"). The Loan accrued interest at 10% per annum, compounded monthly, and
was secured by assets and mining claims owned by Liberty Star in Alaska,
USA.

The following is a summary of the Loan
until its settlement on March 27, 2014:

| |                                                                                                      |   | March 27          |   |   | December3 | 
| | ---------------------------------------------------------------------------------------------------- | - | ----------------- | - | - | --------- | 
| |                                                                                                      |   | 2014              |   |   | 2013      | 
| | Balance of the principal amount:                                                                     |   | (Settlement date) |   |   |           | 
| | Cash advance (US$3,000,000)                                                                          | $ | 3,325             |   | $ | 3,191     | 
| | Expenses incurred on behalf of Liberty Star (US$730,174)                                             |   | 810               |   |   | 776       | 
| | Total principal amount receivable
      (US$3,730,174)                                               |   | 4,135             |   |   | 3,967     | 
| | Accumulated accrued interest (March 27, 2014
      - US$1,542,203; December 31, 2013 - US$1,421,306) |   | 1,709             |   |   | 1,512     | 
| | Balance at settlement date/as of December
      31, 2013                                             |   |                   |   |   |           | 
| | (March 27, 2014 - US$5,272,377; December 31,
      2013 - US$5,151,480)                              |   | 5,844             |   |   | 5,479     | 
| | Loan
      extinguished with transfer of mineral claims (note 6)                                     |   | (5,844            | ) |   |          | 
| | Balance at end of year                                                                               | $ |                  |   | $ | 5,479     | 

The Loan was advanced in conjunction
with the acquisition of a mineral property interest (note 3) pursuant to the
Letter Agreement, which contemplated a joint venture agreement whereby the
Group, subject to an earn-in expenditure requirement, could acquire a 60%
interest in certain of Liberty Stars mineral claims adjacent to the mineral
claims acquired. Liberty Stars assets held as collateral for the Loan included,
but were not limited to, these mineral claims.

In October 2012, as the joint venture
agreement was not executed, the Group delivered a notice of repayment of the
Loan to Liberty Star. In November 2012, the Group and Liberty Star negotiated a
loan settlement agreement and an amendment thereto (together; the "Loan
Settlement Agreement"), whereby the Group agreed to extinguish the Loan in
consideration for receiving title to certain of Liberty Stars mineral claims
(the "Settlement Claims") which were held as collateral for the Loan. Liberty
Star, however, could not complete valid transfer of these claims to the Group as
a third party purported to register a lien on the Settlement Claims in respect
of a debt allegedly owed by Liberty Star. As a result and in accordance with the
terms of the Loan Settlement Agreement, the Loan Settlement Agreement was not
closed and the Group retained all its rights under the Letter Agreement at
December 31, 2013, at which date the Group continued to recognize the Loan as a
financial asset. On March 27, 2014, all outstanding liens against the Settlement
Claims were released and the Group extinguished the Loan and recognized the
addition of the Settlement Claims in mineral property interest for the same
amount (note 3).

---

|-108 -
|------
|      

|6.  | CASH AND CASH EQUIVALENTS AND RESTRICTED
      CASH
|--- | ---------------------------------------------------
|    |                                                    
|(a) | Cash and Cash Equivalents                          

| |                                    |   | December 31 |  |   | December 31 | 
| | ---------------------------------- | - | ----------- |  | - | ----------- | 
| |                                    |   | 2014        |  |   | 2013        | 
| | Business and savings accounts      | $ | 9,130       |  | $ | 7,334       | 
| | Guaranteed investment certificates |   | 317         |  |   | 18,461      | 
| | Total                              | $ | 9,447       |  | $ | 25,795      | 

|(b) | Restricted Cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | At December 31, 2014, restricted cash in the amount of
      $1,206 (December 31, 2013  $1,276) was held in the Pebble Partnership for
      certain equipment demobilization expenses relating to its activities
      undertaken while the Pebble Partnership was subject to joint control of
      the Group and Anglo American (note 3(a)). This cash is not available for
      general use by the Group. The Group has a current obligation (note 9) to
      refund any unutilized balance upon the earlier of (i) sixty days from the
      date of completion of demobilization; and (ii) December 31, 2015 (during
      the year, extended from December 31, 2014).
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|7.  | CAPITAL AND RESERVES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(a) | Authorized Share Capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | At December 31, 2014, the authorized share capital
      comprised an unlimited (2013  unlimited) number of common shares with no
      par value. All issued shares are fully paid.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(b) | Special Warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | In December 2014, the Group initiated a private placement
      financing (the Private Placement) of 35,962,735 share purchase warrants
      (the Special Warrants) at a price of $0.431 per Special Warrant for
      gross proceeds of approximately $15,500. Pursuant to the Private
      Placement, the Special Warrants were issued by the Group as follows:                                                                                                                                                                                                                                                                                                        

| | Date of Issue     |  | Special Warrants Issued |  |   | Gross Proceeds Received | 
| | ----------------- |  | ----------------------- |  | - | ----------------------- | 
| | December 31, 2014 |  | 27,622,642              |  | $ | 11,905                  | 
| | January 2, 2015   |  | 1,160,093               |  |   | 500                     | 
| | January 12, 2015  |  | 7,180,000               |  |   | 3,095                   | 
| | Total             |  | 35,962,735              |  | $ | 15,500                  | 

Of the gross proceeds of $11,905
received during the year ended December 31, 2014, $11,626 was received in cash
and $279 was received in shares of a Canadian public listed company; these
shares were classified as available-for-sale financial assets (note 4). As of
the reporting date, transaction costs related to the Private Placement which
included advisory, finders, regulatory, and legal fees, amounted to $353. As a
result the Group received net proceeds of $11,552 of which cash proceeds were
$11,273 during the year ended December 31, 2014.

The Special Warrants were issued to
eight (8) institutional investors, six (6) accredited investors (as such term is
defined under National Instrument 45-106), eight (8) directors and officers and
one (1) spouse of an officer pursuant to subscription agreements entered with
each Investor. Each Special Warrant will convert, without payment of any
additional consideration by the holder, into one common share of the Company,
either at the option of the holder or automatically within a maximum of two year
period from the issuance date.

The Special Warrants do not confer on
their holders any right as a shareholder of the Company, including but not
limited to any right to vote at any meeting of shareholders or any other
proceedings of the Company or any right to receive any dividend or other
distribution.

Subsequent to year end, 9,943,589 of
the Special Warrants were converted into 9,943,589 common shares of the Company.

|(c) | Share Purchase Option Compensation
  Plan
|--- | -----------------------------------------

The Group has a share purchase option
plan approved by the Groups shareholders that allows the Board of Directors to
grant share purchase options, subject to regulatory terms and approval, to its
officers, directors, employees, and service providers. The
share purchase option plan (the "2014 Rolling Option Plan") is based on the
maximum number of eligible shares equaling a rolling percentage of 10% of the
Company's outstanding common shares, calculated from time to time. Pursuant to
the 2014 Rolling Option Plan, if outstanding share purchase options ("options")
are exercised and the number of issued and outstanding common shares of the
Group increases, then the options available to grant under the plan increase
proportionately. The exercise price of each option is set by the Board of
Directors at the time of grant but cannot be less than the market price, being
the 5-day volume weighted average trading price calculated the day before the
grant. Options can have a maximum term of five years and typically terminate 90
days following the termination of the optionees employment or engagement. In
the case of death or retirement, any outstanding vested options will expire the
earlier of the expiry date or one year from date of death or retirement. The
vesting period for options is at the discretion of the Board of Directors at the
time the options are granted.

---

|-109 -
|------
|      

The following reconciles the Groups
options outstanding at the beginning and end of the year:

| |                              |  | 2014       |   |  | 2013       | 
| | ---------------------------- |  | ---------- | - |  | ---------- | 
| |                              |  |            |   |  | Weighted   | 
| |                              |  |            |   |  | average    | 
| |                              |  |            |   |  | exercise   | 
| |                              |  | Number of  |   |  | price      | 
| | Continuity of options        |  | options    |   |  | ($/option) | 
| | Balance at beginning of year |  | 3,735,700  |   |  | 4.13       | 
| | Granted                      |  | 5,875,100  |   |  | 1.56       | 
| | Exercised (1)                |  |           |   |  |           | 
| | Expired                      |  | (1,881,100 | ) |  | 5.07       | 
| | Forfeited                    |  | (42,700    | ) |  | 2.08       | 
| | Cancelled                    |  |           |   |  |           | 
| | Balance at end of year       |  | 7,687,000  |   |  | 1.95       | 

| | (1) | In 2013 options were exercised when the weighted average
      share price of the Companys shares on the TSX was
$3.15.
| | --- | ------------------------------------------------------------------------------------------------------------------------

For options granted in 2014, the
weighted average fair value was estimated at $0.75 per option and was based on
the Black-Scholes option pricing model using the following weighted average
assumptions:

AssumptionsRisk-free interest rate
    1.53%Expected life
    4.56 yearsExpected volatility (2)
    67.80%Grant date share price
    $1.44Expected dividend
      yield
    Nil


| | (2) | Expected volatility is based on the historical and
      implied volatility of the Companys common share price on the
  TSX.
| | --- | -----------------------------------------------------------------------------------------------------------------------------

The following table summarizes
information about the Groups options outstanding at December 31, 2014:

2014
    
    Options outstanding
    
    
    Options exercisableWeighted
    
    
    
    
    
    
    
    
    WeightedWeighte
    
    
    average
    
    
    
    
    
    Weighted
    
    
    averaged average
    
    
    remaining
    
    
    Number of
    
    
    average
    
    
    remainingNumber of
    
    
    exercise
    
    
    contractual
    
    
    options
    
    
    exercise
    
    
    contractualExercise
    
    options
    
    
    price
    
    
    life
    
    
    exercisabl
    
    
    price
    
    
    lifeprices ($)
    
    outstanding
    
    
    ($/option)
    
    
    (years)
    
    
    e
    
    
    ($/option)
    
    
    (years)0.72
    
    200,000
    
    
    0.72
    
    
    4.71
    
    
    66,667
    
    
    0.72
    
    
    4.710.89
    
    1,180,500
    
    
    0.89
    
    
    4.20
    
    
    376,834
    
    
    0.89
    
    
    4.201.77
    
    4,454,800
    
    
    1.77
    
    
    3.62
    
    
    2,239,900
    
    
    1.77
    
    
    3.613.00
    
    1,824,700
    
    
    3.00
    
    
    1.01
    
    
    1,824,700
    
    
    3.00
    
    
    1.0115.44
    
    27,000
    
    
    15.44
    
    
    1.21
    
    
    27,000
    
    
    15.44
    
    
    1.217,687,000
    
    
    1.95
    
    
    3.11
    
    
    4,535,101
    
    
    2.26
    
    
    2.62


---

|-110 -
|------
|      

The following table summarizes
information about the Groups options outstanding at December 31, 2013:

2013
    
    Options outstanding
    
    
    Options exercisableWeighted
    
    
    
    
    
    
    
    
    WeightedWeighted
    
    
    average
    
    
    Number of
    
    
    Weighted
    
    
    averageaverage
    
    
    remaining
    
    
    share
    
    
    average
    
    
    remainingNumber of
    
    
    exercise
    
    
    contractual
    
    
    purchase
    
    
    exercise
    
    
    contractualExercise
    
    options
    
    
    price
    
    
    life
    
    
    options
    
    
    price
    
    
    lifeprices ($)
    
    outstanding
    
    
    ($/option)
    
    
    (years)
    
    
    exercisabl e
    
    
    ($/option)
    
    
    (years)3.00
    
    2,017,700
    
    
    3.00
    
    
    1.91
    
    
    2,017,700
    
    
    3.00
    
    
    1.915.00  5.35
    
    1,643,000
    
    
    5.01
    
    
    0.09
    
    
    1,643,000
    
    
    5.01
    
    
    0.0915.44
    
    75,000
    
    
    15.44
    
    
    0.92
    
    
    75,000
    
    
    15.44
    
    
    0.923,735,700
    
    
    4.13
    
    
    1.09
    
    
    3,735,700
    
    
    4.13
    
    
    1.09


|(d) | Foreign Currency Translation
  Reserve
|--- | --------------------------------------

| |                                                                                                           |   | Year ended December 31 | 
| | --------------------------------------------------------------------------------------------------------- | - | ---------------------- | 
| |                                                                                                           |   | 2014                   | 
| | Balance at beginning of year                                                                              | $ | 7,234                  | 
| | Foreign exchange translation differences
      incurred in the year                                       |   |                        | 
| | Exchange gain (loss) on translation of the
      investment in the Pebble Partnership under joint venture |   |                       | 
| | Exchange gain on translation of foreign subsidiaries                                                      |   | 9,945                  | 
| | Total foreign exchange translation
      differences during the year                                      |   | 9,945                  | 
| | Deferred income tax on investment                                                                         |   |                       | 
| | Reversal of deferred income tax on investment                                                             |   |                       | 
| | Balance at the end of year                                                                                | $ | 17,179                 | 

The foreign currency translation
reserve represents accumulated exchange differences arising on the translation,
into the Groups presentation currency (the Canadian dollar), of the results of
operations and net assets of the Groups subsidiaries with a US dollar
functional currency. In 2012 and until December 10, 2013, the Pebble Partnership
was under joint control. The Group then reacquired a 100% interest therein.
Until the change in control, the investment in the Pebble Partnership was
accounted for under the equity method with the related tax effect recognized in
other comprehensive loss.

|8.    | RELATED PARTY BALANCES AND TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|      | Balances and transactions between the Company and its
      subsidiaries, which are related parties of the Company, have been
      eliminated on consolidation (note 2(c)). Details between the Group and
      other related parties are disclosed below:                                                                                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|*(a)* | Transactions and Balances with Key Management
      Personnel                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|      | The aggregate value of transactions with key management
      personnel ("KMP"), being the Groups directors and senior management
      including the Senior Vice President ("VP"), Corporate Development, VP,
      Corporate Communications, VP, Engineering, VP, Public Affairs, Chief
      Executive Officer of the Pebble Partnership ("CEO of PLP"), Chairman of
      Pebble Mines Corp ("Chair of PMC"), Senior VP, Corporate Affairs of the
      Pebble Partnership ("PLP Senior VP") and Company Secretary, was as
      follows:

| |                                                                 |   | Year ended December31 |  
| | --------------------------------------------------------------- | - | --------------------- | -
| | Transaction                                                     |   | 2014                  |  
| | Compensation                                                    |   |                       |  
| | Payments to HDSI for services of KMP employed
      by HDSI (1) | $ | 2,369                 |  
| | Payments to KMP (2)                                             |   | 1,814                 |  
| |                                                                 |   | 4,183                 |  
| | Share-based compensation                                        |   | 2,825                 |  
| | Total compensation                                              | $ | 7,008                 |  
| | Transfer of resources to the Group(3)                           |   | (749                  | )
| | Total                                                           | $ | 6,259                 |  

---

|-111 -
|------
|      

| | (1) | The Groups executive directors and senior management
      (other than disclosed in (2)) are employed by the Group through Hunter
      Dickinson Services Inc. ("HDSI").                                                                                                                                        
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                   
| | (2) | The Group directly employs its independent directors, the
      CEO of PLP, the Chair of PMC and PLP Senior VP. Payments represent short
      term employee benefits incurred, including salaries and directors
    fees.                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                   
| | (3) | 1,737,000 Special Warrants were issued to eight directors
      and officers and a spouse of an officer who participated in the private
      placement of Special Warrants (note 7(b)). The Group received $470 in cash
      and $279 was received in shares of a Canadian public listed company (note
      4).

|(b) | Transactions and Balances with other Related
      Parties                                                    
|--- | --------------------------------------------------------------------------------------------------------------
|    |                                                                                                               
|    | The aggregate value of transactions and outstanding
      balances with other related parties were as
follows:

| |                                                                             |   | Year ended December 31 | 
| | --------------------------------------------------------------------------- | - | ---------------------- | 
| | Transactions                                                                |   | 2014                   | 
| | Entity with significant influence(a)                                        |   |                        | 
| | Services rendered to the Group                                              | $ | 4,926                  | 
| | Reimbursement of third party expenses incurred on behalf of the
      Group |   | 779                    | 
| | Total paid by the Group                                                     | $ | 5,705                  | 
| | Jointly controlled entity(b)                                                |   |                        | 
| | Reimbursement of third party expenses incurred by the Group                 | $ |                       | 
| | Total reimbursed (to) the Group                                             | $ |                       | 

| |                                                      |   | December 31 |  |   | December 31 | 
| | ---------------------------------------------------- | - | ----------- |  | - | ----------- | 
| | Balances payable to related parties                  |   | 2014        |  |   | 2013        | 
| | Entity with significant influence over the Group (a) | $ | 383         |  | $ | 459         | 
| | Total                                                | $ | 383         |  | $ | 459         | 

| | (a) | HDSI is a private company that provides geological,
      engineering, environmental, corporate development, financial
      administrative and management services to the Group and its subsidiaries
      at annually set rates pursuant to a management services agreement. The
      annually set rates also include a component of overhead costs such as
      office rent, information technology services and general administrative
      support services. HDSI also incurs third party costs on behalf of the
      Group which are reimbursed by the Group at cost. The Group may make
      pre-payments for services under terms of the services agreement. Several
      directors and other key management personnel of HDSI, who are close
      business associates, are also key management personnel of the
  Group.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (b) | The Group incurred costs on behalf of the Pebble
      Partnership while under joint control (note 3(a)), which were reimbursed
      at cost.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

|9. | TRADE AND OTHER
PAYABLES
|-- | ------------------------

| |                             |   | December 31 |  |   | December 31 | 
| | --------------------------- | - | ----------- |  | - | ----------- | 
| | Falling due within the year |   | 2014        |  |   | 2013        | 
| | Trade                       | $ | 4,444       |  | $ | 2,318       | 
| | Other (note 6 (b))          |   | 1,206       |  |   | 1,276       | 
| | Total                       | $ | 5,650       |  | $ | 3,594       | 

---

|-112 -
|------
|      

|10. | BASIC AND DILUTED LOSS PER SHARE                                                     
|--- | -------------------------------------------------------------------------------------
|    |                                                                                      
|    | The calculation of basic and diluted loss per share was
      based on the following:

| |                                                             |   | Year ended December 31 | 
| | ----------------------------------------------------------- | - | ---------------------- | 
| |                                                             |   | 2014                   | 
| | Loss attributable to common shareholders                    | $ | 31,347                 | 
| | Weighted average number of common shares outstanding (000s) |   | 95,010                 | 

Basic loss per share includes the
effect of Special Warrants issued and outstanding as at December 31, 2014.
Diluted loss per share does not include the effect of share purchase options
outstanding as they are anti-dilutive (i.e. the diluted loss per share would be
reduced).

|11. | EMPLOYMENT COSTS
|--- | ----------------

The amount of salaries (1)
and benefits included in expenses are as follows:

| |                                     |   | Year ended December 31 | 
| | ----------------------------------- | - | ---------------------- | 
| |                                     |   | 2014                   | 
| | Exploration and evaluation expenses | $ | 6,492                  | 
| | General and administration expenses |   | 3,715                  | 
| | Share-based compensation            |   | 3,877                  | 
| | Total                               | $ | 14,084                 | 

| | (1) | Salaries include directors fees and amounts paid to HDSI
      (see 8(b)) for services provided to the Group by HDSI
  personnel.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------

|12. | INCOME TAX EXPENSE
|--- | ------------------

| |                                        |   | Year ended December 31 |  
| | -------------------------------------- | - | ---------------------- | -
| |                                        |   | 2014                   |  
| | Current tax (recovery) expense         |   |                        |  
| |                                        |   |                        |  
| | Current (recovery) expense             | $ |                       |  
| | Current income tax (recovery) expense  | $ |                       |  
| |                                        |   |                        |  
| | Deferred income tax (recovery) expense |   |                        |  
| |                                        |   |                        |  
| | Current (recovery) expense             | $ | (2,289                 | )
| | Deferred income tax (recovery) expense | $ | (2,289                 | )

| |                                                        |   | Year ended December 31 |  
| | ------------------------------------------------------ | - | ---------------------- | -
| | Reconciliation of effective tax rate                   |   | 2014                   |  
| |                                                        |   |                        |  
| | (Loss) for the year                                    | $ | (31,348                | )
| | Total income tax (recovery) expense                    |   | (2,289                 | )
| | (Loss) excluding income tax                            |   | (33,637                | )
| | Income tax using the Company's domestic tax
      rate |   | (8,746                 | )
| | Non-deductible expenses and other                      |   | (1,283                 | )
| | Increase in statutory tax rates                        |   |                       |  
| | Foreign exchange                                       |   |                       |  
| | Deferred income tax assets not recognized              |   | 7,740                  |  
| |                                                        | $ | (2,289                 | )

The Company's domestic tax rate for the
year was 26% (2013  25.75%, 2012  25.00%) .

---

|-113 -
|------
|      

| |                                                          |   | December 31 |   |   | December 31 |  
| | -------------------------------------------------------- | - | ----------- | - | - | ----------- | -
| | Deferred income tax assets (liabilities)                 |   | 2014        |   |   | 2013        |  
| | Resource pool                                            | $ |            |   | $ |            |  
| | Tax
      losses                                         |   | 2,547       |   |   | 115         |  
| | Net deferred income tax assets                           |   | 2,547       |   |   | 115         |  
| | Resource property/investment in Pebble
      Partnership |   | (4,012      | ) |   | (3,901      | )
| | Equipment                                                |   | (49         | ) |   | (17         | )
| | Net deferred income tax liability                        | $ | (1,514      | ) | $ | (3,803      | )

The Group had the following temporary
differences at December 31, 2014 in respect of which no deferred tax asset has
been recognized:

| |                      |   |            |  |   | Resource |  |   |       | 
| | -------------------- | - | ---------- |  | - | -------- |  | - | ----- | 
| | Expiry               |   | Tax losses |  |   | pools    |  |   | Other | 
| | Within one year      | $ |           |  | $ |         |  | $ |      | 
| | One to five years    |   |           |  |   |         |  |   | 1,311 | 
| | After five years     |   | 59,452     |  |   |         |  |   |      | 
| | No
      expiry date |   | 78         |  |   | 101,322  |  |   | 65    | 
| | Total                | $ | 59,530     |  | $ | 101,322  |  | $ | 1,376 | 

The Group has taxable temporary
differences in relation to investments in foreign subsidiaries or branches for
which deferred tax liabilities have not been recognized of approximately $9.8
million.

|13. | FINANCIAL RISK MANAGEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Group is exposed in varying degrees to a variety of
      financial instrument related risks. The Board approves and monitors the
      risk management processes, inclusive of documented investment policies,
      counterparty limits, and controlling and reporting structures. The type of
      risk exposure and the way in which such exposure is managed is provided as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(a) | Credit Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Credit risk is the risk of potential loss to the Group if
      a counterparty to a financial instrument fails to meet its contractual
      obligations. The Groups credit risk is primarily attributable to its
      liquid financial assets, including cash and cash equivalents, restricted
      cash and amounts receivable. The Group limits the exposure to credit risk
      by only investing its cash and cash equivalents and restricted cash with
      high-credit quality financial institutions in business and saving
      accounts, guaranteed investment certificates, and in government treasury
      bills which are available on demand by the Group for its programs. Amounts
      receivable (note 5) include receivable balances with government agencies
      and refundable deposits.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(b) | Liquidity Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Liquidity risk is the risk that the Group will not be
      able to meet its financial obligations when they become due. The Group
      ensures, as far as reasonably possible, it will have sufficient capital in
      order to meet short to medium term business requirements, after taking
      into account cash flows from operations and the Groups holdings of cash
      and cash equivalents and restricted cash. The Groups cash and cash
      equivalents and restricted cash are currently invested in business
      accounts and guaranteed investment certificates which are available on
      demand.                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Groups financial liabilities are comprised of trade
      and other payables (note 9) and a payable to a related party (note 8),
      which are due for payment within 12 months from the reporting date. The
      carrying amounts of the Groups financial liabilities represent the
      Groups contractual obligations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(c) | Foreign exchange risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Company is subject to both currency transaction risk
      and currency translation risk: the Pebble Partnership and U5 Resources
      Inc. both have the US dollar as functional currency, and certain of the
      Companys corporate expenses are incurred in US dollars. The operating
      results and financial position of the Group are reported in Canadian
      dollars in the Groups consolidated financial statements. The fluctuation
      of the US dollar in relation to the Canadian dollar will consequently have
      an impact upon the losses incurred by the Group as well as the
value of the Groups assets and the amount of shareholders equity.                                                                                                                                 

---

|-114 -
|------
|      

The Group has not entered into any
agreements or purchased any instruments to hedge possible currency risks.

The exposure of the Group's financial
assets to foreign exchange risk is as follows:

| | Currency                                            |   | December 31, 2014 |   |   | December 31, 2013 | 
| | --------------------------------------------------- | - | ----------------- | - | - | ----------------- | 
| |                                                     |   | US dollar         |   |   | Amount in         | 
| |                                                     |   | amount            |   |   | Canadian          | 
| | US dollars  Financial assets                       |   | (000s             | ) |   | dollars           | 
| |                                                     |   |                   |   |   |                   | 
| | Amounts receivable                                  | $ | 547               |   | $ | 635               | 
| | Cash
      and cash equivalents and restricted cash |   | 1,515             |   |   | 1,758             | 
| | Total exposed to currency risk                      | $ | 2,062             |   | $ | 2,393             | 

The exposure of the Group's financial
liabilities to foreign exchange risk is as follows:

| | Currency                           |   | December 31, 2014 |   |   | December 31, 2013 | 
| | ---------------------------------- | - | ----------------- | - | - | ----------------- | 
| |                                    |   | US dollar         |   |   | Amount in         | 
| |                                    |   | amount            |   |   | Canadian          | 
| | US dollars  Financial liabilities |   | (000s             | ) |   | dollars           | 
| |                                    |   |                   |   |   |                   | 
| | Trade and other payables           | $ | 4,504             |   | $ | 5,225             | 
| | Total exposed to currency risk     | $ | 4,504             |   | $ | 5,225             | 

Based on the above net exposures and
assuming that all other variables remain constant, a 10% depreciation of the
Canadian dollar relative to the US dollar would result in a loss of
approximately $283 in the year (2013  $983 gain). This sensitivity analysis
includes only outstanding foreign currency denominated monetary items.

|(d) | Interest rate risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Group is subject to interest rate cash flow risk with
      respect to its investments in cash and cash equivalents. The Groups
      policy is to invest cash at fixed rates of interest and cash reserves are
      to be maintained in cash and cash equivalents in order to maintain
      liquidity, while achieving a satisfactory return for shareholders.
      Fluctuations in interest rates when cash and cash equivalents mature
      impact interest income earned.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Assuming that all other variables remain constant, a 100
      basis points change representing a 1% increase or decrease in interest
      rates would have resulted in a decrease or increase in loss as
    follows:                                                                                                                                                                                                                                                               

| |                |   | December |  |   | December 31 | 
| | -------------- | - | -------- |  | - | ----------- | 
| |                |   | 31       |  |   |             | 
| |                |   | 2014     |  |   | 2013        | 
| | Effect on loss | $ | 176      |  | $ | 267         | 

|(e) | Capital Management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Group's policy is to maintain a strong capital base
      so as to maintain investor and creditor confidence and to sustain future
      development of the business. The capital structure of the Group consists
      of equity, comprising share capital, reserves and Special Warrants, net of
      accumulated deficit. There were no changes in the Group's approach to
      capital management during the year. The Group is not subject to any
      externally imposed capital requirements.

---

|-115 -
|------
|      

|(f)     | Fair value                                                                                                                                                                                                                                                                       
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                  
|        | The fair value of the Groups financial assets and
      liabilities approximates the carrying amount. The fair value of AFS
      financial asset is classified into level 1 of the fair value hierarchy as
      quoted market prices are used in the fair value determination.
|        |                                                                                                                                                                                                                                                                                  
|**14.** | COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                  
|        | The Group has the following commitments as of December
      31, 2014:                                                                                                                                                                                                           

| |                               |   | 2015    |   |   | 2016    |   |   | Total     |  
| | ----------------------------- | - | ------- | - | - | ------- | - | - | --------- | -
| |                               |   | (000s  | ) |   | (000s  | ) |   | (000s    | )
| | Anchorage office lease (i)    |   | US$ 477 |   |   | US$ 407 |   |   | US$ 884   |  
| | Anchorage other leases (ii)   |   | 84      |   |   |        |   |   | 84        |  
| | Iliamna site leases (iii)     |   | 260     |   |   |        |   |   | 260       |  
| | Total                         |   | US$ 821 |   |   | US$ 407 |   |   | US$ 1,228 |  
| | Total in Canadian dollars(iv) | $ | 952     |   | $ | 472     |   | $ | 1,424     |  

| | (i)   | The initial 5 year lease term expires on October 31,
      2016.                           
| | ----- | -------------------------------------------------------------------------------------------
| |       |                                                                                            
| | (ii)  | Lease term expires on July 31, 2015.                                                       
| |       |                                                                                            
| | (iii) | Lease for site accommodation and facilities term expires
      on April 30, 2015.          
| |       |                                                                                            
| | (iv)  | Converted at closing rate of $1.1601/US$ on December 31,
      2014, as per Bank of Canada.

The Group has a sub-lease agreement in
respect of a portion of the Anchorage office space subject to the operating
lease for an average annual rent, expressed in thousands, of approximately
US$218 ($253). The term of the sub-lease expires on October 31, 2016.

---

|-116 -
|------
|      

INDEPENDENT AUDITORS' REPORT

We have audited the accompanying consolidated financial
statements of Pebble Limited Partnership and its subsidiaries (the
"Partnership"), which comprise the consolidated statements of financial position
as of December 10, 2013 and December 31, 2012, and the related consolidated
statements of loss and comprehensive loss, changes in equity, and cash flows,
for the period from January 1 to December 10, 2013 and the year ended December
31, 2012, and the related notes to the consolidated financial statements.

Management's Responsibility for the Financial Statements

Management 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; this
includes the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of consolidated financial
statements that are free from material misstatement, whether due to fraud or
error.

Auditors' Responsibility

Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted our audits
in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free from material misstatement.

An audit involves performing procedures to obtain audit
evidence 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
Partnership's preparation and fair presentation of the consolidated financial
statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Partnership's internal control. Accordingly, we express no
such opinion. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of significant 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 is
sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Pebble Limited Partnership and its subsidiaries as of December 10, 2013 and
December 31, 2012, and the results of their operations and their cash flows for
the period from January 1 to December 10, 2013 and year ended December 31, 2012
in accordance with accounting principles generally accepted in the United States
of America.

---

|-117 -
|------
|      

Emphasis of Matter Regarding Going Concern

The accompanying consolidated financial statements for the
period from January 1 to December 10, 2013 and the year ended December 31, 2012
have been prepared assuming that the Partnership will continue as a going
concern. As discussed in Note 2 to the consolidated financial statements, the
Partnership is experiencing difficulty in generating sufficient cash flow to
meet its obligations and sustain its operations, which raises substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also discussed in Note 2 to the consolidated financial
statements. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty. Our opinion is not
modified with respect to this matter.

DELOITTE & TOUCHE LLP

Portland, Oregon May 15, 2015

---

|-118 -
|------
|      

|Consolidated Statements of Loss and Comprehensive
      Loss                             
|-----------------------------------------------------------------------------------------
|For the period from January 1 to December 10, 2013 and
      year ended December 31, 2012
|(Expressed in
      thousands of United States dollars)                                  

|                                           |  |       |  |   | Period from  |  |   |             |  
|------------------------------------------ |  | ----- |  | - | ------------ |  | - | ----------- | -
|                                           |  |       |  |   | January 1 to |  |   | Year ended  |  
|                                           |  |       |  |   | December 10  |  |   | December 31 |  
|                                           |  | Notes |  |   | 2013         |  |   | 2012        |  
|                                           |  |       |  |   |              |  |   |             |  
|Expenses                                   |  |       |  |   |              |  |   |             |  
|Depreciation                               |  | 3     |  | $ | 265          |  | $ | 140         |  
|Exploration expenditure                    |  | 7     |  |   | 53,180       |  |   | 90,053      |  
|Legal and accounting                       |  |       |  |   | 2,631        |  |   | 2,490       |  
|Office and administration                  |  |       |  |   | 8,864        |  |   | 8,927       |  
|Travel                                     |  |       |  |   | 1,504        |  |   | 1,256       |  
|Operating loss                             |  |       |  |   | 66,444       |  |   | 102,866     |  
|Interest income                            |  |       |  |   |             |  |   | (3          | )
|Impairment loss on IDC receivable          |  | 4     |  |   | 1,262        |  |   |            |  
|Interest receivable write off              |  |       |  |   |             |  |   | 141         |  
|Foreign exchange loss                      |  |       |  |   | 102          |  |   | 324         |  
|Loss and comprehensive loss for the period |  |       |  | $ | 67,808       |  | $ | 103,328     |  
|                                           |  |       |  |   |              |  |   |             |  
|Allocated as follows:                      |  |       |  |   |              |  |   |             |  
|Limited partners' interests                |  |       |  |   | 67,808       |  |   | 103,328     |  
|General partner's interest                 |  |       |  |   |             |  |   |            |  
|                                           |  |       |  | $ | 67,808       |  | $ | 103,328     |  

See accompanying notes to the consolidated financial
statements.

---

|-119 -
|------
|      

|Consolidated Statements of Changes in Equity                                             
|-----------------------------------------------------------------------------------------
|For the period from January 1 to December 10, 2013 and
      year ended December 31, 2012
|(Expressed in
      thousands of United States dollars)                                  

|                                                                                     |   | Limited  |   |   | General |  |   |          |  
|------------------------------------------------------------------------------------ | - | -------- | - | - | ------- |  | - | -------- | -
|                                                                                     |   | Partners |   |   | Partner |  |   | Total    |  
|                                                                                     |   |          |   |   |         |  |   |          |  
|Capital                                                                              |   |          |   |   |         |  |   |          |  
|Balance, January 1, 2012                                                             | $ | 498,323  |   | $ | 10      |  | $ | 498,333  |  
|Contributions                                                                        |   | 105,718  |   |   |        |  |   | 105,718  |  
|Balance, December 31, 2012                                                           |   | 604,041  |   |   | 10      |  |   | 604,051  |  
|Contributions for the period from January 1
      to December 10 , 2013              |   | 69,895   |   |   |        |  |   | 69,895   |  
|Balance, December 10, 2013                                                           | $ | 673,936  |   | $ | 10      |  | $ | 673,946  |  
|                                                                                     |   |          |   |   |         |  |   |          |  
|                                                                                     |   |          |   |   |         |  |   |          |  
|Deficit                                                                              |   |          |   |   |         |  |   |          |  
|Balance, January 1, 2012                                                             | $ | (397,101 | ) | $ |        |  | $ | (397,101 | )
|Loss and comprehensive loss for the year                                             |   | (103,328 | ) |   |        |  |   | (103,328 | )
|Balance, December 31, 2012                                                           |   | (500,429 | ) |   |        |  |   | (500,429 | )
|Loss and comprehensive loss for the period
      from January 1 to December 10, 2013 |   | (67,808  | ) |   |        |  |   | (67,808  | )
|Balance, December 10, 2013                                                           | $ | (568,237 | ) | $ |        |  | $ | (568,237 | )
|                                                                                     |   |          |   |   |         |  |   |          |  
|Partners' equity at December 10, 2013                                                | $ | 105,699  |   | $ | 10      |  | $ | 105,709  |  

See accompanying notes to the consolidated financial
statements.

---

|-120 -
|------
|      

|Consolidated Statements of Financial Position          
|-------------------------------------------------------
|(Expressed in
      thousands of United States dollars)

|                                       |  |       |  |   | December 10 |   |   | December 31 |  
|-------------------------------------- |  | ----- |  | - | ----------- | - | - | ----------- | -
|                                       |  | Notes |  |   | 2013        |   |   | 2012        |  
|                                       |  |       |  |   |             |   |   |             |  
|ASSETS                                 |  |       |  |   |             |   |   |             |  
|                                       |  |       |  |   |             |   |   |             |  
|Non-current assets                     |  |       |  |   |             |   |   |             |  
|Tangible assets, net                   |  | 3     |  | $ | 100,497     |   | $ | 100,504     |  
|Due from general partner               |  | 4     |  |   | 99          |   |   | 98          |  
|Other receivables                      |  | 4     |  |   |            |   |   | 1,262       |  
|Total non-current assets               |  |       |  |   | 100,596     |   |   | 101,864     |  
|                                       |  |       |  |   |             |   |   |             |  
|Current assets                         |  |       |  |   |             |   |   |             |  
|Other receivables                      |  | 4     |  |   | 850         |   |   | 1,534       |  
|Due from limited partner               |  | 4     |  |   | 4,900       |   |   |            |  
|Cash                                   |  |       |  |   | 1,319       |   |   | 10,417      |  
|Total current assets                   |  |       |  |   | 7,069       |   |   | 11,951      |  
|                                       |  |       |  |   |             |   |   |             |  
|Total assets                           |  |       |  | $ | 107,665     |   | $ | 113,815     |  
|                                       |  |       |  |   |             |   |   |             |  
|PARTNERS' EQUITY                       |  |       |  |   |             |   |   |             |  
|Capital                                |  |       |  | $ | 673,946     |   | $ | 604,051     |  
|Deficit                                |  |       |  |   | (568,237    | ) |   | (500,429    | )
|Total partners' equity                 |  |       |  |   | 105,709     |   |   | 103,622     |  
|                                       |  |       |  |   |             |   |   |             |  
|LIABILITIES                            |  |       |  |   |             |   |   |             |  
|                                       |  |       |  |   |             |   |   |             |  
|Current liabilities                    |  |       |  |   |             |   |   |             |  
|Trade and other payables               |  | 5     |  |   | 1,956       |   |   | 10,193      |  
|Total current liabilities              |  |       |  |   | 1,956       |   |   | 10,193      |  
|                                       |  |       |  |   |             |   |   |             |  
|Total partners' equity and liabilities |  |       |  | $ | 107,665     |   | $ | 113,815     |  

See accompanying notes to the consolidated financial
statements.

---

|-121 -
|------
|      

|Consolidated Statements of Cash Flows                                                    
|-----------------------------------------------------------------------------------------
|For the period from January 1 to December 10, 2013 and
      year ended December 31, 2012
|(Expressed in
      thousands of United States dollars)                                  

|                                                                      |   | Period from  |   |   |             |  
|--------------------------------------------------------------------- | - | ------------ | - | - | ----------- | -
|                                                                      |   | January 1 to |   |   | Year ended  |  
|                                                                      |   | December 10  |   |   | December 31 |  
|                                                                      |   | 2013         |   |   | 2012        |  
|                                                                      |   |              |   |   |             |  
|Cash flows used in operating
      activities                         |   |              |   |   |             |  
|Loss for the period                                                   | $ | (67,808      | ) | $ | (103,328    | )
|Adjustment for items not
      affecting cash or operating activities |   |              |   |   |             |  
|Depreciation                                                          |   | 265          |   |   | 140         |  
|Foreign
      exchange loss                                           |   |             |   |   | 230         |  
|Impairment loss on IDC
      receivable and interest                  |   | 1,262        |   |   | 141         |  
|                                                                      |   | (66,281      | ) |   | (102,817    | )
|Change in
      other receivables                                     |   | 683          |   |   | 693         |  
|Change in trade and other
      payables                              |   | (8,237       | ) |   | 7           |  
|Net cash used in operating activities                                 |   | (73,835      | ) |   | (102,117    | )
|                                                                      |   |              |   |   |             |  
|Cash flows used in investing activity                                 |   |              |   |   |             |  
|Additions to tangible assets                                          |   | (258         | ) |   | (1,029      | )
|                                                                      |   |              |   |   |             |  
|Cash flows from financing activity                                    |   |              |   |   |             |  
|Capital contributions by limited partners                             |   | 64,995       |   |   | 105,718     |  
|                                                                      |   |              |   |   |             |  
|(Decrease) increase in cash                                           |   | (9,098       | ) |   | 2,572       |  
|Effect of exchange rate fluctuations on cash
      held               |   |             |   |   | (230        | )
|Cash, beginning of period                                             |   | 10,417       |   |   | 8,075       |  
|Cash, end of period                                                   | $ | 1,319        |   | $ | 10,417      |  
|                                                                      |   |              |   |   |             |  
|Non-cash financing activity                                           |   |              |   |   |             |  
|Contribution receivable from limited partner                          | $ | 4,900        |   | $ |            |  

See accompanying notes to the consolidated financial
statements.

---

|-122 -
|------
|      

|1. | Primary business activity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Pebble Limited Partnership (the "Pebble Partnership")
      was formed pursuant to a limited partnership agreement dated July 26, 2007
      and first amended and restated as of July 31, 2007, with a subsequent
      amendment as of September 14, 2007 (the "Agreement"). The purpose of the
      Pebble Partnership is to engineer, permit, construct and operate a modern,
      long-life mine at the Pebble Project near Iliamna, located approximately
      200 miles (320 kilometers) southwest of the city of Anchorage in the State
      of Alaska.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Until December 10, 2013, Northern Dynasty Partnership
      ("Northern Dynasty") and Anglo American US (Pebble) LLC. ("Anglo"),
      wholly-owned US affiliates of Northern Dynasty Minerals Ltd. and Anglo
      American plc. respectively, had equal rights in the Pebble Partnership as
      the limited partners, and each owned 50% of the outstanding shares of the
      general partner, Pebble Mines Corp. To maintain its 50% interest in the
      Pebble Partnership, Anglo was required to make staged cash investments
      into the Pebble Partnership aggregating to $1.5 billion (described below).
      On September 15, 2013, Anglo gave notice to Northern Dynasty of its
      withdrawal from the Pebble Partnership. On December 10, 2013, Northern
      Dynasty exercised its right to acquire Anglos 50% interest and
      consequently holds a 100% interest in the Pebble Partnership and in the
      Pebble Partnerships general partner, Pebble Mines Corp. (which
      administers the Pebble Project). Anglo contributed $573.2 million
      (December 31, 2012 - $504.2 million) to the Pebble Partnership as of
      December 10, 2013.                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Anglo Americans staged investment requirements included
      an initial minimum expenditure of $125 million (completed in 2008) towards
      a prefeasibility report. The prefeasibility report was to be approved by
      the Board of Pebble Mines Corp., and was to summarize all previous
      prefeasibility studies. The Board of Pebble Mines Corp. was also to
      approve the alternatives for a final feasibility study. Anglo was
      required, in order to retain its 50% interest in the Pebble Partnership,
      to commit within 90 days of the later of the receipt of the approved
      prefeasibility report and the approved study alternatives, to fund further
      expenditures which would bring its total investment to at least $450
      million, which amount was to be expended in producing a final feasibility
      study and in related activities, which was expected to take the Pebble
      Partnership to a production decision. Upon an affirmative decision by the
      Pebble Partnership to develop a mine, Anglo was required to commit to the
      remaining portion of the total investment of $1.5 billion in order to
      retain its interest in the Pebble Partnership. To December 10, 2013, Anglo
      American funded $573.2 million. The Pebble Partnership agreement provided
      for equal project control rights for both partners with no operators fees
      payable to either party.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Northern Dynastys contribution to the Pebble Partnership
      was the Pebble mineral property. The mineral property was recorded by the
      Pebble Partnership at the carrying value of the property in Northern
      Dynasty prior to the Agreement date and is comprised of acquisition costs
      and related expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Cash distributions to the partners are first allocated to
      the limited partners based on capital contributions in excess of any
      previous distributions made and then to the limited partners and the
      general partner in proportion to their ownership interests.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | These consolidated financial statements are for the
      period from January 1 to December 10, 2013 and for the year ended December
      31, 2012.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

---

|-123 -
|------
|      

|2.  | Significant accounting policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(a) | Basis of presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | These consolidated financial statements have
      been prepared in accordance with accounting principles generally accepted
      in the United States, and are expressed in United States ("US") dollars,
      which is the currency of the primary economic environment in which the
      Pebble Partnership operates, with the assumption that the Pebble
      Partnership will be able to realize its assets and discharge its
      liabilities in the normal course of business rather than through a process
      of forced liquidation. During the period from January 1 to December 10,
      2013, the Pebble Partnership incurred a loss of $67,808 and used cash from
      operating activities of $73,835. Continued operations of the Pebble
      Partnership are dependent on its ability to develop its mineral property
      claims, receive continued financial support from its limited partner(s),
      or generate profitable operations in the future. These circumstances raise
      substantial doubt about the Pebble Partnerships ability to continue as a
      going concern. The financial statements do not include any adjustment to
      assets and liabilities should the Pebble Partnership be unable to continue
      as a going concern.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | There can be no assurance that the Pebble
      Partnership will continue to receive financial support, in which case it
      will be unable to meet its obligations. Should the Pebble Partnership be
      unable to realize its assets and discharge its liabilities in the normal
      course of business, the net realizable value of its assets may be
      materially less than the amounts recorded in these consolidated financial
      statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The Pebble Partnership has early adopted the
      amendments pursuant to Financial Accounting Standards Boards June 2014
      Accounting Standards Update 2014-10, Development Stage Entities (Topic
      915), Elimination of Certain Financial Reporting Requirements,
      Including an Amendment to Variable Interest Entities Guidance in
      Topic 810, Consolidation(the "Update").The amendments in this
      Update remove the definition of a development stage entity from the Master
      Glossary of the Accounting Standards Codification, thereby removing the
      financial reporting distinction between development stage entities and
      other reporting entities from US Generally Accepted Accounting Principles.
      In addition, the amendments inter alia eliminate the requirements for
      development stage entities to (1) present inception-to-date information in
      the statements of operations and comprehensive loss, partners equity and
      cash flows, (2) label the financial statements as those of a development
      stage entity, and (3) disclose a description of the development stage
      activities in which the entity is engaged.                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The consolidated financial statements have been
      prepared under the historical cost convention. A summary of the
      significant accounting policies are provided below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(b) | Basis of consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | These consolidated financial statements incorporate the
      financial statements of the Pebble Partnership and the subsidiaries
      controlled by the Pebble Partnership listed below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| |                                |               | Proportion of |                      
| | ------------------------------ | ------------- | ------------- | ---------------------
| |                                | Place of      | ownership     |                      
| | Name of subsidiary             | incorporation | interest      | Principal activity   
| |                                |               |               |                      
| | Pebble East Claims Corporation | Alaska, USA   | 100%          | Title holding company
| | Pebble West Claims Corporation | Alaska, USA   | 100%          | Title holding company
| | Kaskanak Copper LLC            | Delaware, USA | 100%          | Holding company      
| | Kaskanak Inc.                  | Alaska, USA   | 100%          | Title holding company

Control exists when the Pebble
Partnership has the power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its activities.
The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that
control ceases. All significant intercompany transactions and balances have been
eliminated.

---

|-124 -
|------
|      

|(c) | Recently issued accounting
pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The new mandatory effective accounting pronouncements did
      not impact the Pebble Partnerships financial statements. The Pebble
      Partnership does not believe that there are any new accounting
      pronouncements that have been issued that are expected to have a material
      impact on its financial position or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(d) | Significant accounting judgments and
    estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The preparation of financial statements requires
      management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities and disclosures of contingent assets and
      liabilities at the date of the financial statements and the reported
      amounts of expenses during the reporting period. Actual outcomes could
      differ from these estimates. The consolidated financial statements include
      estimates which, by their nature, are uncertain. The impacts of such
      estimates are pervasive throughout the consolidated financial statements,
      and may require accounting adjustments based on future occurrences.
      Revisions to accounting estimates are recognized in the period in which
      the estimates are revised and the revisions affect both current and future
      periods.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Significant accounts that require estimates as the basis
      for determining the stated amounts include the mineral property interest,
      plant and equipment, Iliamna Development Corporation ("IDC") loan
      receivable and restoration, rehabilitation and environmental
  costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Depreciation and depletion of the mineral property
      interest and plant and equipment assets are dependent upon estimates of
      useful lives and reserves estimates, both of which are determined with the
      exercise of judgment. The assessment of any impairment of property, plant
      and equipment is dependent upon estimates of fair value that take into
      account factors such as reserves, economic and market conditions and the
      useful lives of assets.                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(e) | Foreign currencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The functional and presentation currency of the Pebble
      Partnership is the US dollar.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Transactions in currencies other than the functional
      currency are recorded at the rates of exchange prevailing on dates of
      transactions. At the end of each reporting period, monetary assets and
      liabilities that are denominated in foreign currencies are translated
      using the period end foreign exchange rate. Non-monetary items that are
      measured in terms of historical cost in a foreign currency are translated
      using the historical rate on the date fair value was determined.                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(f) | Tangible assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Property, plant and equipment ("PPE") are carried at
      cost, less accumulated depreciation and include accumulated impairment
      losses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The cost of an item of PPE consists of the purchase
      price, any costs directly attributable to bringing the asset to the
      location and condition necessary for its intended use and an initial
      estimate of the costs of dismantling and removing the item and restoring
      the site on which it is located.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Depreciation is provided at rates calculated to write off
      the cost of PPE, less their estimated residual value, using the declining
      balance method at various rates ranging from 20% - 30% per
annum.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The estimated useful lives, residual values and
      depreciation method are reviewed at least annually, with the effect of any
      changes in estimates accounted for on a prospective basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | An item of PPE is derecognized upon disposal or when no
      future economic benefits are expected to arise from the continued use of
      the asset. Any gain or loss arising on disposal of the asset, determined
      as the difference between the net disposal proceeds and the carrying
      amount of the asset, is recognized in the consolidated statement of loss
      and comprehensive loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                            

---

|-125 -
|------
|      

Where an item of plant and equipment
consists of major components with different useful lives, the components are
accounted for as separate items of PPE. Expenditures incurred to replace a
component of an item of PPE that is accounted for separately, including major
inspection and overhaul expenditures, are capitalized.

|(g) | Impairment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Unlike goodwill and indefinite-lived intangible assets,
      the accounting rules do not provide for an annual impairment test in
      determining whether tangible assets are impaired. Instead, they require
      that a triggering event occur before testing an asset for impairment.
      Examples of such triggering events include a significant disposal of a
      portion of such assets, an adverse change in the market involving the
      business employing the related asset, a significant decrease in the
      benefits realized from an acquired business, difficulties or delays in
      integrating the business, and a significant change in the operations of an
      acquired business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Once a triggering event has occurred, the impairment test
      employed is based on whether the intent is to hold the asset for continued
      use or to hold the asset for sale. If the intent is to hold the asset for
      continued use, the impairment test involves a comparison of undiscounted
      cash flows against the carrying value of the asset as an initial test. If
      the carrying value of such asset exceeds the undiscounted cash flow, the
      asset would be deemed to be impaired. Impairment would then be measured as
      the difference between the fair value of the fixed or amortizing
      intangible asset and the carrying value to determine the amount of the
      impairment. The Company generally determines fair value by using the
      discounted cash flow method. If the intent is to hold the asset for sale
      and certain other criteria are met (i.e., the asset can be disposed of
      currently, appropriate levels of authority have approved sale, and there
      is an actively pursuing buyer), the impairment test is a comparison of the
      assets carrying value to its fair value less costs to sell. To the extent
      that the carrying value is greater than the assets fair value less costs
      to sell, an impairment loss is recognized for the difference. Assets held
      for sale are separately presented on the balance sheet and are no longer
      depreciated.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Pebble Partnership has not recorded any impairment
      charges on its tangible assets in the periods presented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(h) | Exploration and evaluation expenditures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Exploration and evaluation expenditures include the costs
      of acquiring licenses, costs associated with exploration and evaluation
      activity, and the acquisition date fair value of exploration and
      evaluation assets acquired in a business combination or an asset
      acquisition. Exploration and evaluation expenditures are expensed as
      incurred except for expenditures associated with the acquisition of
      exploration and evaluation assets through a business combination or an
      asset acquisition. Costs incurred before the Pebble Partnership has
      obtained the legal rights to explore an area are expensed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Acquisition costs, including general and administrative
      costs, are only capitalized to the extent that these costs can be related
      directly to operational activities in the relevant area of interest where
      it is considered likely to be recoverable by future exploitation or sale
      or where the activities have not reached a stage which permits a
      reasonable assessment of the existence of reserves.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Exploration and evaluation assets are assessed for
      impairment only when facts and circumstances suggest that the carrying
      amount exceeds the recoverable amount and when the Pebble Partnership has
      sufficient information to reach a conclusion about the technical
      feasibility and commercial viability of the assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Once the technical feasibility and commercial viability
      of the extraction of mineral resources in an area of interest are
      demonstrable, exploration and evaluation assets attributable to that area
      of interest are first tested for impairment and then reclassified to
      mining property and development assets within
PPE.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

---

|-126 -
|------
|      

Recoverability of the carrying amount
of any exploration and evaluation assets is dependent on successful development
and commercial exploitation, or alternatively, sale of the assets.

|(i) | Asset retirement obligation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | An obligation to incur restoration, rehabilitation and
      environmental costs arises when environmental disturbance is caused by the
      exploration, development or ongoing production of a mineral property
      interest. Such costs arising from the decommissioning of plant and other
      site preparation work, discounted to their net present value, are provided
      for and capitalized at the start of each project, as soon as the
      obligation to incur such costs arises. These costs are charged against
      profits over the life of the operation, through the amortization and the
      unwinding of the discounted provision.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The Pebble Partnership has no material restoration,
      rehabilitation and environmental costs as the disturbance to date is
      minimal.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(j) | Financial assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Financial assets are classified into loans and
      receivables. The Pebble Partnership does not hold any financial assets
      classified as any of financial assets at fair value through profit or
      loss, held to maturity instruments or available for sale financial
      assets. The classification depends on the nature and purpose of the
      financial assets and is determined at the time of initial
    recognition.                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Loans and receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The Pebble Partnership has classified other receivables
      as loans and receivables. Loans and receivables are financial assets
      with fixed or determinable payments that are not quoted in an active
      market.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Loans and receivables are initially recognized at the
      transaction value and subsequently carried at amortized cost less
      impairment losses. The impairment loss of receivables is based on a review
      of all outstanding amounts at period end. Bad debts are written off during
      the year in which they are identified. Interest income is recognized by
      applying the effective interest rate, except for short-term receivables
      when the recognition of interest would be immaterial.                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Derecognition of financial liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The Pebble Partnership derecognizes financial liabilities
      when, and only when, the Pebble Partnerships obligations are discharged,
      cancelled or they expire.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(k) | Leases                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Rental costs under operating leases are charged to the
      consolidated statement of loss and comprehensive loss in equal amounts
      over the lease term.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(l) | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The partners are individually liable for any taxes
      related to their respective shares of the Pebble Partnerships taxable
      income or loss. Accordingly, no provision for income taxes is required.
      Additionally, distributions of tax losses are allocated based on funding
      contributions made by each partner.                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(m) | Provisions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Provisions are recorded when a present legal or
      constructive obligation exists as a result of past events where it is
      probable that an outflow of resources embodying economic benefits will be
      required to settle the obligation, and a reliable estimate of the amount
      of the obligation can be made.                                                                                                                                                                                                                                                                                                                                   

---

|-127 -
|------
|      

The amount recognized as a provision is
the best estimate of the consideration required to settle the obligation at the
financial position reporting date, taking into account the risks and
uncertainties surrounding the obligation. Where a provision is measured using
the cash flows estimated to settle the present obligation, its carrying amount
is the present value of those cash flows. When some or all of the economic
benefits required to settle an obligation are expected to be recovered from a
third party, the receivable is recognized as an asset if it is virtually certain
that reimbursement will be received and the amount receivable can be measured
reliably.

|3. | Tangible assets
|-- | ---------------

| |                            |   | Mineral  |  |   | Plant and |  |   |         | 
| | -------------------------- | - | -------- |  | - | --------- |  | - | ------- | 
| |                            |   | property |  |   | equipment |  |   | Total   | 
| |                            |   |          |  |   |           |  |   |         | 
| | Cost                       |   |          |  |   |           |  |   |         | 
| | At January 1, 2012         | $ | 99,347   |  | $ | 877       |  | $ | 100,224 | 
| | Additions                  |   |         |  |   | 1,029     |  |   | 1,029   | 
| | At December 31, 2012       |   | 99,347   |  |   | 1,906     |  |   | 101,253 | 
| | Additions                  |   |         |  |   | 258       |  |   | 258     | 
| | At December 10,
      2013 | $ | 99,347   |  | $ | 2,164     |  | $ | 101,511 | 
| |                            |   |          |  |   |           |  |   |         | 
| | Accumulated depreciation   |   |          |  |   |           |  |   |         | 
| | At January 1, 2012         | $ |         |  | $ | 609       |  | $ | 609     | 
| | Depreciation               |   |         |  |   | 140       |  |   | 140     | 
| | At December 31, 2012       |   |         |  |   | 749       |  |   | 749     | 
| | Depreciation               |   |         |  |   | 265       |  |   | 265     | 
| | At December 10,
      2013 | $ |         |  | $ | 1,014     |  | $ | 1,014   | 
| |                            |   |          |  |   |           |  |   |         | 
| | Carrying value             |   |          |  |   |           |  |   |         | 
| | At December 31,
      2012 | $ | 99,347   |  | $ | 1,157     |  | $ | 100,504 | 
| | At December 10,
      2013 | $ | 99,347   |  | $ | 1,150     |  | $ | 100,497 | 

|4. | Receivables
|-- | -----------

| |                                              |   | December 10 |  |   | December 31 | 
| | -------------------------------------------- | - | ----------- |  | - | ----------- | 
| |                                              |   | 2013        |  |   | 2012        | 
| |                                              |   |             |  |   |             | 
| | Non-current                                  |   |             |  |   |             | 
| | Amounts due from general partner             | $ | 99          |  | $ | 98          | 
| | Loan
      receivable (see below)            |   |            |  |   | 1,262       | 
| |                                              | $ | 99          |  | $ | 1,360       | 
| |                                              |   |             |  |   |             | 
| |                                              |   |             |  |   |             | 
| | Current                                      |   |             |  |   |             | 
| | Contribution receivable from limited partner | $ | 4,900       |  | $ |            | 
| | Prepayments and deposits                     |   | 850         |  |   | 1,534       | 
| |                                              | $ | 5,750       |  | $ | 1,534       | 

Loan Receivable

The Pebble Partnership committed a loan
in the amount of $3,156 to the Iliamna Development Corporation ("IDC"). This
loan was initiated on April 15, 2009 at a value of $1,712 with an increase of
$200 on February 1, 2010 and an increase of $1,244 on April 1, 2010. A lien on
all IDC assets was granted as the security for the loan. The original maturity
date of this loan was December 31, 2011. In 2011, $1,894 was written off in
relation to the loan receivable to reflect managements expectation of future
recoverability of the loan. This adjustment included consideration of a
renegotiated payment plan with IDC that was completed in early 2012 and treated
as an adjusting item as at December 31, 2011. As at December 10, 2013 the loan
was considered not recoverable as the Pebble Partnership had not received payment thereon notwithstanding
the payment plan in place and an impairment loss was recognized in comprehensive
loss.

---

|-128 -
|------
|      

|5. | Related party balances and transactions                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                       
|   | Transactions between the Pebble Partnership and its
      subsidiaries have been eliminated on consolidation and are not disclosed
      in this note. The undernoted summarizes related party activities other
      than those identified elsewhere in these financial
  statements:

| |                                               |   | Period from  |  |   |             | 
| | --------------------------------------------- | - | ------------ |  | - | ----------- | 
| |                                               |   | January 1 to |  |   | Year ended  | 
| |                                               |   | December 10  |  |   | December 31 | 
| | Transactions                                  |   | 2013         |  |   | 2012        | 
| | For services rendered and expenses reimbursed |   |              |  |   |             | 
| | Anglo American plc and subsidiaries (a)       | $ | 1,392        |  | $ | 2,981       | 
| | Hunter Dickinson Services Inc. (b)            |   | 1,641        |  |   | 2,212       | 
| |                                               | $ | 3,033        |  | $ | 5,193       | 

| |                                               |   | December 10 |  |   | December 31 | 
| | --------------------------------------------- | - | ----------- |  | - | ----------- | 
| | Balances payable                              |   | 2013        |  |   | 2012        | 
| | Amounts included in trade and other payables  |   |             |  |   |             | 
| | Anglo American plc and
      subsidiaries (a) | $ |            |  | $ | 474         | 
| | Hunter Dickinson Services Inc. (b)            |   |            |  |   | 186         | 
| |                                               | $ |            |  | $ | 660         | 

|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Anglo American plc and its subsidiaries provided
      technical, geological, corporate development, administrative, safety and
      community services to, and incurred third party costs on behalf of, the
      Pebble Partnership on a full cost recovery basis pursuant to the technical
      services agreements dated July 8, 2008 and further provided in the
      addendum to the said agreements dated November 20, 2009. The balance
      payable in the prior year ended December 31, 2012 is for costs incurred on
      behalf of the Pebble Partnership that were outstanding as at that
    date.                                                                                                                                                                                                                                                   
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Hunter Dickinson Services Inc. (HDSI) is a private
      company which has directors and other key management personnel, who are
      close business associates that are also key management personnel of
      Northern Dynasty Minerals Ltd., which owns the Northern Dynasty
      Partnership. HDSI provides geological, site operations, engineering,
      corporate development, administrative and management services to, and
      incurs third party costs on behalf of, the Pebble Partnership on a full
      cost recovery basis pursuant to an agreement dated July 8, 2008 and
      further provided in the addendum to the said agreement dated November 20,
      2009. The balance payable in the prior year ended December 31, 2012 is for
      costs incurred on behalf of the Pebble Partnership that were outstanding
      as at that date.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|6. | Financial instruments and risk
management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | The Pebble Partnerships financial instruments consist of
      cash, amounts due from the general partner, related parties and other
      unrelated parties, and trade and other payables. All of the Pebble
      Partnerships financial instruments have carrying values which are
      considered to be reasonable approximations of fair value due to the
      short-term nature of these instruments.                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | The Pebble Partnerships financial instruments are
      exposed to a number of financial and market risks, including credit,
      liquidity and foreign exchange risks. The Pebble Partnership may, or may
      not, establish from time to time active policies to manage these risks.
      The Pebble Partnership does not currently have in place any active hedging
      or derivative trading policies to manage these risks as the Pebble
      Partnerships management does not believe that the current size, scale and
      pattern of its operations would warrant such hedging
  activities.

---

|-129 -
|------
|      

|(a) | Credit risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Credit risk is the risk that a counterparty to a
      financial instrument will not discharge its obligations, resulting in a
      financial loss to the Pebble Partnership. The Pebble Partnership has
      procedures in place to minimize its exposure to credit risk. The Pebble
      Partnership management evaluates credit risk on an ongoing basis,
      including evaluation of counterparty credit rating.                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The primary sources of credit risk for the Pebble
      Partnership arise from the following financial assets: (1) cash balances
      and until recently amounts due from IDC which the Pebble Partnership
      impaired during the period from January 1 to December 10, 2013 (note 4).
      Except as discussed in Note 4, the Pebble Partnership does not expect to
      have any credit losses in the future. At December 10, 2013, the Pebble
      Partnership has no financial assets that are past due or impaired due to
      credit risk defaults.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Pebble Partnerships maximum exposure to credit risk
      at the reporting date is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| |                                |   | December 10 |  |   | December 31 | 
| | ------------------------------ | - | ----------- |  | - | ----------- | 
| |                                |   | 2013        |  |   | 2012        | 
| |                                |   |             |  |   |             | 
| | Cash                           | $ | 1,319       |  | $ | 10,417      | 
| | Due from general partner       |   | 99          |  |   | 98          | 
| | Due from limited partner       |   | 4,900       |  |   |            | 
| | Other receivables              |   |            |  |   | 1,534       | 
| | Loan
      receivable (note 4) |   |            |  |   | 1,262       | 
| |                                | $ | 6,318       |  | $ | 13,311      | 

|(b) | Liquidity risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Liquidity risk is the risk that the Pebble Partnership
      will not be able to meet its obligations with respect to financial
      liabilities as they fall due. The Pebble Partnerships financial
      liabilities are comprised of trade and other payables. The Pebble
      Partnership frequently assesses its liquidity position by reviewing the
      timing of amounts due and the Pebble Partnerships current cash flow
      position to meet its obligations.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | As discussed in Note 1, the Pebble Partnership is reliant
      on financial support from its limited partners, which subsequent to
      December 10, 2013, is only Northern Dynasty, to meet cash flow
      requirements.                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | The Pebble Partnerships financial liabilities arise as a
      result of ongoing exploration of its mineral property interest and
      corporate expenses. Payment terms on these liabilities are typically 30 to
      60 days from receipt of invoice and do not generally bear interest. The
      following table summarizes the remaining contractual maturities of the
      Pebble Partnerships financial liabilities:                                               

| |                                |   | December 10 |  |   | December 31 | 
| | ------------------------------ | - | ----------- |  | - | ----------- | 
| |                                |   | 2013        |  |   | 2012        | 
| | Trade and other
      payables | $ | 1,956       |  | $ | 10,193      | 

|(c) | Market risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Market risk is the risk that the fair value for assets
      classified as fair value through profit and loss and
      available-for-sale or future cash flows for assets or liabilities
      considered to be held-to-maturity, other financial liabilities, and
      loans or receivables will fluctuate because of changes in market
      conditions. The Pebble Partnership evaluates market risk on an ongoing
      basis and has established policies and procedures for mitigating its
      exposure to foreign exchange fluctuations. The Pebble Partnership is not
      exposed to interest rate risk, as it does not hold debt balances and is
      not charged interest on its trade payables
balances.

---

|-130 -
|------
|      

|(d) | Foreign exchange risk                                                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                            
|    | The Pebble Partnership is exposed to foreign exchange
      risk as some of its operating expenses are incurred in Canadian ("Cdn")
      dollars and certain of its liabilities are denominated in Cdn dollars. The
      Pebble Partnership does not use any derivative instruments to reduce its
      exposure to fluctuations in foreign currency exchange rates.     
|    |                                                                                                                                                                                                                                                                                                                                                                            
|    | The appreciation of the Cdn dollar against the US dollar
      can increase the costs of operations in US dollar terms. The Pebble
      Partnership maintains its cash balances in US dollars and until December
      10, 2013, exchanged currency to meet its Cdn dollar obligations on an as
      needed basis, thereby reducing the exchange risk on cash
  balances.
|    |                                                                                                                                                                                                                                                                                                                                                                            
|    | The Pebble Partnership is exposed to currency risk
      through the following US dollar equivalent of financial assets and
      liabilities denominated in currencies other than US
  dollars:                                                                                                                                                                           

| |                             |   | December 10 |  |   | December 31 | 
| | --------------------------- | - | ----------- |  | - | ----------- | 
| | Currency                    |   | 2013        |  |   | 2012        | 
| | Canadian dollar exposure    |   |             |  |   |             | 
| |                             |   |             |  |   |             | 
| | Cash                        | $ |            |  | $ | 1           | 
| | Total financial assets      | $ |            |  | $ | 1           | 
| |                             |   |             |  |   |             | 
| | Trade and other payables    | $ | 132         |  | $ | 1,983       | 
| | Total financial liabilities | $ | 132         |  | $ | 1,983       | 

Based on the above net exposures and
assuming all other variables remain constant, a 10% depreciation or appreciation
in the Cdn dollar against the US dollar would result in a $13 (2012 - $198)
decrease or increase in the Pebble Partnerships net loss.

---

|-131 -
|------
|      

|7. | Exploration expenses
|-- | --------------------

| |                                    |   | Period from  |  |   |             | 
| | ---------------------------------- | - | ------------ |  | - | ----------- | 
| |                                    |   | January 1 to |  |   | Year ended  | 
| |                                    |   | December 10  |  |   | December 31 | 
| |                                    |   | 2013         |  |   | 2012        | 
| | Assays and analysis                | $ | 45           |  | $ | 371         | 
| | Engineering                        |   | 8,992        |  |   | 18,643      | 
| | Environmental                      |   | 13,145       |  |   | 19,710      | 
| | Equipment rental                   |   | 38           |  |   | 205         | 
| | Freight                            |   | 449          |  |   | 768         | 
| | Option payment for Kaskanak claims |   | 750          |  |   |            | 
| | Public affairs                     |   | 4,125        |  |   | 7,849       | 
| | Site activities                    |   | 15,477       |  |   | 26,999      | 
| | Socioeconomic                      |   | 7,361        |  |   | 7,553       | 
| | Transportation                     |   | 2,798        |  |   | 7,955       | 
| | Incurred during the period / year  | $ | 53,180       |  | $ | 90,053      | 

|8. | Commitments                                                                   
|-- | ------------------------------------------------------------------------------
|   |                                                                               
|   | The Pebble Partnership has the following non-cancellable
      leases to 2016:

| | Commitment   |   | 2014  |  |   | 2015  |  |   | 2016 | 
| | ------------ | - | ----- |  | - | ----- |  | - | ---- | 
| | Office lease | $ | 740   |  | $ | 763   |  | $ | 651  | 
| | Site leases  |   | 780   |  |   | 260   |  |   |     | 
| | Other leases |   | 144   |  |   | 84    |  |   |     | 
| |              | $ | 1,664 |  | $ | 1,107 |  | $ | 651  | 

Rent expense under non-cancellable operating leases was $1,627 and $1,376 for the period from January 1 to December 10, 2013 and for the year ended December 31, 2012, respectively.

|9. | Subsequent events                                                                                                                                                                     
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                       
|   | The Pebble Partnership has evaluated subsequent events
      for recognition or disclosure through May 15, 2015, which represents the
      date the financial statements were issued.

---