NORTHERN DYNASTY MINERALS LTD.
                        CONSOLIDATED FINANCIAL STATEMENTS

                                   YEARS ENDED
                        DECEMBER 31, 2002, 2001 and 2000

                         (Expressed in Canadian Dollars)



<PAGE>


                             D E V I S S E R G R A Y
                              CHARTERED ACCOUNTANTS

                                                    401 - 905 West Pender Street
                                                            Vancouver, BC Canada
                                                                         V6C 1L6




AUDITOR'S REPORT

To the Shareholders of Northern Dynasty Minerals Ltd.

We have audited the  consolidated  balance sheets of Northern  Dynasty  Minerals
Ltd.  as at December  31,  2002 and 2001,  and the  consolidated  statements  of
operations  and  deficit  and cash flows for each of the years in the three year
period  ended   December  31,  2002.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
in Canada and the United States of America. Those standards require that we plan
and  perform  an audit to obtain  reasonable  assurance  whether  the  financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial statement presentation.

In our opinion,  these consolidated  financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2002
and 2001 and the results of its  operations and cash flows for each of the years
in the three year period ended  December 31, 2002 in  accordance  with  Canadian
generally  accepted  accounting  principles.  As  required  by the  Company  Act
(British Columbia),  we report that, in our opinion,  these principles have been
applied on a consistent basis.


"De Visser Gray"

CHARTERED ACCOUNTANTS

Vancouver, British Columbia
May 6, 2003


<PAGE>
<TABLE>
<CAPTION>

NORTHERN DYNASTY MINERALS LTD.
CONSOLIDATED BALANCE SHEETS
(Expressed in Canadian Dollars)

                                                                                             December 31                December 31
                                                                                                    2002                       2001
                                                                                             -----------                -----------

ASSETS

CURRENT ASSETS

<S>                                                                                          <C>                       <C>
   Cash and equivalents ........................................................             $    424,152              $  2,044,956
   Amounts receivable and prepaids .............................................                  178,834                    52,722
   Balances receivable from related parties (note 8) ...........................                   79,350                   487,155
                                                                                              -----------                ----------
                                                                                                  682,336                 2,584,833

EQUIPMENT (note 4) .............................................................                    2,813                     3,534
                                                                                              -----------                ----------
                                                                                             $    685,149              $  2,588,367
                                                                                              ===========                ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

   Accounts payable and accrued liabilities ....................................             $    174,559              $    183,889
   Balances payable to related parties (note 8) ................................                   11,729                   584,655
                                                                                              -----------                ----------
                                                                                                  186,288                   768,544
                                                                                              -----------                ----------

SHAREHOLDERS' EQUITY

   Share capital (note 7) ......................................................               11,035,977                 7,907,717
   Subscriptions received (note 7(b)) ..........................................                  650,000                       -
   Contributed surplus (note 7(d)) .............................................                   13,271                       -
   Deficit .....................................................................              (11,200,387)               (6,087,894)
                                                                                              -----------                ----------
                                                                                                  498,861                 1,819,823
Nature of operations (note 1)
Subsequent events (note 7(d) and 12)
                                                                                              -----------                ----------
                                                                                             $    685,149              $  2,588,367
                                                                                              ===========                ==========

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

Approved by the Board of Directors

/S/ RONALD W. THIESSEN                                      /S/ JEFFREY R. MASON

Ronald W. Thiessen                                          Jeffrey R. Mason
Director                                                    Director

</TABLE>


<PAGE>

<TABLE>
<CAPTION>

NORTHERN DYNASTY MINERALS LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in Canadian Dollars)

                                                                                                     Years ended December 31
                                                                                                 2002           2001           2000
                                                                                         ------------    -----------    -----------

EXPENSES
<S>                                                                                      <C>             <C>           <C>
   Conference and travel .......................................................         $     55,856    $    20,233   $      1,069
   Depreciation ................................................................                  721            286            368
   Exploration (note 6) ........................................................            4,329,936      1,168,394            -
   Legal, accounting and audit .................................................               72,315         43,823         15,054
   Management and consulting ...................................................               45,518         52,939            -
   Office and administration ...................................................               67,033         35,318         11,595
   Property investigations .....................................................                  -           99,159        239,060
   Salaries and benefits .......................................................              341,639        123,656         35,642
   Shareholder communication ...................................................              164,031          6,944          4,065
   Trust and filing ............................................................               24,768         12,763          6,367
   Write-off of capital assets .................................................                  -              -            2,813
                                                                                         ------------    -----------    -----------
                                                                                            5,101,817      1,563,515        316,033
                                                                                         ------------    -----------    -----------
OTHER ITEMS
   Foreign exchange gain (loss) ................................................              (37,655)         7,876          6,235
   Interest income .............................................................               26,979        100,755        150,903
                                                                                         ------------    -----------    -----------
                                                                                              (10,676)       108,631        157,138
                                                                                         ------------    -----------    -----------

LOSS FOR THE YEAR ..............................................................         $ (5,112,493)   $(1,454,884)  $   (158,895)
                                                                                         ------------    -----------    -----------

WEIGHTED AVERAGE NUMBER OF .....................................................           12,562,113      7,448,167      7,181,619
   COMMON SHARES OUTSTANDING                                                             ============    ===========    ===========

LOSS PER SHARE .................................................................         $      (0.41)   $     (0.20)   $     (0.02)
                                                                                         ============    ===========    ===========



CONSOLIDATED STATEMENTS OF DEFICIT
(Expressed in Canadian Dollars)

                                                                                                   Years ended December 31
                                                                                                 2002           2001           2000
                                                                                         ------------    -----------    -----------

DEFICIT, BEGINNING OF YEAR .....................................................         $ (6,087,894)   $(4,633,010)   $(4,474,115)
LOSS FOR THE YEAR ..............................................................           (5,112,493)    (1,454,884)      (158,895)
                                                                                         ------------    -----------    -----------

DEFICIT, END OF YEAR ...........................................................         $(11,200,387)   $(6,087,894)   $(4,633,010)
                                                                                         ============    ===========    ===========


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


</TABLE>



<PAGE>

<TABLE>
<CAPTION>

NORTHERN DYNASTY MINERALS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in Canadian Dollars)


                                                                                               Years ended December 31
CASH PROVIDED BY (APPLIED TO): ......................................                2002                 2001                 2000
                                                                              -----------          -----------          -----------

OPERATING ACTIVITIES

<S>                                                                           <C>                  <C>                  <C>
Loss for the year ...................................................         $(5,112,493)         $(1,454,884)         $  (158,895)
Items not involving cash
    Stock-based compensation ........................................              13,271                  -                    -
    Depreciation ....................................................                 721                  286                  368
    Write-off capital assets ........................................                 -                    -                  2,813
    Shares issued for property option payments ......................             995,000                  -                    -
Changes in non-cash working capital items
Amounts receivable and prepaids .....................................            (126,112)             (35,610)             (15,773)
Accounts payable and accrued liabilities ............................              (9,330)             179,389                  -
Balances receivable from and payable to related parties .............            (165,121)             371,218             (145,641)
                                                                              -----------          -----------          -----------
                                                                               (4,404,064)            (939,601)            (317,128)
                                                                              -----------          -----------          -----------

INVESTING ACTIVITIES
Purchase of equipment ...............................................                 -                 (2,488)                 -
                                                                              -----------          -----------          -----------
                                                                                      -                 (2,488)                 -
                                                                              -----------          -----------          -----------

FINANCING ACTIVITIES
   Common shares issued for cash, net of issue costs ................           2,133,260              634,375                2,500
   Subscriptions received ...........................................             650,000                  -                    -
                                                                              -----------          -----------          -----------
                                                                                2,783,260              634,375                2,500
                                                                              -----------          -----------          -----------

DECREASE IN CASH AND EQUIVALENTS ....................................          (1,620,804)            (307,714)            (314,628)
Cash and equivalents, beginning of year .............................           2,044,956            2,352,670            2,667,298
                                                                              -----------          -----------          -----------

CASH AND EQUIVALENTS, END OF YEAR ...................................         $   424,152          $ 2,044,956          $ 2,352,670
                                                                              ===========          ===========          ===========

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

</TABLE>


<PAGE>

NORTHERN DYNASTY MINERALS LTD.
Notes to Consolidated Financial Statements
For the year ended December 31, 2002
(Expressed in Canadian Dollars)


1.       NATURE OF OPERATIONS

         Northern  Dynasty  Minerals Ltd. (the "Company") is incorporated  under
         the  laws of the  Province  of  British  Columbia,  and  its  principal
         business  activity  is  the  exploration  of  mineral  properties.  Its
         principal mineral property interests are located in Alaska, USA.

         These  consolidated  financial  statements  have  been  prepared  using
         Canadian  generally  accepted  accounting  principles  assuming 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  develop  profitable  operations  and to  continue  to raise
         adequate   financing.   These  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.


2.       BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

         These  financial  statements  have been  prepared  in  accordance  with
         Canadian generally accepted accounting  principles.  In October,  2001,
         the Company  incorporated  a subsidiary,  Northern  Dynasty Mines Inc.,
         under  the  laws  of the  State  of  Alaska,  USA.  These  consolidated
         financial  statements  include  the  accounts  of the  Company  and its
         wholly-owned   subsidiary.   All  material  intercompany  balances  and
         transactions have been eliminated.


3.       SIGNIFICANT ACCOUNTING POLICIES

(A)      CASH AND EQUIVALENTS

         Cash and  equivalents  consist of cash and highly  liquid  investments,
         having  maturity  dates  of  three  months  or less  from  the  date of
         purchase, that are readily convertible to known amounts of cash.

(B)      EQUIPMENT

         Equipment  is recorded at cost and is  depreciated  over its  estimated
         useful life using the declining balance method at various rates ranging
         from 20% to 30% per annum.

(C)      MINERAL PROPERTY INTERESTS

         The  acquisition  costs of mineral  properties  are deferred  until the
         properties  are  placed  into  production,  sold  or  abandoned.  These
         deferred  costs are  amortized on a  unit-of-production  basis over the
         estimated  useful  life  of  the  related   properties   following  the
         commencement  of  production,  or  written  off if the  properties  are
         allowed to lapse or are  abandoned.  If the deferred  mineral  property
         costs are determined not to be  recoverable  over the estimated  useful
         life or are less than  estimated fair market value,  the  unrecoverable
         portion is charged to earnings in that period.

         Mineral property  acquisition costs include the cash  consideration and
         the fair market value of common  shares,  based on the trading price of
         the shares,  on the date of issue or as  otherwise  provided  under the
         agreement terms for the mineral property interest. Costs for properties
         for which the  Company  does not  possess  unrestricted  ownership  and
         exploration  rights,  such as option  agreements,  are  expensed in the
         period  incurred or until a feasibility  study has determined  that the
         property is capable of  commercial  production.  Exploration  costs and
         option payments are expensed in the period incurred.

         Administrative expenditures are expensed in the period incurred.

(D)      SHARE CAPITAL

         Common shares issued for mineral property interests are recorded at the
         fair market value based upon the trading price of the shares on the TSX
         Venture  Exchange on the date of issue or as otherwise  provided  under
         the agreement terms to issue the shares.

         The proceeds from common shares issued pursuant to  flow-through  share
         financing  agreements  are  credited  to  share  capital,  and  the tax
         benefits of the  exploration  expenditures  incurred  pursuant to these
         agreements are transferred to the purchaser of the flow-through shares.

         Share issue costs are deducted from share capital.

(E)      STOCK-BASED COMPENSATION PLAN

         The Company has a  stock-based  compensation  plan as described in note
         7(d).  Effective  January 1, 2002,  the  Company  has  adopted  the new
         accounting standard of the Canadian Institute of Chartered  Accountants
         ("CICA") for accounting for stock-based compensation.

         The Company has adopted  the fair value  method of  accounting  for all
         stock options granted. Under this method,  stock-based  compensation on
         options granted to employees,  directors and consultants is recorded as
         an  expense  over the  period  the  options  are  vested,  based on the
         estimated fair value at the measurement date using a fair value pricing
         model.

(F)      FOREIGN CURRENCY TRANSLATION

         All of the Company's foreign subsidiaries are considered integrated.

         Monetary  assets and  liabilities of the Company's  integrated  foreign
         operations  are translated  into Canadian  dollars at exchange rates in
         effect at the balance sheet date.  Non-monetary  assets and liabilities
         are translated at historical estimated exchange rates unless such items
         are  carried  at  market,  in which  case  they are  translated  at the
         exchange  rates in effect  on the  balance  sheet  date.  Revenues  and
         expenses, except depreciation, are translated at average exchange rates
         for the period.  Depreciation  is translated at the same exchange rates
         as the assets to which it relates.

         Foreign exchange gains or losses are expensed.

(G)      INCOME TAXES

         The  Company  uses the asset and  liability  method of  accounting  for
         income  taxes.  Under  this  method,   future  income  tax  assets  and
         liabilities  are  computed  based on  differences  between the carrying
         amount  of  assets  and  liabilities  on the  balance  sheet  and their
         corresponding tax values,  generally using the enacted or substantively
         enacted  income tax rates  expected  to apply to taxable  income in the
         years in which those temporary differences are expected to be recovered
         or  settled.  Future  income tax assets  also  result  from unused loss
         carryforwards and other deductions. Future tax assets are recognized to
         the  extent  that  they  are  considered  more  likely  than  not to be
         realized.  The  valuation of future  income tax assets is adjusted,  if
         necessary, by the use of a valuation allowance to reflect the estimated
         realizable amount.

         The Company's  accounting  policy for future income taxes currently has
         no effect on the financial statements of any of the periods presented.

(H)      LOSS PER SHARE

         Basic loss per share is  calculated by dividing the loss for the period
         by the weighted average number of common shares  outstanding during the
         period.

         Diluted loss per share is calculated  using the treasury  stock method.
         Under the treasury stock method,  the weighted average number of common
         shares  outstanding  used for the calculation of diluted loss per share
         assumes  that the  proceeds to be received on the  exercise of dilutive
         stock options and warrants are used to repurchase  common shares at the
         average market price during the period.

         Diluted  loss per share  has not been  presented  as the  effect of the
         outstanding options and warrants would be anti-dilutive.

(I)      FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying values of cash and equivalents,  amounts  receivable,  and
         accounts payable and accrued  liabilities  approximate their fair value
         due  to  their  short  term  nature.  The  Company  is not  exposed  to
         significant credit risk or interest rate risk.

(J)      CHANGE IN ACCOUNTING POLICY - STOCK-BASED COMPENSATION

         Effective January 1, 2002, the Company adopted the new  Recommendations
         of the  Canadian  Institute of  Chartered  Accountants  relating to the
         accounting for stock-based compensation and other stock-based payments.
         Under the new  standard,  payments to  non-employees,  and to employees
         awards that are direct  awards of stock,  that call for  settlement  in
         cash or other assets, or that are stock appreciation  rights which call
         for settlement by the issuance of equity instruments, are accounted for
         using the fair value  method and is  included  in  operations,  with an
         offset to contributed  surplus. No compensation expense is recorded for
         all other non-cash  stock-based employee  compensation awards;  however
         pro-forma  disclosure  of net income and  earnings  per share,  had the
         Company used the fair value method, is presented if applicable.

         Prior to the adoption of the new standard,  no compensation expense was
         recorded for the Company's stock-based incentive plans when the options
         were granted.  Any consideration paid by those exercising stock options
         was credited to share capital upon receipt.

         The new Recommendations are applied prospectively. The adoption of this
         new standard has resulted in no changes to amounts previously reported.

(K)      USE OF ESTIMATES

         The  preparation  of financial  statements in conformity  with Canadian
         generally accepted  accounting  principles  requires management to make
         estimates and  assumptions  that affect the reported  amounts of assets
         and   liabilities,   and  the  disclosure  of  contingent   assets  and
         liabilities as at the balance sheet date,  and the reported  amounts of
         revenues and expenses during the reporting  period.  Significant  areas
         requiring the use of management  estimates include the determination of
         potential  impairments  of asset  values,  rates  for  depreciation  of
         equipment,  and the assumptions  used in the  determination of the fair
         value of  stock-based  compensation.  Actual  results could differ from
         those estimates.

(L)      COMPARATIVE FIGURES

         Certain of the prior years' comparative  figures have been reclassified
         to conform to the  financial  statement  presentation  adopted  for the
         current year.


4.       EQUIPMENT

                                                   Accumulated          Net Book
                                       Cost       Depreciation             Value
                                    -------       ------------          --------
DECEMBER 31, 2002

   Site equipment ..............    $15,387            $14,660            $  727
   Vehicles ....................      4,335              4,239                96
   Computer equipment ..........      2,488                498             1,990
                                    -------            -------            ------
                                    $22,210            $19,397            $2,813
                                    =======            =======            ======

DECEMBER 31, 2001

   Site equipment ...............   $15,387            $14,478            $  909
   Vehicles .....................     4,335              4,198               137
   Computer equipment ...........     2,488                -               2,488
                                    -------            -------            ------
                                    $22,210            $18,676            $3,534
                                    =======            =======            ======


5.       MINERAL PROPERTY INTERESTS

(A)      PEBBLE PROPERTY

         On November 1, 2001,  the  Company  acquired  the rights to two options
         granted  by  Teck  Cominco  American   Incorporated   ("Teck  Cominco")
         respecting its Pebble property in southwestern Alaska.

         The two options  granted by Teck Cominco  were  acquired by the Company
         through an  agreement  with Hunter  Dickinson  Group Inc.  ("HDGI"),  a
         private  company  which is related by virtue of  certain  directors  in
         common. The Company has been assigned, at HDGI's cost, an 80% interest,
         with the right to  acquire  a 100%  interest,  in the two Teck  Cominco
         options.  HDGI's costs ($584,655) included the staking of 134 claims to
         expand the property along with 30 km of induced polarization  surveying
         over the new claims.

         The first  option  enables the  Company to explore the Pebble  property
         prior to electing to  purchase a 100%  interest in the Pebble  deposit,
         free from any underlying royalty.  This option was extended by one year
         in an agreement dated December 19, 2002 whereby the Company issued Teck
         Cominco  200,000  shares.  The Company can elect to (a) purchase the 36
         claims  covering  the  Pebble  deposit  by paying  Teck  Cominco  US$10
         million,  in cash or shares  with the same cash  equivalency,  prior to
         November 30, 2004 and (b) to purchase  the 20% HDGI  interest in shares
         at its independently  appraised value. Interim payments to Teck Cominco
         were also required,  including US$250,000,  in cash or stock (which was
         paid),  plus 500,000 two year share  purchase  warrants  exercisable at
         $0.75 (which were issued on December  31, 2001) and a cumulative  total
         of 1,000,000  shares (500,000 were issued on March 27, 2002 and 500,000
         were  issued on  December  19,  2002)  and  750,000  warrants  (500,000
         exercisable  at $1.15  were  issued  on  March  27,  2002  and  250,000
         exercisable  at $0.60 were issued on December 31, 2002) in two tranches
         before December 31, 2002. If the Company elects to issue shares to Teck
         Cominco in lieu of cash, the Company will manage the sale of any shares
         that Teck Cominco wishes to sell.  Any excess of Teck Cominco's  resale
         proceeds will be credited  against future option  requirements  and any
         share resale  shortfall  must be made up by the Company to maintain the
         option.  If the Company  purchases  the Resource  Lands under the first
         option,  it also has the right  under the  second  option to earn a 50%
         interest in the adjacent  Exploration  Lands by completing  60,000 feet
         (to date 36,353 feet has been  completed) of drilling  before  November
         30, 2004.  Upon the Company  completing the drilling,  Teck Cominco can
         either match the Company's future expenditures by forming a 50:50 joint
         venture,  or sell  its 50%  interest  in the  Exploration  Lands to the
         Company for US$4 million and a 5% net profits interest.

(B)      PICKLE LAKE JOINT VENTURE

         The Company holds a 37.5% participating joint venture interest, subject
         to a 2.5% Net Profits Interest ("NPI") held by the original owners,  in
         mineral properties in northwestern  Ontario under the Pickle Lake Joint
         Venture. The Company is searching for additional joint venture partners
         to fund further  exploration on these  properties.  During fiscal 2002,
         the Company  participated in a small exploration  program on the Pickle
         Lake properties to keep certain claims in good standing.

(C)      LITTLE BALD MOUNTAIN

         The Company holds an 8.1% NPI in the Little Bald  Mountain  property in
         Nevada,  USA,  which may be acquired by Placer Dome U.S. Inc. by annual
         election for an option  payment of  $1,500,000  before  December  1995,
         escalating by $500,000 for each successive year thereafter.  The option
         expires on December 31, 2003.


6.       EXPLORATION EXPENSES

                                                         Years ended December 31
         PEBBLE PROPERTY                                     2002           2001
                                                        ---------      ---------

         Assay and analysis ......................     $  118,948      $  15,502
         Drilling ................................      1,142,867            -
         Engineering .............................         39,313         11,034
         Equipment rental ........................         32,012          7,582
         Freight .................................         70,685            -
         Geological ..............................        629,082        277,700
         Graphics ................................        121,340         25,480
         Helicopter/fixed wing ...................        601,641        124,036
         Option payments .........................        995,000        398,343
         Property fees/assessment ................         46,353        235,464
         Site activities .........................        497,291         61,328
         Socioeconomic ...........................          3,642            -
         Travel and accommodation ................         31,762         11,925
                                                        ---------      ---------
         INCURRED DURING THE YEAR
           (to statement of operations) ..........      4,329,936      1,168,394
                                                        ---------      ---------
         Cumulative exploration expenses,
             beginning of year ...................      1,168,394            -
                                                        ---------      ---------
         Cumulative exploration expenses,
             end of year .........................     $5,498,330    $ 1,168,394
                                                        =========      =========


7.       SHARE CAPITAL

(A)      AUTHORIZED SHARE CAPITAL

         The Company's  authorized share capital consists of 100,000,000  common
         shares, without par value.

(B)      ISSUED AND OUTSTANDING COMMON SHARES

                                                            Number
         COMMON SHARES ISSUED:                           of Shares        Amount
                                                        ----------   -----------

         Balance, December 31, 2000 ...................  7,182,455     7,273,342
              For private placement (net of issue costs) 2,100,000       630,000
              Share purchase options exercised ........     10,000         4,375
                                                        ----------   -----------
         Balance, December 31, 2001 ...................  9,292,455   $ 7,907,717
              Private placement (net of issue costs) ..  1,176,470       391,317
              Private placement (net of issue costs) ..  2,000,000       890,700
              Private placement (net of issue costs)(i)    197,548       189,793
              Share purchase options exercised ........    214,018        87,557
              Property option payments (note 5(a)) ....  1,200,000       995,000
              Share purchase warrants exercised .......  1,325,000       530,000
              Share purchase options exercised ........    109,732        43,893
                                                        ----------   -----------
         Balance, December 31, 2002 ................... 15,515,223   $11,035,977
                                                        ==========   ===========

         (i) On August 27,  2002,  the  Company  closed a private  placement  of
             197,548 units at a price of $1.05 per unit. Each unit comprised one
             common share and one share  purchase  warrant.  Each share purchase
             warrant entitles the holder to purchase one additional common share
             at a price of $1.15 until  December  27,  2003.  The  warrants  are
             subject to a 45-day  accelerated expiry if the closing price of the
             common shares of the Company as traded on the TSX Venture  Exchange
             is at least $1.73 for ten consecutive trading days.

         Subsequent to the year end, on January 14, 2003, the Company  completed
         a private placement by issuing 1,300,000 flow-through units and 400,000
         non  flow-through  units  at $0.50  each.  Each  flow-through  unit was
         comprised   of   a   flow-through   common   share   and   a   two-year
         non-flow-through  share  purchase  warrant.  Each warrant  entitles the
         holder to purchase one common  share at a price of $0.60 until  January
         14, 2005. The non flow-through units were comprised of one common share
         and one two-year share purchase warrant with the same warrant terms. As
         at December 31, 2002, the Company had received  $650,000 for the entire
         flow-through portion of the private placement (note 11).

(C)      SHARE PURCHASE WARRANTS

         The  continuity of share purchase  warrants  (each warrant  exercisable
         into one common share) for the year ended December 31, 2002 is:

<TABLE>
<CAPTION>

                                                       Exercise           Dec. 31                               Expired/    Dec. 31,
         Expiry date                                      Price              2001       Issued     Exercised    Cancelled       2002
         -----------                                   --------         ---------    ---------    ----------    --------   ---------

<S>      <C>                                           <C>              <C>          <C>          <C>           <C>         <C>
         July 16, 2003 .............................   $   0.40         2,100,000          -      (1,325,000)        -       775,000
         December 27, 2003 .........................   $   1.15               -        197,548           -           -       197,548
         December 31, 2003 .........................   $   0.75           500,000          -            --           -       500,000
         February 20, 2004 .........................   $   0.45               -      1,176,470           -           -     1,176,470
         March 27, 2004 ............................   $   1.15               -        500,000           -           -       500,000
         April 19, 2004 ............................   $   0.62               -      2,000,000           -           -     2,000,000
         December 31, 2004 .........................   $   0.60               -        250,000           -           -       250,000
                                                                        ---------    ---------    ----------    --------   ---------
                                                                        2,600,000    4,124,018    (1,325,000)        -     5,399,018

         Weighted average exercise price                                $    0.47    $    0.66    $     0.40    $    -     $    0.63
                                                                        =========    =========    ==========    =====-==   =========

</TABLE>

         Subsequent to December 31, 2002,  147,000 share purchase  warrants were
         exercised at $0.45.

         The  continuity of share purchase  warrants  (each warrant  exercisable
         into one common share) for the year ended December 31, 2001 is:

<TABLE>
<CAPTION>

                                                            Exercise       Dec. 31                              Expired/    Dec. 31,
         Expiry date                                           Price          2000        Issued    Exercised Cancelled         2001
         -----------                                        --------   ------------    ---------   ---------- ----------   ---------

<S>                                                         <C>        <C>             <C>         <C>          <C>        <C>
         July 16, 2003 ..................................   $   0.40             -     2,100,000          -          -     2,100,000
         December 31, 2003 ..............................   $   0.75             -       500,000          -          -       500,000
                                                                       ------------    ---------   ----------   --------   ---------
                                                                                 -     2,600,000          -          -     2,600,000

         Weighted average exercise price                               $         -     $    0.47   $      -     $    -     $    0.47
                                                                       ============    =========   ==========   ========   =========

</TABLE>

(D)      SHARE PURCHASE OPTION COMPENSATION PLAN

         The Company has a share purchase option  compensation  plan approved by
         the shareholders that allows it to grant up to 2,600,000 share purchase
         options,  vesting over up to two years, subject to regulatory terms and
         approval, to its employees,  officers,  directors and consultants.  The
         exercise  price of each option can be set equal to or greater  than the
         closing  market price of the common  shares on the TSX on the day prior
         to the date of the grant of the option,  less any allowable  discounts.
         Options  have a  maximum  term  of five  years  and  terminate  30 days
         following the termination of the optionee's  employment,  except in the
         case of retirement or death. In the case of retirement,  they terminate
         30 to 90 days after the date of retirement,  at management's discretion
         and in the case of death;  they  terminate  at the  earlier of one year
         after the date of death or the expiry date of the options.

         The  continuity of share  purchase  options for the year ended December
         31, 2002 is:

<TABLE>
<CAPTION>
                                                         Exercise        Dec. 31                               Expired/      Dec. 31
        Expiry date                                         Price           2001     Granted    Excercised   Cancelled          2002
        -----------                                   -----------     ----------    --------    ----------   ----------    ---------

<S>                                                  <C>               <C>           <C>         <C>          <C>          <C>
        February 17,2002 ..........................   $      0.55         13,000         -         (13,000)         -            -
        February 12, 2003 .........................   $      0.43          8,000         -             -            -          8,000
        May 15, 2004 ..............................   $      0.40      1,388,500         -        (310,750)      (7,500)   1,070,250
        December 20, 2004 .........................   $      0.50            -       119,000           -            -        119,000
                                                                      ----------    --------    ----------    ---------    ---------
                                                                       1,409,500     119,000      (323,750)      (7,500)   1,197,250

        Weighted average exercise price                               $     0.40    $   0.50    $     0.40    $    0.40    $    0.41
                                                                      ==========    ========    ==========    =========    =========
</TABLE>

         Subsequent  to December 31, 2002,  13,500 share  purchase  options were
         exercised at $0.40 and 8,000 share  purchase  options were exercised at
         $0.43 into a total of 21,500 common shares.

         The  continuity of share  purchase  options for the year ended December
         31, 2001 is:

<TABLE>
<CAPTION>

                                                Exercise    Dec. 31                                           Expired/       Dec. 31
        Expiry date                                Price       2000          Granted         Exercised      Cancelled           2001
        -----------                             --------    -------         --------         ---------      ---------      ---------

<S>              <C> <C>                        <C>         <C>                                              <C>
        February 20, 2001 ................      $  0.50     14,000             -                 -           (14,000)          -
        April 30, 2001 ...................      $  0.48      8,000             -                 -            (8,000)          -
        August 2, 2001 ...................      $  0.32      3,000             -                 -            (3,000)          -
        February 17,2002 .................      $  0.55     16,000             -                (2,500)         (500)         13,000
        February 12, 2003 ................      $  0.43        -               8,000             -               -             8,000
        May 15, 2004 .....................      $  0.40        -           1,473,500            (7,500)      (77,500)      1,388,500
                                                            ------         ---------          --------      --------       ---------
                                                            41,000         1,481,500           (10,000)     (103,000)      1,409,500

        Weighted average exercise price                     $ 0.50         $    0.40          $   0.44      $   0.42       $    0.40
                                                            ======         =========          ========      ========       =========
</TABLE>


         The exercise  prices of all share purchase  options  granted during the
         year were equal to the market  price at the grant date.  The  estimated
         fair value of all options granted to non-employees during the year have
         been reflected in the statement of operations as follows:

              Management and consulting                                 $ 13,271
                                                                        --------
              TOTAL STOCK-BASED COMPENSATION COST RECOGNIZED
                 IN OPERATIONS, CREDITED TO CONTRIBUTED SURPLUS         $ 13,271
                                                                        ========

         The  weighted-average  assumptions  used to estimate  the fair value of
         options granted during the year were:

              Risk-free interest rate                                         3%
              Expected option life                                       2 years
              Expected vesting period                                 0-6 months
              Expected volatility                                            40%
              Expected dividend yield                                        nil
              Closing share price of the Company as at the year end date   $0.61

         Option  pricing   models   require  the  input  of  highly   subjective
         assumptions  including the expected  price  volatility.  Changes in the
         subjective  input  assumptions  can  materially  affect  the fair value
         estimate,  and therefore the existing models do not necessarily provide
         a reliable measure of the fair value of the Company's stock options.


8.       RELATED PARTY TRANSACTIONS AND BALANCES

                                                             Years ended
                                                   -----------------------------
                                                   December 31,     December 31,
TRANSACTIONS                                               2002             2001
                                                   ------------     ------------

Services rendered and expenses reimbursed
     Hunter Dickinson Inc. (a) ...............      $ 1,227,425       $  333,142
     Hunter Dickinson Group Inc. (b) .........           28,698          586,966
                                                   ============     ============

BALANCES RECEIVABLE (PAYABLE)                      December 31,     December 31,
                                                           2002             2001
                                                   ------------     ------------

     Hunter Dickinson Inc. (a) ...............     $     79,350       $  487,155
     Hunter Dickinson Group Inc. (b) .........          (11,729)       (584,655)
                                                   ============     ============

         (a) Hunter  Dickinson  Inc.  ("HDI") is a private  company with certain
             directors   in   common   that   provides   geological,   corporate
             development,  administrative and management services to, and incurs
             third party costs on behalf of, the Company on a full cost recovery
             basis pursuant to an agreement dated December 31, 1996. The balance
             receivable  from HDI has resulted  from advances by the Company for
             such services to be rendered.

         (b) Hunter  Dickinson  Group Inc.  ("HDGI") is a private  company  with
             certain  directors in common that provides  consulting  services at
             market  rates to the  Company.  The  balances  payable to HDGI have
             resulted  from the services  rendered,  but not yet paid for by the
             Company.


9.       INCOME TAXES

         As at December 31, 2002, the Canadian  parent company had the following
         amounts  available  to reduce  future  taxable  income,  the future tax
         benefits of which have not been reflected in the accounts, as it cannot
         be considered likely that these amounts will be utilized.

         The  following  non-capital  and  capital  losses,  approximately,  are
         available to reduce future taxable income:

         Expiry Date
         -----------

               2003                                                   $   64,000
               2004                                                       53,000
               2005                                                       54,000
               2006                                                            -
               2007                                                            -
               2008                                                       25,000
               2009                                                      306,000
               2010                                                      799,000
                                                                      ----------
         Total non-capital losses                                      1,301,000
         Capital loss carried forward                                  2,091,500
         Excess of aggregate tax cost of equipment
              over net book value                                              -
                                                                      ----------
         Total losses and excess equipment tax costs available        $3,392,500
                                                                      ==========


10.      SEGMENTED INFORMATION

         The Company  operates in a single  reportable  operating and geographic
         segment,  the  exploration  and  development  of mineral  properties in
         Alaska, USA.


11.      COMMITMENTS

         At  December  31,  2002,  the  Company is  committed  to incur prior to
         December 31, 2003,  on a  best-efforts  basis,  $650,000 in  qualifying
         Canadian exploration  expenditures  pursuant to a private placement for
         which  flow-through  proceeds had been  received  prior to December 31,
         2002 (note 7(b)), and renounced to the subscribers as at that date.


12.      SUBSEQUENT EVENTS

         Subsequent to the year end, the Company:

         (a) completed  on  January  14,  2003 a private  placement  by  issuing
             1,300,000  flow-through units and 400,000 non flow-through units at
             $0.50 each (note 7(b)),

         (b) issued  21,500  common  shares  pursuant  to the  exercise of share
             purchase options (note 7(d)), and

         (c) issued 147,000  common shares  pursuant to the exercise of warrants
             (note 7(c)).


13.      DIFFERENCES  BETWEEN  CANADIAN  AND UNITED  STATES  GENERALLY  ACCEPTED
         ACCOUNTING PRINCIPLES (GAAP)

(A)      MINERAL PROPERTY COSTS

         The Company's  policy of expensing  all property  costs except where an
         outright  property  interest has been acquired results in an accounting
         treatment for these costs which the Company  considers to be materially
         congruent  with US GAAP.  Accordingly,  the Company  considers  that no
         US/Canadian  GAAP  difference  exists with respect to mineral  property
         costs in these consolidated financial statements.

(B)      STOCK OPTIONS

         Under U.S.  GAAP,  compensation  cost must be considered  for all stock
         options  granted  requiring  the Company to utilize both the  intrinsic
         value-based  and  the  fair  value  based  methods  of  accounting  and
         reporting stock-based compensation.

         The  Company,  if required to report  under U.S.  GAAP,  would elect to
         apply Accounting  Principles Board Opinion No. 25: Accounting for Stock
         Issued to Employees  ("APB 25") to account all stock  options  granted.
         Further,   Statement  of  Financial   Accounting   Standards  No.  123,
         Accounting  for  Stock-Based   Compensation   ("SFAS  123"),   requires
         additional  disclosure  to reflect  the  results of the  Company had it
         elected to follow SFAS 123.

         Under APB 25, compensation cost must be recognized for all compensatory
         stock options granted whenever the market price of the Company's shares
         on the date of grant  exceeds the exercise  price.  The policies of the
         TSX  Venture  Exchange  permit the  issuance of options  with  exercise
         prices  discounted up to 25% from the closing  market value at the date
         of granting.  Such a discount,  if provided option holders,  would give
         rise to a compensation expense under U.S. GAAP as noted above. However,
         the Company has to date only  granted  stock  options  without  vesting
         periods and only where the exercise price is based on the fair value of
         the stock at the date of the grant and,  accordingly,  under U.S. GAAP,
         would not have recognized any compensation costs.

         See note 7(d) for a  summary  of the  changes  in the  Company's  share
         options for the 2002 and 2001 fiscal years.