---

NORTHERN DYNASTY MINERALS LTD. 
  CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED 
  DECEMBER 31, 2003, 2002 AND 2001

(Expressed in Canadian Dollars)

---

D E  V I S S E R  G R A YCHARTERED ACCOUNTANTS

401 - 905 West Pender StreetVancouver, BC CanadaV6C 1L6

AUDITORS' 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, 2003 and 2002, and the consolidated
  statements of operations and deficit and cash flows for each of the years in
  the three year period ended December 31, 2003. 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, 2003 and 2002 and the results of its operations and cash flows
  for each of the years in the three year period ended December 31, 2003 in accordance
  with Canadian generally accepted accounting principles



CHARTERED ACCOUNTANTS

Vancouver, British Columbia
  May 7, 2004

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NORTHERN DYNASTY MINERALS LTD.Consolidated Balance Sheets
  (Expressed in Canadian Dollars)

|                                                        |   | December 31, |   |   | December 31, |  
|------------------------------------------------------- | - | ------------ | - | - | ------------ | -
|                                                        |   | 2003         |   |   | 2002         |  
|                                                        |   |              |   |   |              |  
|Assets                                                  |   |              |   |   |              |  
|                                                        |   |              |   |   |              |  
|Current assets                                          |   |              |   |   |              |  
|Cash and equivalents                                    | $ | 3,441,464    |   | $ | 424,152      |  
|Amounts receivable
      and prepaids                   |   | 229,145      |   |   | 178,834      |  
|Balances
      receivable from related parties (note 8) |   |             |   |   | 79,350       |  
|                                                        |   | 3,670,609    |   |   | 682,336      |  
|                                                        |   |              |   |   |              |  
|Equipment(note 4)                                       |   | 12,037       |   |   | 2,813        |  
|                                                        |   |              |   |   |              |  
|                                                        | $ | 3,682,646    |   | $ | 685,149      |  
|                                                        |   |              |   |   |              |  
|Liabilities and Shareholders' Equity                    |   |              |   |   |              |  
|                                                        |   |              |   |   |              |  
|Current liabilities                                     |   |              |   |   |              |  
|Accounts payable and
      accrued liabilities          | $ | 145,642      |   | $ | 174,559      |  
|Balances
      payable to related parties (note 8)      |   | 284,080      |   |   | 11,729       |  
|                                                        |   | 429,722      |   |   | 186,288      |  
|                                                        |   |              |   |   |              |  
|Shareholders' equity                                    |   |              |   |   |              |  
|Share capital (note
      7)                            |   | 21,064,437   |   |   | 11,035,977   |  
|Subscriptions received
      (note 7(b)(i))             |   |             |   |   | 650,000      |  
|Contributed surplus
      (note 7(e))                   |   | 1,688,335    |   |   | 13,271       |  
|Deficit                                                 |   | (19,499,848  | ) |   | (11,200,387  | )
|                                                        |   | 3,252,924    |   |   | 498,861      |  
|Nature of operations (note 1)                           |   |              |   |   |              |  
|Subsequent events (note 11)                             |   |              |   |   |              |  
|                                                        |   |              |   |   |              |  
|                                                        | $ | 3,682,646    |   | $ | 685,149      |  

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            

---

NORTHERN DYNASTY MINERALS LTD.Consolidated Statements of Operations
  (Expressed in Canadian Dollars)

|                                                         |   | Years ended
      December 31 |  
|-------------------------------------------------------- | - | ----------------------------- | -
|                                                         |   | 2003                          |  
|                                                         |   |                               |  
|Expenses                                                 |   |                               |  
|Conference and travel                                    | $ | 80,019                        |  
|Depreciation                                             |   | 3,832                         |  
|Exploration (note 6)                                     |   | 5,501,729                     |  
|Exploration - stock-based
      compensation (note 7(d)) |   | 426,178                       |  
|Legal, accounting and
      audit                        |   | 29,977                        |  
|Office and administration                                |   | 521,557                       |  
|Property investigations                                  |   |                              |  
|Shareholder communication                                |   | 578,476                       |  
|Stock-based compensation
      (note 7(d))               |   | 1,248,886                     |  
|Trust
      and filing                                   |   | 39,125                        |  
|                                                         |   | 8,429,779                     |  
|                                                         |   |                               |  
|Other items                                              |   |                               |  
|Foreign exchange loss
      (gain)                       |   | (62,206                       | )
|Gain on disposal of
      equipment                      |   | (3,403                        | )
|Interest
      income                                    |   | (64,709                       | )
|                                                         |   | (130,318                      | )
|                                                         |   |                               |  
|Loss for the year                                        | $ | 8,299,461                     |  
|                                                         |   |                               |  
|Weighted average number of                               |   |                               |  
|common
      shares outstanding                          |   | 23,386,208                    |  
|                                                         |   |                               |  
|Basic and diluted loss per share                         | $ | 0.35                          |  
|                                                         |   |                               |  
|                                                         |   |                               |  
|Consolidated Statements of Deficit                       |   |                               |  
|(Expressed in Canadian Dollars)                          |   |                               |  
|                                                         |   |                               |  
|                                                         |   | Years ended
      December 31 |  
|                                                         |   | 2003                          |  
|Deficit, beginning of year                               | $ | (11,200,387                   | )
|Loss for the year                                        |   | (8,299,461                    | )
|Deficit, end of year                                     | $ | (19,499,848                   | )

---

NORTHERN DYNASTY MINERALS LTD.Consolidated Statements of Cash Flows
  (Expressed in Canadian Dollars)

|                                                        |   | Years ended
      December 31 |  
|------------------------------------------------------- | - | ----------------------------- | -
|Cash provided by (applied to):                          |   | 2003                          |  
|                                                        |   |                               |  
|Operating activities                                    |   |                               |  
|Loss for the year                                       | $ | (8,299,461                    | )
|Items not involving
      cash                          |   |                               |  
|Depreciation                                            |   | 3,832                         |  
|Gain on disposal of assets                              |   | (3,403                        | )
|Shares issued for property option payments              |   |                              |  
|Stock-based compensation                                |   | 1,675,064                     |  
|Changes in non-cash
      working capital items         |   |                               |  
|Accounts payable and accrued liabilities                |   | (28,917                       | )
|Amounts receivable and prepaids                         |   | (50,311                       | )
|Balances receivable from and payable to                 |   |                               |  
|related parties                                         |   | 351,701                       |  
|                                                        |   | (6,351,495                    | )
|                                                        |   |                               |  
|Investing activities                                    |   |                               |  
|Proceeds on disposal
      of equipment                 |   | 3,403                         |  
|Purchase of equipment                                   |   | (13,056                       | )
|                                                        |   | (9,653                        | )
|                                                        |   |                               |  
|Financing activities                                    |   |                               |  
|Common shares issued
      for cash, net of issue costs |   | 9,378,460                     |  
|Subscriptions received                                  |   |                              |  
|                                                        |   | 9,378,460                     |  
|                                                        |   |                               |  
|Increase (decrease) in cash and equivalents             |   | 3,017,312                     |  
|Cash and equivalents, beginning of
      year           |   | 424,152                       |  
|                                                        |   |                               |  
|Cash and equivalents, end of year                       | $ | 3,441,464                     |  

|The accompanying notes are an integral part of
      these consolidated financial statements
|--------------------------------------------------------------------------------------------
|                                                                                            
|Supplemental Disclosure
        of Non-Cash Financing Activities                            
|                                                                                            

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2003
      (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. As
        described in note 12, these principles differ in certain respects from
        principles and practices generally accepted in the United States.                                                                                                                                                                                                                                                                                                                                                                           
|   
|    | The Company has a wholly owned subsidiary, Northern
        Dynasty Mines Inc., incorporated 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, which 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                                                                                                                                                                                                                                                                                                                                                                                                                                                      

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2003
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|    | 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 related to exploration
        activities 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 terms of the agreement to issue the shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    | The proceeds from common shares issued pursuant
        to flow-through share financing agreements are credited to share capital
        as 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    | The Company has a share option plan which is described
        in note 7(d). The Company accounts for all non-cash stock-based payments
        and awards that are direct awards of stock, that call for settlement in
        cash or other assets, or that are share appreciation rights which call
        for settlement by the issuance of equity instruments, granted on or after
        January 1, 2002, using the fair value based method.                                                                                                                                                                                                                                                                                                                                      
|   
|    | Under the fair value based method, stock-based payments
        are measured at the fair value of the consideration received, or the fair
        value of the equity instruments issued, or liabilities incurred, whichever
        is more reliably measurable. The fair value of non-cash stock-based payments
        is periodically re-measured until counterparty performance is complete,
        and any change therein is recognized over the period and in the same manner
        as if the Company had paid cash instead of paying with or using equity
        instruments. The cost of non-cash stock-based payments that are fully
        vested and non-forfeitable at the grant date is measured and recognized
        at that date.                                  
|   
|    | Under the fair value based method, compensation
        cost attributable to awards that are direct awards of shares, or share
        appreciation rights which call for settlement by the issuance of equity
        instruments, is measured at fair value at the grant date and recognized
        over the vesting period. Compensation cost attributable to awards which
        call for settlement in cash or other assets is measured at fair value
        at the grant date and recognized over the vesting period. For awards that
        vest at the end of a vesting period, compensation cost is recognized on
        a straight-line basis; for awards that vest on a graded basis, compensation
        cost is recognized on a pro-rata basis over the vesting period.
|   
|    | Consideration received upon the exercise of share
        options is credited to share capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2003
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|(f) | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | All of the Company's foreign subsidiaries are considered
        integrated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    | Monetary assets and liabilities of the Company and
        its 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 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 share 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.                                                                                                                                                                                                                                                                                                                                                                                     

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2003
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|(j)    | 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, and rates for depreciation of equipment, as well as the
        assumptions used in determining the fair value of non-cash stock-based
        compensation. Actual results could differ from those estimates.
|      
|(k)    | 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, 2003  |   |        |  |   |              |  |   |          | 
| | Site equipment     | $ | 15,387 |  | $ | 15,387       |  | $ |         | 
| | Vehicles           |   |       |  |   |             |  |   |         | 
| | Computer equipment |   | 15,544 |  |   | 3,507        |  |   | 12,037   | 
| |                    | $ | 30,931 |  | $ | 18,894       |  | $ | 12,037   | 
| |                    |   |        |  |   |              |  |   |          | 
| | 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    | 

|**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 was 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
        of $584,655 included the staking of 134 claims to expand the property
        along with 30 km of induced polarization surveying over the new claims.

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2003
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|    | The first option enables
        the Company to explore the Pebble property for more than two years 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 for the one year deferral. 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) purchase the 20% HDGI interest in shares at its independently
        appraised value. If the Company elects to issue shares to Teck Cominco
        in lieu of cash, the Company can manage the sale of any shares that Teck
        Cominco wishes to sell. Teck Cominco's resale proceeds will be credited
        and any share resale shortfall must be made up by the Company. Interim
        payments to Teck Cominco were also required, including US$250,000, in
        cash or shares with the same cash equivalency, prior to December 31, 2001
        (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 were issued
        on March 27, 2002 exercisable at $1.15 and 250,000 were issued on December
        31, 2002 exercisable at $0.60) in two tranches before December 31, 2002.
        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 December 31,
        2003, 43,016 feet had been completed) of drilling before November 30,
        2004. Upon the Company completing the drilling and exercising the first
        option, Teck Cominco can either form 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 certain 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. The Company continues to maintain these claims in good standing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(c) | Little Bald Mountain                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company holds an 8.1% net profits
        interest 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 expired on December 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|(d) | Farmout Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | In December 2003, the Company entered into a Farmout
        Agreement (the "Agreement") with Taseko Mines Limited ("Taseko"), a public
        company with certain directors in common with the Company. Under the terms
        of the Agreement, Taseko granted to the Company rights to earn joint venture
        working interests, subject to a maximum of $650,000, on certain exploration
        properties located in the vicinity of the Gibraltar mine property. For
        a period of 150 days after the Company has earned its working interests,
        Taseko has the right to purchase, at its option, the Company's earned
        interests for cash or common share consideration aggregating 110% of the
        Company's earn- in amount. If Taseko elects to issue common shares, the
        common shares to be issued upon

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2003
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|   | exercise will be valued at the weighted average
        ten-day trading price as traded on the TSX Venture Exchange.                                                                                                                
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | During the year ended December 31, 2003, the Company
        had earned an interest in these properties to the extent of $650,000.                                                                                                  
|  
|   | Subsequent to the year end and subject to regulatory
        consent, Taseko exercised its right to purchase the Company's interests
        by issuing 256,272 common shares of Taseko for total consideration of
        $715,000.
|  
|6. | EXPLORATION EXPENSES                                                                                                                                                                                                                

| |                                                           |   | Pebble      |  |   | Other       |  |   | Years ended December 31 | 
| | --------------------------------------------------------- | - | ----------- |  | - | ----------- |  | - | ----------------------- | 
| |                                                           |   | Property    |  |   | Property    |  |   | 2003                    | 
| |                                                           |   | (note 5(a)) |  |   | (note 5(d)) |  |   |                         | 
| | Assay and analysis                                        | $ | 290,771     |  | $ |            |  | $ | 290,771                 | 
| | Drilling                                                  |   | 2,050,068   |  |   | 650,000     |  |   | 2,700,068               | 
| | Engineering                                               |   | 83,301      |  |   |            |  |   | 83,301                  | 
| | Equipment rental                                          |   | 27,648      |  |   |            |  |   | 27,648                  | 
| | Freight                                                   |   | 53,275      |  |   |            |  |   | 53,275                  | 
| | Geological                                                |   | 620,908     |  |   | 1,275       |  |   | 622,183                 | 
| | Graphics                                                  |   | 99,932      |  |   |            |  |   | 99,932                  | 
| | Helicopter/fixed
      wing                               |   | 632,331     |  |   |            |  |   | 632,331                 | 
| | Option payments                                           |   |            |  |   |            |  |   |                        | 
| | Property fees/assessment                                  |   | 195,389     |  |   |            |  |   | 195,389                 | 
| | Site activities                                           |   | 723,326     |  |   |            |  |   | 723,326                 | 
| | Socioeconomic                                             |   | 5,858       |  |   |            |  |   | 5,858                   | 
| | Travel
      and accommodation                            |   | 67,647      |  |   |            |  |   | 67,647                  | 
| | Exploration expenses incurred during                      |   |             |  |   |             |  |   |                         | 
| | the
      year (to statement of operations)               | $ | 4,850,454   |  | $ | 651,275     |  | $ | 5,501,729               | 
| | Stock-based
      compensation                            |   |             |  |   |             |  |   | 426,178                 | 
| | Exploration expenses, including stock-based compensation, |   |             |  |   |             |  |   |                         | 
| | incurred during
      the year                            |   |             |  |   |             |  |   | 5,927,907               | 
| | Cumulative exploration expenses,                          |   |             |  |   |             |  |   |                         | 
| | beginning
      of year                                   |   |             |  |   |             |  |   | 5,498,330               | 
| | Cumulative exploration expenses,                          |   |             |  |   |             |  |   |                         | 
| | end
      of year                                         |   |             |  |   |             |  | $ | 11,426,237              | 

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2003
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|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:                                        |   | Price |  | of Shares  |  |   | Amount     | 
| | Balance, December 31, 2001                                   |   |       |  | 9,292,455  |  | $ | 7,907,717  | 
| | Private placement (net of issue costs)                       | $ | 0.34  |  | 1,176,470  |  |   | 391,317    | 
| | Private placement (net of issue costs)                       |   | 0.50  |  | 2,000,000  |  |   | 890,700    | 
| | Private placement (net of issue costs)                       |   | 1.05  |  | 197,548    |  |   | 189,793    | 
| | Share purchase options exercised                             |   | 0.40  |  | 310,750    |  |   | 124,300    | 
| | Share purchase options exercised                             |   | 0.55  |  | 13,000     |  |   | 7,150      | 
| | Property option payments (note 5(a))                         |   | 0.60  |  | 700,000    |  |   | 420,000    | 
| | Property option payments (note 5(a))                         |   | 1.15  |  | 500,000    |  |   | 575,000    | 
| | Share purchase
      warrants exercised                      |   | 0.40  |  | 1,325,000  |  |   | 530,000    | 
| | Balance, December 31, 2002                                   |   |       |  | 15,515,223 |  |   | 11,035,977 | 
| | Private placement January 2003, net of
      issue costs (i) |   | 0.50  |  | 1,700,000  |  |   | 809,654    | 
| | Private placement July 2003, net of issue
      costs (ii)   |   | 0.72  |  | 6,944,445  |  |   | 4,979,549  | 
| | Share purchase options exercised                             |   | 0.40  |  | 981,500    |  |   | 392,600    | 
| | Share purchase options exercised                             |   | 0.43  |  | 8,000      |  |   | 3,440      | 
| | Share purchase options exercised                             |   | 0.50  |  | 12,500     |  |   | 6,250      | 
| | Share purchase options exercised                             |   | 0.75  |  | 12,500     |  |   | 9,375      | 
| | Warrants exercised                                           |   | 0.40  |  | 775,000    |  |   | 310,000    | 
| | Warrants exercised                                           |   | 0.45  |  | 1,176,470  |  |   | 529,412    | 
| | Warrants exercised                                           |   | 0.60  |  | 1,910,000  |  |   | 1,146,000  | 
| | Warrants exercised                                           |   | 0.62  |  | 2,000,000  |  |   | 1,240,000  | 
| | Warrants exercised                                           |   | 0.75  |  | 500,000    |  |   | 375,000    | 
| | Warrants exercised                                           |   | 1.15  |  | 197,548    |  |   | 227,180    | 
| | Balance, December 31, 2003                                   |   |       |  | 31,733,186 |  | $ | 21,064,437 | 

| | (i)  | On January 14, 2003, the Company completed a private
        placement consisting of 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
        in respect of the flow- through portion of the private placement.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (ii) | On July 31, 2003, the Company completed a private
        placement consisting of 6,944,445 units at a price of $0.72 per unit.
        Each unit was comprised of one common share and one warrant exercisable
        to purchase an additional common share at a price of $0.90 until June
        12, 2004. All shares issued pursuant to the private placement financing
        and upon the exercise of the warrants have a hold period expiring July
        31, 2004.                                                                                                                                                                                                                                                   

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2003
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|    | Subsequent to the year-end, on March 16, 2004, the
        Company completed a $22 million private placement equity financing by
        issuing 2,750,000 units at $8.00 each. Each unit was comprised of a common
        share and one half warrant. Each whole warrant entitles the holder to
        purchase one common share at a price of $9.00 until March 16, 2005.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                              
|(c) | Share purchase warrants                                                                                                                                                                                                                                                                                                                                                      
|   
|    | The continuity of share purchase warrants (each
        warrant exercisable into one common share) for the year ended December
        31, 2003 is:                                                                                                                                                                                                                          

| |                                 |   | Exercise |  |   | Dec. 31   |  |   |           |  |   |            |   |   | Expired/  |  |   | Dec. 31   | 
| | ------------------------------- | - | -------- |  | - | --------- |  | - | --------- |  | - | ---------- | - | - | --------- |  | - | --------- | 
| | Expiry date                     |   | Price    |  |   | 2002      |  |   | Issued    |  |   | Exercised  |   |   | Cancelled |  |   | 2003      | 
| | July 16, 2003                   | $ | 0.40     |  |   | 775,000   |  |   |          |  |   | (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 | ) |   |          |  |   |          | 
| | June 12, 2004                   | $ | 0.90     |  |   |          |  |   | 6,944,445 |  |   |           |   |   |          |  |   | 6,944,445 | 
| | December 31, 2004               | $ | 0.60     |  |   | 250,000   |  |   |          |  |   | (250,000   | ) |   |          |  |   |          | 
| | January 14, 2005                | $ | 0.60     |  |   |          |  |   | 1,700,000 |  |   | (1,660,000 | ) |   |          |  |   | 40,000    | 
| |                                 |   |          |  |   | 5,399,018 |  |   | 8,644,445 |  |   | (6,559,018 | ) |   |          |  |   | 7,484,445 | 
| |                                 |   |          |  |   |           |  |   |           |  |   |            |   |   |           |  |   |           | 
| | Weighted average exercise price |   |          |  | $ | 0. 63     |  | $ | 0.84      |  | $ | 0.58       |   | $ |          |  | $ | 0.92      | 

| | Subsequent to December 31, 2003,                                                                                                                                                                                                                                       
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                        
| | 10,000 share purchase warrants were exercised at $0.60,
          500,000 share purchase warrants were exercised at $1.15.The continuity of share purchase warrants (each warrant exercisable
          into one common share) for the year ended December 31, 2002 is:

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

|(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 3,600,000
        share purchase options, vesting over up to two years, subject to regulatory
        terms and approval, to its employees, officers, directors and consultants.
        The exercise

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2003
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

| | price of each option can be set equal to or greater
        than the closing market price of the common shares on the TSX Venture
        Exchange 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 cases of retirement or death. The vesting of the options
        occurs six, twelve, and eighteen months after the grant dates, with one-third
        vested every six months.
      The continuity of share purchase options for the year
        ended December 31, 2003 is:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                 |   | Exercise |  |   | Dec. 31   |  |   |           |  |   |            |   |   | Expired / |  |   | Dec. 31   | 
| | ------------------------------- | - | -------- |  | - | --------- |  | - | --------- |  | - | ---------- | - | - | --------- |  | - | --------- | 
| | Expiry date                     |   | Price    |  |   | 2002      |  |   | Granted   |  |   | Exercised  |   |   | Cancelled |  |   | 2003      | 
| | February 12, 2003               | $ | 0.43     |  |   | 8,000     |  |   |          |  |   | (8,000     | ) |   |          |  |   |          | 
| | May 15, 2004 (i)                | $ | 0.40     |  |   | 1,070,250 |  |   |          |  |   | (981,500   | ) |   |          |  |   | 88,750    | 
| | December 20, 2004               | $ | 0.50     |  |   | 119,000   |  |   |          |  |   | (12,500    | ) |   |          |  |   | 106,500   | 
| | May 9, 2005                     | $ | 0.75     |  |   |          |  |   | 107,500   |  |   | (12,500    | ) |   |          |  |   | 95,000    | 
| | July 29, 2005                   | $ | 0.94     |  |   |          |  |   | 50,000    |  |   |           |   |   |          |  |   | 50,000    | 
| | July 29, 2005                   | $ | 1.18     |  |   |          |  |   | 15,500    |  |   |           |   |   |          |  |   | 15,500    | 
| | July 29, 2005                   | $ | 2.35     |  |   |          |  |   | 315,000   |  |   |           |   |   |          |  |   | 315,000   | 
| | July 29, 2005                   | $ | 2.30     |  |   |          |  |   | 7,500     |  |   |           |   |   |          |  |   | 7,500     | 
| | November 30, 2005               | $ | 5.00     |  |   |          |  |   | 1,535,000 |  |   |           |   |   |          |  |   | 1,535,000 | 
| | November 30, 2005               | $ | 5.05     |  |   |          |  |   | 38,000    |  |   |           |   |   |          |  |   | 38,000    | 
| |                                 |   |          |  |   | 1,197,250 |  |   | 2,068,500 |  |   | (1,014,500 | ) |   |          |  |   | 2,251,250 | 
| |                                 |   |          |  |   |           |  |   |           |  |   |            |   |   |           |  |   |           | 
| | Weighted average exercise price |   |          |  | $ | 0.41      |  | $ | 4.24      |  | $ | 0.41       |   | $ |          |  | $ | 3.93      | 

| | (i) | Subsequent to December 31, 2003,                                                                                                                                                                                                                                                                                                                                                                              
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | 88,750 share purchase options were exercised at $0.40,
        67,666 share purchase options were exercised at $0.50,
        20,000 share purchase options were exercised at $0.75,
        5,000 share purchase options were exercised at $1.18, and
        10,666 share purchase options were exercised at $5.00.The continuity of share purchase options for the year ended December
        31, 2002 is:

| |                                 |   | Exercise |  |   | Dec. 31   |  |   |         |  |   |           |   |   | Expired / |   |   | Dec. 31   | 
| | ------------------------------- | - | -------- |  | - | --------- |  | - | ------- |  | - | --------- | - | - | --------- | - | - | --------- | 
| | Expiry date                     |   | Price    |  |   | 2001      |  |   | Granted |  |   | Exercised |   |   | Cancelled |   |   | 2002      | 
| | 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    |  | $ | 0.41      |   | $ | 0.40      |   | $ | 0.41      | 

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2003
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

| | The exercise prices of all share purchase options
        granted during the year were equal to the market price at the grant date.
        Using an option pricing model with the assumptions noted below, the estimated
        fair value of all options granted during 2003 and 2002 have been reflected
        in the statement of operations as follows:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                   |   | Years ended December 31, | 
| | ------------------------------------------------- | - | ------------------------ | 
| | Exploration                                       |   | 2003                     | 
| | Engineering                                       | $ | 57,822                   | 
| | Environmental, socioeconomic and land             |   | 22,698                   | 
| | Geological                                        |   | 345,658                  | 
| |                                                   |   | 426,178                  | 
| | Operations and administration                     |   | 1,248,886                | 
| | Total compensation cost recognized in operations, |   |                          | 
| | credited to
      contributed surplus             | $ | 1,675,064                | 

| | The weighted average assumptions used to estimate the fair value of options
      granted during 2003 and 2002 were:
| | --------------------------------------------------------------------------------------------------------------------

| | Risk-free interest rate | 3%          | 
| | ----------------------- | ----------- | 
| | Expected life           | 2.06 years  | 
| | Vesting period          | 0-18 months | 
| | Expected Volatility     | 92%         | 
| | Expected dividend yield | nil         | 

| | 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 share purchase options.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(e) | Contributed surplus                                      |   |           | 
|--- | -------------------------------------------------------- | - | --------- | 
|    |                                                          |   |           | 
|    | Balance, December 31, 2001 and 2000                      | $ |          | 
|    | Changes during 2002:                                     |   |           | 
|    | Non-cash
      stock-based compensation to non-employees |   | 13,271    | 
|    | Contributed surplus, December 31, 2002                   |   | 13,271    | 
|    | Changes during 2003:                                     |   |           | 
|    | Non-cash
      stock-based compensation                  |   | 1,675,064 | 
|    | Contributed surplus, December 31,
      2003             | $ | 1,688,335 | 

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2003
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|8. | RELATED PARTY BALANCES AND TRANSACTIONS
|-- | ---------------------------------------

| |                                           |   | Years ended             |  
| | ----------------------------------------- | - | ----------------------- | -
| | Transactions                              |   | December 31, 2003       |  
| | Services rendered and expenses reimbursed |   |                         |  
| | Hunter Dickinson Inc. (a)                 | $ | 1,257,404               |  
| | Hunter
      Dickinson Group Inc. (b)     |   | 22,320                  |  
| |                                           |   |                         |  
| |                                           |   |                         |  
| | Balances receivable (payable)             |   | December 31,
      2003 |  
| | Hunter Dickinson Inc. (a)                 | $ | (279,201                | )
| | Hunter Dickinson
      Group Inc. (b)     |   | (4,879                  | )
| |                                           | $ | (284,080                | )

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

|9. | INCOME TAXES                                                                                                                                                                                                                                                                                                                                            
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | As at December 31, 2003, Northern Dynasty Minerals
        Ltd., 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 more likely
        than not that these amounts will be utilized.

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2003
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

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

| |  | Expiry Date                                                         |   |           | 
| |  | ------------------------------------------------------------------- | - | --------- | 
| |  | 2004                                                                | $ | 53,000    | 
| |  | 2005                                                                |   | 54,000    | 
| |  | 2006                                                                |   |          | 
| |  | 2007                                                                |   |          | 
| |  | 2008                                                                |   | 25,000    | 
| |  | 2009                                                                |   | 306,000   | 
| |  | 2010                                                                |   | 813,000   | 
| |  | 2011                                                                |   | 1,158,000 | 
| |  | Total non-capital losses                                            |   | 2,409,000 | 
| |  | Capital losses carried forward                                      |   | 2,544,000 | 
| |  | Excess of aggregate tax cost of equipment
      over net book value |   |          | 
| |  | Total losses and excess equipment
      tax costs available         | $ | 4,953,000 | 

|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. | SUBSEQUENT EVENTS                                                                                                                                                  
|   
|    | Subsequent to December 31, 2003, the Company:                                                                                                                      
|   
|    | (a)                                                                                                                                                                
|   
|    | (b)                                                                                                                                                                
|   
|    | (c)                                                                                                                                                                
|   
|12. | 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.

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2003
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|(b) | Stock options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | United States Statement of Financial Accounting
        Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation", requires that stock-based compensation be accounted for based on
        a fair value methodology, although, in certain instances, it allows the
        effects to be disclosed in the notes to the financial statements rather
        than in the statement of operations. SFAS 123 also allows an entity to
        continue to measure compensation costs for stock-based compensation plans
        using the intrinsic value based method of accounting as prescribed by
        APB Opinion No. 25 ("APB 25"), which is comparable to Canadian GAAP prior
        to January 1, 2003. To December 31, 2002, the Company had elected to measure
        compensation cost for those plans using APB 25 for US GAAP purposes.
|   
|    | United States Statement of Financial Accounting
        Standards 148 ("SFAS 148"), "Accounting for Stock-Based Compensation
        - Transition and Disclosure - an amendment of FASB Statement No. 123", permits the Company to adopt a fair value methodology on a prospective
        basis. Effective January 1, 2003, for US GAAP purposes the Company prospectively
        adopted the fair value method of accounting for stock-based compensation,
        a treatment consistent with the accounting treatment used for Canadian
        GAAP.                                                                                                                                                                                                                                                                                                            
|   
|    | 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 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 2003 and 2002 fiscal years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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