---





MANAGEMENT'S DISCUSSION AND ANALYSIS

YEAR ENDED DECEMBER 31, 2010

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

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

|1.1  | DATE                                                        | 3                                                               
|---- | ----------------------------------------------------------- | ----------------------------------------------------------------
|1.2  | OVERVIEW                                                    | 5                                                               
|     | 1.2.1                                                       | SUMMARY                                                         
|     |                                                             | 1.2.1.1                                                         
|     |                                                             | 1.2.1.2                                                         
|     |                                                             | 1.2.1.3                                                         
|     |                                                             | 1.2.1.4                                                         
|     | 1.2.2                                                       | OTHER PROPERTIES                                                
|     |                                                             | 1.2.2.1                                                         
|     |                                                             | 1.2.2.2                                                         
|     | 1.2.3                                                       | MARKET   TRENDS                                                 
|1.3  | SELECTED ANNUAL   INFORMATION                               | 18                                                              
|1.4  | SUMMARY   OF QUARTERLY RESULTS                              | 19                                                              
|1.5  | RESULTS OF OPERATIONS                                       | 20                                                              
|1.6  | LIQUIDITY                                                   | 22                                                              
|1.7  | CAPITAL RESOURCES                                           | 23                                                              
|1.8  | OFF-BALANCE SHEET ARRANGEMENTS                              | 23                                                              
|1.9  | TRANSACTIONS WITH   RELATED PARTIES                         | 23                                                              
|1.10 | FOURTH   QUARTER                                            | 24                                                              
|1.11 | PROPOSED TRANSACTIONS                                       | 24                                                              
|1.12 | CRITICAL   ACCOUNTING ESTIMATES                             | 25                                                              
|1.13 | CHANGES IN ACCOUNTING   POLICIES INCLUDING INITIAL ADOPTION | 27                                                              
|1.14 | FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS                 | 31                                                              
|1.15 | OTHER MD&A   REQUIREMENTS                                   | 35                                                              
|     | 1.15.1                                                      | DISCLOSURE OF OUTSTANDING SHARE DATA                            
|     | 1.15.2                                                      | DISCLOSURE CONTROLS AND   PROCEDURES                            
|     | 1.15.3                                                      | MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
|     | 1.15.4                                                      | CHANGES IN INTERNAL   CONTROL OVER FINANCIAL REPORTING          
|     | 1.15.5                                                      | RISK   FACTORS                                                  

Page 2

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

|1.1 | Date
|--- | ----

This Management’s Discussion and Analysis ("MD&A") should   be read in conjunction with the audited consolidated financial statements of   Northern Dynasty Minerals Ltd. ("Northern Dynasty" or the "Company") for the   year ended December 31, 2010, as publicly filed on SEDAR at www.sedar.com.

The Company reports in accordance with International Financial   Reporting Standards ("IFRS") and the following disclosure, and associated   consolidated financial statements, are presented in accordance with IFRS. This   MD&A is prepared as of March 29, 2011. All dollar figures stated herein are   expressed in Canadian dollars, unless otherwise specified.

|This discussion includes certain statements that may be deemed   "forward-looking statements". These forward-looking statements constitute   "forward-looking statements" within the meaning of Section 27A of the Securities   Act of 1933 and Section 21E of the Securities Exchange Act of 1934.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|All information contained in this management discussion   relating to the contents of the Preliminary Assessment, including but not   limited to statements of the Pebble Project's potential and information under   the headings "Preliminary Assessment Key Findings,” “Production Profiles,”   “Financial Valuation” and “Capital and Operating Costs” are "forward looking   statements" within the definition of the United States Private Securities   Litigation Reform Act of 1995. The information relating to the possible   construction of a port, road, power generating facilities and power transmission   facilities also constitutes such "forward looking statements." The Preliminary   Assessment was prepared to broadly quantify the Pebble project's capital and   operating cost parameters and to provide guidance on the type and scale of   future project engineering and development work that will be needed to   ultimately define the project's likelihood of feasibility and optimal production   rate. It was not prepared to be used as a valuation of the Pebble project nor   should it be considered to be a pre-feasibility study. Although based on a   comprehensive technical review of recent engineering and technical studies   undertaken by the Pebble Partnership and Northern Dynasty, the studies of   capital and operating costs are incomplete and have not been optimized, so the   ultimate costs may vary significantly from the amounts set out in the   Preliminary Assessment. This could materially and adversely impact the projected   economics of the Pebble Project. The Preliminary Assessment is based on   Wardrop’s comprehensive review of recent engineering and technical studies   undertaken principally by the Pebble Limited Partnership (the “Pebble   Partnership”) and by Northern Dynasty. The economic assessments and other   opinions expressed in the Preliminary Assessment are strictly those of Northern   Dynasty and Wardrop, and do not reflect the views of any other stakeholder in   the project. As such, any project which is ultimately put forward by the Pebble   Partnership for permitting under the National Environmental Policy Act may   differ from those mine models presented in the Preliminary Assessment.
|The Preliminary Assessment, in part, uses inferred mineral   resources which are considered too speculative geologically to be categorized as   mineral reserves and to have economic considerations applied to them. There can   be no assurance that the operating and financial projections contained in the   Preliminary Assessment will be realized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|The following are the principal risk factors and uncertainties   which, in management's opinion, are likely to most directly affect the   conclusions of the Preliminary Assessment and the ultimate feasibility of the   Pebble project. A portion of the mineralized material at the Pebble Project is   currently classified as an inferred resource and it is not a reserve. The   mineralized material in the Preliminary Assessment is based on the measured,   indicated and inferred resources estimated by Hunter Dickinson Inc. and audited   by Wardrop, a TetraTech Company. Additional process tests and other engineering   and geologic work will be required to determine if the mineralized material is   an economically exploitable reserve. There can be no assurance that this   mineralized material can become a reserve or the amount that may be converted to   a reserve or the grade thereof. Final feasibility work has not been done to   confirm the pit design, mining methods, and processing methods assumed in the   Preliminary Assessment. Final feasibility could determine that the assumed pit   design, mining methods, and processing methods are not correct.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

Page 3

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

|Construction and   operation of the mine and processing facilities depends on securing   environmental and other permits on a timely basis. No permits have been applied   for and there can be no assurance that required permits can be secured or   secured on a timely basis. Data is incomplete and cost estimates have been   developed in part based on the expertise of the individuals participating in the   preparation of the Preliminary Assessment and on costs at projects believed to   be comparable, and not based on firm price quotes. Costs, including design,   procurement, construction, and on-going operating costs and metal recoveries   could be materially different from those contained in the Preliminary   Assessment. There can be no assurance that mining can be conducted at the rates   and grades assumed in the Preliminary Assessment. The project requires the   development of port facilities, roads and electrical generating and transmission   facilities. Although Northern Dynasty believes that the State of Alaska favours   the development of these facilities, there can be no assurance that these   infrastructure facilities can be developed on a timely and cost-effective basis.   Energy risks include the potential for significant increases in the cost of fuel   and electricity. The Preliminary Assessment assumes specified, long-term prices   levels for gold, copper, silver and molybdenum. Prices for these commodities are   historically volatile, and Northern Dynasty has no control of or influence on   those prices, all of which are determined in international markets. There can be   no assurance that the prices of these commodities will continue at current   levels or that they will not decline below the prices assumed in the Preliminary   Assessment. Prices for gold, copper, silver, and molybdenum have been below the   price ranges assumed in Preliminary Assessment during the past ten years, and   for extended periods of time. The project will require major financing, probably   a combination of debt and equity financing. Interest rates are at historically   low levels. There can be no assurance that debt and/or equity financing will be   available on acceptable terms. A significant increase in costs of capital could   materially and adversely affect the value and feasibility of constructing the   project. Other general risks include those ordinary to very large construction   projects including the general uncertainties inherent in engineering and   construction cost, the need to comply with generally increasing environmental   obligations, and accommodation of local and community concerns. The Company is   also subject to the specific risks inherent in the mining business, as well as   general economic and business conditions. For more information on the Company,   Investors should review the Company’s annual Form 40-F filing with the United   States Securities and Exchange Commission and its home jurisdiction filings that   are available at www.sedar.com.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The Company reviews its forward looking statements on an   ongoing basis and updates this information when circumstances require it.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

*Unless otherwise noted, Northern Dynasty is solely   responsible for the content of the disclosure set out herein.*

Page 4

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

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

|Cautionary Note to Investors Concerning   Estimates of Inferred Resources                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The following section uses the term "inferred resources". The   Company advises investors that although this term is recognized and required by   Canadian regulations, the SEC does not recognize it. "Inferred resources" have a   great amount of uncertainty as to their existence, and as to their economic and   legal feasibility. It cannot be assumed that any part or all of a mineral   resource will ever be upgraded to a higher category. Under Canadian rules,   estimates of inferred mineral resources may not form the basis of economic   studies, except in rare cases. Investors are cautioned not to assume that any   part or all of an inferred resource exists, or is economically or legally   mineable.

|1.2 | Overview
|--- | --------

|1.2.1 | Summary
|----- | -------

Northern Dynasty is a mineral exploration company which holds   indirect interests in 627 square miles of mineral claims in southwest Alaska,   USA. These claims are part of or in the vicinity of the Pebble   Copper-Gold-Molybdenum Project (the "Pebble Project").

|*1.2.1.1* | *Pebble Project*
|--------- | ----------------

The Pebble property ("Pebble") is located in southwest Alaska,   19 miles (30 kilometers) from the villages of Iliamna and Newhalen, and   approximately 200 miles (320 kilometers) southwest of the city of Anchorage.   Situated approximately 1,000 feet above sea-level and 65 miles from tidewater on   Cook Inlet, the site conditions are favorable for successful mine site and   infrastructure development.

Mineralization was discovered in 1987, and by 1997 an initial   mineral resource of copper, gold and molybdenum had been outlined in the Pebble   deposit by a previous operator.

Northern Dynasty acquired the right to earn an interest in the Pebble property in late 2001. Over the next 51⁄2 years, the Company explored the Pebble deposit and surrounding property, leading to the discovery of higher grade mineralization to the east and an overall expansion of the deposit, as well as the discovery of two other porphyry copper-gold-molybdenum deposits, a porphyry copper zone and a gold-copper skarn occurrence along the extensive mineralized trend. Comprehensive environmental, social and engineering studies began in 2004.

In mid-2007, a wholly-owned affiliate of Northern Dynasty and a   wholly-owned subsidiary of Anglo American plc, Anglo American US (Pebble) LLC,   ("Anglo American") established the Pebble Limited Partnership (the “Pebble   Partnership”) to engineer, permit, construct and operate a modern, long-life   mine at the Pebble Project. The 50/50 Pebble Partnership owns the Pebble Project   which consists of the Pebble Deposit and 329.8 square miles of associated   resource lands, and also has access to a stream of financing provided by Anglo   American for comprehensive exploration, engineering, environmental and   socioeconomic programs and, if warranted, development of the Pebble Project. Work programs at Pebble since mid-2007 have   been carried out by the Pebble Partnership.

Page 5

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

2011 Preliminary Assessment demonstrates a financially and   technically robust project

Positive results of an independent Preliminary Assessment on   the Pebble Project were announced by Northern Dynasty on February 23, 2011. The   study, completed by Wardrop Engineering Inc., a Tetra Tech Company ("Wardrop"),   was based on concept, pre-feasibility and feasibility-level study programs   undertaken by the Pebble Partnership and Northern Dynasty. The Preliminary   Assessment updates and substantially revises project economic analysis last done   by Northern Dynasty in 2004.

The economic assessments and other opinions expressed in the   Preliminary Assessment are strictly those of Northern Dynasty and Wardrop, and   do not reflect the views of any other stakeholder in the project. The Pebble   Partnership continues to separately undertake detailed engineering studies   toward the completion of a prefeasibility report for the Pebble Project,   including ongoing programs to engage project stakeholders in the planning   process. As such, any project which is ultimately put forward by the Pebble   Partnership for permitting under the National Environmental Policy Act ("NEPA")   may differ from those mine models presented in the Preliminary Assessment.

The Preliminary Assessment describes and assigns potential   economic value to three mine development cases comprising 25, 45 and 78 years of   open pit mining and a nominal processing rate of 200,000 tons per day. Key   results include:

- For the Pebble Project, the 45-year Reference Case yields a 14.2% pre-tax   internal rate of return ("IRR"), a 6.2-year payback on initial capital   investment of US$4.7 billion and a US$6.1 billion pre-tax net present value   ("NPV") at a 7% discount rate and long-term metal prices defined in the   Preliminary Assessment as $2.50 per pound of copper, $1,050 per ounce of gold,   $13.50 per pound of molybdenum and $15.00 per ounce of silver. At current   prevailing metal prices, defined in the Preliminary Assessment as $4.00 per   pound of copper, $1,350 per ounce of gold, $15.00 per pound of molybdenum and   $28.00 per ounce of silver, the 45-year Reference Case yields a 23.2% pre-tax   IRR, a 3.2-year payback on initial capital investment and a US$15.7 billion   pre-tax NPV at a 7% discount rate.
- For Northern Dynasty’s 50% share of the project, the 45-year Reference Case   yields an 18% pre-tax and 15.4% post-tax IRR, a 4.7-year pre-tax and 5.3-year   post-tax payback on initial capital investment and a US$3.6 billion pre-tax and   US$2.4 billion post-tax NPV at a 7% discount rate and long-term metal prices.
- At current prevailing metal prices, the 45-year Reference Case yields a   30.2% pre-tax and 25.1% post-tax IRR, a 2.6-year pre-tax and 3.1-year post-tax   payback on initial capital investment and a US$8.3 billion pre-tax and $5.6   billion post-tax NPV at a 7% discount rate for Northern Dynasty’s 50% interest.
- The 45-year Reference Case produces 31 billion ("B") lb copper, 30 million   ("M") oz gold, 1.4 B lb molybdenum, 140 M oz silver, 1.2 M kg rhenium and   907,000 oz palladium while mining only 32% of the mineral resource.
- For the 45-year Reference Case, cash costs per payable lb of copper after   by-product credits total (US$0.11).

Northern Dynasty management believes that this expert,   independent study confirms the economic potential of this superior asset. As   described in the Preliminary Assessment, the Pebble Project is both a financially and technically robust project characterized   by low costs and globally significant production of copper, gold and molybdenum   over an unparalleled operating life.

Page 6

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

Pebble is a large, polymetallic project located in a low risk   political jurisdiction with the potential to generate substantial annual   revenues, with increasingly better returns over decades of production into the   future. Although projects of the scale of Pebble are commonly developed by   consortiums of major mining and metal companies, it also has the potential to be   a company maker. Given current industry and commodity market conditions,   Northern Dynasty believes that Pebble will generate significant competitive   interest in the Company from a broad range of potential acquirers.

Pebble Partnership continues to advance Prefeasibility Study   and prepare for permitting

The Pebble Partnership continues to advance engineering and   project design initiatives for the Pebble Project. This effort will be informed   by input received from project stakeholders through public consultation forums   undertaken in Alaska prior to the completion of a Prefeasibility Study and the   submission of permit applications. At this time, it is expected that the Pebble   Partnership will complete a Prefeasibility Study for the Pebble Project in 2012,   prior to initiating permitting under NEPA.

Permitting will be initiated when the Pebble Partnership   submits its Project Description and Environmental Baseline Document. These   documents will provide the basis for an Environmental Impact Statement ("EIS")   to be prepared. The EIS will be prepared by a third-party contractor under the   direction of a lead federal agency. The Pebble EIS will be the focal point for   project permitting. It will determine whether sufficient evaluation of the   project’s potential environmental/socioeconomic effects and development   alternatives has been undertaken, and provide the basis for federal, state and   local government agencies to make individual permitting decisions.

The Pebble Partnership’s 2010 work plan included an engineering   program; an environmental and socioeconomic study program to continue baseline   data collection in key areas (e.g. hydrology, water quality, fish resources); a   geology and site investigation program involving ongoing exploration drilling,   support for engineering and environmental studies; and a public affairs program   to engage project stakeholders and local communities, and advance key   initiatives in the areas of workforce development, business development and   public consultation.

In 2011, the Pebble Partnership has budgeted US$91 million to   advance the Prefeasibility Study for the Pebble Project, finalize the   Environmental Baseline Document, continue its community engagement and workforce   development programs and prepare for permitting under NEPA.

Corporate

Northern Dynasty has cash and cash equivalents on hand of $40.4   million for its operating requirements. With the project funding that has been   approved by Anglo American for 2011, and given its holdings of cash and cash   equivalents, management believes that the Company has sufficient capital   resources to cover its short to medium term cash requirements.

Page 7

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

|*1.2.1.2* | *Limited Partnership Established to Advance the   Pebble Project*
|--------- | -----------------------------------------------------------------

On July 26, 2007, the Company converted a wholly-owned general   partnership that held its Pebble property interests into a limited partnership,   the Pebble Partnership. Anglo American subscribed for 50% of the Pebble   Partnership's equity effective July 31, 2007. The Company (through a   wholly-owned affiliate) and Anglo American effectively have equal rights in the   Pebble Partnership. To maintain its 50% interest in the Pebble Partnership,   Anglo American is required to commit staged cash investments into the Pebble   Partnership aggregating to US$1.425 billion, potentially increasing to US$1.5   billion, as described below.

Anglo American’s staged investment requirements include an   initial minimum expenditure of US$125 million (completed in 2008) towards a   Prefeasibility Report. The Prefeasibility Report is to be approved by the Board   of the general partner (Pebble Mines Corp.), and is to summarize all previous   prefeasibility studies and provide approved alternatives for a Final Feasibility   Study. After approval of a receipt of the approved Prefeasibility Report, Anglo   American is required, in order to retain its 50% interest in the Pebble   Partnership, to commit within 60 days to further expenditures which would bring   its total investment to at least US$450 million, which amount is to be expended   towards producing a final Feasibility Study and in related activities, the   completion of which is expected to take the Pebble Partnership to a production   decision. Upon an affirmative decision by the Pebble Partnership to develop a   mine, Anglo American is required to commit to the remaining portion of the total   investment of US$1.425 billion in order to retain its interest in the Pebble   Partnership. Following completion of the US$1.425 billion expenditure, any   further expenditure will be funded by Anglo American and the Company (through   its affiliate) on a 50:50 basis (subject to dilution for non-contribution). If   the Feasibility Study is completed after 2011, Anglo American’s overall funding   requirement increases from US$1.425 billion to US$1.5 billion. Given the current   estimated completion date for the Prefeasibility Study in 2012, it is expected   that Anglo American’s funding requirement will in fact be $1.5 billion. The   Pebble Partnership agreement provides for equal project control rights with no   operator’s fees payable to either party.

The Company determined that its investment in the Pebble   Partnership qualifies as an interest in a jointly controlled entity in   accordance with IAS 31, *Interests in Joint Ventures*. The Company applies   the equity method to account for its interest in the Pebble Partnership.

Anglo American’s cash contribution since the formation of the   Pebble Partnership on July 31, 2007 to December 31, 2010 amounts to $340.2   million (US$319.9 million).

The corporate office of the Pebble Partnership is located in   Anchorage, Alaska. The Alaska-based operations are guided by the Board of the   general partner with equal representation from Anglo American and Northern   Dynasty.

|*1.2.1.3* | *Technical Programs*
|--------- | --------------------

Exploration of the Pebble Project has revealed that the   property is underlain by an extensive, northeast-trending mineralized   system.

Following successful exploration of the Pebble deposit and   surrounding mineral property by Northern Dynasty between 2001 and 2003,   comprehensive technical programs, including drilling, engineering, environmental   and socioeconomic studies focused on advancing the Pebble deposit have been   underway since 2004. Since mid-2007, these programs have been carried out by the   Pebble Partnership.

Page 8

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

|1.2.1.3.1 | 2011 Preliminary Assessment for Northern   Dynasty
|--------- | --------------------------------------------------

On February 17, 2011, Wardrop issued an independent   43-101-compliant Preliminary Assessment Technical Report on the Pebble Project.   The Preliminary Assessment is based on concept, pre-feasibility and   feasibility-level technical and engineering studies completed by the Pebble   Partnership and Northern Dynasty. The economic assessments and other opinions   expressed in the Preliminary Assessment are strictly those of Northern Dynasty   and Wardrop, and do not reflect the views of any other stakeholder in the   project. The Pebble Partnership continues to separately undertake detailed   engineering studies toward the completion of a prefeasibility report for the   Pebble Project, including ongoing programs to engage project stakeholders in the   planning process. As such, any project which is ultimately put forward by the   Pebble Partnership for permitting under the NEPA may differ from those mine   models presented in the Preliminary Assessment.

The Preliminary Assessment Technical Report describes and   assigns potential economic value for three successive development cases:

|1. | An Investment Decision Case (“IDC Case”), which describes an   initial 25-year open pit mine life upon which a decision to initiate mine   permitting, construction and operations may be based;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                 
|2. | A Reference Case, which is based on 45 years of open pit mine   production; and                                                                                                                 
|   |                                                                                                                                                                                                 
|3. | A Resource Case, which is based on 78 years of open pit mine   production and seeks to assess the longer-term value of the project in current   dollars.                                        

The 25-year IDC Case is the only scenario for which a tailings   storage facility has been comprehensively engineered, although preliminary   engineering studies have identified a number of suitable sites nearby to receive   tailings after 25 years. Ongoing investigations would be undertaken during the   first 25 years of mining, including construction of an early access shaft and   assessing possibility of underground mining to determine the optimal mining   method and plan for subsequent phases of development.

For the purposes of its Preliminary Assessment, Wardrop has   selected the 45-year Reference Case as its base case. All currency values are in   US dollars. Production rates are stated in imperial tons. Mineral Resources are   stated in metric tonnes.

The Preliminary Assessment, in part, uses inferred mineral   resources which are considered too speculative geologically to be categorized as   mineral reserves and to have economic considerations applied to them. There can   be no assurance that the operating and financial projections contained in the   Preliminary Assessment will be realized.

Page 9

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

Key Parameters and Findings

| | The Preliminary Assessment is based on a mineral resource   estimate announced in February 2010. At a 0.30% CuEQ1cutoff, there   are:                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                      
| | 5.94 billion tonnes of measured and indicated resources   grading 0.42% copper, 0.35 g/t gold and 250 ppm molybdenum (0.78%   CuEQ), and containing 55 billion pounds of copper, 67 million ounces of   gold, and 3.3 billion pounds of molybdenum, including                                                                        
| |                                                                                                                                                                                                                                                                                                                                      
| | - 527 million tonnes of measured resources grading 0.33% Cu,   0.35 g/t Au and 178 ppm Mo and                                                                                                                                                                                                                                        
| | - 5,414 million tonnes of indicated resources grading 0.43% Cu,   0.35 g/t Au and 257 ppm Mo;                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                      
| | and 4.84 billion tonnes of inferred resources grading 0.24%   copper, 0.26 g/t gold and 215 ppm molybdenum (0.53% CuEQ), and   containing 25.6 billion pounds of copper, 40.4 million ounces of gold, and 2.3   billion pounds of molybdenum.                                                                                        
| |                                                                                                                                                                                                                                                                                                                                      
| | The Pebble deposit would support open pit mining utilizing   conventional drill, blast and truck- haul methods, with an initial mine life of   25 years and potential for mine extensions to 78 years and beyond.                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                      
| | The potential exists for underground block cave development at   a mining rate of 150,000 tons per day to emerge as the preferred mining method   for phases of development beyond 25 years.                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                      
| | The process plant would employ conventional crush-grind-float   technology and equipment with a nominal throughput of 200,000 tons per day, as   well as secondary gold recovery. Average mill throughput for the first 25 years   would be 219,000 tons per day, rising to 229,000 tons per day for the 45-year   and 78-year cases.
| |                                                                                                                                                                                                                                                                                                                                      
| | Other project facilities and infrastructure would include: a   378 megawatt natural gas-fired turbine plant at the mine site; an 86-mile   transportation corridor to Cook Inlet for road and pipeline rights-of-way; and a   new deep-water port on Cook Inlet.                                                                     
| |                                                                                                                                                                                                                                                                                                                                      
| | Construction of the Pebble Project would take four years, and   employ a peak labour force of 2,080. The operations workforce averages 1,120   over the first 25 years of mining.                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                      
| | The 45-year Reference Case processes 3.8 billion tons of   material with a strip ratio of 2.1:1 and average grades of 0.46% copper, 0.011   oz gold per ton and 214 ppm molybdenum.                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                      
| | The 45-year Reference Case produces 31 billion lb copper, 30   million oz gold, 1.4 billion lb molybdenum, 140 million oz silver, 1.2 million   kg rhenium and 907,000 oz palladium, while developing 32% of the total Pebble   mineral resource.                                                                                    
| |                                                                                                                                                                                                                                                                                                                                      
| | Economic valuations are expressed in US dollars in real terms   utilizing long-term metal prices of $2.50/lb copper, $1,050/oz gold, $13.50/lb   molybdenum, $15/oz silver, $3,000/kg rhenium and $490/oz palladium.                                                                                                                 

_________________________
  1Mineral resources are   within a volume or shell defined by long-term metal price estimates of $2.50/lb   copper, $900/oz gold and $25/lb molybdenum. Mineral resources that are not   mineral reserves do not have demonstrated economic viability.

Copper equivalent calculations for the resource estimate used   metal prices of $1.85/lb for copper, $902/oz for gold and $12.50/lb for   molybdenum, and metallurgical recoveries of 85% for copper 69.6% for gold, and   77.8% for molybdenum in the Pebble West area and 89.3% for copper, 76.8% for   gold, 83.7% for molybdenum in the Pebble East area. Recovery values reflect   average results of metallurgical testwork completed to the date of the estimate   and are subject to revision pending ongoing metallurgical studies. Revenue is   calculated for each metal based on grades, recoveries and selected metal prices;   accumulated revenues are then divided by the revenue at 1% copper. Recoveries   for gold and molybdenum are normalized to the copper recovery as shown below:

CuEq (Pebble West) = Cu % + (Au g/t x 69.6%/85% x 29.00/40.79)   + (Mo % x 77.8%/85% x 75.58/40.79) 
  CuEq (Pebble East) = Cu% + (Au g/t x   76.8%/89.3% x 29.00/40.79)+ (Mo % x 83.7%/89.3% x 5.58/40.79)

Page 10

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

- Annual cash flows are calculated and subsequently discounted at a rate of 7%.   Market convention generally uses a discount rate of 8% for copper and other base   metal projects and 5% for gold and other precious metal projects. Given the   large contribution of gold to total revenues at Pebble, a 7% blended discount   rate has been selected.
- For the Pebble Project, the 45-year Reference Case yields a 14.2% pre-tax   Internal Rate of Return ("IRR"), a 6.2-year payback on initial capital   investment and a $6.1 billion pre-tax Net Present Value ("NPV") at long-term   metal prices. At current prevailing metal prices, the 45-year Reference Case   yields a 23.2% pre-tax IRR, a 3.2-year payback on initial capital investment and   a $15.7 billion pre-tax NPV at a 7% discount rate.
- For Northern Dynasty’s 50% interest in the Pebble Project, the 45-year   Reference Case yields an 18% pre-tax and 15.4% post-tax IRR, a 4.7-year pre-tax   and 5.3-year post-tax payback on initial capital investment, and a $3.6 billion   pre-tax and $2.4 billion post-tax NPV at a 7% discount rate at long-term metal   prices. At current prevailing metal prices, Northern Dynasty’s 50% interest in   the Pebble Project yields an 30.2% pre-tax and 25.1% post-tax IRR, a 2.6-year   pre-tax and 3.1-year post-tax payback on initial capital investment and an $8.3   billion pre-tax and $5.6 billion post-tax NPV at a 7% discount rate.
- Initial capital expenditures for all three development cases are estimated at   $4.7 billion, excluding capital costs associated with outsourced power, road and   port infrastructure. Sustaining capital requirements for the 45-year Reference   Case are estimated to be $6.14 billion.
- Operating costs for the 45-year Reference Case average $966 million per year   and total $43.5 billion over the life of the mine. Operating costs per ton   milled average $11.55 for the 45-year Reference Case, while cash costs per   payable pound of copper, after by-product credits, are minus $0.11.
- Net Smelter Return ("NSR") for the 45-year Reference Case averages $2.67   billion per year and totals $120.2 billion over the life of mine. NSR per ton   milled for the 45-year Reference Case averages $31.91.
- For the 45-year Reference Case, 56% of NSR would be derived from copper, 24%   from gold, 16% from molybdenum and 4% from other metals (silver, rhenium and   palladium).

Qualified Persons for the Preliminary Assessment Technical   Report include Hassan Ghaffari, P.Eng, Robert Morrison, P.Geo, Andre de Ruijter,   P.Eng, Tysen Hantelmann, P.Eng, Aleksandar Zivkovic, P.Eng, and Scott Cowie,   MAusIMM; Doug Ramsey, P.R. Bio is author of sustainability section. All of these   qualified persons are independent of Northern Dynasty.

Additional details on the Preliminary Assessment are described   in Northern Dynasty’s 2010 Annual Information Form and the February 2011   Preliminary Assessment Technical Report, both of which are posted on the   Company’s profile at www.sedar.com.

Page 11

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

|1.2.1.3.2 | Pebble Partnership Studies toward Prefeasibility   Study
|--------- | --------------------------------------------------------

The Pebble Partnership has assembled an experienced engineering   and permitting team for the Pebble Project, consisting of more than 20 senior   engineers and technical specialists (many of whom are from the Anglo American   group or Northern Dynasty), as well as engineering firms and specialized   consultancies from around the world.

Exploration and Drilling

The 2010 site investigation and exploration drilling program   was completed in late October. A total of 57,740 feet (17,600 m) in 66 drill   holes were drilled in 2010, including 54,350 feet (16,600 m) in 48 holes   successfully completed on geological, geophysical and geochemical targets   throughout the district. In addition, 18 geotechnical holes were drilled in the   Pebble West area and on other engineering targets. In addition, a 95 line-mile   Induced Polarization (IP) ground geophysics survey and an airborne   electromagnetic geophysical survey utilizing Z-Axis Tipper electromagnetic   ("ZTEM") technology was done to assess both the known Pebble deposit and other   regional geology.

Engineering

The 2010 engineering program was designed to assess a range of   options to optimize the project scale, and included trade-off studies of major   project components; metallurgical studies to determine the optimal conventional   processing systems and designs; and evaluations of the major infrastructure   elements to identify the alternatives and designs for these project   components.

*Metallurgy*

Flotation and locked-cycle testwork continued on samples from   untested portions of the eastern part of the Pebble deposit. In total, 24 new   samples were tested over a wide range of head grades, pyrite and clay contents   during the fourth quarter of 2010. As predicted from previous geometallurgical   studies, samples from the potassium-silicate domain displayed the highest   copper, gold and molybdenum recoveries as a result of the low proportion of   pyrite and clay in their feed. Samples from the quartz pyrophyllite and sericite   domains displayed lower recoveries due to the higher and more variable amounts   of clay and pyrite in these geometallurgical domain types.

A continuous flotation testwork program was completed using   four two-tonne test composites representing the four major geometallurgical   domain types in the deposit. For the work, rougher recoveries compared well to   the locked cycle test results; however, cleaner circuit performance was below   expectation for several samples. Cleaner results would likely have been improved   if larger samples were available as greater throughput rates and more operator   experience was required for the more complex cleaner circuit. Products produced   from the continuous testwork will be used for future gold, copper-moly   separation, molybdenum refining, and tailings thickening testwork.

Page 12

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

*Infrastructure*

A base case for project infrastructure has been developed in   conjunction with the ongoing Prefeasibility Study program. Infrastructure for   the project includes port, road, and power options that will be necessary to   support future mine operations.

Collection of additional geotechnical data to support   prefeasibility design of tailings storage, the proposed plant site, and mine   waste storage was completed in the fourth quarter of 2010.

Environmental and Socioeconomic Studies

Comprehensive environmental and socioeconomic baseline study   programs are ongoing at the Pebble Project, with the objectives of collecting   data in the Pebble Project area and comparing annual variability. This data   provides a foundation for the sound environmental design of the project and   preparation of state and federal permit applications in future years. The 2010   field programs primarily focused on hydrology, water quality and fish resources.

The Environmental Baseline Document ("EBD") is being finalized   by the Pebble Partnership; data from ongoing monitoring will be integrated until   other prefeasibility work is completed. This document will be submitted with   permit applications once mine engineering and a proposed development plan is   completed. The EBD will present information and analysis on baseline physical,   chemical, biological and social conditions based upon ongoing data collection by   the Pebble Partnership’s environmental study team since 2004. Its purpose is to   provide the public, regulatory agencies and the Pebble Partnership with a   detailed compendium of pre-development environmental and socioeconomic   conditions in the project area. It is expected that the EBD will be completed   and publicly released in 2011.

*Cultural Resource Studies*

Cultural resource studies have been carried out by the Pebble   Partnership on all areas that might be affected by the project, with the   exception of possible road and port locations. Examination of the road and port   sites will be undertaken, once a decision is made regarding the exact location   of these project features.

Community Engagement

An active program of stakeholder outreach continued throughout   2010, and included community meetings, stakeholder visits, presentations and   event appearances, as well as stakeholder tours to the Pebble Project site and   to operating mines in the United States. The focus of these outreach activities   is to update stakeholders on the Pebble Project, to receive feedback on   stakeholder priorities and concerns, and to advise participants about modern   mining practices. The 2010 site tours ran for five months in 2010 and hosted 53   tour groups, which included 197 stakeholders.

The Pebble Partnership has a number of other initiatives   underway to enhance stakeholder relationships, including:

|1. | The *Pebble Fund for Sustainable Bristol Bay Fisheries &   Communities* Established in 2008 with a five-year, US$5 million commitment,   the goal of the Pebble Fund is to enhance the health and sustainability of   regional fisheries and the communities they support. Grants are determined based   on the criteria and selections made by an advisory board comprised   of citizens from communities throughout the Bristol Bay region.   The third round of grants was announced in May 2010, when $843,000 was awarded   to 17 worthy community development projects in southwest Alaska. The Pebble Fund   has supported 65 community- based projects throughout southwest Alaska via   grants totaling more than US$2.4 million, while leveraging nearly US$12 million   in matching funds from other organizations.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 13

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

|2. | An independent stakeholder dialogue process concerning the   Pebble Project was initiated in late 2010 by the Keystone Center  a non-profit   organization specializing in facilitating stakeholder-driven consultation   processes concerning contentious, science-based issues. From December 3, 2010,   the Keystone Process will convene Independent Science Panels of respected   experts in a range of technical, scientific and sociological fields to review   environmental and socioeconomic data compiled by the Pebble Partnership for the   purpose of project engineering and permitting, while providing expert insight to   Pebble Project stakeholders.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Pebble Partnership stakeholder relations plans for 2011   include a continuation of local community and state-wide stakeholder engagement,   public education programming, as well as the stakeholder tour program. The   Pebble Fund program will continue with the possible introduction of a   ‘micro-loan’ program to support the development of sustainable local businesses.   A total of four Independent Science Panel events are planned for the fall of   2011 as part of the Keystone process, to review the sufficiency of the Pebble   Partnership’s environmental baseline studies to support federal and state   permitting. As the Pebble Project advances toward the completion of a   Prefeasibility Study and preparation for project permitting under NEPA, it is   expected that the Pebble Partnership will initiate a broad-based public   consultation program to involve stakeholders in the process by which the project   is being designed.

Employment and Workforce Development

The Pebble Partnership is one of the most important private   sector employers in southwest Alaska. To the end of December 2010, a total of   372 Alaskans have been employed at the Pebble Project.

Employee training and further workforce development initiatives   continue to expand. Workforce development initiatives at the Pebble Project   include the provision of training in the areas of equipment operations, health,   safety and environment. Working with the U.S. and Alaska Departments of Labour,   the Pebble Partnership has established the first-ever registered apprenticeship   training program to help local drill helpers become certified drillers. The   Company is also investing in programs to train local workers to become   environmental technicians, emergency medical technicians and bear guards. In   addition, scholarships are available to high school students from the Bristol   Bay region that are interested in pursuing studies at college and   vocational/technical schools in the fields of project management, operations,   geology, science, engineering and other areas of responsible resource   development.

The Pebble Partnership expects to complete and publicly release   a Workforce Development strategy for the Pebble Project in 2011, to identify   long-term education, training and recruitment programs and partnerships to   ensure appropriately qualified and skilled workers are available to construct   and operate the Pebble Project, and to fulfill its local hire commitments.

Page 14

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

|*1.2.1.4* | *Legal Matters*
|--------- | ---------------

A lawsuit filed on July 29, 2009, in Anchorage Superior Court   by Trustees for Alaska (an environmental law firm) on behalf of certain   activists asserts that the Alaska Department of Natural Resources violated   Alaska’s Constitution by granting exploration and temporary water use permits to   the Pebble Partnership. Neither the Company nor the Pebble Partnership are named   as parties, however the Pebble Partnership has been granted intervener status in   the case. While plaintiffs had requested a preliminary injunction to halt   exploration activity at Pebble until the case is resolved, the court denied this   request on November 27, 2009, and drilling has continued. The Superior Court   heard the Trustees’ constitutional challenge in December 2010. Pending final   submissions from the plaintiffs, it is expected to issue a final ruling within   six months. The lawsuit is considered unlikely to succeed as it seeks to   overturn the State’s regulatory regime for resource management in Alaska.

On February 23, 2011, the Company issued a news release   announcing that it was in receipt of a new independent Preliminary Assessment of   the Pebble Project, which is based on the information generated and provided by   the Pebble Partnership and Northern Dynasty. The information provided by the   Pebble Partnership and the Preliminary Assessment constitute a material change   in the affairs of the Company because it changed the technical parameters and   estimated net present value of the property by billions of dollars from the last   such assessment done in 2004. Anglo American, the other 50% partner in the   Pebble Partnership, has alleged that that the news release contained   confidential information which is the property of the Pebble Partnership and was   not authorized to be released, and Anglo American reserves all rights to claim   that the release has damaged Anglo American and/or the Pebble Partnership. The   Company has received legal advice that the news release was a permitted   disclosure under the various agreements with Anglo American, and its issuance   was a mandatory requirement under Canadian and US regulatory requirements. The   Company does not believe that Anglo American’s allegations have any merit;   however, it cannot give assurances about future events or actions by Anglo   American.

|1.2.2     | Other Properties                 
|--------- | ---------------------------------
|          |                                  
|*1.2.2.1* | *South Pebble, SP and KAK Claims*

*Agreement between Full Metal Minerals and the Pebble   Partnership*

On September 10, 2010, the Pebble Partnership entered into a   letter agreement, (the "FMM Agreement") with Full Metal Minerals Corp. and its   subsidiary Full Metal Minerals (USA) Inc. (together, "FMM"), which is subject to   due diligence by the Pebble Partnership. In the event that any issues uncovered   by the Pebble Partnership during its due diligence review are satisfactorily   resolved and the FMM Agreement becomes binding, the Pebble Partnership can earn   a 60% interest in FMM’s South Pebble Claims (the "FMM Properties"), by incurring   exploration expenditures of at least US$3 million and making annual payments of   US$50,000 to FMM over a period ending on December 31, 2013. The venture between   FMM and the Pebble Partnership will be in the form of a limited liability   company ("LLC") operated by the Pebble Partnership.

For the duration of the earn-in period and the term of the LLC,   the Pebble Partnership will have an option to select and purchase claims that   form part of the FMM Properties (the "Purchased Claims") at a price of US$25 per   acre, provided that the Purchased Claims are declared or agreed to be outside of   the current scope of the LLC, constitute no more than 20,000 acres, constitute a continuous block of claims and are located outside an   "Exclusion Area" specified in the FMM Agreement.

Page 15

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

The FMM Properties total 542 claims covering approximately 135   square miles and located west and northwest of the ground held 100% by the   Pebble Partnership; 99 of these claims, covering an area of 24.3 square miles,   form the "Exclusion Area".

Under the FMM Agreement, the Pebble Partnership was required to   complete a Z-Axis Tipper Electromagnetic Technique ("ZTEM") airborne survey over   the FMM Properties before January 1, 2011, which was completed in the third   quarter of 2010. In addition, from the date of signature until either completion   of the earn-in or termination of the FMM Agreement, the Pebble Partnership is   required to make annual payments of US$50,000 to FMM. The first payment has been   made.

*Exploration*

A helicopter borne ZTEM and aeromagnetic geophysical survey was   conducted over 954 line miles. The airborne work was performed over at least 40   days during the period of July and August 2010 to assist in planning further   exploration and development work. The total cost of all work was approximately   $227,300 and was paid for by Pebble Partnership.

|*1.2.2.2* | *Big Chunk North and South and Bonanza Hills   Claims*
|--------- | ------------------------------------------------------

*Northern Dynasty’s Purchase and Option Agreement with   Liberty Star*

On June 29, 2010, Northern Dynasty entered into an agreement   with Liberty Star Uranium and Metals Corp. and its subsidiary, Big Chunk Corp.   (together, "Liberty Star"), pursuant to which Liberty Star sold 23.8 square   miles of claims, the "Purchased Claims", to a US subsidiary of Northern Dynasty   in consideration for both a US$1 million cash payment and a secured convertible   loan from Northern Dynasty in the amount of US$3 million which accrues interest   at 10% per annum calculated monthly (the "Loan"). The Loan is repayable, in cash   or convertible into Liberty Star shares, after Northern Dynasty has spent at   least US$1 million earning into the joint venture. As of the date of this   MD&A, Northern Dynasty has not spent US$1 million.

In addition, subject to negotiating and signing a definitive   earn-in option and joint venture agreement, Northern Dynasty can earn a 60%   interest in Liberty Star’s remaining Big Chunk and Bonanza Hills projects in   Alaska by spending US$10 million on those properties over six years. The Loan   may be applied as part of the earn-in requirements, at Northern Dynasty’s   discretion. As of the date of this MD&A, Northern Dynasty and Liberty Star   have not entered into a joint venture agreement.

The Pebble Partnership had the right for a limited period to   acquire the Purchased Claims but has declined to exercise that right.

The total area of the properties is 186.7 square miles, and   includes 95 Purchased Claims; 428 Big Chunk South claims (102.9 square miles);   184 Big Chunk North claims (46 square miles ); and 56 Bonanza Hills claims (14   square miles). All are located in the vicinity of the Pebble property.

Page 16

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

*Exploration*

For the Big Chunk North claims, a helicopter borne ZTEM and   aeromagnetic geophysical survey was conducted over 283 line miles. The airborne   work was performed during August 2010 to assist in planning further exploration   and development work. The total cost of all work was approximately $90,900.

An air rotary drill program, consisting of two holes, was   completed by Foundex Pacific on the Big Chunk South (BC) claims under the   supervision of Knight Piesold Engineering. The work was performed during August   2010 to test areas and assist in planning further exploration and development   work. The total cost of all work was approximately $227,600.

On the Bonanza Hills claims, a helicopter borne ZTEM and   aeromagnetic geophysical survey was conducted over 91 line miles. The airborne   work was performed over at least 2 days during August 2010 to assist in planning   further exploration and development work. The total cost of all work was   approximately $29,000.

|1.2.3 | Market Trends
|----- | -------------

Copper prices showed a significant increase between late 2003   and mid-2008, and after a steep decline in late 2008 and early 2009, have been   steadily increasing since that time.

Although the gold price has dropped from time to time, over the   past five years, the average annual price has steadily increased. This upward   trend accelerated in 2009 in response to the global economic uncertainty that   began in mid-2008.

Molybdenum prices have been more volatile than gold or copper,   beginning an upward trend in 2003 that reached a peak of US$34/lb in October   2005, decreasing through 2006, then rising in 2007 and until the latter part of   2008, when they dropped significantly. This decrease continued until May 2009.   Since that time, prices have been variable, but on an overall up-trend.

Average annual prices as well as the average price so far in   2011 for copper, gold and molybdenum are shown in the table below :

|Year                            | Average metal price (US$)
|------------------------------- | -------------------------
|Copper                          | Gold                     
|2008                            | 3.16/lb                  
|2009                            | 2.34/lb                  
|2010                            | 3.42/lb                  
|2011 (to the date of this MD&A) | 4.38/lb                  

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

Page 17

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

|1.3 | Selected Annual   Information
|--- | -----------------------------

The following consolidated financial statements have been   prepared in accordance with IFRS as issued by the International Accounting   Standards Board ("IASB") and interpretations of the IFRS Interpretations   Committee ("IFRIC"). The Company adopted and transitioned to IFRS as of January   1, 2008. All figures are expressed in thousands of Canadian dollars, except per   share amounts.

|                                             |   | As at       |  |   | As at       |  |   | As at       | 
|-------------------------------------------- | - | ----------- |  | - | ----------- |  | - | ----------- | 
|                                             |   | December 31 |  |   | December 31 |  |   | December 31 | 
|Statements of   Financial Position           |   | 2010        |  |   | 2009        |  |   | 2008        | 
|Property, plant and equipment                | $ |            |  | $ |            |  | $ | 11          | 
|Investment in the Pebble Partnership         |   | 99,306      |  |   | 104,937     |  |   | 121,611     | 
|Mineral property interests                   |   | 1,055       |  |   |            |  |   |            | 
|Current assets                               |   | 43,886      |  |   | 45,133      |  |   | 46,282      | 
|Total   assets                               |   | 144,247     |  |   | 150,070     |  |   | 167,904     | 
|Shareholders’ equity                         |   | 140,060     |  |   | 146,070     |  |   | 163,315     | 
|Other liabilities                            |   | 3,633       |  |   | 3,807       |  |   | 4,441       | 
|Current liabilities                          |   | 554         |  |   | 193         |  |   | 148         | 
|Total   shareholders’ equity and liabilities |   | 144,247     |  |   | 150,070     |  |   | 167,904     | 
|Working capital                              | $ | 43,332      |  | $ | 44,940      |  | $ | 46,134      | 

|                                                     |   | Year ended  |   |   | Year ended  |   |   | Year ended  |  
|---------------------------------------------------- | - | ----------- | - | - | ----------- | - | - | ----------- | -
|                                                     |   | December 31 |   |   | December 31 |   |   | December 31 |  
|Expenses (income)                                    |   | 2010        |   |   | 2009        |   |   | 2008        |  
|Conference and travel                                | $ | 288         |   | $ | 349         |   | $ | 273         |  
|Depreciation                                         |   |            |   |   |            |   |   | 4           |  
|Donations                                            |   | 12          |   |   | 445         |   |   |            |  
|Exploration                                          |   | 1,800       |   |   | 321         |   |   | 408         |  
|Insurance                                            |   | 248         |   |   | 263         |   |   | 407         |  
|Legal, accounting and audit                          |   | 274         |   |   | 354         |   |   | 370         |  
|Office costs                                         |   | 653         |   |   | 331         |   |   | 226         |  
|Salaries                                             |   | 2,188       |   |   | 1,453       |   |   | 1,381       |  
|Shareholder communication                            |   | 431         |   |   | 750         |   |   | 384         |  
|Trust and filing                                     |   | 224         |   |   | 199         |   |   | 235         |  
|Foreign exchange loss (gain)                         |   | 138         |   |   | 130         |   |   | (9,130      | )
|Deferred income tax expense (recovery)               |   | 30          |   |   | (25         | ) |   |            |  
|Impairment of marketable securities                  |   |            |   |   | 15          |   |   |            |  
|Impairment of property, plant and equipment (“PPE”)  |   |            |   |   | 11          |   |   |            |  
|Interest income                                      |   | (544        | ) |   | (335        | ) |   | (1.115      | )
|Share-based compensation                             |   | 8,373       |   |   | 8,479       |   |   | 7,707       |  
|Loss   for the year                                  | $ | 14,115      |   | $ | 12,740      |   | $ | 1,150       |  
|                                                     |   |             |   |   |             |   |   |             |  
|Basic and diluted loss per common share              | $ | 0.15        |   | $ | 0.14        |   | $ | 0.01        |  
|Weighted average number of common shares outstanding |   | 93,779      |   |   | 92,828      |   |   | 92,544      |  

Page 18

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

|1.4 | Summary of Quarterly   Results
|--- | ------------------------------

Expressed in thousands of Canadian dollars, except per share   amounts. Small differences are due to rounding.

|                                                                       |   | Dec 31  |   |   | Sep 30  |   |   | Jun 30  |   |   | Mar 31  |   |   | Dec 31  |   |   | Sep 30  |   |   | Jun 30  |   |   | Mar 31  |  
|---------------------------------------------------------------------- | - | ------- | - | - | ------- | - | - | ------- | - | - | ------- | - | - | ------- | - | - | ------- | - | - | ------- | - | - | ------- | -
|                                                                       |   | 2010    |   |   | 2010    |   |   | 2010    |   |   | 2010    |   |   | 2009    |   |   | 2009    |   |   | 2009    |   |   | 2009    |  
|Other assets                                                           | $ | 1,055   |   | $ | 1,055   |   | $ | 1,055   |   | $ |        |   | $ |        |   | $ |        |   | $ | 1       |   | $ | 2       |  
|Equity investment in PLP                                               |   | 99,306  |   |   | 102,741 |   |   | 106,295 |   |   | 101,423 |   |   | 104,937 |   |   | 106,904 |   |   | 116,120 |   |   | 125,935 |  
|Current   assets                                                       |   | 43,886  |   |   | 43,421  |   |   | 44,955  |   |   | 46,632  |   |   | 45,133  |   |   | 45,236  |   |   | 45,641  |   |   | 45,316  |  
|Total assets                                                           |   | 144,247 |   |   | 147,217 |   |   | 152,305 |   |   | 148,055 |   |   | 150,070 |   |   | 152,140 |   |   | 161,762 |   |   | 171,253 |  
|                                                                       |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |  
|Equity                                                                 |   | 140,060 |   |   | 143,287 |   |   | 148,305 |   |   | 144,322 |   |   | 146,070 |   |   | 151,797 |   |   | 161,693 |   |   | 171,087 |  
|Other liabilities                                                      |   | 3,633   |   |   | 3,737   |   |   | 3,825   |   |   | 3,645   |   |   | 3,807   |   |   |        |   |   |        |   |   |        |  
|Current liabilities                                                    |   | 554     |   |   | 193     |   |   | 175     |   |   | 88      |   |   | 193     |   |   | 343     |   |   | 69      |   |   | 166     |  
|Total   shareholders’ equity and liabilities                           |   | 144,247 |   |   | 147,217 |   |   | 152,305 |   |   | 148,055 |   |   | 150,070 |   |   | 152,140 |   |   | 161,762 |   |   | 171,253 |  
|                                                                       |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |  
|Working   capital                                                      |   | 43,332  |   |   | 43,228  |   |   | 44,780  |   |   | 46,544  |   |   | 44,940  |   |   | 44,893  |   |   | 45,572  |   |   | 45,150  |  
|                                                                       |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |  
|Comprehensive Loss                                                     |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |  
|Expenses                                                               |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |  
|Conference and travel                                                  |   | 61      |   |   | 44      |   |   | 55      |   |   | 128     |   |   | 59      |   |   | 101     |   |   | 79      |   |   | 110     |  
|Depreciation                                                           |   |        |   |   |        |   |   |        |   |   |        |   |   | (12     | ) |   | 2       |   |   | 1       |   |   | 9       |  
|Donations                                                              |   | 4       |   |   | 5       |   |   |        |   |   | 3       |   |   |        |   |   |        |   |   |        |   |   | 445     |  
|Exploration                                                            |   | 850     |   |   | 653     |   |   | 150     |   |   | 147     |   |   | 241     |   |   | 11      |   |   | 17      |   |   | 52      |  
|Foreign exchange loss (gain)                                           |   | 112     |   |   | 110     |   |   | (105    | ) |   | 21      |   |   | 12      |   |   | 74      |   |   | 86      |   |   | (42     | )
|Insurance                                                              |   | 61      |   |   | 61      |   |   | 62      |   |   | 64      |   |   | 66      |   |   | 65      |   |   | 65      |   |   | 67      |  
|Impairment on marketable securities                                    |   |        |   |   |        |   |   |        |   |   |        |   |   | 15      |   |   |        |   |   |        |   |   |        |  
|Legal, accounting and audit                                            |   | 122     |   |   | 86      |   |   | 36      |   |   | 30      |   |   | 128     |   |   | 130     |   |   | 55      |   |   | 41      |  
|Office costs                                                           |   | 137     |   |   | 183     |   |   | 226     |   |   | 107     |   |   | 33      |   |   | 53      |   |   | 168     |   |   | 77      |  
|Salaries                                                               |   | 436     |   |   | 580     |   |   | 747     |   |   | 425     |   |   | 249     |   |   | 361     |   |   | 393     |   |   | 450     |  
|Shareholder communication                                              |   | 77      |   |   | 98      |   |   | 158     |   |   | 98      |   |   | 113     |   |   | 230     |   |   | 213     |   |   | 194     |  
|Share-based compensation                                               |   | 1,588   |   |   | 1,543   |   |   | 4,340   |   |   | 902     |   |   | 1,346   |   |   | 1,313   |   |   | 1,352   |   |   | 4,468   |  
|Trust   and filing                                                     |   | 7       |   |   | 10      |   |   | 42      |   |   | 165     |   |   | 7       |   |   | 18      |   |   | 28      |   |   | 146     |  
|Total before undernoted                                                |   | 3,455   |   |   | 3,373   |   |   | 5,711   |   |   | 2,090   |   |   | 2,257   |   |   | 2,358   |   |   | 2,457   |   |   | 6,017   |  
|                                                                       |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |  
|Interest income                                                        |   | (198    | ) |   | (175    | ) |   | (90     | ) |   | (81     | ) |   | (89     | ) |   | (111    | ) |   | (47     | ) |   | (88     | )
|Impairment loss on PPE                                                 |   |        |   |   |        |   |   |        |   |   |        |   |   | 11      |   |   |        |   |   |        |   |   |        |  
|Deferred income tax                                                    |   | 21      |   |   | 41      |   |   | 3       |   |   | (35     | ) |   | (25     | ) |   |        |   |   |        |   |   |        |  
|Loss   for the period                                                  |   | 3,278   |   |   | 3,239   |   |   | 5,624   |   |   | 1,974   |   |   | 2,154   |   |   | 2,247   |   |   | 2,410   |   |   | 5,929   |  
|Loss (gain) on marketable securities                                   |   | 1       |   |   | (1      | ) |   | 1       |   |   |        |   |   |        |   |   | 2       |   |   | (1      | ) |   |        |  
|Exchange difference on translation of the Pebble   Partnership         |   | 3,435   |   |   | 3,554   |   |   | (4,872  | ) |   | 3,514   |   |   | 1,967   |   |   | 9,216   |   |   | 9,815   |   |   | (4,324  | )
|Deferred income tax                                                    |   | (124    | ) |   | (129    | ) |   | 176     |   |   | (127    | ) |   | (609    | ) |   |        |   |   |        |   |   |        |  
|Comprehensive loss                                                     | $ | 6,590   |   | $ | 6,663   |   | $ | 929     |   | $ | 5,361   |   | $ | 3,512   |   | $ | 11,465  |   | $ | 12,224  |   | $ | 1,605   |  
|                                                                       |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |  
|Basic   and diluted loss per common share                              | $ | 0.03    |   | $ | 0.03    |   | $ | 0.06    |   | $ | 0.02    |   | $ | 0.02    |   | $ | 0.02    |   | $ | 0.03    |   | $ | 0.06    |  
|                                                                       |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |  
|Weighted   average number of common shares outstanding YTD (thousands) |   | 93,973  |   |   | 93,857  |   |   | 93,815  |   |   | 93,254  |   |   | 93,063  |   |   | 92,958  |   |   | 92,728  |   |   | 92,557  |  

Page 19

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

|1.5 | Results of   Operations
|--- | -----------------------

The following financial data has been prepared in accordance   with IFRS as issued by the IASB and interpretations of the IFRS Interpretations   Committee ("IFRIC") and are expressed in Canadian dollars unless otherwise   stated.

The Company’s operations and business are not driven by   seasonal trends, but rather the achievement of project milestones such as the   achievement of various technical, environmental, socio-economic and legal   objectives, including obtaining the necessary permits, completion of   pre-feasibility and final feasibility studies, preparation of engineering   designs, as well as receipt of financings to fund these objectives along with   mine construction.

|*1.5.1* | *Results of Comprehensive Loss for the Year Ended   December 31, 2010 vs. 2009*
|------- | -------------------------------------------------------------------------------

Loss increased to $14.1 million, compared to $12.7 million in   the previous fiscal year. The increase was attributable to higher salary costs   and exploration related expenses incurred during 2010 (both discussed   below).

The Company recorded exploration costs of $1.8 million (2009    $321,000) as it conducted two independent studies on the Pebble Project and   initiated an independent Preliminary Assessment Technical Report based on a   review of the recent engineering and technical studies undertaken principally by   the Pebble Partnership and the Company. The Company also completed required   exploration work on the Liberty Star claims*.*Salary costs increased to   $2.2 million (2009  $1.5 million) as a result of US payroll related taxation   payments for employees who worked on the Pebble Project and legal and due   diligence activities relating to the Company’s purchase of the Liberty Star   claims (refer 1.2.2.2) .

Share-based compensation is measured by determining the fair   value of the share purchase options at the grant date for each tranche. The   share-based compensation for each tranche is recognized over the period during   which the share purchase option vests. Share-based compensation decreased   marginally to $8.4 million (2009  $8.5 million) as a result of the Company   including forfeitures in the determination of share-based compensation.

As a result of the appreciation of the Canadian dollar against   the US dollar from approximately 1USD=1.05CAD at January 1, 2010 to   1USD=0.9946CAD at December, 2010, the Company recorded an exchange loss of $5.6   million in other comprehensive income related to the exchange difference on the   equity investment in the Pebble Partnership, which has a US dollar functional   currency. This compared to the loss recognized in 2009 of $16.7 million due to   the strengthening of the Canadian dollar from 1USD=1.22CAD at January 1, 2009 to   1USD=1.05CAD at December 31, 2009.

|*1.5.2* | *Financial position as at December 31, 2010 vs.   December 31, 2009*
|------- | --------------------------------------------------------------------

The Company’s total assets decreased to $144.2 million from   $150.1 million. The decrease was mainly attributable to the decrease in the   carrying value of the Group’s investment in the Pebble Partnership as a result   of the exchange loss of $5.6 million recognized on translation (refer 1.5.1) .   Cash and cash equivalents decreased by $4.5 million partly as a result of the   purchase of the Liberty Star claims for a consideration of approximately $1.1   million in cash and a loan advance of $3.1 million. The Company utilized $6.0   million of its cash resources in its operations, earned interest income of $0.3   million on cash balances held and received $5.2 million in proceeds from the   issue of shares for cash as a result of the exercise of share purchase   options.

Page 20

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

|*1.5.3* | *Investment in the Pebble Partnership*
|------- | --------------------------------------

As indicated in section 1.2.1.2, the Company has determined   that, in accordance with IFRS, it has joint control of the Pebble Partnership   and applies the equity method to account for its investment in the Pebble   Partnership.

Expenditures incurred on the Pebble Project through the Pebble   Partnership are being funded 100% by Anglo American. Anglo American’s total   contributions from inception to December 31, 2010 are $340.2 million (US$319.9   million). For the year ended December 31, 2010, the Pebble Partnership incurred   losses of $68.8 million (2009  $68.3 million). Exploration costs increased to   $62.8 million from $62.3 million in the previous year as the Pebble Partnership   continued to focus on preparing a Pre-Feasibility study for the Pebble Project.   The main exploration expenditures during the period were for:

- engineering (2010  $11.1 million; 2009  $12.2 million);
- environmental planning and testing (2010  $13.3 million; 2009  $18.4   million);
- site activities (2010  $30.0 million; 2009  $23.6 million); and
- public affairs (2010  $8.3 million; 2009  $8.1 million).

For further discussion on exploration activities and the   technical programs underway on the Pebble Project, please refer to section   1.2.1.3.

|*1.5.4* | *Discussion of Quarterly Trends*
|------- | --------------------------------

The Company’s investment in the Pebble Partnership is carried   in US dollars. Exchange differences arising from the translation of the Group’s   investment in the Pebble Partnership are taken directly to the foreign currency   translation reserve in other comprehensive loss.

As a result of the depreciation of the US dollar in Q1, Q3, and   Q4 of 2010 and from Q2 through Q4 of 2009, the Company has recorded an exchange   loss in other comprehensive loss in six of the past eight quarters relating to   the exchange differences arising on translation of the Company’s equity   investment in the Pebble Partnership, which has a US dollar functional currency.   This has also resulted in a decrease in the Company’s investment in the Pebble   Partnership balance on the statements of financial position over the same   corresponding period

The following table summarizes the movement in the US dollar to   the Canadian dollar and the resulting exchange differences recognized in each   quarter:

|        |  |                       |  |  | 1CAD for 1USD |  |  |       | 
|------- |  | --------------------- |  |  | ------------- |  |  | ----- | 
|Period  |  | USD   movement to CAD |  |  | Start         |  |  | End   | 
|Q1 2009 |  | Appreciation          |  |  | $1.22         |  |  | $1.26 | 
|Q2 2009 |  | Depreciation          |  |  | $1.26         |  |  | $1.16 | 
|Q3 2009 |  | Depreciation          |  |  | $1.16         |  |  | $1.07 | 
|Q4 2009 |  | Depreciation          |  |  | $1.07         |  |  | $1.05 | 
|Q1 2010 |  | Depreciation          |  |  | $1.05         |  |  | $1.02 | 
|Q2 2010 |  | Appreciation          |  |  | $1.02         |  |  | $1.06 | 
|Q3 2010 |  | Depreciation          |  |  | $1.06         |  |  | $1.03 | 
|Q4 2010 |  | Depreciation          |  |  | $1.03         |  |  | $0.99 | 
|FY 2009 |  | Depreciation          |  |  | $1.22         |  |  | $1.05 | 
|FY 2010 |  | Depreciation          |  |  | $1.05         |  |  | $0.99 | 

Page 21

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

Share-based compensation expense also typically fluctuates   based on the timing of share purchase option grants and the vesting periods   associated with these grants. The fair value of share purchase options is   recognized at the grant date and the compensation expense for each tranche is   recognized over the period during which the share purchase option vests. As a   result of the vesting of certain tranches of share purchase options granted in   Q1 2009, share-based compensation decreased until Q2 of 2010. In Q2 of 2010, the   Company granted new share purchase options which resulted in the increase in   share-based compensation recognized due to the vesting of certain tranches of   these new share purchase options. In Q3 and Q4 of 2010, share-based compensation   decreased relative to Q2 of 2010, as a result of the vesting of certain tranches   of these options and the inclusion of forfeiture rates.

|1.6 | Liquidity
|--- | ---------

Historically, the Company's sole source of funding has been the   issuance of equity securities for cash, primarily through private placements to   sophisticated investors and institutions. Except for 2008, the Company has   issued common shares in each of the past few years pursuant to private placement   financings and the exercise of warrants and/or share purchase options. The   Company's access to financing is always uncertain. There can be no assurance of   continued access to significant equity funding.

The funding of expenditures on the Pebble Project held through   the Pebble Partnership is currently being provided by Anglo American (described   below). Excluding cash and cash equivalents in the Pebble Partnership, Northern   Dynasty has approximately $40 million in cash and cash equivalents for its own   operating requirements. With the Pebble Project being funded by Anglo American   for 2011, and given the Company’s holdings of cash and cash equivalents, the   Company believes it has sufficient sources to cover its short to medium term   cash requirements.

As discussed in section 1.2.2, the Company is in a 50:50   limited partnership with Anglo American. Each of the Company and Anglo American   effectively has equal rights in the Pebble Partnership through wholly-owned   affiliates. To maintain its 50% interest in the Pebble Partnership, Anglo   American is required to make staged cash investments into the Pebble Partnership   aggregating to US$1.425 billion, increasing to US$1.5 billion if the feasibility   study is completed past 2011, over a period of several years. Anglo American   completed the initial US$125 million commitment to fund prefeasibility study   expenditures in 2008, plus additional expenditures approved. If a prefeasibility   study is completed and the decision is to proceed, in order to retain its 50%   interest, Anglo American is required to commit to further expenditures which   will bring its total investment to at least US$450 million, which amount is to   be expended producing a final feasibility study and in related activities, the   completion of which is expected to take the Pebble Partnership to a production   decision. Upon an affirmative decision to develop a mine, Anglo American is   required to commit to the remainder of the total investment of US$1.425 billion   to US$1.5 billion in order to retain its 50% interest in the Pebble   Partnership.

Page 22

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

At December 31, 2010, the Company had working capital of   approximately $43.3 million as compared to $44.9 million at December 31,   2009.

The Company has no long term debt, capital lease obligations,   operating leases or any other long term obligations. The Company has no   "Purchase Obligations", defined as any agreement to purchase goods or services   that is enforceable and legally binding on the Company that specifies all   significant terms, including: fixed or minimum quantities to be purchased;   fixed, minimum or variable price provisions; and the approximate timing of the   transaction.

The Pebble Partnership has purchase orders for goods and   services relating to its activities on the Pebble Project. It also is   responsible for all maintenance payments on the property and routine office   leases. All costs are funded through existing cash resources in the Pebble   Partnership which are being funded by Anglo American and are in the normal   course of operations.

The Company is responsible for all maintenance payments on the   Purchased Claims (refer 1.2.2.2) . Subject to entering into a definitive joint   venture agreement with Liberty Star, the Company would be required to spend   US$10 million in exploration and claims maintenance over 6 years.

|1.7 | Capital Resources
|--- | -----------------

The Company has no long-term debt and had 94,177,066 common   shares issued and outstanding at December 31, 2010.

The Company had no commitments for material capital   expenditures as of December 31, 2010.

The Pebble Partnership, which is being funded by Anglo   American, has an approximate US$2.6 million commitment to the Pebble Fund for   Sustainable Bristol Bay Fisheries & Communities over the next three years   (refer to C*ommunity Engagement*in 1.2.1.3.2)

The Company has no lines of credit or other sources of   financing.

|1.8 | Off-Balance Sheet   Arrangements
|--- | --------------------------------

None.

|1.9 | Transactions with Related   Parties
|--- | -----------------------------------

The Company and its subsidiaries transacts with Hunter   Dickinson Services Inc. ("HDSI"), a private company which previously was owned   equally by eight public companies, one of which was Northern Dynasty. During the   year, the Company sold its interest in HDSI for a nominal value. HDSI has   certain directors in common with the Company and carries out geological,   corporate development, administrative, financial management services (including   raising of funds), investor relations, and other management activities for, and   incurs third party costs on behalf of the Company.

Costs for services rendered by HDSI to the Company for the year   ended December 31, 2010 were $2.8 million as compared to $1.6 million for the   year ended December 31, 2009. The increase over 2009 is due to the Company using   resources provided by HDSI to assist with ongoing administration and management   of the Company including assisting with the purchase of claims from Liberty Star and exploration work subsequently undertaken,   continuous disclosure obligations, shareholder communications and investor   relations, as well as assisting with the Company’s role as partner in the Pebble   Partnership. Costs for expenses paid by HDSI and reimbursed by the Company for   the year ended December 31 2010 amounted to $0.7 million as compared to $0.6   million for the year ended December 31, 2009.

Page 23

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

The Company paid consultant fees on behalf of the Pebble   Partnership in the amount of $134,000 during the year in the normal course of   operations of which $59,000 was reimbursed by the Pebble Partnership.

Compensation paid to key management personnel (directors and   senior management comprising the senior Vice President ("VP"), Corporate   Development; VP, Engineering and VP, Public Affairs) for the year comprised   salaries of $1.0 million (2009  $1.0 million) and share-based compensation of   $4.1 million (2009  $3.1 million).

|1.10 | Fourth Quarter
|---- | --------------

Loss increased to $3.2 million from $2.2 million in 2009. The   increase was attributable to an increase in share-based compensation recognized   and exploration related expenses.

Share-based compensation is measured by determining the fair   value of the share purchase option at the grant date for each tranche. The   share-based compensation for each tranche is recognized over the period during   which the share purchase option vests. Share-based compensation increased in Q4   2010 to $1.6 million (2009  $1.3 million) as a result of the increase in   weighted average assumptions and inputs used to estimate the fair value of share   purchase options granted during the year.

The Company recorded exploration costs of $850,000 (2009    $241,000) as it conducted a scoping study and block cave review on the Pebble   Project and initiated an independent Preliminary Assessment Technical Report   based on a review of the recent engineering and technical studies undertaken   principally by the Pebble Partnership and the Company. The Company also   completed exploration work on the Liberty Star claims*.*Salary costs for   the period increased to $436,000 (2009  $249,000) as a result of additional   work being done on the Preliminary Assessment.

As a result of the appreciation of the Canadian dollar against   the US dollar from approximately 1USD=1.03CAD at October 1, 2010 to   1USD=0.9946CAD at December 31, 2010, the Company recorded an exchange loss of   $3.4 million in other comprehensive income related to the exchange difference on   the equity investment in the Pebble Partnership, which has a US dollar   functional currency. This compared to the loss recognized in 2009 of $2 million   when the Canadian dollar strengthened from 1USD=1.07CAD at October 31, 1, 2009   to 1USD=1.05CAD at December 31, 2009.

|1.11 | Proposed   Transactions
|---- | -----------------------

There are no proposed asset or business acquisitions or   dispositions, other than those in the ordinary course, before the Board of   Directors for consideration.

Page 24

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

|1.12 | Critical Accounting   Estimates
|---- | -------------------------------

The Company's significant accounting policies are presented in   Note 2 in the notes to the consolidated financial statements for the year ended   December 31, 2010. The preparation of the consolidated   financial statements requires management to make estimates and assumptions that   affect the reported amounts of assets and liabilities at the end of the   reporting period presented and reported amounts of expenses during said   reporting period. Actual outcomes could differ from these estimates. The   consolidated financial statements include estimates which, by their nature, are   uncertain. The impacts of such estimates are pervasive throughout the   consolidated financial statements, and may require accounting adjustments   based on future occurrences. Revisions to accounting estimates are recognized in   the period in which the estimate is revised and future periods if the revision   affects both current and future periods. These estimates are based on historical   experience, current and future economic conditions and other factors, including   expectations of future events that are believed to be reasonable under the   circumstances.

Significant assumptions about the future and other sources of   estimation uncertainty at the end of the reporting period, that could result in   a material adjustment to the carrying amounts of assets and liabilities in the   event that actual results differ from assumptions made, include, but are not   limited to, the following:

| | i.   | the recoverability of amounts receivable which are included in   the consolidated statements of financial position;                                                                                                           
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                               
| | ii.  | the carrying value and the recoverability of the investment in   the Pebble Partnership included in the consolidated statements of financial   position;                                                                      
| |      |                                                                                                                                                                                                                               
| | iii. | the carrying value and the recoverability of the mineral   property interest, included in the consolidated statements of financial   position;                                                                                
| |      |                                                                                                                                                                                                                               
| | iv.  | the inputs used in accounting for share-based compensation   expense in loss; and                                                                                                                                             
| |      |                                                                                                                                                                                                                               
| | v.   | the provision for the income tax recovery which is included in   profit or loss and the composition of deferred income tax liabilities included   in the consolidated statements of financial position at December 31,   2010.

|*1)* *Mineral resources and reserves, and the carrying   values of the Company’s investment in the Pebble   Partnership*
|------------------------------------------------------------------------------------------------------------------------

Mineral resources and reserves are estimated by professional   geologists and engineers in accordance with recognized industry, professional   and regulatory standards. These estimates require inputs such as future metals   prices, future operating costs, and various technical geological, engineering,   and construction parameters. Changes in any of these inputs could cause a   significant change in the resources and reserves estimates which in turn could   have a material effect on the carrying value of the Company’s investment in the   Pebble Partnership.

*2) Impairment analysis of assets*

At the end of each reporting period the carrying amounts of the   Company’s assets are reviewed to determine whether there is any indication that   those assets are impaired. If any such indication exists, the recoverable amount   of the asset is estimated in order to determine the extent of the impairment, if   any. The recoverable amount is the higher of fair value less costs to sell and   value in use. In assessing value in use, the estimated future cash flows are   discounted to their present value using a pre-tax discount rate that reflects   current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount   of an asset is estimated to be less than its carrying amount, the carrying   amount of the asset is reduced to its recoverable amount and the impairment loss   is recognized in the profit or loss for the period. For the purposes of   impairment testing, exploration and evaluation assets are allocated to   cash-generating units to which the exploration activity relates. For an asset   that does not generate largely independent cash inflows, the recoverable amount   is determined for the cash generating unit to which the asset belongs.

Page 25

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

Recoverability of the carrying amount of the exploration and   evaluation assets is dependent on successful development and commercial   exploitation, or alternatively, sale of the respective assets.

Changes in any of the assumptions used to determine impairment   testing could materially affect the results of the analysis.

At December 31, 2010, the Company reviewed the carrying value   of its assets and determined that there were no indicators of impairment.

*3) Restoration, rehabilitation, and environmental   obligations*

An obligation to incur restoration, rehabilitation and   environmental costs arises when environmental disturbance is caused by the   exploration or development of a mineral property interest. Such costs arising   from the decommissioning of plant and other site preparation work, discounted to   their net present value, are provided for and capitalized at the start of each   project to the carrying amount of the asset, along with a corresponding   liability as soon as the obligation to incur such costs arises. The timing of   the actual rehabilitation expenditure is dependent on a number of factors such   as the life and nature of the asset, the operating license conditions, and when   applicable the environment in which the mine operates.

Discount rates using pre-tax rates that reflect the time value   of money are used to calculate the net present value. These costs are charged   against profit or loss over the economic life of the related asset, through   amortization using either the unit-of-production or the straight line method.   The corresponding liability is progressively increased as the effect of   discounting unwinds creating an expense recognized in profit or loss.

Decommissioning costs are also adjusted for changes in   estimates. Those adjustments are accounted for as a change in the corresponding   capitalized cost, except where a reduction in costs is greater than the   unamortized capitalized cost of the related assets, in which case the   capitalized cost is reduced to nil and the remaining adjustment is recognized in   profit or loss.

The operations of the Company may in the future be affected   from time to time in varying degree by changes in environmental regulations or   changes in estimates used in determining restoration and rehabilitation   obligations. Both the likelihood of new regulations or degree of changes in   estimates and their overall effect upon the Company are not predictable.

At December 31, 2010, the Company has no material restoration,   rehabilitation and environmental obligations as the disturbance to date is   minimal.

Page 26

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

*4) Share-based compensation expense*

From time to time, the Company through its Board of Directors,   grants share purchase options to directors, employees and service providers. The   Company uses the Black-Scholes option pricing model to estimate a value for   these options. This model, and other models which are used to value options,   require inputs such as expected volatility, expected life to exercise, and   interest rates. Changes in any of these inputs could cause a significant change   in the share-based compensation expense charged in a period.

During the year the Company granted share purchase options and   the share-based compensation expense recognized relates to the vesting of   tranches from this grant and grants of share purchase options in prior year   grants. The following are the weighted average assumptions and inputs used to   estimate the fair value of share purchase options granted during the year:

|                          |   | Years ended December 31 | 
|------------------------- | - | ----------------------- | 
|                          |   | 2010                    | 
|Risk-free interest rate   |   | 2.36%                   | 
|Expected life             |   | 3.72 years              | 
|Expected volatility       |   | 65%                     | 
|Grant date share price    | $ | 7.87                    | 
|Expected   dividend yield |   | Nil                     | 

*5) Income Taxes*

The Company uses the asset and liability method of accounting   for income taxes. Under this method, deferred income tax assets and liabilities   are computed based on differences between the carrying amounts of assets and   liabilities on the statements of financial position and their corresponding tax   values, generally using the substantively enacted or 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. Deferred income tax assets   also result from unused loss carry forwards, resource-related pools and other   deductions. A deferred tax asset is only recognized to the extent that it is   probable that future taxable profits will be available against which the asset   can be utilized.

A deferred tax liability would arise on the carrying value of   the investment in the Pebble Partnership as a result of historical transactions.   The Company recognizes net deferred tax liabilities as it believes it does not   control the timing of the reversal of these temporary differences even though   management has made the judgment that the reversal is not expected to occur in   the foreseeable future.

|1.13 | Changes in Accounting Policies   including Initial Adoption
|---- | -----------------------------------------------------------

Accounting Standards, Interpretations and Amendments to   Existing Standards

Effective January 1, 2010, the Group adopted new and revised   International Financial Reporting Standards ("IFRS") that were issued by the   IASB. The application of these new and revised IFRS has not had any material impact on the amounts reported for the   current and prior years but may affect the accounting for future transactions or   arrangements.

Page 27

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

|*(a)* | *Amendments to IFRS 2 Share-based Payment  Group   Cash-settled Share-based Payment Transactions*
|----- | --------------------------------------------------------------------------------------------------

The amendments clarify the scope of IFRS 2, as well as the   accounting for group cash-settled share-based payment transactions in the   separate (or individual) financial statements of an entity receiving the goods   or services when another group entity or shareholder has the obligation to   settle the award.

|*(b)* | *Amendments to IFRS 3 Business   Combinations*
|----- | ----------------------------------------------

The main amendments to IFRS 3 Business Combinations are as   follows:

|(i)   | The revised standard also applies to business combinations   involving only mutual entities and to business combinations achieved by contract   alone.                                                                                                           
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                  
|(ii)  | The definition of a business has been amended to clarify that   it can include a set of activities and assets that are not being operated as a   business, as long as an acquirer is capable of operating the set of activities   and assets as a business.      
|      |                                                                                                                                                                                                                                                                  
|(iii) | All business combinations are accounted for by applying the   acquisition method (previously the purchase method).                                                                                                                                               
|      |                                                                                                                                                                                                                                                                  
|(iv)  | The acquirer can elect to measure any non-controlling interest   at fair value at the acquisition date, or at its proportionate interest in the   fair value of the identifiable assets and liabilities of the acquiree, on a   transaction-by-transaction basis.
|      |                                                                                                                                                                                                                                                                  
|(v)   | Subsequent recognition of deferred tax assets acquired in a   business combination that did not satisfy the criteria for recognition at the   acquisition date would be recognized in profit or   loss.                                                          

This standard applies prospectively to acquisitions with a date   on or after the beginning of the first annual period beginning on or after July   1, 2009.

|*(c)* | *Amendments to IFRS 2 Share-based Payments and IFRS 3   Business Combinations*
|----- | ------------------------------------------------------------------------------

The amendments clarify that business combinations as defined in   IFRS 3 (2008) are outside the scope of IFRS 2, notwithstanding that they may be   outside the scope of IFRS 3. As a result, business combinations amongst entities   under common control and the contribution of a business upon the formation of a   joint venture will not be accounted for under IFRS 2.

|*(d)* | *Amendments to IFRS 8 Operating   Segments*
|----- | -------------------------------------------

The amendments clarify that disclosing segment information with   respect to total assets is only required if such information is regularly   reported to the chief operating decision maker.

|*(e)* | *Amendments to IAS 7 Statement of Cash   Flows*
|----- | -----------------------------------------------

The amendments clarify that only expenditures that result in   the recognition of an asset can be classified as a cash flow from investing   activities.

Page 28

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

|*(f)* | *Amendments to IAS 17   Leases*
|----- | -------------------------------

The IASB deleted guidance stating that a lease of land with an   indefinite economic life normally is classified as an operating lease, unless at   the end of the lease term title is expected to pass to the lessee. The   amendments also clarify that when a lease includes both the land and building   elements, an entity should determine the classification of each element taking   into account the fact that land normally has an indefinite economic life.

|*(g)* | *Amendments to IAS 27 Consolidated and Separate Financial   Statements*
|----- | -----------------------------------------------------------------------

The main amendments to IAS 27 *Consolidated and Separate   Financial Statements*are as follows:

|(i)   | Changes in a parent’s ownership interest that do not result in   the loss of control of a controlled subsidiary are accounted for as equity   transactions. Accordingly, acquisitions of additional non-controlling interests   are accounted for as equity transactions. Disposals of equity interests while   retaining control are accounted for as equity transactions.
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                            
|(ii)  | Transactions resulting in a loss of control would cause a gain   or loss to be recognized in profit or loss.                                                                                                                                                                                                                                                               
|      |                                                                                                                                                                                                                                                                                                                                                                            
|(iii) | Losses applicable to the non-controlling interests, including   negative other comprehensive income, are allocated to non-controlling interests   even if doing so causes the non- controlling interests to have a negative   balance.                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                            
|*(h)* | *Amendments to IAS 36 Impairment of   Assets*                                                                                                                                                                                                                                                                                                                              

The amendments clarify that the largest unit to which goodwill   should be allocated is the operating segments level. This amendment applies   prospectively.

|*(i)* | *Amendments to IAS 38 Intangible   Assets*
|----- | ------------------------------------------

The amendments clarify that an intangible asset that is   separable only together with a related contract, identifiable asset or liability   is recognized separately from goodwill together with the related item, and that   complementary intangible assets with similar useful lives may be recognized as a   single asset. The amendments also describe valuation techniques commonly used by   entities when measuring the fair value of intangible assets acquired in a   business combination for which no active market exists. These amendments are   applied prospectively.

|*(j)* | *Amendments to IAS 39 Financial Instruments: Recognition and   Measurement*
|----- | ---------------------------------------------------------------------------

The main amendments consist of:

|(i)   | Additional guidance provided to help determine whether loan   prepayment penalties result in an embedded derivative that needs to be   separated.                                                                                                                                                                                                 
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                   
|(ii)  | Clarification that the scope exemption is restricted to forward   contracts between an acquirer and a selling shareholder to buy or sell an   acquiree that will result in a business combination at a future acquisition date   within a reasonable period normally necessary to obtain any required approvals   and to complete the transaction.
|      |                                                                                                                                                                                                                                                                                                                                                   
|(iii) | Clarification that the gains or losses on a cash flow hedge   should be reclassified from other comprehensive income to profit or loss during   the period that the hedged forecast cash flows impact profit or   loss.                                                                                                                           

The amendments apply prospectively to all unexpired contracts   from the date of adoption.

Page 29

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

*Accounting standards issued but not yet   effective*

|*(i)*   | *Effective for annual periods beginning on or after February   1, 2010*
|------- | -----------------------------------------------------------------------
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|*(ii)*  | *Effective for annual periods beginning on or after July 1,   2010*    
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|*(iii)* | *Effective for annual periods beginning on or after January   1, 2011* 
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        
|        |                                                                        

Page 30

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

|       |                                                                        | Amendments to IAS 34 Interim Financial Reporting                                                                                                                                                            
|------ | ---------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                        |                                                                                                                                                                                                             
|       |                                                                        |                                                                                                                                                                                                             
|       |                                                                        | Addition of further examples of events or transactions that   require disclosure and removal of references to materiality when discussing   other minimum disclosures.                                      
|       |                                                                        |                                                                                                                                                                                                             
|       |                                                                       
|*(iv)* | *Effective for annual periods beginning on or after July 1,   2011*   
|       |                                                                        |                                                                                                                                                                                                             
|       |                                                                        |                                                                                                                                                                                                             
|       |                                                                        | Amendments to IFRS 7 Financial Instruments:   Disclosures                                                                                                                                                   
|       |                                                                        |                                                                                                                                                                                                             
|       |                                                                        |                                                                                                                                                                                                             
|       |                                                                        | Increase in disclosure with regards to the transfer of   financial assets, especially if there is a disproportionate amount of transfer   transactions that take place around the end of a reporting period.
|       |                                                                        |                                                                                                                                                                                                             
|       |                                                                       
|*(v)*  | *Effective for annual periods beginning on or after January   1, 2013*
|       |                                                                        |                                                                                                                                                                                                             
|       |                                                                        |                                                                                                                                                                                                             
|       |                                                                        | New standard IFRS 9 Financial Instruments                                                                                                                                                                   
|       |                                                                        |                                                                                                                                                                                                             
|       |                                                                        |                                                                                                                                                                                                             
|       |                                                                        | Partial replacement of IAS 39 Financial Instruments:   Recognition and Measurement                                                                                                                          

The Group has not early adopted these revised standards and is   currently assessing the impact that these standards will have on the   consolidated financial statements.

|1.14 | Financial Instruments and   Other Instruments
|---- | ---------------------------------------------

The loan advance provided by the Group as   part of it consideration for claims purchased has an equity conversion option.   This equity conversion feature has been determined to be an embedded derivative   which requires separation from the loan receivable. For embedded derivatives   identified for separation, the fair value of the derivative must be calculated   as of the inception date and at each reporting date subsequent to the inception   date. The Group has determined that the fair value of the equity conversion   option at the date of inception and at December 31, 2010, is of nominal value as   the earn-in and joint venture agreement has not been entered into and the first   US$1 million has still to be incurred by the Group in respect to the JV   Agreement claims.

1) Non-derivative financial   assets:

The Company has the following non-derivative financial assets:   financial assets at fair value through profit or loss, available-for-sale   financial assets, and loans and receivables.

*Financial assets at fair value through   profit or loss**("FVTPL")*

A financial asset is classified at fair   value through profit or loss if it is classified as held for trading or is   designated as such upon initial recognition. Financial assets are designated as   at FVTPL if the Company manages such investments and makes purchase and sale   decisions based on their fair value in accordance with the Company’s documented   risk management or investment strategy. Attributable transaction costs are   recognized in profit or loss when incurred. Financial assets at fair value   through profit or loss are measured at fair value, and changes therein are   recognized in profit or loss.

*Available-for-sale financial   assets*

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

Page 31

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

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

*Loans and receivables*

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

Loans and receivables comprise amounts   receivable including the Liberty Star loan receivable and balances receivable   from a related party.

2) Non-derivative financial   liabilities:

The Company has the following   non-derivative financial liabilities: amounts payable and other   liabilities.

Such financial liabilities are recognized   initially at fair value net of any directly attributable transaction costs.   Subsequent to initial recognition these financial liabilities are measured at   amortized cost using the effective interest method.

3) Financial Risk Management

The Company is exposed in varying degrees to a variety of   financial instrument related risks. The Board approves and monitors the risk   management processes, inclusive of documented investment policies, counterparty   limits, and controlling and reporting structures. The type of risk exposure and   the way in which such exposure is managed is provided as follows:

*Credit Risk*

Credit risk is the risk of potential loss to the Company if a   counterparty to a financial instrument fails to meet its contractual   obligations. The Company’s credit risk is primarily attributable to its liquid   financial assets, including cash and cash equivalents, amounts receivable and   balances receivable from related parties. The Company limits the exposure to   credit risk in its cash and cash equivalents by only investing its cash and cash   equivalents with high-credit quality financial institutions in business and   saving accounts, guaranteed investment certificates, and in government treasury   bills which are available on demand by the Company for its programs.

Page 32

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

The Company’s loan receivable from Liberty Star is secured over   other claims and assets owned by Liberty Star in Alaska, USA. Management has   assessed the recoverability of the loan as at the end of the reporting period   and based on financial information available on Liberty Star, management has   concluded that there is no objective evidence of impairment to the loan and   considers the full amount to be recoverable.

*Liquidity Risk*

Liquidity risk is the risk that the Company will not be able to   meet its financial obligations when they become due. The Company ensures, as far   as reasonably possible, it will have sufficient capital in order to meet short   term business requirements, after taking into account cash flows from operations   and the Company’s holdings of cash and cash equivalents. The Company believes   that these sources will be sufficient to cover its short to medium term cash   requirements. In the longer term on completion of the US$1.425 billion (or   US$1.5 billion) expenditure by Anglo American, any further expenditure will need   to be funded by the Group and Anglo American on a 50:50 basis. The Group   currently does not have the required funding to meet these long term obligations   should they arise.

The Company’s cash and cash equivalents are currently invested   in business accounts and guaranteed investment certificates which are available   on demand.

The Company has no contractual obligations other than current   trade and related party payables.

Further discussion can be found in Section 1.6 *Liquidity.*

*Foreign Exchange Risk*

The Company is exposed to foreign exchange risk as some of its   cash and cash equivalents are held in US dollars. Also certain of the Company’s   corporate expenses are incurred in US dollars. As a consequence, the Company’s   operations are subject to currency transaction risk and currency translation   risk. The operating results and financial position of the Company are reported   in Canadian dollars in the Company’s condensed consolidated interim financial   statements. The fluctuation of the US dollar in relation to the Canadian dollar   will consequently have an impact upon the losses incurred by the Company and may   also affect the value of the Company’s assets and the amount of shareholders’   equity. The Company has not entered into any agreements or purchased any   instruments to hedge possible currency risks at this time.

The exposure of the Company’s cash and cash equivalents,   amounts receivable and amounts receivable from related parties to foreign   exchange risk (in thousands of dollars) is as follows:

|Currency                    |   | As at December 31, 2010 |  |   | As at December 31, 2009 | 
|--------------------------- | - | ----------------------- |  | - | ----------------------- | 
|                            |   | Foreign                 |  |   | Amount in               | 
|                            |   | currency                |  |   | Canadian                | 
|                            |   | amount                  |  |   | dollars                 | 
|US dollars                  |   |                         |  |   |                         | 
|Amounts receivable          | $ | 3,153                   |  | $ | 3,136                   | 
|Cash and cash   equivalents |   | 49                      |  |   | 48                      | 
|Total   financial assets    | $ | 3,202                   |  | $ | 3,458                   | 

Page 33

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

The exposure of the Company’s amounts payable and other   liabilities and amounts due to related parties to foreign exchange risk (in   thousands of dollars) is as follows:

|Currency                                |   | As at December 31, 2010 |  |   | As at December 31, 2009 | 
|--------------------------------------- | - | ----------------------- |  | - | ----------------------- | 
|                                        |   |                         |  |   |                         | 
|                                        |   |                         |  |   |                         | 
|                                        |   | Foreign currency        |  |   | Amount in               | 
|                                        |   | amount                  |  |   | Canadian   dollars      | 
|US dollars                              |   |                         |  |   |                         | 
|Amounts payable and   other liabilities | $ | 1                       |  | $ | 1                       | 
|Total   financial liabilities           | $ | 1                       |  | $ | 1                       | 

Based on the above net exposures and assuming that all other   variables remain constant, a 10% depreciation of the Canadian dollar against the   US dollar would result in a decrease in the loss of approximately $318,000 in   the year (2009  $68,000). This sensitivity analysis includes only outstanding   foreign currency denominated monetary items and excludes the effect of any   translation adjustments for the investment in the Pebble Partnership.

*Interest rate risk*

The Company is subject to interest rate risk with respect to   its investments in cash and cash equivalents. The Company’s policy is to invest   cash at fixed rates of interest and cash reserves are to be maintained in cash   and cash equivalents in order to maintain liquidity, while achieving a   satisfactory return for shareholders. Fluctuations in interest rates when the   cash and cash equivalents mature impact interest income earned.

Assuming that all other variables remain constant, a 100   basis points change representing a 1% increase or decrease in interest rates would have resulted in an increase or   decrease in the loss of approximately $400,000 in the year (2009  $385,000).

*Commodity price risk*

While the value of the Company’s core mineral resource   property, held through its 50% interest in the Pebble Partnership, is related to   the price of gold, copper and molybdenum and the outlook for these minerals, the   Company currently does not have any operating mines and hence does not have any   hedging or other commodity based risks in respect of its operational   activities.

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

*Capital Management*

The Company's policy is to maintain a strong capital base so as   to maintain investor and creditor confidence and to sustain future development   of the business. The capital structure of the Company consists of equity,   comprising share capital, net of accumulated deficit.

There were no changes in the Company's approach to capital   management during the period. The Company is not subject to any externally   imposed capital requirements.

Page 34

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

|1.15 | Other MD&A   Requirements
|---- | -------------------------

Additional information relating to the Company, including the   Company's Annual Information Form, is available on SEDAR at www.sedar.com.

|1.15.1 | Disclosure of Outstanding   Share Data
|------ | --------------------------------------

The capital structure of the Company as of the date of this   MD&A are as per the following table:

|                       |  |                   |  |  | Exercise price |  |  |           |  |  |            | 
|---------------------- |  | ----------------- |  |  | -------------- |  |  | --------- |  |  | ---------- | 
|                       |  | Expiry date       |  |  | per share      |  |  | Number    |  |  | Number     | 
|Common shares          |  |                   |  |  |                |  |  |           |  |  | 94,744,129 | 
|                       |  |                   |  |  |                |  |  |           |  |  |            | 
|Share purchase options |  | April 14, 2011    |  |  | $9.74          |  |  | 22,500    |  |  |            | 
|                       |  | April 30, 2011    |  |  | $7.25          |  |  | 90,000    |  |  |            | 
|                       |  | October 27, 2011  |  |  | $3.00          |  |  | 70,408    |  |  |            | 
|                       |  | February 2, 2012  |  |  | $5.00          |  |  | 365,668   |  |  |            | 
|                       |  | February 4, 2012  |  |  | $5.00          |  |  | 961,441   |  |  |            | 
|                       |  | February 20, 2012 |  |  | $10.95         |  |  | 150,000   |  |  |            | 
|                       |  | March 26, 2012    |  |  | $8.25          |  |  | 25,000    |  |  |            | 
|                       |  | April 11, 2013    |  |  | $9.74          |  |  | 75,000    |  |  |            | 
|                       |  | May 27, 2013      |  |  | $7.59          |  |  | 1,514,030 |  |  |            | 
|                       |  | August 22, 2013   |  |  | $5.35          |  |  | 40,000    |  |  |            | 
|                       |  | October 27, 2013  |  |  | $3.00          |  |  | 107,000   |  |  |            | 
|                       |  | February 2, 2014  |  |  | $5.00          |  |  | 1,823,000 |  |  |            | 
|                       |  | March 15, 2014    |  |  | $15.44         |  |  | 1,247,400 |  |  |            | 
|                       |  | May 27, 2015      |  |  | $7.59          |  |  | 951,000   |  |  |            | 
|                       |  | March 15, 2016    |  |  | $15.44         |  |  | 951,000   |  |  | 8,393,447  | 

|1.15.2 | Disclosure Controls and   Procedures
|------ | ------------------------------------

The Company’s management, with the participation of its Chief   Executive Officer and Chief Financial Officer, have evaluated the effectiveness   of the Company’s disclosure controls and procedures. Based on that evaluation,   the Company’s Chief Executive Officer and Chief Financial Officer have concluded   that, as of the end of the period covered by this report, the Company’s   disclosure controls and procedures were effective to provide reasonable   assurance that the information required to be disclosed by the Company in   reports it files is recorded, processed, summarized and reported, within the   appropriate time periods.

|1.15.3 | Management’s Report on   Internal Control over Financial Reporting
|------ | ------------------------------------------------------------------

The Company's management, including the Chief Executive Officer   and the Chief Financial Officer, is responsible for establishing and maintaining   adequate internal control over financial reporting. Internal control over   financial reporting ("ICFR") is a process designed by, or under the supervision   of the Company's principal executive and principal financial officers and   effected by the Company's Board of Directors, management and other personnel, to   provide reasonable assurance regarding the reliability of financial reporting   and the preparation of consolidated financial statements for external purposes   in accordance with IFRS. The Company's internal control over financial reporting   includes those policies and procedures that:

Page 35

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

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

The Company’s management, including its Chief Executive Officer   and Chief Financial Officer, believe that any system of internal control over   financial reporting, no matter how well conceived and operated, can provide only   reasonable, not absolute, assurance that the objectives of the control system   are met. Furthermore, the design of a control system must reflect the fact that   there are resource constraints and the benefits of controls must be considered   relative to their costs. Because of the inherent limitations in all control   systems, they cannot provide absolute assurance that all control issues and   instances of fraud, if any, within the Company have been prevented or detected.   These inherent limitations include the realities that judgments in   decision-making can be faulty and breakdowns can occur because of simple error   or mistake. Additionally, controls can be circumvented by the individual acts of   some persons, by collusion of two or more people, or by unauthorized override of   controls. The design of any system of controls is also based in part upon   certain assumptions about the likelihood of future events, and there can be no   assurance that any design will succeed in achieving its stated goals under all   potential future conditions. Accordingly, because of the inherent limitations in   a cost effective control system, misstatements due to error or fraud may occur   and not be detected.

The Company’s management assessed the effectiveness of the   Company’s internal control over financial reporting as of December 31, 2010. In   making the assessment, it used the criteria set forth in the Internal   Control-Integrated Framework issued by the Committee of Sponsoring Organizations   of the Treadway Commission ("COSO"). Based on their assessment, management has   concluded that, as of December 31, 2010, the Company’s internal control over   financial reporting was effective based on those criteria.

The Company’s internal control over financial reporting as of   December 31, 2010, has been audited by Deloitte & Touche LLP, Independent   Registered Chartered Accountants who also audited the Company’s consolidated   financial statements for the year ended December 31, 2010. Deloitte & Touche   LLP as stated in their report that immediately precedes the Company's audited   consolidated financial statements for the year ended December 31, 2010,   expressed an unqualified opinion on the effectiveness of the Company’s internal   control over financial reporting.

|1.15.4 | Changes in Internal Control   over Financial Reporting
|------ | ------------------------------------------------------

There has been no change in the design of the Company’s   internal control over financial reporting that has materially affected, or is   reasonably likely to materially affect, the Company’s internal control over   financial reporting during the period covered by this Management’s Discussion   and Analysis.

Page 36

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

|1.15.5 | Risk Factors
|------ | ------------

The following are the principal risk factors and uncertainties   which, in management's opinion, are likely to most directly affect the ultimate   feasibility of the Pebble project.

*The Pebble Project’s mineral property interests do not   contain any ore reserves or any known body of economic mineralization*

Although there are known bodies of mineralization on the Pebble   Project, and the Pebble Partnership has completed core drilling programs within,   and adjacent to, the deposits to determine measured and indicated resources,   there are currently no known reserves or body of commercially viable ore and the   Pebble Project must be considered an exploration prospect only. Extensive   additional work is required before the Company or the Pebble Partnership can   ascertain if any mineralization may be economic and hence constitute "ore".   Engineering, socioeconomic and environmental studies are ongoing. Exploration   for minerals is a speculative venture necessarily involving substantial risk. If   the expenditures the Company and/or the Pebble Partnership incur and have   incurred in the past on the Pebble Project do not result in discovery and   development of commercial quantities of ore, the value of exploration and   acquisition expenditures incurred will be totally lost.

*Feasibility work to determine the viability of the Pebble   Project has not been completed and permits have not been applied for*

Final feasibility work has not been done to confirm the pit or   underground mine design, mining methods, and processing methods. Final   feasibility could determine that the currently assumed pit or other mine design,   mining methods, and processing methods are incorrect. Construction and operation   of the mine and processing facilities depends on securing environmental and   other permits on a timely basis. No permits have been applied for and there can   be no assurance that required permits can be secured or secured on a timely   basis. Cost estimates used are based on costs at projects believed to be   comparable, and not based on firm price quotes. Costs, including design,   procurement, construction, and on-going operating costs and metal recoveries   could be materially different from those currently assumed. There can be no   assurance that mining can be conducted at assumed rates and grades. The project   requires the development of port facilities, roads and electrical generating and   transmission facilities. Although the Company believes that the State of Alaska   favours the development of these facilities, there can be no assurance that   these infrastructure facilities can be developed on a timely and cost-effective   basis. Energy risks include the potential for significant increases in the cost   of fuel and electricity.

*Volatility in Metal Prices*

The project has been evaluated using projected long-term price   levels for copper, gold and molybdenum. Prices for these commodities are   historically volatile, and the Company has no control of or influence on those   prices, all of which are determined in international markets. The level of   interest rates, the rate of inflation, the world supplies of and demands for   copper, gold and molybdenum and the stability of exchange rates can all cause   fluctuations in these prices. Such external economic factors are influenced by   changes in international investment patterns and monetary systems and political   developments. There can be no assurance that the prices of these commodities   will continue at current levels or that they will not decline below the   projected prices. The prices of copper, gold and molybdenum have fluctuated in   recent years, and future significant price declines could cause unfavorable   changes in the economics of the project and may result in investors being unwilling to finance mineral projects, with the   result that the Company may not have sufficient financing with which to funds   its exploration and development activities.

Page 37

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

*Compliance with environmental requirements will command   large resources and changes to these requirements could significantly increase   the costs developing the Pebble Project and could delay these   activities.*

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

*Changes in government regulations and the presence of   unknown environmental hazards may result in significant unanticipated compliance   and reclamation costs*

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

*General Mining Risks*

Mining is an inherently risky business with large capital   expenditures and cyclical metals markets.

Although the Company and the Pebble Partnership maintain high   environmental standards for their project, like most major mining projects,   there are almost always public concerns about new mining projects. The opponents   of the Pebble Project are well organized and are trying to bring public and   political pressure against the Pebble Project. If successful, the opponents   could delay or prevent the commercialization of the Pebble Project even if it is   found to be economically viable and technically legally permittable.

The Company and Pebble Partnership also compete with many   companies possessing far greater financial resources and technical facilities   for the acquisition of mineral concessions, claims, leases and other mineral   interests, as well as for the recruitment and retention of qualified   employees.

Page 38

---

|NORTHERN DYNASTY MINERALS   LTD.    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|YEAR ENDED DECEMBER   31, 2010      

The Pebble Project will also require major financing, probably   a combination of debt and equity financing. There can be no assurance that debt   and/or equity financing will be available on acceptable terms. A significant increase in costs of capital   could materially and adversely affect the value and feasibility of constructing   the project.

Page 39

---