---











MANAGEMENT'S DISCUSSION AND
ANALYSIS



YEAR ENDED DECEMBER 31, 2016







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|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

Table of Contents

1.1
    DATE
    31.2
    OVERVIEW
    61.2.1
    PEBBLE
      PROJECT
    9**1.2.1.1**
    TECHNICALINFORMATION
    9**1.2.2.2**
    LEGALMATTERS
    121.2.3
    FINANCINGS
    191.2.4
    MARKET
      TRENDS
    201.3
    SELECTED
      ANNUAL INFORMATION
    211.4
    SUMMARY
      AND DISCUSSION OF QUARTERLY RESULTS
    221.5
    RESULTS
      OF OPERATIONS
    231.5.1
    RESULTS
      OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2016 VS. 2015
    231.5.2
    FINANCIAL
      POSITION AS AT DECEMBER 31, 2016 VS. DECEMBER 31, 2015
    241.6
    LIQUIDITY
    241.7
    CAPITAL
      RESOURCES
    261.8
    OFF-BALANCE
      SHEET ARRANGEMENTS
    261.9
    TRANSACTIONS
      WITH RELATED PARTIES
    261.10
    FOURTH
      QUARTER 2016 VS. 2015
    271.11
    PROPOSED
      TRANSACTIONS
    281.12
    CRITICAL
      ACCOUNTING ESTIMATES
    281.13
    CHANGES
      IN ACCOUNTING POLICIES INCLUDING INITIAL ADOPTION
    281.14
    FINANCIAL
      INSTRUMENTS AND OTHER INSTRUMENTS
    281.15
    OTHER
      MD&A REQUIREMENTS
    301.15.1
    DISCLOSURE
      OF OUTSTANDING SHARE DATA
    301.15.2
    DISCLOSURE
      CONTROLS AND PROCEDURES
    301.15.3
    MANAGEMENTS
      REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
    301.15.4
    CHANGES
      IN INTERNAL CONTROL OVER FINANCIAL REPORTING
    311.15.5
    LIMITATIONS
      OF CONTROLS AND PROCEDURES
    311.15.6
    RISK
      FACTORS
    32


Page |2

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|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

1.1       
Date

This Managements Discussion and Analysis ("MD&A") should
be read in conjunction with the audited consolidated financial statements
(Financial Statements) of Northern Dynasty Minerals Ltd. ("Northern Dynasty"
or the "Company") for the year ended December 31, 2016 as publicly filed under
the Companys profile on SEDAR at www.sedar.com.

The Company reports in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board
("IASB") and interpretations of the IFRS Interpretations Committee (together,
"IFRS"). The following disclosure and associated Financial Statements are
presented in accordance with IFRS. This MD&A is prepared as of March 28,
2017. All dollar amounts herein are expressed in Canadian dollars, unless
otherwise specified.

This MD&A contains certain forward-looking information and
forward-looking statements within the meaning of applicable Canadian securities
laws and forward-looking statements within the meaning of the United States
Private Securities Litigation Reform Act of 1995. Forward-looking statements
describe our future plans, strategies, expectations and objectives, and are
generally, but not always, identifiable by use of the words "may", "will",
"should", "continue", "expect", "anticipate", "estimate", "believe", "intend",
"plan" or "project" or the negative of these words or other variations on these
words or comparable terminology.

Forward-looking statements contained or incorporated by
reference into this MD&A include, without limitation, statements regarding:

| | the outcome of our multi-dimensional strategy to address
      the United States Environmental Protection Agencys ("EPA") pre-emptive
      regulatory action under Section 404(c) of the CleanWater Act(the "CWA") and our plans to prepare the Pebble Project (as
      hereinafter defined) to initiate federal and state permitting under the
      National Environmental Policy Act(the "NEPA") (the
      "Multi-dimensional Strategy");
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the outcome of the legal and direct discussions,
      including possible mediation proceedings that we are engaged in with the
      EPA and any future actions that may or may not be taken by the EPA;                                                                                                                                                                                                                                       
| | the outcome of any other legal proceedings in which we
      are engaged;                                                                                                                                                                                                                                                                                                                                                                       
| | the impact of any change in the administration of the EPA
      resulting from the new federal administration in Washington, DC;                                                                                                                                                                                                                                                                                                                
| | our ability to proceed with applications for federal and
      state permitting under the CWA and the NEPA;                                                                                                                                                                                                                                                                                                                                     
| | our expectations regarding the potential for securing the
      necessary permitting of a mine at the Pebble Project;                                                                                                                                                                                                                                                                                                                           
| | our expected financial performance in future periods;                                                                                                                                                                                                                                                                                                                                                                                           
| | our plan of operations, including our plans to carry out
      and finance the Multi-dimensional Strategy activities, exploration and
      development activities, legal and direct discussion, and possible
      mediation proceedings with the EPA;                                                                                                                                                                                         
| | our ability to raise capital for the Multi-dimensional
      Strategy activities, exploration and development activities;                                                                                                                                                                                                                                                                                                                       
| | our expectations regarding the exploration and
      development potential of the Pebble Project; and                                                                                                                                                                                                                                                                                                                                           
| | factors relating to our investment decisions.                                                                                                                                                                                                                                                                                                                                                                                                   

Forward-looking information is based on the reasonable
assumptions, estimates, analysis and opinions of management made in light of its
experience and its perception of trends, current conditions and expected
developments, as well as other factors that management believes to be relevant
and reasonable in the circumstances at the date that such statements are made,
but which may prove to be incorrect. We believe that the assumptions and
expectations reflected in such forward-looking information are reasonable.

Page |3

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|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

Key assumptions upon which the Companys forward-looking
information are based include:

| | that we will be able to secure sufficient capital
      necessary for the Multi-dimensional Strategy activities, the outcome of
      litigation against and direct discussions, including possible mediation
      with the EPA, continued environmental assessment and permitting activities
      and engineering work which must be completed prior to any potential
      development of the Pebble Project which would then require engineering and
      financing in order to advance to ultimate construction;
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | we will ultimately have the opportunity to proceed with
      permit application preparations under the CWA and NEPA for the Pebble
      Project;                                                                                                                                                                                                                                                                                                                                                                     
| | that we will ultimately be able to demonstrate that a
      mine at the Pebble Project can be developed and operated in an
      environmentally sound and socially responsible manner, meeting all
      relevant federal, state and local regulatory requirements so that we will
      be ultimately able to obtain permits authorizing construction of a mine at
      the Pebble Project;                                                                                                                         
| | that the market prices of copper, gold, molybdenum and
      silver will not significantly decline or stay depressed for a lengthy
      period of time;                                                                                                                                                                                                                                                                                                                                                               
| | that our key personnel will continue their employment
      with us; and                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | that we will continue to be able to secure minimal
      adequate financing on acceptable terms.                                                                                                                                                                                                                                                                                                                                                                                                                       

Readers are cautioned that the foregoing list is not exhaustive
of all factors and assumptions which may have been used. Forward looking
statements are also subject to risks and uncertainties facing our business, any
of which could have a material impact on our outlook.

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

| | a negative outcome of the Multi-dimensional Strategy,
      including legal and political challenges with which we are engaged
      regarding the Pebble Project, which would have a material adverse effect
      on us;
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | an inability to ultimately obtain permitting for a mine
      at the Pebble Project;                                                                                                                                      
| | an inability to continue to fund the Multi-dimensional
      Strategy, exploration and development activities and other operating
      costs;                                                                            
| | the highly cyclical and speculative nature of the mineral
      resource exploration business;                                                                                                                            
| | the pre-development stage economic viability and
      technical uncertainties of the Pebble Project and the lack of known
      reserves on the Pebble Project;                                                          
| | an inability to recover even the financial statement
      carrying values of the Pebble Project if we cease to continue on a going
      concern basis;                                                                  
| | the potential for loss of the services of key executive
      officers;                                                                                                                                                   
| | a history of, and expectation of further, financial
      losses from operations impacting our ability to continue on a going
      concern basis;                                                                        
| | the volatility of copper, gold, molybdenum and silver
      prices and mining share prices;                                                                                                                               
| | the inherent risk involved in the exploration,
      development and production of minerals, and the presence of unknown
      geological and other physical and environmental hazards at the Pebble
      Project;       
| | the potential for changes in, or the introduction of new,
      government regulations relating to mining, including laws and regulations
      relating to the protection of the environment and project legal titles;   
| | potential claims by third parties to titles or rights
      involving the Pebble Project;                                                                                                                                 
| | the possible inability to insure our operations against
      all risks;                                                                                                                                                  
| | the highly competitive nature of the mining business;                                                                                                                                                                     
| | the potential equity dilution to current shareholders
      from future equity financings; and                                                                                                                            
| | that we have never paid dividends and will not do so in
      the foreseeable future.                                                                                                                                     

Page |4

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|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

While the effort was made to list the primary risk factors,
this list should not be considered exhaustive of the factors that may affect any
of our forward-looking statements or information. Forward-looking statements or
information are statements about the future and are inherently uncertain, and
actual achievements of the Company or other future events or conditions may
differ materially from those reflected in the forward-looking statements or
information due to a variety of risks, uncertainties and other factors,
including, without limitation, the risks and uncertainties described above and
otherwise contained herein.

Our forward-looking statements and risk factors are based on
the reasonable beliefs, expectations and opinions of management on the date of
this MD&A. Although we have attempted to identify important factors that
could cause actual results to differ materially from those contained in
forward-looking information, there may be other factors that cause results not
to be as anticipated, estimated or intended. There is no assurance that such
information will prove to be accurate, as actual results and future events could
differ materially from those anticipated in such information. Accordingly,
readers should appreciate the inherent uncertainty of, and not place undue
reliance on forward-looking information. We do not undertake to update any
forward-looking information, except as, and to the extent required by,
applicable securities laws.

During the period 2007 to 2013, a major part of the project
expenditures were on exploration programs, resource estimates, environmental
data collection and technical studies, with a significant portion spent on
engineering of various possible mine development models, as well as related
infrastructure, power and transportation systems. These costs are not reflected
in the Companys asset accounts as they were largely incurred by third parties
or are required to be expensed. The technical and engineering studies that were
completed relating to mine-site and infrastructure development are not
considered to be current or necessarily representative of managements current
understanding of the most likely development scenario for the Project.
Accordingly, the Company is uncertain whether it can realize significant value
from this prior work. Environmental baseline studies and data, as well as
geological information from exploration, remain important information available
to the Company from this period in continuing its advancement of the Project.

For more information on the Company, investors should review
the Companys annual information form and home jurisdiction filings that are
available on SEDAR at www.sedar.com.

The Company reviews its forward looking statements on an
ongoing basis and updates this information when circumstances require it.

Page |5

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|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

Cautionary Note to Investors
      Concerning Estimates of Measured and Indicated ResourcesThe 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 SEC
      does not recognize them. Investors are cautioned not to assume that all
      orany part of mineral deposits in these categories will ever be
      converted into reserves.


Cautionary Note to Investors
      Concerning Estimates of Inferred ResourcesThe 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 all
      or any part of a mineral resource will ever be upgraded to a higher
      category. Under Canadian rules, estimates of inferred mineral resources
      may not form the basis of economic studies, except in rare cases.
      Investors arecautioned not to assume that all or any part of an
      inferred resource exists, or is economicallyor legally mineable.


1.2        Overview

Northern Dynasty is a mineral exploration company which, via
its subsidiaries, holds a 100% interest in mining claims on State of Alaska land
in southwest Alaska, USA ("US"). The claims are part of or in the vicinity of
the Pebble Copper-Gold-Molybdenum-Silver Project (the "Pebble Project" or
Pebble). The Companys Alaska mineral resource exploration business is
operated through an Alaskan registered limited partnership, the Pebble Limited
Partnership (the "Pebble Partnership"), in which the Company owns a 100%
interest.

The Pebble Project is an initiative to develop one of the
worlds most important mineral resources, as measured by aggregate contained
metals. The current estimate of these mineral resources at a 0.30% copper
equivalent (CuEQ)1cut-off grade comprise:

| | 6.44 billion tonnes in the combined Measured and
      Indicated categories at a grade of 0.40% copper, 0.34 g/t gold, 240 ppm
      molybdenum and 1.66 g/t silver, containing 57 billion pounds of copper, 70
      million ounces of gold, 3.4 billion pounds of molybdenum and 344 million
      ounces of silver; and
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                           
| | 4.46 billion tonnes in the Inferred category at a grade
      of 0.25% copper, 0.26 g/t gold, 222 ppm molybdenum and 1.19 g/t silver,
      containing 24.5 billion pounds of copper, 37 million ounces of gold, 2.2
      billion pounds of molybdenum and 170 million ounces of silver.                                 

Mineralization indicating the presence of the Pebble deposit
was discovered by a prior operator in 1987, and by 1997 an initial outline of
the deposit had been identified. Northern Dynasty acquired the right to earn an
interest in the Pebble property in 2001. Exploration since that time has led to
significant expansion of the Pebble deposit, including the discovery of a
substantial volume of higher grade mineralization in the eastern part of the
deposit. Comprehensive deposit delineation, environmental, socioeconomic and
engineering studies of the Pebble deposit began in 2004. A number of other
occurrences of copper, gold and molybdenum have also been identified along the
extensive northeast-trending mineralized system that underlies the property. The
potential of these earlier-stage prospects has not yet been fully explored.

_______________________________

1For additional details, see section 1.2.1 below.

Page |6

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|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

From 2001 when Northern Dynastys involvement began to December
31, 2016, a total of $814 million (US$758 million) has been invested to advance
the Pebble Project.2

In February 2014, the US Environmental Protection Agency
(EPA) announced the initiation of a pre-emptive regulatory action under the
Clean Water Act (CWA) to consider restriction or a prohibition on mining
activities associated with the Pebble deposit. Much of the Companys efforts
since that time have been focused on legal and other initiatives to ward off
this action, and ensure the Pebble Project can proceed into normal course
permitting unencumbered by any extraordinary development restrictions.

In 2016, work by Northern Dynasty and the Pebble Partnership
concentrated on three key activities:

| | advancing a Multi-dimensional Strategy, including
      litigation as described in section 1.2.1.2 below, to address the EPAs
      pre-emptive regulatory action under Section 404(c) of the CWA;           
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                               
| | maintaining an active corporate presence in Alaska in
      order to advance relationships with political and regulatory offices of
      government, Alaska Native partners and other stakeholder groups; and
|  |                                                                                                                                                                                                               
| | working toward securing a transaction with a potential
      partner(s) to further advance the Pebble Project.                                                                                                

On October 27, 2016, the Pebble Partnership and the EPA (the
parties) filed a joint Notice in federal court stating their intent to enter
into mediation in an effort to resolve ongoing litigation under the Federal
Advisory Committee Act ("FACA"), as described in section 1.2.1.2 Legal Matters
below. On December 30, 2016, the parties filed a joint Notice in federal court
staying the ongoing FACA litigation until March 20, 2017 and, on that date, the
parties filed a Joint Motion in federal court to extend a stay of proceedings in
ongoing litigation under FACA to May 4, 2017 in the interest of resolving the
matter.

The Company has made substantial progress in recent discussions
with the EPA and intends to continue negotiating the matter directly, rather
than through mediation. Government representatives are actively engaged in these
discussions and, along with the Pebble Partnership, are focused on achieving a
resolution that will be agreeable to both parties. In the meantime, the Courts
Preliminary Injunction of November 25, 2014, will remain in effect for the
duration of any stay.

In 2017, the Company plans to:

| | continue to advance the Multi-dimensional Strategy to
      address the EPAs pre-emptive CWA regulatory action with the goal that the
      Pebble Project will be able to initiate federal and state permitting under
      the National Environmental Policy Act ("NEPA") unencumbered by any
      extraordinary development restrictions imposed by the EPA;
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

_____________________________

2Of this, approximately $595 million (US$573
million) was provided by a wholly-owned subsidiary of Anglo American plc (Anglo
American) which participated in the Pebble Partnership from 2007 to 2013, and
the remainder was financed by Northern Dynasty. During the period 2007 to 2013,
a major part of the expenditures were on exploration programs, resource
estimates, environmental data collection and technical studies, with a
significant portion spent on engineering of various possible mine development
models, as well as related infrastructure, power and transportation systems. The
technical and engineering studies that were completed relating to mine-site and
infrastructure development are not considered to be current or necessarily
representative of managements current understanding of the most likely
development scenario for the Project. Accordingly, the Company is uncertain
whether it can realize significant value from this prior work. Environmental
baseline studies and data, as well as geological information from exploration,
remain important information available to the Company from this period in
continuing its advancement of the Project.

Page |7

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|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

| | maintain an active corporate presence in Alaska to
      advance relationships with political and regulatory offices of government
      (both in Alaska and Washington, D.C.), Alaska Native partners and broader
      stakeholder relationships;                                                                                                                                                                                                                                                                                                                                                   
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | if either the Multi-dimensional Strategy is successful or
      the EPA changes it position with the result that permit applications can
      proceed, prepare documentation to initiate federal and state permitting
      under the CWA and the NEPA. In the event permit applications can proceed,
      the Company plans to undertake environmental monitoring, engineering and
      environmental studies, field investigations and related technical studies
      to finalize a proposed development plan, in order to prepare documentation
      to initiate federal and state permitting;
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | maintain the Pebble Project and Pebble claims in good
      standing; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | continue to seek potential partner(s) to further advance the Pebble Project.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

The current Multi-dimensional Strategy may be impacted by the
change in the leadership of the EPA that was completed in the first quarter of
2017 as a result of the new federal administration in Washington, DC. Through
the Pebble Partnership, the Company has had preliminary discussions with certain
members of the new administration and believes, based on these discussions and
other public statements, that there is a possibility that the new leadership of
the EPA will reconsider its position with respect to the EPAs previously
proposed pre-emptive action under Section 404(c) of the CWA. This would allow
the Pebble Project to proceed with the permitting process. These discussions
are, however, not binding and there is no assurance that this change of
leadership will result in the EPA reversing its position. In addition, on
February 22, 2017, the US House Committee on Science, Space and Technology
recommended that the new EPA Administrator rescind the federal agencys
pre-emptive Section 404(c) action. As of the date of this MD&A, there has
not yet been a formal response to this recommendation.

At this time, the Pebble Partnership is still planning to
remain engaged in direct discussions, including possible mediation with the EPA.
There can also be no assurance of the results of the discussion and possible
mediation with the EPA. In the event that there is a change in the EPAs
position that results in Pebble being able to proceed into the permitting
process, it is anticipated that (i) the Multi-dimensional Strategy will change,
as the key objective of this strategy will have been met, however, political and
stakeholder outreach efforts will continue; (ii) the Pebble Partnership will
execute technical studies and prepare documentation to initiate applications for
federal and state permitting under the CWA and the NEPA; and (iii) the Company
may re-direct some of its efforts on the Multi-dimensional Strategy to these
permitting activities. In the event that there is no change in the EPA position,
then the Multi-dimensional Strategy and the related discussion and possible
mediation proceedings with the EPA will continue. Even if the dealings with the
EPA are successful and the permitting process for the Pebble Project commences,
there can be no assurance that the permits required to build and operate the
Pebble Project will be successfully secured.

Page |8

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|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

Corporate

As at December 31, 2016, the Company has $7.2 million in cash
and cash equivalents for its operating requirements.

Subsequent to December 31, 2016, the Company received US$37.44
million in a bought deal offering of 20,240,000 common shares at US$1.85 per
common share.

The Company has prioritized the allocation of available
financial resources in order to meet key corporate and Pebble Project
expenditure requirements for at least the next twelve months. Although the
Company will seek financing as necessary to advance its programs, there can be
no assurances that it will be successful in obtaining additional financing. If
the Company is unable to raise the necessary capital resources to meet
obligations as they come due, the Company will at some point have to reduce or
curtail its operations.

1.2.1    Pebble Project

1.2.1.1 Technical Information

The Pebble property ("Pebble") is located in southwest Alaska,
approximately 17 miles (27 kilometers) from the villages of Iliamna and
Newhalen, and approximately 200 miles (320 kilometers) southwest of the city of
Anchorage. The property consists of 2,402 mineral claims. Situated approximately
1,000 feet above sea-level and 65 miles (100 kilometers) from tidewater on Cook
Inlet, the site conditions are favorable for sound mine site and infrastructure
development.

Mineral Resources

The current estimate of the mineral resources in the Pebble
deposit, effective date December 2014, is based on drilling to the end of 2013
and includes approximately 59,000 assays obtained from 699 drill holes. The
resource was estimated using ordinary kriging by David Gaunt, P.Geo., a
qualified person who is not independent of Northern Dynasty. A base case cut-off
of 0.3% CuEq is highlighted.

Pebble Project
Mineral Resources

Cut-offCuEq %
    CuEq%
    Tonnes
    Cu(%)
    Au(g/t)
    Mo(ppm)
    Ag(g/t)
    CuBlbs
    AuMoz
    MoBlbs
    AgMozMeasured0.3
    0.65
    527,000,000
    0.33
    0.35
    178
    1.66
    3.83
    5.93
    0.21
    28.130.4
    0.66
    508,000,000
    0.34
    0.36
    180
    1.68
    3.80
    5.88
    0.20
    27.420.6
    0.77
    279,000,000
    0.40
    0.42
    203
    1.84
    2.46
    3.77
    0.12
    16.511.0
    1.16
    28,000,000
    0.62
    0.62
    302
    2.27
    0.38
    0.56
    0.02
    2.04Indicated0.3
    0.77
    5,912,000,000
    0.41
    0.34
    245
    1.66
    53.42
    64.62
    3.20
    315.500.4
    0.82
    5,173,000,000
    0.45
    0.35
    260
    1.75
    51.31
    58.21
    2.97
    291.050.6
    0.99
    3,450,000,000
    0.55
    0.41
    299
    1.99
    41.82
    45.47
    2.27
    220.711.0
    1.29
    1,411,000,000
    0.77
    0.51
    343
    2.42
    23.95
    23.14
    1.07
    109.79Measured + Indicated0.3
    0.76
    6,439,000,000
    0.40
    0.34
    240
    1.66
    56.76
    70.38
    3.40
    343.630.4
    0.81
    5,681,000,000
    0.44
    0.35
    253
    1.75
    55.09
    63.92
    3.17
    319.62


Page |9

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|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

Cut-offCuEq %
    CuEq%
    Tonnes
    Cu(%)
    Au(g/t)
    Mo(ppm)
    Ag(g/t)
    CuBlbs
    AuMoz
    MoBlbs
    AgMoz0.6
    0.97
    3,729,000,000
    0.54
    0.41
    291
    1.98
    44.38
    49.15
    2.39
    237.371.0
    1.29
    1,439,000,000
    0.76
    0.51
    342
    2.42
    24.11
    23.60
    1.08
    111.97Inferred0.3
    0.54
    4,460,000,000
    0.25
    0.26
    222
    1.19
    24.55
    37.25
    2.18
    **170.4****9**0.4
    0.68
    2,630,000,000
    0.33
    0.30
    266
    1.39
    19.14
    25.38
    1.55
    117.580.6
    0.89
    1,290,000,000
    0.48
    0.37
    291
    1.79
    13.66
    15.35
    0.83
    74.281.0
    1.20
    360,000,000
    0.69
    0.45
    377
    2.27
    5.41
    5.14
    0.30
    25.94


Notes to the above table:

These resource estimates have been prepared in accordance with
NI 43-101 and the CIM Definition Standards. Inferred Mineral Resources are
considered to be too speculative to allow the application of technical and
economic parameters to support mine planning and evaluation of the economic
viability of the project. Under Canadian rules, estimates of Inferred Mineral
Resources may not form the basis of feasibility or pre-feasibility studies, or
economic studies except for Preliminary Economic Assessments as defined under
43-101. It cannot be assumed that all or any part of the Inferred Resources will
ever be upgraded to a higher category.

The mineral resource tabulation uses copper equivalency that
incorporates the contribution of copper, gold and molybdenum. Although the
estimate includes silver, it was not used as part of the copper equivalency
calculation in order to facilitate comparison with previous estimates which did
not consider the silver content or its potential economic contribution.

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

Contained metal calculations are based on 100% recoveries.

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

All mineral resource estimates, cut-offs and metallurgical
recoveries are subject to change as a consequence of more detailed economic
analyses that would be required in pre-feasibility and feasibility studies.

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

Parameter
    Units
    Cost ($)
    ValueMetal Price
    Gold
    $/oz
    -
    1,540.00Copper
    $/lb
    -
    3.63Molybdenum
    $/lb
    -
    12.36Metal Recovery
    Copper
    %
    -
    89Gold
    %
    -
    72Molybdenum
    %
    -
    82Operating Cost
    Mining (mineralized material or
      waste)
    $/ton mined
    1.01
    -Added haul lift from depth
    $/ton/bench
    0.03
    -Process Process cost adjusted by total
      crushing energy
    $/ton milled
    4.40
    - Transportation
    $/ton milled
    0.46
    - Environmental
    $/ton milled
    0.70
    - G&A
    $/ton milled
    1.18
    -


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|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

Parameter
    Units
    Cost ($)
    ValueBlock Model
    Current block model
    ft
    -
    75 x 75 x 50Density
    Mineralized material and waste rock
    -
    -
    Block modelPit Slope Angles
    
    degrees
    -
    42


Additional details can be found in the technical report,
entitled "2014 Technical Report on the Pebble Project, Southwest Alaska,
USA," authored by J. David Gaunt, PGeo., James Lang, PGeo., Eric Titley,
PGeo., and Ting Lu, PEng., effective date December 31, 2014, which is filed
under the Companys profile at www.sedar.com.

Environmental and Socioeconomic

Extensive environmental baseline data has been collected since
2004. The goal is to design and plan a project that protects clean water,
healthy fish and wildlife populations, and other natural resources in the
region.

In January 2012, the Pebble Partnership publicly released the
27,000-page Environmental Baseline Document ("EBD") for the Pebble Project,
which characterizes a broad range of environmental and social conditions in
southwest Alaska  including climate, water quality, wetlands, fish and aquatic
habitat, wildlife, land and water use, socioeconomics and subsistence
activities. The purpose of the EBD 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. Research for the
Pebble EBD was conducted by more than 40 respected independent research firms,
utilizing over 100 scientific experts and engineering groups, laboratories and
support services. Researchers were selected for their specific areas of
expertise and Alaskan experience, with cooperating government agencies
participating in several studies. Information for the EBD was gathered through
field studies, laboratory tests, review of government records and other
third-party sources, and interviews with Alaska residents. The EBD study is
available at http://pebbleresearch.com/. The
Pebble Partnership also facilitated a four-day workshop with federal and state
regulatory agencies in January 2012 to present the EBD findings. The workshop
was broadcast publicly via the Internet. In addition, a series of public
presentations of the EBD findings was coordinated in more than 20 communities
throughout southwest Alaska and elsewhere around the State. Public and expert
review of the EBD was facilitated under the Keystone initiative3.

The EBD encompasses data from the range of environmental and
social conditions described above during the period 2004-2008 and from some
disciplines in 2009. Environmental baseline data reports through 2014 are being
integrated with the database from the EBD so that this information can be shared
with state/federal agencies and the public as part of the future permitting
process under NEPA. Environmental monitoring of the site has continued at
reduced levels over the past two years.

In March 2017, the Company announced that the Pebble
Partnership had selected HDR Alaska, Inc. to serve as lead regulatory and
permitting consultant for the Pebble Project, with the goal of preparing
necessary documentation to initiate federal and state permitting under the CWA
and NEPA by the end of the year, in anticipation of a successful outcome of the
Companys Multi-dimensional Strategy to address the EPAs pre-emptive
regulatory action under Section 404(c) of the CWA.

____________________________________

3An independent stakeholder dialogue process
concerning the Pebble Project initiated in late 2010 by the Keystone Center  a
non-profit organization specializing in facilitating stakeholder-driven
consultation processes concerning contentious, science-based issues.

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|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

Community Engagement

An active program of stakeholder outreach has been undertaken
at Pebble, and has 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 and Canada. 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.

Stakeholder outreach and community engagement is ongoing,
although at a reduced scale commensurate with other project activities. As the
Pebble Project advances toward the completion of a Project Description and
preparation for project permitting under NEPA, it is expected that the Pebble
Partnership will initiate further stakeholder engagement programs to involve
stakeholders in the planning process.

1.2.1.2 Legal Matters

Environmental Protection Agency and
Bristol Bay Watershed Assessment

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

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

The EPA called for public comment on the quality and
sufficiency of scientific information presented in the draft BBWA report. In
response, the Pebble Partnership and Northern Dynasty made submissions on the
draft report. Northern Dynasty made a presentation highlighting these
shortcomings at public hearings held in Seattle, Washington, on May 31, 2012 and
in Anchorage, Alaska, on August 7, 2012. In July 2012, the Company also
submitted a 635-page critique of the draft report in response to the EPAs call
for public comment, and called upon the EPA to cease such unwarranted actions
until such time as a definitive proposal for the development of the Pebble
deposit is submitted into the rigorous NEPA permitting process. All submissions
prepared by Northern Dynasty and the Pebble Partnership with respect to the
EPAs BBWA and CWA 404(c) regulatory action can be found on Northern Dynastys
website.

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|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

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

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

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

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

Preliminary Injunction

In late May 2014, the Pebble Partnership filed suit in the US
District Court for Alaska and sought an injunction to halt the pre-emptive
regulatory action initiated by the EPA under the CWA, asserting that, in the
absence of a permit application, the action exceeds the federal agencys
statutory authority and violates the Alaska Statehood Act among other federal
laws. The State of Alaska and Alaska Peninsula Corporation, an Alaska Native
village corporation with extensive land holdings in the Pebble Project area,
later joined in the Pebble Partnerships lawsuit against the EPA as
co-plaintiffs. On September 26, 2014, a US federal court in Alaska granted the
EPAs motion to dismiss the case. This ruling did not judge the merits of the
statutory authority case, it only deferred that hearing and judgment until after
a final Section 404(c) determination has been made by the EPA. If or when the
EPA action is deemed "final", the Pebble Partnership will pursue the underlying
case. The Company also appealed the decision to grant the motion to dismiss to
the 9th Circuit Court of Appeals. This appeal was denied in May 2015. The Pebble
Partnership still holds the option to pursue its statutory authority case in the
instance that EPA finalizes a pre-emptive regulatory action under the CWA.

Proposed Determination

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

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|Management's Discussion And
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|Year ended December 31, 2016              
|                                          

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

Federal Advisory Committee Act ("FACA")
action

On September 3, 2014, the Pebble Partnership initiated a second
action against EPA in federal district court in Alaska charging that EPA
violated the FACA due to its close interactions with, and the undue influence of
Environmental Non-Governmental Organizations and anti-mining activists in
developing the BBWA, and with respect to its unprecedented pre-emptive
regulatory actionunder the CWA. On September 24, 2014, the US federal
court judge in Alaska released an order recognizing that the EPA agreed not to
take the next step to advance its 404(c) regulatory action with respect to
southwest Alaskas Pebble Project until at least January 2, 2015.

On November 24, 2014, a US federal court judge in Alaska
granted the Pebble Partnerships request for a preliminary injunction in
relation to the FACA case. While the preliminary injunction does not resolve the
Pebble Partnerships claims that the EPA actions with respect to the BBWA and
subsequent 404(c) regulatory action violated FACA, the decision permits the
further discovery process of the underlying facts to enable the court to issue a
final decision on the merits of the FACA case. Granting of a preliminary
injunction also reflects the courts view that PLP has a likelihood of
prevailing on the merits of its case. On June 4, 2015, the federal court in
Alaska issued an order denying the EPAs motion to dismiss this case.

The Pebble Partnership has filed numerous requests for
production of documents and has received tens of thousands of documents produced
by the EPA. The Pebble Partnership has also served a number of notices of
depositions for current and former EPA employees, EPA contractors and relevant
third parties. More than a dozen depositions of EPA witnesses have been
completed. Additionally, the Pebble Partnership has asked the Court to compel
the Agency and certain third parties to produce documents that are relevant to
its FACA claims and that are being improperly withheld. Should the Pebble
Partnership prevail in its FACA litigation against the EPA, the federal agency
may be unable to rely upon the BBWA as part of the administrative record for any
regulatory action at the Pebble Project.

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|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

Mediation

On October 27, 2016, the Pebble Partnership and the EPA filed a
joint Notice in federal court stating their intent to enter into mediation in an
effort to resolve ongoing litigation under FACA.

On December 30, 2016, the Pebble Partnership and the EPA filed
a joint Notice in federal court staying the ongoing FACA litigation until March
20, 2017 and, on that date, the parties filed a Joint Motion in federal court to
extend a stay of proceedings in ongoing litigation under FACA to May 4, 2017 in
the interest of resolving the matter.

To date, no mediator has been appointed in these mediation
proceedings as the Company has made substantial progress in recent direct
discussions with the EPA and intends to continue negotiating the matter
directly, rather than through mediation. Government representatives are actively
engaged in these discussions and, along with the Pebble Partnership, are focused
on achieving a resolution that will be agreeable to both parties. In the
meantime, the Courts Preliminary Injunction of November 25, 2014, will remain
in effect for the duration of any stay.

Freedom of Information Act ("FOIA")
action

On October 14, 2014, the Pebble Partnership filed suit in
federal district court in Alaska charging that EPA has violated the FOIA by
improperly withholding documents related to the Pebble Project, the Bristol Bay
Watershed Assessment and consideration of a pre-emptive 404(c) veto under the
CWA. The EPA moved for summary judgment claiming that its search for and
disclosure of documents was adequate. The Pebble Partnership opposed the
governments motion, pointing out several deficiencies in the EPAs search
parameters and the agencys overly broad assertion of the deliberative process
privilege to withhold documents. On August 24, 2015, the US federal court judge
granted in part and deferred in part the EPAs motion for summary judgement on
the FOIA litigation. The court accepted the EPAs position that it had made an
adequate search for documents but left the matter open should the EPA not meet
its obligations in the FACA litigation or if additional documents surface.
Additionally, the judge ordered EPA to produce a sample of 183 partially or
fully withheld documents so that it could conduct an in-camera review of the
sample and test the merits of EPAs withholdings under the deliberative process
privilege. Before producing this sample to the Court, EPA chose to voluntarily
release 115 documents (or 63% of the sample ordered by the Court), relinquishing
its claim of privilege as to these documents.

In briefings before the Court, the Pebble Partnership argued
that the voluntary release of 63% of the agencys same documents conclusively
demonstrated that the EPA had been over broad in its assertion of the
deliberative process privilege, particularly because the content of the
voluntarily released documents was not in fact deliberative. The Court agreed,
finding that EPA "improperly withheld documents in full," and that "many of the
documents that defendant released should have been released to begin with
because the portions that defendant released were not deliberative." It then
ordered the EPA to review an additional 65 documents. Of these 65 documents, the
EPA voluntarily released 55 documents in whole or in part (or 85% of the
documents). Given the EPAs high rate of release, the Pebble Partnership
submitted a brief to the Court arguing that the EPA should be forced to review
the remaining documents being withheld and arguing that judgment should not be
granted to the agency at this time. The Court agreed, concluding that it had "no
confidence that [EPA] has properly withheld documents, either in full or in
part, pursuant to the deliberative process privilege." The Court reiterated its
earlier finding that EPA had been withholding documents that "should never have
been withheld to begin with." As a result, the Court ordered the Agency to
re-evaluate all remaining documents EPA is withholding in response to the Pebble
Partnerships January 2014 FOIA request and to submit these documents for
in-camera review. After this review, the Court issued an order resolving
Pebbles challenges to the remaining withholdings and forcing EPA, yet again, to produce additional
documents that the agency had been improperly withholding for over two
years.

Page |15

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|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

Office of the EPA Inspector General
("OIG") review

Counsel for Northern Dynasty and the Pebble Partnership has
submitted numerous letters to the independent OIG since January 2014, raising
concerns of apprehension of bias, process irregularities and undue influence by
environmental organizations in the EPA's preparation of the Bristol Bay
Watershed Assessment. In response to Congressional and other requests, on May 2,
2014, the OIG announced that it would investigate the EPAs conduct in preparing
An Assessment of Potential Mining Impacts on Salmon Ecosystems of Bristol
Bay, Alaska, "to determine whether the EPA adhered to laws, regulations,
policies and procedures in developing its assessment of potential mining impacts
in Bristol Bay, Alaska." On January 13, 2016, the OIG published its report (the
"OIG Report"). While acknowledging significant scope limitations in its review
and subsequent OIG Report, the OIG concluded that: we found no evidence of bias
in how the EPA conducted its assessment of the Bristol Bay watershed, or that
the EPA pre-determined the assessment outcome, but that an EPA Region 10
employee may have been guilty of a possible misuse of position.

Several other investigations of EPA conduct at Pebble
contradict the OIG Report. The US Congress House Committee on Oversight and
Government Reform found that EPA employees had inappropriate contact with
outside groups and failed to conduct an impartial, fact-based review of the
proposed Pebble mine. In addition, a report by former United States Senator and
Defense Secretary William S. Cohen and his firm (further described below), said
their investigation raise(s) serious concerns as to whether EPA orchestrated
the process to reach a pre-determined outcome; had inappropriately close
relationships with anti-mine advocates; and was candid about its decision-making
process.

The findings of the OIG Report are not expected to materially
affect the Pebble Partnerships strategy for addressing the EPAs CWA Section
404(c) regulatory action. The Company remains confident that the Pebble Project
will ultimately enter federal and state permitting unencumbered by any
extraordinary development restrictions.

Cohen report

In March 2015, William Cohen and his firm, The Cohen Group,
assisted by the law firm DLA Piper, was retained by the Pebble Partnership to
conduct an independent review of whether the EPA acted fairly in connection with
its evaluation of potential mining in the Bristol Bay watershed. Secretary Cohen
was requested to evaluate the fairness of EPA's actions and decisions in this
matter based upon a thorough assessment of the facts and relying on his
experience as a senior government official, as well as his 24 years as a member
of the US Senate and House of Representatives.

A team of independent investigators employed by The Cohen Group
and DLA Piper reviewed thousands of documents secured through FOIA requests and
interviewed approximately 60 individuals involved with the EPA or its review of
the Pebble Project. On October 6, 2015, Mr. Cohen released his report entitled
Report of an Independent Review of the United States Environmental Protection
Agencys Actions in Connection with its Evaluation of Potential Mining in
Alaskas Bristol Bay Watershed. The report stated the conclusion of Mr.
Cohen that he did not believe the EPA used the "fairest and most appropriate
process" in its proposed pre-emptive regulatory action under the CWA.

Mr. Cohen urged policymakers to require that the permitting
process under NEPA and the regulations developed by the Council on Environmental
Quality (the "Permit/NEPA Process") be followed. Mr. Cohen commented that the
Permit/NEPA Process is more comprehensive than the pre-emptive Section 404(c) action employed by the EPA and he
could find no valid reason why that process was not used.

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|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

The Cohen report also raised a number of concerns about the
EPAs Bristol Bay Watershed Assessment study and the CWA Section 404(c)
regulatory action, including possible prejudice and pre-determination of
outcomes by the EPA, inappropriately close relationships between certain EPA
officials and anti-mine advocates, EPAs candor with respect to certain actions
it took, lack of consistency between the BBWA and the proposed determination,
and lack of cooperation by EPA personnel with respect to Congressional queries
and FOIA requests.

Northern Dynasty does not consider the Cohen report to
constitute an "experts" report but rather considers it to constitute an
informed view of the Companys treatment by the EPA expressed by a person
familiar with governmental due process goals. Mr. Cohen has appeared before a
Congressional committee (House Committee on Science, Space and Technology) with
respect to the findings in his report.

US House Committee on Science, Space and
Technology

On February 22, 2017, the US House Committee on Science, Space
and Technology Chairman, Lamar Smith, sent a letter to the EPA Administrator
Scott Pruit recommending that "the incoming Administration rescind the EPAs
proposed determination to use Section 404(c) in a pre-emptive fashion for the
Pebble Mine in Bristol Bay, Alaska. This simple action will allow a return to
the long-established Clean Water Act permitting process and stop attempts by the
EPA to improperly expand its authority. Moreover, it will create regulatory
certainty for future development projects that will create jobs and contribute
to the American economy."

Multi-dimensional Strategy

In summary, in 2016 the Pebble Partnership has advanced a
Multi-dimensional Strategy to address the EPAs pre-emptive regulatory action
under Section 404(c) of the CWA. The goal is to position the Pebble Project to
initiate federal and state permitting under NEPA unencumbered by any
extraordinary development restrictions imposed by the federal agency. This
strategy includes three discrete pieces of litigation against the EPA,
including:

| | challenging the EPAs statutory authority to
      pre-emptively impose development restrictions at the Pebble Project under
      Section 404(c) of the CWA prior to the Pebble Partnership submitting a
      proposed development plan for the project or the development of an EIS
      under NEPA;
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                         
| | alleging that the EPA violated FACA in the course of
      undertaking the Bristol Bay Watershed Assessment and subsequent Section
      404(c) of the CWA regulatory action; and                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                         
| | alleging that the EPA is unlawfully withholding relevant
      documentation and other information sought by the Pebble Partnership under
      FOIA.                                                                                                                                                   

In 2017, the Company intends to continue with the
Multi-dimensional Strategy and the Pebble Partnership plans to engage in direct
discussion, including possible mediation with the EPA. There can be no assurance
of the results of the discussion and possible mediation with the EPA. Even if
the dealings with the EPA are successful and the permitting process for the
Pebble Project commences, there can be no assurance that the permits required to
build and operate the Pebble Project will be successfully secured.

Northern Dynasty and the Pebble Partnership are represented by
respected international law firm Steptoe & Johnson LLP ("Steptoe"), which
for more than seven decades has been acknowledged as a leader in litigation and advocacy in Washington DC. Steptoe
and the Pebble Partnership have agreed to cap legal fees related to the FACA
suit and other ongoing legal matters at US$1 million to the point at which
motions for summary judgment in the case have been fully argued to the court and
are ripe for adjudication, expected to be in 2017. Steptoe will be due a success
fee payment upon prevailing in the FACA litigation or arising from other
positive outcomes (see section 1.6 for estimate of success fees payable as at
December 31, 2016).

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|Northern Dynasty Minerals Ltd.            
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|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

Other Matters

On February 14, 2017, short seller investment firm Kerrisdale
Capital Management LLC published a negative piece (the "Kerrisdale Report")
regarding the Pebble Project, which the Company is attempting to develop. On
February 15 and 17, 2017, two purported shareholder class actions were filed
against the Company and certain of its current officers and directors in US
federal courts, specifically the Central District of California (Los Angeles)
and the Southern District of New York (New York City). The cases are captioned:
Diaz v. Northern Dynasty Minerals Ltd. et al, Case No. 17-cv-01241 (C.D.
Cal.)and Kirwin v. Northern Dynasty Minerals Ltd. et al, Case No.
17-cv-01238 (S.D.N.Y.). The complaints appear to rely on the claims made in
the Kerrisdale Report and allege damages to a class of investors who purchased
shares of the Company prior to the publication of the Kerrisdale Report and
allege liability for losses pursuant to Section 10(b) of the Exchange Act of
1934 and SEC Rule 10b-5 thereunder, as well as control person liability against
the individual defendants pursuant to Section 20(a) of the Exchange Act. The
Company has not yet been served with either of these complaints, but has seen
them and assessed their substance. The Company believes that the allegations in
these complaints are without merit, and it intends to defend itself vigorously
against these actions.

Kerrisdale is not a mining company and does not disclose any
record of success in mining investments or issuing mining valuation or
investment reports. On the contrary, Kerrisdale has a track record of aggressive
short selling and activism. In contrast, Northern Dynastys Pebble team has
extensive experience in mining and a formidable track record of success in
developing and operating mines internationally. The Kerrisdale Report relies on
anonymous co-authors whose mining credentials, if any, Kerrisdale has not
disclosed and who likewise may hold or have held short positions in Northern
Dynasty. Specifically, Kerrisdale has not disclosed if these anonymous authors
have any requisite technical qualifications or practical mining experience to
substantiate the claims of the short report. In contrast, Northern Dynasty
publicly files technical reports which have been certified by named,
independent, experienced and reputable Qualified Persons (as defined by
securities laws) who have certified the accuracy and completeness of these
reports. An internationally recognized engineering firm conducted and compiled
an extensive and independent Preliminary Assessment (also referred to as a
Preliminary Economic Assessment, or "PEA") of the Pebble Project on behalf of
Northern Dynasty. This PEA, published in 2011, showed the project possesses
significant value. While the analyses of this assessment now require updating,
it remains a source of much useful information and is available for download at
www.sedar.com. The PEA shows the large mineral
endowment and potential of the Pebble Project. The Kerrisdales short report
purports to develop a zero value thesis without requesting or having had access
to the necessary and extensive technical, analytical, geological and economic
information that Northern Dynastys Qualified Persons used. No Kerrisdale
personnel have visited the Pebble Project or had discussions with Northern
Dynastys technical team or executives.

For further information, refer to the Companys Annual
Information Form for the year ended December 31, 2016 which is filed on www.sedar.com.

1.2.3   Financings

$17.1 Million Prospectus Financing

In June 2016, Northern Dynasty completed a prospectus offering
  of 38,000,000 units of the Company at a price of $0.45 per unit (the "Offering")
  for gross proceeds to the Company of approximately $17.1 million. Each Unit
  consists of one common share (a "Share ") and one common share purchase warrant
  (a Warrant). Each Warrant will be exercisable into one common share (a
  "Warrant Share") at an exercise price of $0.65 per Warrant Share for a period of
  five (5) years from the closing of the Offering. On the closing date, the
  Warrants were listed for trading on the TSX under the symbol NDM.WT.B.

Page |18

---

|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

In Canada, the Offering was qualified by the Companys short
form base shelf prospectus dated March 7, 2016 and the Companys prospectus
supplement dated May 26, 2016, as filed by the Company with the Canadian
securities regulatory authorities in the Provinces of British Columbia, Alberta
and Ontario.

The Units were offered in the US pursuant to a base shelf
prospectus contained in the Companys registration statement on Form F-3 (the
"Registration Statement") filed by the Company with the US Securities and
Exchange Commission (the "Commission") under the United States Securities Actof 1933, as amended (the "US Securities Act"). The Registration Statement
was declared effective by the Commission on March 30, 2016. On March 31, 2016,
the Company filed with the Commission pursuant to Rule 424(b) under the US
Securities Act the base prospectus related to the Registration Statement (the
US Base Prospectus). On May 26, 2016, the Company filed with the Commission
pursuant to Rule 424(b) under the US Securities Act a prospectus supplement
relating to the Shares and Warrants. On July 15, 2016, the Company filed with
the Commission pursuant to Rule 424(b) under the US Securities Act a prospectus
supplement relating to the additional Shares that may be issued should the
Warrants held by US investors be exercised.

The net proceeds of the Offering were to fund the Companys
Multi-dimensional Strategy to address the EPAs proposed pre-emptive regulatory
action under the CWA, prepare the Pebble Project to initiate federal and state
permitting under NEPA, keep the project in good standing, advance a potential
partner(s) transaction and for working capital and general corporate purposes.

$2 Million Private Placement

In July 2016, the Company completed a private placement of
4,444,376 units in the capital of the Company, each comprising of one share and
one share purchase warrant, at a price of $0.45 per unit for gross proceeds of
approximately $2 million. Each share purchase warrant is exercisable into one
common share of the Company at the exercise price of $0.65 per share until June
10, 2021. The shares and warrants were subject to applicable resale
restrictions, including a four month hold under Canadian legislation. Following
a four-month hold period, the warrants were listed for trading under the symbol
NDM.WT.B.

The proceeds are to be used for working capital purposes.

US$37.44 Million Bought Deal

In January 2017, the Company completed a bought deal offering
of 20,240,000 common shares at a price of US$1.85 per unit for gross proceeds of
approximately US$37.44 million. The offering was made through a syndicate of
underwriters co-led by Cantor Fitzgerald Canada Corporation, TD Securities Inc.
and BMO Capital Markets.

The net proceeds are to be used for (i) advancement of the
Companys Multi-dimensional Strategy to address the pre-emptive regulatory
action of the EPA under Section 404 (c) of the CWA; (ii) to prepare the Pebble
Project for the initiation of federal and state permitting under NEPA; (iii)
environmental monitoring, engineering and environmental studies, field
investigations and related technical studies to finalize a proposed development
plan for the Pebble Project, (iv) enhanced outreach and engagement with
political and regulatory offices in the Alaska state and U.S. federal government
and among Alaska Native partners and broader regional and state-wide stakeholder
groups, (v) Alaskan corporate, tenure and site maintenance, (vi) general
corporate purposes, and (vii) working capital requirements.

Page |19

---

|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

1.2.4    Market
Trends

Copper prices have been variable since late 2011 and averaged  lower in 2012, 2013, 2014 and 2015.  Prices were variable to improving for  most of 2016, then began an uptrend late in the year that has, largely, been  sustained so far in 2017.  The recent  trend is related to current and expected disruptions in some production as well  as the potential for new demand, for example, from infrastructure development  in the US.  The recent closing price is US$2.62/lb.

The gold price was on an uptrend over several years to 2012, then  decreased in 2013.  Prices were variable in 2014 and 2015, and the average  annual prices decreased.  Gold prices trended upward for most of 2016,  with some variability from October to December which has continued in  2017.  The recent closing price is US$1,257/oz.

Following increases in 2010 and 2011, molybdenum prices were  variable and weakening in 2012 and 2013. Prices increased from January to  August 2014, then largely decreased over the next 18 months to the end of 2015.  Prices improved in the first half of 2016, then dropped slightly and have, largely,  been flat since that time, with a recent price of US$6.92/lb.

Silver prices ranged from $26/oz and $35/oz between October 2011  and the end of 2012, then trended downward in 2013.  Prices were variable in  2014 and 2015, with the average annual prices decreasing in both years.   Prices were variable to increasing during most of 2016, then variable to  decreasing late in the  year.  In  2017, silver prices have been variable to increasing, with a recent price of US$17.94/oz.

Average annual prices of copper, gold, molybdenum and silver
for the past five years as well as the average prices so far in 2017 are shown
in the table below:

Year
    Average metal price1CopperUS$/lb
    GoldUS$/oz
    MolybdenumUS$/lb
    SilverUS$/oz2012
    3.61
    1,669
    12.81
    31.162013
    3.32
    1,410
    10.40
    23.802014
    3.14
    1,276
    11.91
    19.082015
    2.49
    1,160
    6.73
    15.682016
    2.21
    1,251
    6.56
    17.142017 (to the date of this MD&A)
    2.64
    1,218
    6.92
    17.39


1. Source: LME Official Cash Price as provided atwww.metalprices.com

Page |20

---

|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

1.3      
 Selected Annual Information

The following selected annual information is from the audited
consolidated financial statements which have been prepared in accordance with
IFRS. Unless otherwise stated, all monetary amounts are expressed in thousands
of Canadian dollars except per share amounts, which are expressed in Canadian
dollars.

|                                                                   |   | Fiscal year |   |   | Fiscal year |   |   | Fiscal year |  
|------------------------------------------------------------------ | - | ----------- | - | - | ----------- | - | - | ----------- | -
|                                                                   |   | 2016        |   |   | 2015        |   |   | 2014        |  
|Total assets                                                       | $ | 150,347     |   | $ | 157,704     |   | $ | 135,510     |  
|Total non-current liabilities (non-financial)                      | $ |            |   | $ |            |   | $ | 1,514       |  
|Total current
      liabilities                                    | $ | 1,500       |   | $ | 2,724       |   | $ | 6,033       |  
|                                                                   |   |             |   |   |             |   |   |             |  
|Exploration and evaluation expenses                                | $ | 7,935       |   | $ | 8,718       |   | $ | 12,877      |  
|General and administrative expenses                                |   | 6,729       |   |   | 8,272       |   |   | 9,059       |  
|Legal, accounting and audit                                        |   | 9,442       |   |   | 17,001      |   |   | 8,325       |  
|Share-based compensation                                           |   | 2,995       |   |   | 903         |   |   | 3,877       |  
|Other
      items(i)                                               |   | (119        | ) |   | (1,065      | ) |   | (2,791      | )
|Loss for the
      year                                            | $ | 26,982      |   | $ | 33,829      |   | $ | 31,347      |  
|                                                                   |   |             |   |   |             |   |   |             |  
|Basic and diluted loss per common share                            | $ | 0.11        |   | $ | 0.23        |   | $ | 0.33        |  
|Weighted average
      number of common shares outstanding (000) |   | 246,161     |   |   | 146,313     |   |   | 95,009      |  

Notes

|(i) | Other items include interest income and expense, exchange
      gain or loss, other income, amounts written off and deferred income
      tax.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------

1.4      Summary and
Discussion of Quarterly Results

All monetary amounts are expressed in thousands of dollars
except per share amounts and where otherwise indicated. Minor differences are
due to rounding.

Excerpts fromStatements of
    
    Dec 31
    
    
    Sep 30
    
    
    Jun 30
    
    
    Mar 31
    
    
    Dec 31
    
    
    Sep 30
    
    
    Jun 30
    
    
    Mar 31Comprehensive Loss
    
    2016
    
    
    2016
    
    
    2016
    
    
    2016
    
    
    2015
    
    
    2015
    
    
    2015
    
    
    2015(Income)ExpensesExploration and evaluation
    $
    2,610
    
    $
    2,006
    
    $
    1,294
    
    $
    2,025
    
    $
    3,374
    
    $
    1,786
    
    $
    1,484
    
    $
    2,074General and administrative 1
    
    1,311
    
    
    1,444
    
    
    1,844
    
    
    2,130
    
    
    1,813
    
    
    3,076
    
    
    1,567
    
    
    1,816Legal, accounting and audit 2
    
    984
    
    
    1,286
    
    
    3,318
    
    
    3,854
    
    
    6,379
    
    
    4,452
    
    
    2,922
    
    
    3,248Share-based compensation
    
    714
    
    
    1,939
    
    
    186
    
    
    156
    
    
    469
    
    
    33
    
    
    41
    
    
    360Other items3
    
    (95
    )
    
    (68
    )
    
    (54
    )
    
    98
    
    
    373
    
    
    50
    
    
    (236
    )
    
    (1,252
    )$Loss for the quarter
    $
    5,524
    
    $
    6,607
    
    $
    6,588
    
    $
    8,263
    
    
    12,408
    
    $
    9,397
    
    $
    5,778
    
    $
    6,246Basic and diluted loss per common share
    $
    0.02
    
    $
    0.02
    
    $
    0.03
    
    $
    0.04
    
    $
    0.07
    
    $
    0.07
    
    $
    0.04
    
    $
    0.05Weighted average number of common shares (000s)
    
    266,767
    
    
    264,622
    
    
    230,920
    
    
    222,106
    
    
    181,339
    
    
    137,173
    
    
    130,973
    
    
    130,082


|1. | The Company did not accrue or pay CEO, CFO and directors
      fees in Q1 and Q2 of 2015.                                                                                                          
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                     
|2. | Primarily, legal costs incurred by the Group in response
      to the EPAs activities surrounding the Pebble Project.                                                                              
|   |                                                                                                                                                                                                     
|3. | Other items include interest income and expense, exchange
      gain or loss, gain or loss on disposal of financial assets and plant and
      equipment and deferred income tax (recovery)
expense.

Page |21

---

|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

Discussion of Quarterly Trends

Exploration and evaluation expenses ("E&E") have trended
down other than in Q4 2016 and Q4 2015 as the Company paid annual claim fees.
E&E includes costs for Native community engagement, select environmental
monitoring programs, annual fees for claims (paid in Q4 each year), site leases,
land access agreements and technical studies undertaken.

General and administrative expenses ("G&A") have fluctuated
based on the level of corporate and financing activities undertaken. G&A has
averaged approximately $1.8 million per quarter over the period, with the
exception of Q3 2015, when G&A increased mainly due to the recognition of
arrear CEO, CFO and directors fees and a 2014 bonus commitment.

Legal, accounting and audit expenses are comprised primarily of
legal costs incurred by the Group in response to the EPAs activities
surrounding the Pebble Project and have fluctuated in line with ongoing
activities to advance the Companys Multi-dimensional Strategy to address the
EPAs preemptive regulatory action as discussed in Section 1.2.1.2 Legal Matters.

Share-based compensation expense ("SBC") has fluctuated due to
the timing and quantum of share purchase option ("option") grants and the
vesting periods associated with these grants. Grants of options occurred in Q3
2016 (6,206,000 options) and Q4 2015 (3,657,500 options). In Q3 2016 SBC was
also impacted by the grant of 639,031 restricted share units (RSUs) and
458,129 deferred share units (DSUs).

1.5     
Results of Operations

The following financial data has been prepared from the
Financial Statements for the year ended December 31, 2016, and is expressed in
thousands of Canadian dollars unless otherwise stated.

The Companys operations and business are not driven by
seasonal trends, but rather are driven towards the achievement of project
milestones relating to the Pebble Project such as the achievement of various
technical, environmental, socio-economic and legal objectives, including
obtaining the necessary permits, the 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
Operations for the Year Ended December 31, 2016 vs. 2015

The Company recorded a decrease in loss of approximately $6.8
million due primarily to the decrease in legal, accounting and audit expenses of
approximately $7.6 million and G&A of approximately $1.5 million which was
offset by an increase in SBC of approximately $2.1 million.

E&E comprised mainly of the following for the year as
compared to 2015, expressed in thousands of dollars:

|E&E                               |   | 2016  |  |   | 2015  | 
|--------------------------------- | - | ----- |  | - | ----- | 
|Engineering                       | $ | 282   |  | $ | 224   | 
|Environmental                     |   | 732   |  |   | 907   | 
|Site activities                   |   | 1,298 |  |   | 2,176 | 
|Socio-economic                    |   | 4,186 |  |   | 3,963 | 
|Property fees and assessments     |   | 1,351 |  |   | 1,276 | 
|Other activities
      and travel |   | 86    |  |   | 172   | 
|Total                             | $ | 7,935 |  | $ | 8,718 | 

Page |22

---

|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

E&E was approximately $0.8 million lower than 2015 due
largely to the reduction in costs relating to environmental and site activities
as both were impacted by demobilization and remediation activities in 2015. The
Companys incurred higher socio-economic costs relating to maintaining
relationships with political and regulatory offices of government, Alaska Native
partners and other stakeholder groups, increased marginally by approximately
$0.2 million. Annual rental fees for the Pebble claims also increased from 2015
as some claims fell into a new fee category due to age of the claims.

The following table provides a breakdown of G&A, and legal,
accounting and audit expenses incurred in the year as compared to 2015,
expressed in thousands of dollars:

|                                               |   | 2016   |  |   | 2015   | 
|---------------------------------------------- | - | ------ |  | - | ------ | 
|Conference and travel                          | $ | 366    |  | $ | 369    | 
|Consulting                                     |   | 388    |  |   | 232    | 
|Insurance                                      |   | 417    |  |   | 398    | 
|Office costs, including information technology |   | 875    |  |   | 1,188  | 
|Management and administration                  |   | 3,842  |  |   | 5,009  | 
|Shareholder communication                      |   | 634    |  |   | 759    | 
|Trust and filing                               |   | 207    |  |   | 317    | 
|Total G&A                                      |   | 6,729  |  |   | 8,272  | 
|Legal, accounting
      and audit              |   | 9,442  |  |   | 17,001 | 
|                                               | $ | 16,171 |  | $ | 25,273 | 

G&A decreased by approximately $1.5 million due primarily
to a decrease in management and administration costs. In 2016, certain of the
director fees were paid through the issue of DSUs and RSUs, the cost of which is
included in SBC (see below). In 2015, the Company paid a 2014 bonus commitment.
The Company however paid additional consulting fees relating to advice on
various corporate matters. Legal, accounting and audit costs decreased by $7.6
million as legal fees incurred were lower than in 2015 and the Company had
entered into a fixed fee arrangement with Steptoe (refer 1.2.1.2 Legal Matters).

SBC has fluctuated due to the timing and quantum of share
purchase option grants and the vesting periods associated with these grants. SBC
increased by $2.1 million in the year as the Company granted 6,206,000 options
in July 2016. In 2015, 3,657,500 options were granted in October of that year.
For each grant, the vesting terms are: one-third on grant date, one-third in 12
months and one-third in 24 months. SBC was also impacted by the SBC on the
639,031 RSUs issued to the Chairman, CEO and CFO (which vest in 12 months) and
SBC on 458,129 DSUs issued to non-executive directors (2015  no DSUs or RSUs
were issued).

1.5.2    Financial
position as at December 31, 2016 vs. December 31, 2015

The total assets of the Company decreased by $7.4 million due
in large part to the appreciation in the Canadian dollar versus the US dollar
which resulted in a $4.6 million decrease in the value of the Companys mineral
property, plant and equipment when translated to the Companys reporting
currency. As well, the Company sold its available-for-sale financial assets
(refer 1.6
Liquidity).

Page |23

---

|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

1.6     
Liquidity

The Company's major sources of funding has been the issuance of
  equity securities for cash, primarily through private placements and prospectus
  offerings to sophisticated investors and institutions, the issue of common
  shares pursuant to the exercise of share purchase options and most recently
  through the exercise of warrants. The Company has also acquired companies in
  2015 whose primary assets were cash and equivalents through the issuance of
  equity securities. The Company's access to financing is always uncertain. There
  can be no assurance of continued access to significant equity funding.

As at December 31, 2016, the Companys cash and cash
  equivalents were approximately $7.2 million, a decrease of approximately $0.3
  million from December 31, 2015. In 2016, the Company completed financings for
  gross proceeds of approximately $19.1 million (refer 1.2.3 Financings), raised
  approximately $1.8 million from the sale of its available-for-sale financial
  assets (being shares in a listed entity which the Company received on the
  acquisition of Mission Gold Ltd. in 2015), received approximately $3.4 million
  from the exercise of warrants, received approximately $0.6 million from the
  exercise of options and employed approximately $24.0 million in its operating
  activities. Subsequent to the reporting date, the Company completed a bought
  deal financing and raised gross proceeds of approximately US$37.4 m (refer
  1.2.3
  Financings). Accordingly, the
  Company has prioritized the allocation of its available financial resources
  (cash at year end and funds from the forementioned financing) in order to meet
  key corporate and Pebble Project expenditure requirements for at least the next
  twelve months (refer 1.2 Overviewand the Companys plans for 2017). Additional financing will be required
  to pursue any material expenditures at the Pebble Project beyond 2017. There can
  be no assurances that the Company will be successful in obtaining additional
  financing at that point. If the Company is unable to raise the necessary capital
  resources to meet obligations as they come due, the Company will at some point
  have to reduce or curtail its operations.

At December 31, 2016, the Company had working capital of
approximately $6.4 million as compared to $7.9 million at December 31, 2015. The
Company has no long term debt, capital lease obligations, operating leases or
any other long term obligations other than those disclosed below:

The following commitments and payables (expressed in thousands)
existed at December 31, 2016:

|                            |   | Payments due by period as of the reporting date | 
|--------------------------- | - | ----------------------------------------------- | 
|                            |   | Total                                           | 
|                            |   |                                                 | 
|Trade and other payables    | $ | 1,260                                           | 
|Payables to related parties |   | 240                                             | 
|Lease commitments           |   | 695                                             | 
|                            |   |                                                 | 
|Total                       | $ | 2,195                                           | 

The Company, through the Pebble Partnership, is advancing its
Multi-dimensional Strategy to address the EPAs pre-emptive regulatory action
under Section 404(c) of the CWA, including through litigation against the EPA,
contesting the EPAs statutory authority to act pre-emptively under the CWA, and
alleging violation of FACA and the unlawful withholding of documentation under
FOIA. The Company has a contingent liability for additional legal fees and costs
that may be due to the Companys counsel should there be a successful outcome or
settlement. However, the Company is unable to estimate or determine the length
of time that each of the legal initiatives mentioned above will take to advance
to specific milestone events or final conclusion. As of the reporting date of
the Financial Statements, if there was a favourable outcome or settlement, the
Company estimates there would potentially be additional legal fees of
approximately $20.2 million (US$15.1 million at closing Bank of Canada rate on
December 31, 2016, of $1.3427 per US$1) payable by the Company which would be
payable in three equal tranches over three years.

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

Page |24

---

|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

1.7    
 Capital Resources

The Companys capital resources consist of its cash reserves.
As of December 31, 2016, the Company had no long term debt or commitments for
material capital expenditures.

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

1.8     
Off-Balance Sheet Arrangements

There are none.

1.9    
 Transactions with Related Parties

Transactions with Hunter Dickinson
Services Inc. ("HDSI")

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

Current directors of the Company namely Robert Dickinson and
Ron Thiessen are active members of the HDI Board of Directors. Marchand Snyman,
the Companys CFO, is also an active member of the HDI Board of Directors. Other
key management personnel of the Company  Doug Allen, Stephen Hodgson, Bruce
Jenkins, Sean Magee and Trevor Thomas  are active members of HDIs senior
management team.

The business purpose of the related
party relationship

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

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

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

The measurement basis used

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

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

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

Page |25

---

|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

Ongoing contractual or other commitments
resulting from the related party relationship

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

Transactions during the Reporting Period
and Balances with HDSI at the end of the Reporting Period

Disclosure as to transactions with HDSI and any amounts due to
or from HDSI is provided in Note 8(b) in the notes to the Financial Statements
which accompany this MD&A and which are available under the Companys
profile at www.sedar.com.

Key Management Personnel

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

1.10     Fourth
Quarter 2016 vs. 2015

The Company recorded a $6.7 million decrease in loss to $5.7
million, primarily due to a decrease in legal expenses as discussed herein.

E&E comprised mainly of the following during the three
months ended December 31, 2016 as compared to the prior year quarter, expressed
in thousands of dollars:

|E&E                               |   | 2016  |  |   | 2015  | 
|--------------------------------- | - | ----- |  | - | ----- | 
|Engineering                       | $ | 16    |  | $ | 27    | 
|Environmental                     |   | 194   |  |   | 256   | 
|Site activities                   |   | 228   |  |   | 726   | 
|Socio-economic                    |   | 798   |  |   | 1,078 | 
|Property fees and assessments     |   | 1,351 |  |   | 1,276 | 
|Other activities
      and travel |   | 23    |  |   | 11    | 
|Total                             | $ | 2,610 |  | $ | 3,374 | 

E&E was approximately $0.8 million lower than 2015 as site
activities were reduced and socioeconomic costs relating to relationships with
political and regulatory offices of government, Alaska Native partners and other
stakeholder groups were lower. The Company however, incurred higher rental
payments for claims. In 2015, E&E was impacted by and the completion of
demobilization and remediation activities at site.

Page |26

---

|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

The following G&A, and legal, accounting and audit expenses
were incurred during the three months ended December 31, 2016 as compared to
2015, expressed in thousands of dollars:

|                                  |   | 2016  |  |   | 2015  | 
|--------------------------------- | - | ----- |  | - | ----- | 
|Conference and travel             | $ | 75    |  | $ | 77    | 
|Consulting                        |   | 18    |  |   | 61    | 
|Insurance                         |   | 101   |  |   | 105   | 
|Office costs                      |   | 223   |  |   | 207   | 
|Management and administration     |   | 716   |  |   | 1,127 | 
|Shareholder communication         |   | 137   |  |   | 184   | 
|Trust and filing                  |   | 41    |  |   | 52    | 
|Total G&A                         |   | 1,311 |  |   | 1,813 | 
|Legal, accounting
      and audit |   | 984   |  |   | 6,379 | 
|                                  | $ | 2,295 |  | $ | 8,192 | 

G&A decreased by approximately $0.5 million due primarily
to lower management and administration costs. Legal, accounting and audit costs
decreased by approximately $5.4 million as less time was incurred by legal
counsel and the Company had entered into a fixed fee arrangement with Steptoe
(refer 1.2.1.2Legal Matters).

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.

1.12    Critical
Accounting Estimates

The required disclosure is provided in Note 2 in the notes to
the Financial Statements which accompany this MD&A and which are available
under the Companys profile at www.sedar.com.

1.13    Changes in
Accounting Policies including Initial Adoption

The required disclosure is provided in Note 2 in the notes to
the Financial Statements which accompany this MD&A and which are available
under the Companys profile at www.sedar.com.

1.14    Financial
Instruments and Other Instruments

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, restricted cash ($nil at
December 31, 2016) and amounts receivable. The Company limits the exposure to
credit risk by only investing its cash and cash equivalents and restricted cash
with high-credit quality financial institutions in business and

Page |27

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|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

saving accounts, guaranteed investment certificates, and in
government treasury bills which are available on demand by the Group as and when
required. There has been no change in the Companys objectives and policies for
managing this risk except for changes in the carrying amounts of financial
assets exposed to credit risk, and there was no significant change to the
Companys exposure to credit risk during the year ended December 31, 2016.
Amounts receivable include receivable balances with government agencies, prepaid
expenses and refundable deposits. Management has also concluded that there is no
objective evidence of impairment to the Companys amounts receivable.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to
meet its financial obligations when they become due. There has been no change in
the Companys objectives and policies for managing this risk. The Companys
liquidity position has been discussed in Section 1.6
Liquidity.

Foreign Exchange Risk

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

There has been no change in the Companys objectives and
policies for managing this risk, except for the changes in the carrying amounts
of the financial assets exposed to foreign exchange risk, and there was no
significant change to the Companys exposure to foreign exchange risk during the
year ended December 31, 2016.

Interest rate risk

The Company is subject to interest rate risk with respect to
its investments in cash and cash equivalents. There has been no change in the
Companys objectives and policies for managing this risk and no significant
change to the Companys exposure to interest rate risk during the year ended
December 31, 2016.

Commodity price risk

While the value of the Companys Pebble Project, held through
its 100% interest in the Pebble Partnership, is related to the price of copper,
gold, molybdenum and silver 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.

Copper, gold, molybdenum and silver 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.

Page |28

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|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

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 currently consists of
equity, comprising share capital and reserves, 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.

1.15    Other MD&A
Requirements

Additional information relating to the Company, including the
Companys 2016 Annual Information Form, is available under the Companys profile
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 is shown in the following table:

|                                                       |  | Number      | 
|------------------------------------------------------ |  | ----------- | 
|Common shares issued and outstanding                   |  | 298,787,573 | 
|Share options pursuant to the Companys incentive plan |  | 14,867,331  | 
|Deferred share units                                   |  | 458,129     | 
|Restricted share units                                 |  | 639,031     | 
|Warrants and
      non-incentive plan options1         |  | 47,311,472  | 

Notes:

|1. | Non-incentive plan options were issued on the acquisition
      of Cannon Point in October 2015. Warrants were issued pursuant to the
      acquisition of Mission Gold in December 2015, the prospectus financing in
      June 2016 and the private placement in July 2016.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

1.15.2 Disclosure Controls and
Procedures

The Companys management, with the participation of its Chief
Executive Officer ("CEO") and Chief Financial Officer ("CFO"), have evaluated
the effectiveness of the Companys disclosure controls and procedures. Based on
that evaluation, the Companys CEO and CFO 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 and is
accumulated and communicated to management, including the CEO and CFO, as
appropriate to allow timely decisions regarding required disclosure.

1.15.3 Managements Report on
Internal Control over Financial Reporting

The Company's management, including the CEO and the CFO, 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 ICFR includes those policies and procedures that:

Page |29

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|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

- 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 assessed the effectiveness of the
Companys ICFR as of December 31, 2016. In making the assessment, it used the
criteria set forth in the Internal Control-Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
Based on their assessment, management has concluded that, as of December 31,
2016, the Companys ICFR was effective based on those criteria.

1.15.4 Changes in Internal Control over
Financial Reporting

There has been no change in the Companys ICFR that has
materially affected, or is reasonably likely to materially affect, the Companys
ICFR.

1.15.5 Limitations of Controls and
Procedures

The Companys management, including its CEO and CFO, believe
that any system of disclosure controls and procedures or ICFR, 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.

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|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

1.15.6 Risk Factors

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

In the event that we are unsuccessful in
our litigation against the EPA, the EPA refuses to withdraw its regulatory
action or we are otherwise unable to reach a settlement with the EPA, we may
never be able to proceed with permitting with respect to the pebble project.

The principal risk currently facing the Company is that we may
be unable to resolve our ongoing issues with the EPA with respect to its
pre-emptive regulatory action under Section 404(c) of the CWA. While we believe
our position has merit, the proceedings have been lengthy and have required us
to expend substantial funds and time.

There is no assurance that there will be
any change in the position taken by the EPA with respect to its pre-emptive
regulatory action under Section 404(c) of the CWA resulting from the new federal
administration in Washington, DC and the resulting change in the leadership of
the EPA.

There has recently been a change in the leadership of the EPA
resulting from the appointment of a new administrator of the EPA by the new
federal administration in Washington, DC. There is no assurance that this change
of leadership will result in the EPA reversing its position with respect the
EPAs pre-emptive regulatory action under Section 404(c) of the CWA or otherwise
enable the Company to proceed with its permit application process. The Company
can provide no assurance with respect to the reaching or timing of a resolution,
if any, with the EPA or with respect to other matters relating to the EPA. Even
if the current issues with the EPA are resolved, there is no assurance that the
Company will be successful in obtaining the required permits to proceed with the
development of the Pebble Project.

Inability to Ultimately Achieve Mine
Permitting and Build a Mine at the Pebble Project.

Notwithstanding any possible negotiated or other settlement
with the EPA or a change in the EPAs position that enables us to proceed with
our permit applications, the Company may ultimately be unable to secure the
necessary permits under United States Federal and Alaskan State laws to build
and operate a mine at the Pebble Project. There is no assurance that the EPA
will not seek to undertake future regulatory action to impede or restrict the
Pebble Project. In addition, there are prominent and well organized opponents of
the Pebble Project and the Company may be unable, even if we present solid
scientific and technical evidence of risk mitigation, to overcome such
opposition and convince governmental authorities that a mine should be permitted
at the Pebble Project. The Company faces not only the permitting and regulatory
issues typical of companies seeking to build a mine, but additional public and
regulatory scrutiny due to its location and likely size. Accordingly, there is
no assurance that the Company will obtain the required permits even if the
current issues with the EPA are resolved and the Company is able to proceed with
the permit application process. In the ordinary course the Companys permitting
process would first involve filing CWA 404 permit applications with the US Army
Corps of Engineers, which would trigger an EIS process under NEPA. The EIS
process under NEPA, and the requirement for the Company to secure a broad range
or other permits and authorizations from multiple federal and state regulatory
agencies will take several years. After all permits are in hand, a number of
years would be required to finance and build a mine and commence operations.
During these periods, the Company would likely have no income and so would
require additional financing to continue its operations. Unless and until we
build a mine at the Pebble Project we will be unable to achieve revenues from
operations and may not be able to sell or otherwise recover our
investment in the Pebble Project, which would have a material adverse effect on
the Company and an investment in the Companys common shares.

Page |31

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|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

Negative Operating Cash Flow

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

Risk of Secure Title or Property
Interest

There can be no certainty that title to any property interest
acquired by the Company or any of its subsidiaries is without defects. Although
the Company has taken reasonable precautions to ensure that legal title to its
properties is properly documented, there can be no assurance that its property
interests may not be challenged or impugned. Such property interests may be
subject to prior unregistered agreements or transfers or other land claims, and
title may be affected by undetected defects and adverse laws and regulations.

The Pebble Partnerships mineral concessions at Pebble are
located on State of Alaska lands specifically designated for mineral exploration
and development. Alaska is a stable jurisdiction with a well-developed
regulatory and legal framework for resource development and public lands
management, a strong commitment to the rule of law and lengthy track record for
encouraging investment in the development if its land and natural resources.

The Pebble Project is Subject to
Political and Environmental Regulatory Opposition

As is typical for a large scale mining project, the Pebble
Project faces organized opposition from certain individuals and organizations
who are motivated to preclude any possible mining in the Bristol Bay Watershed
(the BBW). The BBW is an important wildlife and salmon habitat area. The EPA
has gone so far as to suggest that it may peremptorily prevent the Pebble
Project from proceeding even before a mine permitting application is filed.
Accordingly, one of the greatest risks to the Pebble Project is seen to be
political/permitting risk which may ultimately preclude construction of a mine
at the Pebble Project. Opposition may include legal challenges to exploration
and development permits, which may delay or halt development. Other tactics may
also be employed by opposition groups to delay or frustrate development at
Pebble, included political and public advocacy, electoral strategies, media and
public outreach campaigns and protest activity.

The Pebble Partnerships Mineral
Property Interests Do Not Contain Any Ore Reserves or Any Known Body of Economic
Mineralization

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

Page |32

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|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

Mineral Resources Disclosed by Northern
Dynasty or the Pebble Partnership for the Pebble Project are Estimates Only

Northern Dynasty has included mineral resource estimates that
have been made in accordance with NI 43-101. These resource estimates are
classified as measured resources, indicated resources and inferred
resources. Northern Dynasty advises investors that while these terms are
mandated by Canadian securities administrators, the SEC does not recognize these
terms. Investors are cautioned not to assume that any part or all of mineral
deposits classified as "measured resources" or "indicated resources" will ever
be converted into ore reserves. Further, "inferred resources" have a great
amount of uncertainty as to their existence, and economic and legal feasibility.
It cannot be assumed that all or any part of an inferred mineral resource will
ever be upgraded to a higher category. Under Canadian rules, estimates of
inferred mineral resources may not form the basis of feasibility or
prefeasibility studies, except in rare cases. Investors are cautioned not to
assume that part or all of an inferred resource exists, or is economically or
legally mineable.

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

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

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

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

Northern Dynastys consolidated financial statements have been
prepared on the basis that Northern Dynasty will continue as a going concern. At
December 31, 2016, Northern Dynasty had working capital of approximately $6.4
million. Northern Dynasty has prioritized the allocation of available financial
resources in order to meet key corporate and Pebble Project expenditure
requirements in the near term. Additional financing will be required for
continued corporate expenditures and expenditures at the Pebble Project.
Northern Dynastys continuing operations and the underlying value and
recoverability of the amounts shown for mineral property interest are entirely
dependent upon the existence of economically recoverable mineral reserves at the
Pebble Project, the ability of the Company to finance its operating costs, the
completion of the exploration and development of the Pebble Project, the Pebble
Partnership obtaining the necessary permits to mine, and on future profitable
production at the Pebble Project. Furthermore, failure to continue as a going
concern would require that Northern Dynasty's assets and liabilities be restated
on a liquidation basis, which would likely differ significantly from their going
concern assumption carrying values. Refer also to discussion in 1.6 Liquidity.

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

Page |33

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|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

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

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

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

Mining is inherently dangerous and
subject to conditions or events beyond the Companys control, which could have a
material adverse effect on the Companys business

Hazards such as fire, explosion, floods, structural collapses,
industrial accidents, unusual or unexpected geological conditions, ground
control problems, power outages, inclement weather, seismic activity, cave-ins
and mechanical equipment failure are inherent risks in the Companys
exploration, development and mining operations. These and other hazards may
cause injuries or death to employees, contractors or other persons at the
Companys mineral properties, severe damage to and destruction of the Companys
property, plant and equipment and mineral properties, and contamination of, or
damage to, the environment, and may result in the suspension of the Companys
exploration and development activities and any future production activities.
Safety measures implemented by the Company may not be successful in preventing
or mitigating future accidents.

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

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

Page |34

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|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

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

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

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

Government regulations relating to mineral rights tenure,
permission to disturb areas and the right to operate can adversely affect
Northern Dynasty. Northern Dynasty and the Pebble Partnership may not be able to
obtain all necessary licenses and permits that may be required to carry out
exploration at our projects. Obtaining the necessary governmental permits is a
complex, time-consuming and costly process. The duration and success of efforts
to obtain permits are contingent upon many variables not within our control.
Obtaining environmental permits may increase costs and cause delays depending on
the nature of the activity to be permitted and the interpretation of applicable
requirements implemented by the permitting authority. There can be no assurance
that all necessary approvals and permits will be obtained and, if obtained, that
the costs involved will not exceed those that we previously estimated. It is
possible that the costs and delays associated with the compliance with such
standards and regulations could become such that we would not proceed with the
development or operation of a mine at the Pebble Project. Refer to further
discussion in 1.2.1.2 Legal
Matters.

Litigation

The Company is currently and may in future be subject to legal
proceedings, including with regard to actions in 1.2.1.2
Other Mattersin the pursuit of its Pebble
Project. Given the uncertain nature of these actions, the Company cannot
reasonably predict the outcome thereof. If the Company is unable to resolve
these matters favorably it will likely have a material adverse effect of the
Company. Please refer to the Risk Factor regarding the EPA litigation above.

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

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

Page |35

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|Northern Dynasty Minerals Ltd.            
|------------------------------------------
|Management's Discussion And
      Analysis
|Year ended December 31, 2016              
|                                          

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

Northern Dynastys success depends to a significant extent on
the performance and continued service of certain independent contractors,
including HDSI (refer 1.9Transactions with RelatedParties).
The Company has access to the full resources of HDSI, an experienced exploration
and development firm with in-house geologists, engineers and environmental
specialists, to assist in its technical review of the Pebble Project. There can
be no assurance that the services of all necessary key personnel will be
available when required or if obtained, that the costs involved will not exceed
those that we previously estimated. It is possible that the costs and delays
associated with the loss of services of key personnel could become such that we
would not proceed with the development or operation of a mine at the Pebble
Project.

The Market Price of Northern Dynastys
Common Shares is Subject to High Volatility and Could Cause Investor
Loss.

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

Northern Dynasty Will Require Additional
Funding to Meet the Development Objectives of the Pebble Project.

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

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