---

**NORTHERN DYNASTY MINERALS LTD.**
  CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED
  DECEMBER 31, 2004, 2003 AND 2002



(Expressed in Canadian Dollars)

---

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

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

**AUDITORS’ REPORT**

To the Shareholders of Northern Dynasty Minerals Ltd.

We have audited the consolidated balance sheets of Northern
  Dynasty Minerals Ltd. as at December 31, 2004 and 2003, and the consolidated
  statements of operations and deficit and cash flows for each of the years in
  the three year period ended December 31, 2004. These financial statements are
  the responsibility of the Company's management. Our responsibility is to express
  an opinion on these financial statements based on our audits.

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

In our opinion, these consolidated financial statements present
  fairly, in all material respects, the financial position of the Company as at
  December 31, 2004 and 2003 and the results of its operations and cash flows
  for each of the years in the three year period ended December 31, 2004 in accordance
  with Canadian generally accepted accounting principles

*“De Visser Gray”*

**CHARTERED ACCOUNTANTS**

Vancouver, British Columbia
  March 18, 2005

---

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

|                                                        |   | December 31, |   |   | December 31, |  
|------------------------------------------------------- | - | ------------ | - | - | ------------ | -
|                                                        |   | 2004         |   |   | 2003         |  
|                                                        |   |              |   |   |              |  
|Assets                                                  |   |              |   |   |              |  
|                                                        |   |              |   |   |              |  
|Current assets                                          |   |              |   |   |              |  
|Cash and equivalents                                    | $ | 12,476,047   |   | $ | 3,441,464    |  
|Marketable securities
      (note 4)                    |   | 363,906      |   |   | –            |  
|Amounts receivable
      and prepaids                   |   | 402,206      |   |   | 229,145      |  
|Balances receivable from related
      parties (note 9) |   | 12,060       |   |   | –            |  
|                                                        |   | 13,254,219   |   |   | 3,670,609    |  
|                                                        |   |              |   |   |              |  
|Equipment(note 5)                                       |   | 398,101      |   |   | 12,037       |  
|Mineral property interests(note 6)                      |   | 11,788,621   |   |   | –            |  
|                                                        |   |              |   |   |              |  
|                                                        |   |              |   |   |              |  
|                                                        | $ | 25,440,941   |   | $ | 3,682,646    |  
|                                                        |   |              |   |   |              |  
|Liabilities and Shareholders' Equity                    |   |              |   |   |              |  
|                                                        |   |              |   |   |              |  
|Current liabilities                                     |   |              |   |   |              |  
|Accounts payable and
      accrued liabilities          | $ | 3,025,155    |   | $ | 145,642      |  
|Balances
      payable to related parties (note 9)      |   | –            |   |   | 284,080      |  
|                                                        |   | 3,025,155    |   |   | 429,722      |  
|                                                        |   |              |   |   |              |  
|Shareholders' equity                                    |   |              |   |   |              |  
|Share capital (note
      8)                            |   | 76,109,561   |   |   | 21,064,437   |  
|Contributed surplus
      (note 8(e))                   |   | 7,504,720    |   |   | 1,688,335    |  
|Deficit                                                 |   | (61,198,495  | ) |   | (19,499,848  | )
|                                                        |   | 22,415,786   |   |   | 3,252,924    |  
|Nature of operations (note 1)                           |   |              |   |   |              |  
|Subsequent events (notes 6(a) and 11)                   |   |              |   |   |              |  
|                                                        |   |              |   |   |              |  
|                                                        | $ | 25,440,941   |   | $ | 3,682,646    |  

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

Approved by the Board of Directors

|/s/ Ronald W. Thiessen | /s/ Jeffrey R. Mason
|---------------------- | --------------------
|                       |                     
|Ronald W. Thiessen     | Jeffrey R. Mason    
|Director               | Director            

---

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

|                                                         |   | Years ended December 31 |  
|-------------------------------------------------------- | - | ----------------------- | -
|                                                         |   | 2004                    |  
|                                                         |   |                         |  
|Expenses                                                 |   |                         |  
|Conference and travel                                    | $ | 351,201                 |  
|Depreciation                                             |   | 45,994                  |  
|Exploration (note 7)                                     |   | 32,594,900              |  
|Exploration
      - stock-based compensation (note 8(d)) |   | 3,111,302               |  
|Legal, accounting and
      audit                        |   | 143,916                 |  
|Office and administration                                |   | 1,382,986               |  
|Shareholder communication                                |   | 471,032                 |  
|Stock-based compensation
      (note 8(d))               |   | 3,267,575               |  
|Trust and filing                                         |   | 85,438                  |  
|                                                         |   | 41,454,344              |  
|                                                         |   |                         |  
|Other items                                              |   |                         |  
|Foreign exchange loss
      (gain)                       |   | 251,135                 |  
|Gain on disposal of
      equipment                      |   | –                       |  
|Interest income                                          |   | (357,926                | )
|Write down of marketable securities                      |   | 351,094                 |  
|                                                         |   | 244,303                 |  
|                                                         |   |                         |  
|Loss for the year                                        | $ | (41,698,647             | )
|                                                         |   |                         |  
|Weighted average number of                               |   |                         |  
|common shares outstanding                                |   | 39,926,335              |  
|                                                         |   |                         |  
|Basic and diluted loss per share                         | $ | (1.04                   | )
|                                                         |   |                         |  
|                                                         |   |                         |  
|                                                         |   |                         |  
|Consolidated Statements of Deficit                       |   |                         |  
|(Expressed in Canadian Dollars)                          |   |                         |  
|                                                         |   |                         |  
|                                                         |   | Years ended December 31 |  
|                                                         |   | 2004                    |  
|Deficit, beginning of year                               | $ | (19,499,848             | )
|Loss for the year                                        |   | (41,698,647             | )
|Deficit, end of year                                     | $ | (61,198,495             | )

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

---

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

|                                                        |   | Years ended December 31 |  
|------------------------------------------------------- | - | ----------------------- | -
|Cash provided by (applied to):                          |   | 2004                    |  
|                                                        |   |                         |  
|                                                        |   |                         |  
|Operating activities                                    |   |                         |  
|Loss for the year                                       | $ | (41,698,647             | )
|Items not involving
      cash                          |   |                         |  
|Depreciation                                            |   | 45,994                  |  
|Gain on disposal of assets                              |   | –                       |  
|Shares issued for property option payments              |   | –                       |  
|Stock-based compensation                                |   | 6,378,877               |  
|Marketable securities received (note 6(d))              |   | (715,000                | )
|Write down of marketable securities                     |   | 351,094                 |  
|Changes in non-cash
      working capital items         |   |                         |  
|Amounts receivable and prepaids                         |   | (173,061                | )
|Accounts payable and accrued liabilities                |   | 2,879,513               |  
|Balances receivable from and payable to                 |   |                         |  
|related parties                                         |   | (296,140                | )
|                                                        |   | (33,227,370             | )
|                                                        |   |                         |  
|Investing activities                                    |   |                         |  
|Purchase of equipment                                   |   | (432,058                | )
|Proceeds on disposal
      of equipment                 |   | –                       |  
|                                                        |   | (432,058                | )
|                                                        |   |                         |  
|Financing activities                                    |   |                         |  
|Common shares
      issued for cash, net of issue costs |   | 42,694,011              |  
|Subscriptions received                                  |   | –                       |  
|                                                        |   | 42,694,011              |  
|                                                        |   |                         |  
|Increase (decrease) in cash and equivalents             |   | 9,034,583               |  
|Cash and equivalents, beginning of year                 |   | 3,441,464               |  
|                                                        |   |                         |  
|Cash and equivalents, end of year                       | $ | 12,476,047              |  

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

* Supplemental Disclosure of Non-Cash Investing and
  Financing Activities

During the year ended December 31, 2004, the Company issued
  1,772,725 common shares at $6.65 per share for acquisition of mineral property
  interests. The Company also recorded a fair value of stock options allocated
  to shares issued on exercise in the amount of $562,492.

---

NORTHERN DYNASTY MINERALS LTD.Consolidated Schedules of Exploration Expenses
  (Expressed in Canadian Dollars)

|                                                                |   |                 |  |   | Other      |   |   |            | 
|--------------------------------------------------------------- | - | --------------- |  | - | ---------- | - | - | ---------- | 
|                                                                |   | Pebble Property |  |   | Properties |   |   | Total      | 
|                                                                |   |                 |  |   |            |   |   |            | 
|Exploration expenses for the year ended December
      31, 2004 |   |                 |  |   |            |   |   |            | 
|                                                                |   |                 |  |   |            |   |   |            | 
|Assays and
      analysis                                       | $ | 745,237         |  | $ | (3,623     | ) | $ | 741,614    | 
|Drilling                                                        |   | 7,689,138       |  |   | (715,000   | ) |   | 6,974,138  | 
|Engineering                                                     |   | 3,886,839       |  |   | –          |   |   | 3,886,839  | 
|Environmental                                                   |   | 9,806,864       |  |   | –          |   |   | 9,806,864  | 
|Equipment
      rental                                          |   | 248,577         |  |   | –          |   |   | 248,577    | 
|Exploration
      option payments                               |   | –               |  |   | –          |   |   | –          | 
|Freight                                                         |   | 603,711         |  |   | –          |   |   | 603,711    | 
|Geological                                                      |   | 1,398,162       |  |   | (749       | ) |   | 1,397,413  | 
|Graphics                                                        |   | 93,985          |  |   | 472        |   |   | 94,457     | 
|Helicopter                                                      |   | 3,823,073       |  |   | 2,798      |   |   | 3,825,871  | 
|Property
      fees and assessments                             |   | 139,714         |  |   | –          |   |   | 139,714    | 
|Site activities                                                 |   | 3,715,240       |  |   | –          |   |   | 3,715,240  | 
|Socioeconomic                                                   |   | 686,948         |  |   | –          |   |   | 686,948    | 
|Travel and
      accommodation                                  |   | 475,105         |  |   | (1,591     | ) |   | 473,514    | 
|Incurred during the period                                      |   | 33,312,593      |  |   | (717,693   | ) |   | 32,594,900 | 
|Cumulative expenditures, December 31, 2003                      |   | 10,348,784      |  |   | 651,275    |   |   | 11,000,059 | 
|Cumulative expenditures, December 31, 2004                      | $ | 43,661,377      |  | $ | (66,418    | ) | $ | 43,594,959 | 
|                                                                |   |                 |  |   |            |   |   |            | 
|                                                                |   |                 |  |   |            |   |   |            | 
|Exploration expenses for the year ended December
      31, 2003 |   |                 |  |   |            |   |   |            | 
|                                                                |   |                 |  |   |            |   |   |            | 
|Assays and
      analysis                                       | $ | 290,771         |  | $ | –          |   | $ | 290,771    | 
|Drilling                                                        |   | 2,050,068       |  |   | 650,000    |   |   | 2,700,068  | 
|Engineering                                                     |   | 83,301          |  |   | –          |   |   | 83,301     | 
|Equipment
      rental                                          |   | 27,648          |  |   | –          |   |   | 27,648     | 
|Freight                                                         |   | 53,275          |  |   | –          |   |   | 53,275     | 
|Geological                                                      |   | 620,908         |  |   | 1,275      |   |   | 622,183    | 
|Graphics                                                        |   | 99,932          |  |   | –          |   |   | 99,932     | 
|Helicopter                                                      |   | 632,331         |  |   | –          |   |   | 632,331    | 
|Property
      fees and assessments                             |   | 195,389         |  |   | –          |   |   | 195,389    | 
|Site activities                                                 |   | 723,326         |  |   | –          |   |   | 723,326    | 
|Socioeconomic                                                   |   | 5,858           |  |   | –          |   |   | 5,858      | 
|Travel and
      accommodation                                  |   | 67,647          |  |   | –          |   |   | 67,647     | 
|Incurred during fiscal 2004                                     |   | 4,850,454       |  |   | 651,275    |   |   | 5,501,729  | 
|Cumulative expenditures, December 31, 2002                      |   | 5,498,330       |  |   | –          |   |   | 5,498,330  | 
|Cumulative expenditures, December 31, 2003                      | $ | 10,348,784      |  | $ | 651,275    |   | $ | 11,000,059 | 

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

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|1.  | NATURE OF OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | Northern Dynasty Minerals Ltd. (the "Company") is
        incorporated under the laws of the Province of British Columbia, and its
        principal business activity is the exploration of mineral properties.
        Its principal mineral property interests are located in Alaska, USA.                                                                                                                                                                                                                                                                                                                                                
|   
|    | These consolidated financial statements have been
        prepared using Canadian generally accepted accounting principles assuming
        a going concern. The Company has incurred losses since inception and the
        ability of the Company to continue as a going concern depends upon its
        ability to develop profitable operations and to continue to raise adequate
        financing. These financial statements do not reflect adjustments, which
        could be material, to the carrying values of assets and liabilities which
        may be required should the Company be unable to continue as a going concern.
|   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|2.  | BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    | These financial statements have been prepared in
        accordance with Canadian generally accepted accounting principles. As
        described in note 12, these principles differ in certain respects from
        principles and practices generally accepted in the United States.                                                                                                                                                                                                                                                                                                                                                      
|   
|    | The Company has a wholly owned subsidiary, Northern
        Dynasty Mines Inc., incorporated under the laws of the State of Alaska,
        USA. These consolidated financial statements include the accounts of the
        Company and its wholly owned subsidiary. All material intercompany balances
        and transactions have been eliminated.                                                                                                                                                                                                                                                                                      
|   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|3.  | SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(a) | Cash and equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    | Cash and equivalents consist of cash and highly
        liquid investments, having maturity dates of three months or less from
        the date of purchase, which are readily convertible to known amounts of
        cash.                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(b) | Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    | Equipment is recorded at cost and is depreciated
        over its estimated useful life using the declining balance method at various
        rates ranging from 20% to 30% per annum.                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(c) | Mineral property interests                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|    | The acquisition costs of mineral properties are
        deferred until the properties are placed into production, sold or abandoned.
        These deferred costs are amortized on a unit-of-production basis over
        the estimated useful life of the related properties following the commencement
        of production, or written off if the properties are allowed to lapse or
        are abandoned. If the deferred                                                                                                                                                                                                             

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|    | mineral property costs are determined not to be
        recoverable over the estimated useful life or are less than estimated
        fair market value, the unrecoverable portion is charged to earnings in
        that period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | Mineral property acquisition costs include the cash
        consideration and the fair market value of common shares, based on the
        trading price of the shares, on the date of issue or as otherwise provided
        under the agreement terms for the mineral property interest. Costs for
        properties for which the Company does not possess unrestricted ownership
        and exploration rights, such as option agreements, are expensed in the
        period incurred or until a feasibility study has determined that the property
        is capable of commercial production.                                                                                                                                               
|   
|    | Exploration costs and option payments are expensed
        in the period incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    | Administrative expenditures related to exploration
        activities are expensed in the period incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(d) | Share capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    | Common shares issued for mineral property interests
        are recorded at the fair market value based upon the trading price of
        the shares on the TSX Venture Exchange on the date of issue or as otherwise
        provided for under the terms of the agreement to issue the shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|    | The proceeds from common shares issued pursuant
        to flow-through share financing agreements are credited to share capital
        as the tax benefits of the exploration expenditures incurred pursuant
        to these agreements are transferred to the purchaser of the flow-through
        shares.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    | Share issue costs are deducted from share capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(e) | Stock-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    | The Company has a stock option plan which is described
        in note 8(d). The Company accounts for all non-cash stock-based payments
        and awards that are direct awards of stock, that call for settlement in
        cash or other assets, or that are share appreciation rights which call
        for settlement by the issuance of equity instruments, granted on or after
        January 1, 2002, on a fair value basis.                                                                                                                                                                                                                                                                                                              
|   
|    | Under this measurement approach, stock-based payments
        are measured at the fair value of the consideration received, or the fair
        value of the equity instruments issued, or liabilities incurred, whichever
        is more reliably measurable. The fair value of non-cash stock-based payments
        is periodically re-measured until counterparty performance is complete,
        and any change therein is recognized over the period and in the same manner
        as if the Company had paid cash instead of paying with or using equity
        instruments. The cost of non-cash stock-based payments that are fully
        vested and non-forfeitable at the grant date is measured and recognized
        at that date.
|   
|    | Under the applicable Canadian accounting standards,
        compensation costs attributable to awards that are direct awards of shares,
        or share appreciation rights which call for settlement by the issuance
        of equity instruments, is measured at fair value at the grant date and
        recognized over the vesting period. Compensation cost attributable to
        awards which call for settlement in cash or other assets is measured at
        fair value at the grant date and recognized over the vesting period. For
        awards that vest at the end of a vesting period, compensation cost is
        recognized on a straight-line                                                                              

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|    | basis; for awards that vest on a graded basis, compensation
        cost is recognized on a pro-rata basis over the vesting period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | Consideration received on the exercise of stock
        options is recorded as share capital and the related contributed surplus,
        recognized initially as the options vested with the recipient, is transferred
        to share capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(f) | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    | All of the Company's foreign subsidiaries are considered
        integrated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    | Monetary assets and liabilities of the Company and
        its integrated foreign operations are translated into Canadian dollars
        at exchange rates in effect at the balance sheet date. Non-monetary assets
        and liabilities are translated at historical exchange rates unless such
        items are carried at market, in which case they are translated at the
        exchange rates in effect on the balance sheet date. Revenues and expenses,
        except depreciation, are translated at average exchange rates for the
        period. Depreciation is translated at the same exchange rates as the assets
        to which it relates.                                                                                                                                                                                     
|   
|    | Foreign exchange gains or losses are expensed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(g) | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    | The Company uses the asset and liability method
        of accounting for income taxes. Under this method, future income tax assets
        and liabilities are computed based on differences between the carrying
        amount of assets and liabilities on the balance sheet and their corresponding
        tax values, generally using the enacted or substantively enacted income
        tax rates expected to apply to taxable income in the years in which those
        temporary differences are expected to be recovered or settled.                                                                                                                                                                                                                                                                                                        
|   
|    | Future income tax assets also result from unused
        loss carry forwards and other deductions. Future tax assets are recognized
        to the extent that they are considered more likely than not to be realized.
        The valuation of future income tax assets is adjusted, if necessary, by
        the use of a valuation allowance to reflect the estimated realizable amount.                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    | The Company's accounting policy for future income
        taxes currently has no effect on the financial statements of any of the
        periods presented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(h) | Asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    | The fair value of a liability for an asset retirement
        obligation is recognized on an undiscounted cash flow basis when a reasonable
        estimate of the fair value of the obligation can be made. The asset retirement
        obligation is recorded as a liability with a corresponding increase to
        the carrying amount of the related long-lived asset. Subsequently, the
        asset retirement cost is allocated to expense using a systematic and rational
        method and is adjusted to reflect period-to-period changes in the liability
        resulting from the passage of time and from revisions to either expected
        payment dates or the amounts comprising the original estimate of the obligation.
        As at December 31, 2004, the Company does not have any asset retirement
        obligations.

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|(i) | Impairment of long-lived assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | Long-lived assets are assessed for impairment when
        events and circumstances warrant. The carrying value of a long-lived asset
        is impaired when the carrying amount exceeds the estimated undiscounted
        net cash flow from use and fair value. In that event, the amount by which
        the carrying value of an impaired long-lived asset exceeds its fair value
        is charged to earnings.                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(j) | Loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    | Basic loss per share is calculated by dividing the
        loss for the period by the weighted average number of common shares outstanding
        during the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    | Diluted loss per share is calculated using the treasury
        stock method. Under the treasury stock method, the weighted average number
        of common shares outstanding used for the calculation of diluted loss
        per share assumes that the proceeds to be received on the exercise of
        dilutive stock options and warrants are used to repurchase common shares
        at the average market price during the period.                                                                                                                                                                                                                                                                                                                                                            
|   
|    | Diluted loss per share has not been presented as
        the effect of the outstanding options and warrants would be anti-dilutive.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(k) | Fair value of financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    | The carrying values of cash and equivalents, amounts
        receivable, and accounts payable and accrued liabilities approximate their
        fair value due to their short term nature. The fair value of balances
        receivable from or payable to related parties are not readily determinable
        to the related party nature of such balances.                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    | Marketable securities are presented at the lower
        of cost, net of accumulated write downs, and market value. The Company
        is not exposed to significant credit risk or interest rate risk.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(l) | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    | The preparation of financial statements in conformity
        with Canadian generally accepted accounting principles requires management
        to make estimates and assumptions that affect the reported amounts of
        assets and liabilities, and the disclosure of contingent assets and liabilities
        as at the balance sheet date, and the reported amounts of revenues and
        expenses during the reporting period. Significant areas requiring the
        use of management estimates include the determination of potential impairments
        of asset values, and rates for depreciation of equipment, as well as the
        assumptions used in determining the fair value of non-cash stock-based
        compensation. Actual results could differ from those estimates.
|   
|(m) | Environmental expenditures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    | The operations of the Company have been, and may
        in the future be, affected from time to time in varying degree by changes
        in environmental regulations, including those for site restoration costs.
        Both the likelihood of new regulations and their overall effect upon the
        Company vary greatly from country to country and are not predictable.
        The Company’s policy is to meet or possibly                                                                                                                                                                                                                                                                                                                                                                   

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|    | surpass environmental standards
        set by relevant legislation by the application of technically proven and
        economically feasible measures.                                                                                                                                                                                                                                                                                                                                                                             
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Environmental expenditures
        that relate to ongoing environmental and reclamation programs are charged
        against operations as incurred or capitalized and amortized depending
        on their expected future economic benefit. Estimated future removal and
        site restoration costs are recognized when the ultimate liability is reasonably
        determinable, and are charged against operations over the estimated remaining
        life of the related business operations, net of expected recoveries.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(n) | Marketable securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company's investments
        in marketable securities are recorded at cost and carried at the lower
        of their aggregate cost and market value.                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(o) | Comparative figures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The preparation the prior
        years' comparative figures have been reclassified to conform to the financial
        statement presentation adopted for the current year.                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.  | MARKETABLE SECURITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

| |                                                      | Number    |          | Market   | Carrying
| | ---------------------------------------------------- | --------- | -------- | -------- | --------
| |                                                      | of shares | Cost     | value    | value   
| | December 31, 2004                                    |           |          |          |         
| | Taseko Mines Limited common shares
      (note 6(d)) | 256,272   | $715,000 | $533,046 | $363,906

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|5. | EQUIPMENT
|-- | ---------

| |                        |   |         |  |   | Accumulated  |  |   | Net Book
| | ---------------------- | - | ------- |  | - | ------------ |  | - | --------
| |                        |   | Cost    |  |   | Depreciation |  |   | Value   
| | December 31, 2004      |   |         |  |   |              |  |   |         
| | Buildings              | $ | 186,359 |  | $ | 13,977       |  | $ | 172,382 
| | Furniture and fixtures |   | 179,281 |  |   | 17,585       |  |   | 161,696 
| | Site equipment         |   | 15,387  |  |   | 15,387       |  |   | –       
| | Vehicles               |   | 17,500  |  |   | 5,250        |  |   | 12,250  
| | Computer equipment     |   | 64,462  |  |   | 12,689       |  |   | 51,773  
| |                        | $ | 462,989 |  | $ | 64,888       |  | $ | 398,101 
| |                        |   |         |  |   |              |  |   |         
| | December 31, 2003      |   |         |  |   |              |  |   |         
| | Site equipment         | $ | 15,387  |  | $ | 15,387       |  | $ | –       
| | Computer equipment     |   | 15,544  |  |   | 3,507        |  |   | 12,037  
| |                        | $ | 30,931  |  | $ | 18,894       |  | $ | 12,037  

|   |                           
|-- | --------------------------
|6. | MINERAL PROPERTY INTERESTS

| |                                                       |   | Years ended December 31
| | ----------------------------------------------------- | - | -----------------------
| |                                                       |   | 2004                   
| |                                                       |   |                        
| | Balance, beginning of the period                      | $ | –                      
| |                                                       |   |                        
| | Resource Lands                                        |   |                        
| | Issuance of 1,772,775 common shares
      (note 6(a)) |   | 11,788,621             
| | Pebble Property                                       | $ | 11,788,621             

|(a) | Pebble Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | By Assignment Agreement dated October 29, 2001 between
        the Company and Hunter Dickinson Group Inc. ("HDGI"), a related party
        to the Company, the Company was assigned an 80% interest in two options
        granted by Teck Cominco American Incorporated ("Teck Cominco") to HDGI
        in respect of Teck Cominco’s "Pebble" gold/copper/molybdenum property
        in southwestern Alaska. One option granted the right to purchase the known
        mineralized resource at Pebble (the "Resource Lands Option") and the second
        option allowed the purchase of a 50% interest in the lands surrounding
        the Resource Lands (the "Exploration Lands Option"). HDGI is a related
        party by virtue of both having directors in common with Company and its
        shareholders or their associates being at the time significant shareholders
        of the Company. The Assignment Agreement was ratified by shareholders
        of the Company on June 28, 2002.
|   
|    | The Company was assigned the 80% interest together
        with the right to acquire the remaining 20% interest in these option agreements
        in consideration of the Company reimbursing HDGI's costs of $584,655,
        which included the staking of 134 claims to expand the property and 30
        kilometers of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

| | induced polarization surveying over the new claims,
        and agreeing to "carry"( i.e. pay for) HDGI’s 20% interest up to
        a certain point.
      The Resource Lands Option was extended by one year in
        an agreement dated December 19, 2002 under which the Company issued to
        Teck Cominco 200,000 shares for the extension. Pursuant to the Resource
        Lands Option the Company had the right to purchase the 36 claims of the
        Resource Lands, subject to HDGI's 20% carried interest, by paying Teck
        Cominco US$10 million (as adjusted) in cash or shares prior to November
        30, 2004, which it did on November 23, 2004 by the issuance of 1,772,775
        shares to Teck Cominco. Teck Cominco has the right for 180 days to elect
        whether to require the Company to manage the resale of these shares in
        a manner where Teck Cominco is guaranteed US$10 million in resale
        proceeds. Teck Cominco's resale proceeds would be credited with any share
        resale surplus, and any share resale shortfall below the US$10 million
        made up by the Company in cash or through the issuance of additional shares.
        The Company had the right, until March 14, 2005, to purchase HDGI's 20%
        carried interest in the Resource Lands and the Exploration Lands by payment,
        in shares, of the independently appraised value of the 20% carried interest.
      Interim payments to Teck Cominco were also required
        under the Options, including US$250,000, in cash or shares prior to
        December 31, 2001 (which was paid in cash), 500,000 two-year share purchase
        warrants exercisable at $0.75 (which were issued on December 31, 2001)
        and a cumulative total of 1,000,000 shares (which were issued during the
        year ended December 31, 2002) and an additional 750,000 warrants (of which
        500,000 were issued on March 27, 2002 exercisable at $1.15 and the
        remaining 250,000 were issued on December 31, 2002 exercisable at $0.60)
        in two tranches before December 31, 2002.
      If the Company exercised the Resource Lands Option it
        could then exercise the Exploration Lands Option and earn a 50% interest
        in the adjacent Exploration Lands, subject to HDGI's 20% carried interest
        therein, by completing 60,000 feet of drilling on the Exploration Lands
        before November 30, 2004. This drilling requirement was completed before
        November 30, 2004 and the Company earned its 50% interest in the Exploration
        Lands Option.
      Upon the Company exercising the Resource Lands Option,
        Teck Cominco could either form a 50/50 joint venture with the Company
        with respect to the Exploration Lands, or sell its 50% interest in the
        Exploration Lands to the Company for US$4 million and retain a net
        profits interest. On February 21, 2005, subsequent to the year end, Teck
        Cominco elected to sell its 50% interest in the Exploration Lands to the
        Company for the stipulated US$4 million payment, a 4% pre-payback
        net profits interest (after debt service), and a 5% after-payback net
        profits interest in any mine production from the Exploration Lands. The
        Company issued 977,795 shares of the Company at the then-prevailing market
        price in satisfaction of the US$4 million payment.
      As a consequence of exercising the Options, the Company
        had a 90 day period (extended by agreement to March 14, 2005) to elect
        whether to acquire HDGI's 20% carried interest in the Resource Lands and
        HDGI's 20% carried interest in the Exploration Lands for share consideration
        equal to the independently appraised value of the two carried interests
        in a valuation acceptable to the TSX Venture Exchange. On March 15, 2005,
        the Company announced it had reached an agreement with HDGI to acquire
        the 20% remaining carried interests in the Resource Lands and the Exploration
        Lands for a purchase price consisting of 14,002,268
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|    | common shares (the "Consideration Shares"), representing
        approximately 20% of the immediate post-transaction market capitalization
        of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | No bonuses, commissions or finders' fees were payable
        in respect of the acquisition of the carried interest or the issue of
        the Consideration Shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    | As a result of the acquisition of the carried interest,
        Northern Dynasty acquired a 100% working interest in the entire Pebble
        property (subject only to the Teck Cominco net profits interest in the
        Exploration Lands portion of the property).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(b) | Pickle Lake Joint Venture                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    | The Company holds a 37.5% participating joint venture
        interest, subject to a 2.5% net profits interest ("NPI") held by the original
        owners, in certain mineral properties in northwestern Ontario under the
        Pickle Lake Joint Venture. The Company is searching for additional joint
        venture partners to fund further exploration on these properties. The
        Company continues to maintain these claims in good standing.                                                                                                                                                                                                                                                                                                                       
|   
|(c) | Little Bald Mountain                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    | The Company holds an 8.1% net profits interest in
        the Little Bald Mountain property in Nevada, USA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(d) | Farmout Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    | In December 2003, the Company entered into a Farmout
        Agreement (the "Agreement") with Taseko Mines Limited ("Taseko"), a public
        company with certain directors in common with the Company. Under the terms
        of the Agreement, Taseko granted to the Company rights to earn a joint
        venture working interest, subject to a maximum contribution of $650,000,
        in certain exploration properties located in the vicinity of Taseko’s
        Gibraltar mine property. For a period of 150 days after the Company had
        earned its working interests, Taseko had the right to purchase, at its
        option, the Company's earned interest for cash or common share consideration
        aggregating 110% of the Company's earn-in amount.
|   
|    | During the year ended December 31, 2003, the Company
        had earned an interest in these properties to the extent of $650,000,
        which was charged to operations in that year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    | During 2004, Taseko exercised its right to purchase
        the Company's interest by issuing, subject to regulatory approvals, 256,272
        common shares of Taseko for total consideration of $715,000. On June
        15, 2004, regulatory approval was received and the Taseko common shares
        were issued to the Company. The Company's holdings of these shares are
        presented as marketable securities (note 4).                                                                                                                                                                                                                                                                                                                                              

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|7. | EXPLORATION EXPENSES
|-- | --------------------

| |                                                           |   | Pebble      |  |   | Other       |   |   |                         |  |   |           
| | --------------------------------------------------------- | - | ----------- |  | - | ----------- | - | - | ----------------------- |  | - | ----------
| |                                                           |   | Property    |  |   | Property    |   |   | Years ended December 31
| |                                                           |   | (note 6(a)) |  |   | (note 6(d)) |   |   | 2004                    |  |   | 2003      
| | Assay and analysis                                        | $ | 745,237     |  | $ | (3,623      | ) | $ | 741,614                 |  | $ | 290,771   
| | Drilling                                                  |   | 7,689,138   |  |   | (715,000    | ) |   | 6,974,138               |  |   | 2,700,068 
| | Engineering                                               |   | 3,886,839   |  |   | –           |   |   | 3,886,839               |  |   | 83,301    
| | Environmental                                             |   | 9,806,864   |  |   | –           |   |   | 9,806,864               |  |   | –         
| | Equipment rental                                          |   | 248,577     |  |   | –           |   |   | 248,577                 |  |   | 27,648    
| | Freight                                                   |   | 603,711     |  |   | –           |   |   | 603,711                 |  |   | 53,275    
| | Geological                                                |   | 1,398,162   |  |   | (749        | ) |   | 1,397,413               |  |   | 622,183   
| | Graphics                                                  |   | 93,985      |  |   | 472         |   |   | 94,457                  |  |   | 99,932    
| | Helicopter/fixed wing                                     |   | 3,823,073   |  |   | 2,798       |   |   | 3,825,871               |  |   | 632,331   
| | Option payments                                           |   | –           |  |   | –           |   |   | –                       |  |   | –         
| | Property fees/assessment                                  |   | 139,714     |  |   | –           |   |   | 139,714                 |  |   | 195,389   
| | Site activities                                           |   | 3,715,240   |  |   | –           |   |   | 3,715,240               |  |   | 723,326   
| | Socioeconomic                                             |   | 686,948     |  |   | –           |   |   | 686,948                 |  |   | 5,858     
| | Travel and accommodation                                  |   | 475,105     |  |   | (1,591      | ) |   | 473,514                 |  |   | 67,647    
| | Exploration expenses incurred during                      |   |             |  |   |             |   |   |                         |  |   |           
| | the year (to statement of operations)                     | $ | 33,312,593  |  | $ | (717,693    | ) | $ | 32,594,900              |  | $ | 5,501,729 
| | Stock-based compensation                                  |   |             |  |   |             |   |   | 3,111,302               |  |   | 426,178   
| | Exploration expenses, including stock-based compensation, |   |             |  |   |             |   |   |                         |  |   |           
| | incurred
      during the year                            |   |             |  |   |             |   |   | 35,706,202              |  |   | 5,927,907 
| | Cumulative exploration expenses,                          |   |             |  |   |             |   |   |                         |  |   |           
| | beginning of
      year                                   |   |             |  |   |             |   |   | 11,426,237              |  |   | 5,498,330 
| | Cumulative exploration expenses,                          |   |             |  |   |             |   |   |                         |  |   |           
| | end of year                                               |   |             |  |   |             |   | $ | 47,132,439              |  | $ | 11,426,237

|    |                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8.  | SHARE CAPITAL                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                    
|(a) | Authorized share capital                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                    
|    | The Company's authorized
        share capital consists of an unlimited number of common shares, without
        par value.                                                                                                        
|    |                                                                                                                                                                                                                                    
|    | At the Annual and Extraordinary
        General Meeting of Shareholders held in June 2004, shareholders approved
        the increase in authorized share capital from 100,000,000 to an unlimited
        number of common shares.

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|(b) | Issued and outstanding common shares
|--- | ------------------------------------

| |                                                              |       | Number of  |  |   |           
| | ------------------------------------------------------------ | ----- | ---------- |  | - | ----------
| | Common shares issued:                                        | Price | Shares     |  |   | Amount    
| | Balance, December 31, 2001                                   |       | 9,292,455  |  | $ | 7,907,717 
| | Private placement
      (net of issue costs)                 | $0.34 | 1,176,470  |  |   | 391,317   
| | Private placement
      (net of issue costs)                 | 0.50  | 2,000,000  |  |   | 890,700   
| | Private placement
      (net of issue costs)                 | 1.05  | 197,548    |  |   | 189,793   
| | Share purchase
      options exercised                       | 0.40  | 310,750    |  |   | 124,300   
| | Share purchase
      options exercised                       | 0.55  | 13,000     |  |   | 7,150     
| | Property option
      payments (note 5(a))                   | 0.60  | 700,000    |  |   | 420,000   
| | Property option
      payments (note 5(a))                   | 1.15  | 500,000    |  |   | 575,000   
| | Share purchase
      warrants exercised                      | 0.40  | 1,325,000  |  |   | 530,000   
| | Balance, December 31, 2002                                   |       | 15,515,223 |  |   | 11,035,977
| | Private
      placement January 2003, net of issue costs (i) | 0.50  | 1,700,000  |  |   | 809,654   
| | Private placement
      July 2003, net of issue costs (ii)   | 0.72  | 6,944,445  |  |   | 4,979,549 
| | Share purchase
      options exercised                       | 0.40  | 981,500    |  |   | 392,600   
| | Share purchase
      options exercised                       | 0.43  | 8,000      |  |   | 3,440     
| | Share purchase
      options exercised                       | 0.50  | 12,500     |  |   | 6,250     
| | Share purchase
      options exercised                       | 0.75  | 12,500     |  |   | 9,375     
| | Warrants exercised                                           | 0.40  | 775,000    |  |   | 310,000   
| | Warrants exercised                                           | 0.45  | 1,176,470  |  |   | 529,412   
| | Warrants exercised                                           | 0.60  | 1,910,000  |  |   | 1,146,000 
| | Warrants exercised                                           | 0.62  | 2,000,000  |  |   | 1,240,000 
| | Warrants exercised                                           | 0.75  | 500,000    |  |   | 375,000   
| | Warrants exercised                                           | 1.15  | 197,548    |  |   | 227,180   
| | Balance, December 31, 2003                                   |       | 31,733,186 |  |   | 21,064,437
| | Private placement
      March 2004, net of issue costs (iii) | 8.00  | 2,750,000  |  |   | 21,905,914
| | Private placement
      August 2004, net of issue costs (iv) | 3.55  | 2,816,902  |  |   | 9,800,333 
| | Share purchase
      options exercised                       | 0.40  | 88,750     |  |   | 35,500    
| | Share purchase
      options exercised                       | 0.50  | 106,500    |  |   | 53,250    
| | Share purchase
      options exercised                       | 0.75  | 70,000     |  |   | 52,500    
| | Share purchase
      options exercised                       | 1.18  | 10,000     |  |   | 11,800    
| | Share purchase
      options exercised                       | 5.00  | 33,999     |  |   | 169,995   
| | Fair value of stock
      options allocated to shares issued |       |            |  |   |           
| | on exercise                                                  |       | –          |  |   | 562,492   
| | Property option
      payments                               | 6.65  | 1,772,725  |  |   | 11,788,621
| | Warrants exercised                                           | 0.60  | 30,000     |  |   | 18,000    
| | Warrants exercised                                           | 0.90  | 6,944,445  |  |   | 6,250,000 
| | Warrants exercised                                           | 1.15  | 500,000    |  |   | 575,000   
| | Warrants exercised                                           | 4.65  | 821,875    |  |   | 3,821,719 
| | Replacement of
      lost certificate                        |       | 11,905     |  |   | –         
| | Balance, December 31, 2004                                   |       | 47,690,287 |  | $ | 76,109,561

| | (i) | In January 2003, the Company completed a private
        placement consisting of 1,300,000 flow-through units and 400,000 non flow-through
        units at $0.50 each. Each flow-through unit was comprised of a flow-through
        common share and a two-year non-flow-through share purchase warrant. Each
        warrant entitled the holder to purchase one common share
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|    |                                                                                                                                                     | at a price of $0.60 until January 14, 2005. The
        non flow-through units were comprised of one common share and one two-year
        share purchase warrant with the same warrant terms.                                                                                                                                                                                                                                                                                                                                                                                      
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | (ii)                                                                                                                                                | In July 2003, the Company completed a private placement
        consisting of 6,944,445 units at a price of $0.72 per unit. Each unit
        was comprised of one common share and one warrant exercisable to purchase
        an additional common share at a price of $0.90 until June 12, 2004.                                                                                                                                                                                                                                                                                 
|   
|    | (iii)                                                                                                                                               | In March 2004, the Company completed a private placement
        by issuing 2,750,000 units at $8.00 each. Each unit was comprised
        of a common share and one half warrant. Each whole warrant entitled the
        holder to purchase one common share at a price of $9.00 until March
        16, 2005.                                                                                                                                                                                                                                                                    
|   
|    |                                                                                                                                                     | On July 16, 2004, the Company enacted, pursuant
        to approval from the TSX Venture Exchange, a reduction in the exercise
        price for 821,875 of these warrants to $4.65 each with a 30-day accelerated
        expiry provision, at the option of the Company, in the event the closing
        price of the Company's common shares on the TSX Venture Exchange is at
        least $4.65 for any 10 consecutive trading days. Such notice was issued
        on October 14, 2004 and all 821,875 of these warrants were exercised within
        the allotted 30 days.
|   
|    | (iv)                                                                                                                                                | In August 2004, the Company completed a private
        placement consisting of 2,816,902 units at a price of $3.55 per unit.
        Each unit was comprised of one common share and one warrant exercisable
        to purchase one additional common share at a price of $4.15 until
        August 5, 2005. The common shares in the units and the shares issuable
        on exercise of the warrants are subject to a four-month hold period expiring
        December 5, 2005.                                                                                               
|   
|(c) | Share purchase warrants                                                                                                                            
|   
|    | The continuity of share purchase warrants
        (each warrant exercisable into one common share) for the year ended December
        31, 2004 is:

| |                                       |           |       | Exercise |       | Dec. 31   |       |           |       |            |       | Expired/  |  | Dec. 31  
| | ------------------------------------- | --------- | ----- | -------- | ----- | --------- | ----- | --------- | ----- | ---------- | ----- | --------- |  | ---------
| | Expiry date                           | Note      |       | Price    |       | 2003      |       | Issued    |       | Exercised  |       | Cancelled |  | 2004     
| | March 27, 2004                        |           |       | $1.15    |       | 500,000   |       | –         |       | (500,000   | )     | –         |  | –        
| | June 12, 2004                         | 8(b)(ii)  |       | $0.90    |       | 6,944,445 |       | –         |       | (6,944,445 | )     | –         |  | –        
| | January 14, 2005                      | 8(b)(i)   |       | $0.60    |       | 40,000    |       | –         |       | (30,000    | )     | –         |  | 10,000   
| | March 16, 2005                        | 8(b)(iii) |       | $9.00    |       | –         |       | 553,125   |       | –          |       | –         |  | 553,125  
| | March 16, 2005                        | 8(b)(iii) |       | $4.65    | *     | –         |       | 821,875   |       | (821,875   | )     | –         |  | –        
| | August 5, 2005                        | 8(b)(iv)  |       | $4.15    |       | –         |       | 2,816,902 |       | –          |       | –         |  | 2,816,902
| |                                       |           |       |          |       | 7,484,445 |       | 4,191,902 |       | (8,296,320 | )     | –         |  | 3,380,027
| |                                       |           |       |          |       |           |       |           |       |            |       |           |  |          
| | Weighted
      average exercise price |           | $0.92 |          | $4.89 |           | $0.82 |           | $   – |            | $4.93

| | * The exercise price of these warrants was amended
        to $4.65 from $9.00 during the current year (see note 8(b) (iii)).
      Subsequent to December 31, 2004, 10,000 share purchase
        warrants were exercised at $0.60.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

| | The continuity of share purchase warrants (each warrant
        exercisable into one common share) for the year ended December 31, 2003
        is:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------

| |                                 | Exercise |  | Dec. 31   |  |           |  |            |   | Expired/  |  | Dec. 31  
| | ------------------------------- | -------- |  | --------- |  | --------- |  | ---------- | - | --------- |  | ---------
| | Expiry date                     | Price    |  | 2002      |  | Issued    |  | Exercised  |   | Cancelled |  | 2003     
| | July 16, 2003                   | $0.40    |  | 775,000   |  | –         |  | (775,000   | ) | –         |  | –        
| | December 27, 2003               | $1.15    |  | 197,548   |  | –         |  | (197,548   | ) | –         |  | –        
| | December 31, 2003               | $0.75    |  | 500,000   |  | –         |  | (500,000   | ) | –         |  | –        
| | February 20, 2004               | $0.45    |  | 1,176,470 |  | –         |  | (1,176,470 | ) | –         |  | –        
| | March 27, 2004                  | $1.15    |  | 500,000   |  | –         |  | –          |   | –         |  | 500,000  
| | April 19, 2004                  | $0.62    |  | 2,000,000 |  | –         |  | (2,000,000 | ) | –         |  | –        
| | June 12, 2004                   | $0.90    |  | –         |  | 6,944,445 |  | –          |   | –         |  | 6,944,445
| | December 31, 2004               | $0.60    |  | 250,000   |  | –         |  | (250,000   | ) | –         |  | –        
| | January 14, 2005                | $0.60    |  | –         |  | 1,700,000 |  | (1,660,000 | ) | –         |  | 40,000   
| |                                 |          |  | 5,399,018 |  | 8,644,445 |  | (6,559,018 | ) | –         |  | 7,484,445
| |                                 |          |  |           |  |           |  |            |   |           |  |          
| | Weighted average exercise price |          |  | $0. 63    |  | $0.84     |  | $0.58      |   | $  –      |  | $0.92    

|(d) | Share purchase option compensation plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | The Company has a share purchase option compensation
        plan, approved by the shareholders at the 2004 Annual and Extraordinary
        General Meeting, that authorizes the Company to grant up to 7,000,000
        share purchase options to its employees, officers, directors and consultants.
        As at December 31, 2004, 1,657,499 of these options had been exercised,
        4,199,834 were outstanding and 1,142,667 remained available to grant.
        Vesting of these options is over a period of up to two years, subject
        to regulatory terms and approval. The exercise price of each option can
        be set equal to or greater than the closing market price of the common
        shares on the TSX Venture Exchange on the day prior to the date of the
        grant of the option, less any allowable discounts from the market price.
        Options have a maximum term of five years and terminate 30 days following
        the termination of the optionee's employment, except in the cases of retirement
        or death. Typically, the vesting of the options occurs six, twelve, and
        eighteen months after the grant dates, with one-third becoming vested
        every six months.

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

| | The continuity of share purchase options for the year ended December 31,
      2004 is:
| | ---------------------------------------------------------------------------------------

| |                                 | Exercise |  | Dec. 31   |  |           |  |           |   | Expired / |   | Dec. 31  
| | ------------------------------- | -------- |  | --------- |  | --------- |  | --------- | - | --------- | - | ---------
| | Expiry date                     | Price    |  | 2003      |  | Granted   |  | Exercised |   | Cancelled |   | 2004     
| | May 15, 2004                    | $0.40    |  | 88,750    |  | –         |  | (88,750   | ) | –         |   | –        
| | December 20, 2004               | $0.50    |  | 106,500   |  | –         |  | (106,500  | ) | –         |   | –        
| | May 9, 2005                     | $0.75    |  | 95,000    |  | –         |  | (70,000   | ) | –         |   | 25,000   
| | July 29, 2005                   | $0.94    |  | 50,000    |  | –         |  | –         |   | –         |   | 50,000   
| | July 29, 2005                   | $1.18    |  | 15,500    |  | –         |  | (10,000   | ) | (2,500    | ) | 3,000    
| | July 29, 2005                   | $2.35    |  | 315,000   |  | –         |  | –         |   | –         |   | 315,000  
| | September 19, 2005              | $2.30    |  | 7,500     |  | –         |  | –         |   | –         |   | 7,500    
| | November 30, 2005               | $5.00    |  | 1,535,000 |  | –         |  | (33,999   | ) | (31,667   | ) | 1,469,334
| | November 30, 2005               | $5.05    |  | 38,000    |  | –         |  | –         |   | –         |   | 38,000   
| | November 30, 2006               | $4.65    |  | –         |  | 100,000   |  | –         |   | –         |   | 100,000  
| | November 30, 2006               | $5.00    |  | –         |  | 2,192,000 |  | –         |   | –         |   | 2,192,000
| |                                 |          |  | 2,251,250 |  | 2,292,000 |  | (309,249  | ) | (34,167   | ) | 4,199,834
| |                                 |          |  |           |  |           |  |           |   |           |   |          
| | Weighted average exercise price |          |  | $3.93     |  | $4.98     |  | $1.04     |   | $4.72     |   | $4.71    

| | Subsequent to December 31, 2004, 3,000 share purchase
        options were exercised at $1.18 and 20,000 share purchase options
        were exercised at $0.75.
      The continuity of share purchase options for the year
        ended December 31, 2003 is:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                 | Exercise |  | Dec. 31   |  |           |  |            |   | Expired / |  | Dec. 31  
| | ------------------------------- | -------- |  | --------- |  | --------- |  | ---------- | - | --------- |  | ---------
| | Expiry date                     | Price    |  | 2002      |  | Granted   |  | Exercised  |   | Cancelled |  | 2003     
| | February 12, 2003               | $0.43    |  | 8,000     |  | –         |  | (8,000     | ) | –         |  | –        
| | May 15, 2004 (i)                | $0.40    |  | 1,070,250 |  | –         |  | (981,500   | ) | –         |  | 88,750   
| | December 20, 2004               | $0.50    |  | 119,000   |  | –         |  | (12,500    | ) | –         |  | 106,500  
| | May 9, 2005                     | $0.75    |  | –         |  | 107,500   |  | (12,500    | ) | –         |  | 95,000   
| | July 29, 2005                   | $0.94    |  | –         |  | 50,000    |  | –          |   | –         |  | 50,000   
| | July 29, 2005                   | $1.18    |  | –         |  | 15,500    |  | –          |   | –         |  | 15,500   
| | July 29, 2005                   | $2.35    |  | –         |  | 315,000   |  | –          |   | –         |  | 315,000  
| | September 19, 2005              | $2.30    |  | –         |  | 7,500     |  | –          |   | –         |  | 7,500    
| | November 30, 2005               | $5.00    |  | –         |  | 1,535,000 |  | –          |   | –         |  | 1,535,000
| | November 30, 2005               | $5.05    |  | –         |  | 38,000    |  | –          |   | –         |  | 38,000   
| |                                 |          |  | 1,197,250 |  | 2,068,500 |  | (1,014,500 | ) | –         |  | 2,251,250
| |                                 |          |  |           |  |           |  |            |   |           |  |          
| | Weighted average exercise price |          |  | $0.41     |  | $4.24     |  | $0.41      |   | $  –      |  | $3.93    

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

| | The exercise prices of all share purchase options
        granted during the year were equal to the market price at the grant date.
        Using an option pricing model with the assumptions noted below, the estimated
        fair value of all options granted during 2004 and 2003 have been reflected
        in the statement of operations as follows:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                   |   | Years ended December 31 | 
| | ------------------------------------------------- | - | ----------------------- | 
| |                                                   |   | 2004                    | 
| | Exploration                                       |   |                         | 
| | Engineering                                       | $ | 270,562                 | 
| | Environmental, socioeconomic
      and land       |   | 517,451                 | 
| | Geological                                        |   | 2,323,289               | 
| |                                                   |   | 3,111,302               | 
| | Operations and administration                     |   | 3,267,575               | 
| | Total compensation cost recognized in             |   |                         | 
| | operations, credited to contributed
      surplus | $ | 6,378,877               | 

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

| |                         | 2004          | 2003          | 2002        
| | ----------------------- | ------------- | ------------- | ------------
| | Risk-free interest rate | 3%            | 3%            | 3%          
| | Expected life           | 2.2 years     | 2.1 years     | 2.0 years   
| | Vesting period          | 0 – 18 months | 0 – 18 months | 0 – 6 months
| | Expected volatility     | 80%           | 92%           | 40%         
| | Expected dividend yield | nil           | nil           | nil         

|    | Option pricing models require the input of highly subjective assumptions
      including the expected price volatility. Changes in the subjective input
      assumptions can materially affect the fair value estimate, and therefore
      the existing models do not necessarily provide a reliable measure of the
      fair value of the Company's share purchase options.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(e) | Contributed surplus                                                                                                                                                                                                                                                                                                                                                            

| | Balance, December 31, 2002                                               | $ | 13,271    |  
| | ------------------------------------------------------------------------ | - | --------- | -
| | Changes during 2003                                                      |   |           |  
| | Non-cash stock-based
      compensation                                  |   | 1,675,064 |  
| | Contributed surplus, December 31, 2003                                   |   | 1,688,335 |  
| | Changes during 2004:                                                     |   |           |  
| | Non-cash stock-based
      compensation                                  |   | 6,378,877 |  
| | Fair value of stock options allocated to
      shares issued on exercise |   | (562,492  | )
| | Contributed surplus, December 31, 2004                                   | $ | 7,504,720 |  

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|9. | RELATED PARTY BALANCES AND TRANSACTIONS
|-- | ---------------------------------------

| |                                             |   | Years ended       |  
| | ------------------------------------------- | - | ----------------- | -
| | Transactions                                |   | December 31, 2004 |  
| | Services rendered and expenses reimbursed   |   |                   |  
| | Hunter
      Dickinson Inc. (a)             | $ | 2,002,148         |  
| | Hunter Dickinson Group Inc.
      (b)       |   | 12,800            |  
| | Brian Mountford
      & Associates Ltd. (c) |   | 112,000           |  
| | Sidev Holdings Ltd. (d)                     |   | 148,567           |  
| | Galahad Gold plc (e)                        |   | 129,000           |  
| |                                             |   |                   |  
| |                                             |   |                   |  
| |                                             |   |                   |  
| | Balances receivable (payable)               |   | December 31, 2004 |  
| | Hunter Dickinson Inc. (a)                   | $ | 35,484            |  
| | Hunter
      Dickinson Group Inc. (b)       |   | (3,424            | )
| | Brian Mountford & Associates Ltd. (c)       |   | (20,000           | )
| |                                             | $ | 12,060            |  

| | (a) | Hunter Dickinson Inc. ("HDI") is a private company
        with certain directors in common that provides geological, technical,
        corporate development, administrative and management services to, and
        incurs third party costs on behalf of, the Company on a full cost-recovery
        basis pursuant to an agreement dated December 31, 1996. The balances payable
        to HDI has resulted from advances by HDI to the Company and from services
        rendered to, but not yet paid for by, the Company.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) | Hunter Dickinson Group Inc. ("HDGI") is a private
        company with certain directors in common that provides consulting services
        at market rates to the Company. The balances payable to HDGI have resulted
        from the services rendered to, but not yet paid for by, the Company.                                                                                                                                                                                                                               
|
| |     | In October 2001, the Company was assigned an 80%
        interest in two options granted by Teck Cominco to HDGI in respect of
        Teck Cominco’s "Pebble" gold-copper- molybdenum property in southwestern
        Alaska (note 6(a))                                                                                                                                                                                                                                                                                         
|
| |     | Subsequent to the year end, the Company announced
        it had reached an agreement with HDGI to acquire the 20% remaining interest
        in the Pebble Property from HDGI (note 6(a)).                                                                                                                                                                                                                                                                                                                                        
|
| | (c) | During the year ended December 31, 2004, the Company
        paid $112,000 (year ended December 31, 2003 – $16,500) to
        Brian Mountford & Associates Ltd., a private company controlled by
        Brian Mountford, a director of the Company, and President and Director
        of Northern Dynasty Mines Inc., a wholly owned private USA subsidiary
        of the Company, for engineering and project management services and for
        his services as an officer of the                                           

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|    |                                                                                                                                                                                                                                                                                                                                                          | Company. Mr Mountford also serves as a consultant
        to Galahad Gold plc, a significant shareholder of the Company.                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | (d)                                                                                                                                                                                                                                                                                                                                                      | During the year ended December 31, 2004, the Company
        paid $148,567 (year ended December 31, 2003 – $12,415) to
        Sidev Holdings Ltd., a private company controlled by Bruce Jenkins, the
        Chief Operating Officer and a director of Northern Dynasty Mines Inc.,
        a wholly owned private USA subsidiary of the Company, for project management
        services.
|   
|    | (e)                                                                                                                                                                                                                                                                                                                                                      | During the year ended December 31, 2004, the Company
        was charged $129,000 (year ended December 31, 2003 - $nil) by
        Galahad Gold plc, a significant shareholder of the Company with a director
        in common, for engineering services.                                                                                                                                  
|   
|    |                                                                                                                                                                                                                                                                                                                                                         
|10. | INCOME TAXES                                                                                                                                                                                                                                                                                                                                            
|   
|    | As at December 31, 2003, Northern Dynasty
        Minerals Ltd., the Canadian parent company had the following amounts available
        to reduce future taxable income, the future tax benefits of which have
        not been reflected in the accounts, as it cannot be considered more likely
        than not that these amounts will be utilized.
|   
|    | The following non-capital and capital
        losses, approximately, are available to reduce future taxable income:                                                                                                                                                                                                                                     

| | Expiry Date                                                   |   |          
| | ------------------------------------------------------------- | - | ---------
| | 2005                                                          | $ | 54,000   
| | 2006                                                          |   | –        
| | 2007                                                          |   | –        
| | 2008                                                          |   | 25,000   
| | 2009                                                          |   | 306,000  
| | 2010                                                          |   | 813,000  
| | 2011                                                          |   | 1,187,000
| | 2012                                                          |   | 1,754,000
| | Total non-capital losses                                      |   | 4,139,000
| | Capital losses carried forward                                |   | 1,420,000
| | Excess of aggregate tax cost of equipment over net book value |   | –        
| | Total losses and excess equipment tax costs available         | $ | 5,559,000

|    |                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|11. | SEGMENTED INFORMATION                                                                                                                                               
|   
|    | The Company operates in a single reportable operating
        and geographic segment – the exploration and development of mineral
        properties in Alaska, USA.

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|12. | SUBSEQUENT EVENTS                            
|--- | ---------------------------------------------
|   
|    | Subsequent to December 31, 2004, the Company:

| | • | completed a $30.8 million private placement equity financing,                                                      
| | - | -------------------------------------------------------------------------------------------------------------------
| | • | issued 23,000 common shares pursuant to the exercise of share
      purchase options,                              
| | • | issued 10,000 common shares pursuant to the exercise of share
      purchase warrants,                             
| | • | issued approximately 977,800 common shares pursuant to the
      Teck Cominco property acquisition (note 6(a)), and
| | • | issued 14,002,268 common shares to acquire the 20% remaining
      interest in the Pebble property (note 6(a)).    

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|13  | DIFFERENCES BETWEEN CANADIAN
        AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(a) | Mineral property costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Company’s policy
        of expensing all property costs except where an outright property interest
        has been acquired results in an accounting treatment for these costs which
        the Company considers to be materially congruent with US GAAP. Accordingly,
        the Company considers that no US/Canadian GAAP difference exists with
        respect to mineral property costs in these consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(b) | Stock options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | United States Statement
        of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
        for Stock-Based Compensation", requires that stock-based compensation
        be accounted for based on a fair value methodology, although, in certain
        instances, it allows the effects to be disclosed in the notes to the financial
        statements rather than in the statement of operations. SFAS 123 also allows
        an entity to continue to measure compensation costs for stock-based compensation
        plans using the intrinsic value based method of accounting as prescribed
        by APB Opinion No. 25 ("APB 25"), which is comparable to Canadian GAAP
        prior to January 1, 2003. To December 31, 2002, the Company had elected
        to measure compensation cost for those plans using APB 25 for US GAAP
        purposes.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | United States Statement
        of Financial Accounting Standards 148 ("SFAS 148"), "Accounting for
        Stock-Based Compensation - Transition and Disclosure - an amendment
        of FASB Statement No. 123", permits the Company to adopt a
        fair value methodology on a prospective basis. Effective January 1, 2003,
        for US GAAP purposes the Company prospectively adopted the fair value
        method of accounting for stock-based compensation, a treatment consistent
        with the accounting treatment used for Canadian GAAP.                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Under APB 25, compensation
        cost must be recognized for all compensatory stock options granted whenever
        the market price of the Company's shares on the date of grant exceeds
        the exercise price. The policies of the TSX Venture Exchange permit the
        issuance of options with exercise prices discounted up to 25% from the
        closing market value at the date of granting. Such a                                                                                                                                                                                                                                                                                                                                                                                                                                                              

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|    | discount, if provided option holders, would give
        rise to a compensation expense under U.S. GAAP as noted above. However,
        the Company has to date only granted stock options where the exercise
        price is based on the fair value of the stock at the date of the grant
        and, accordingly, under U.S. GAAP, would not have recognized any compensation
        costs.                                                              
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | See note 7(d) for a summary of the changes in the
        Company’s stock options for the 2004 and 2003 fiscal years.                                                                                                                                                                                                                                                                                                                                           
|   
|(c) | Available-for-sale securities                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|    | US GAAP requires investments in available-for-sale
        securities to be recorded at fair value in accordance with SFAS 115, "Accounting
        for Certain Investments in Debt and Equity Securities". Unrealized
        gains are recorded as "other comprehensive income" and the cumulative
        balance of these amounts is recorded as a separate component of shareholders’
        equity.                                                      
|   
|    | US GAAP requires the Company to present comprehensive
        income in accordance with SFAS 130, "Reporting Comprehensive Income",
        which establishes standards for the reporting and display of comprehensive
        income, its components and accumulated balances. Comprehensive income
        comprises net income and all changes to shareholders’ equity except
        those resulting from investments by owners and distributions to owners.
|   
|    | Canadian GAAP does not require the presentation
        of comprehensive income.                                                                                                                                                                                                                                                                                                                                                                                
|   
|    | Under US GAAP, the Company's investment in marketable
        securities, namely its holdings of common shares of Taseko Mines Limited,
        would have a mark-to-market adjustment of $169,140 to reflect their
        market value of $533,046 at December 31, 2004. No such adjustment
        would be recorded under Canadian GAAP.                                                                                                                    

---

|NORTHERN DYNASTY MINERALS LTD.
      Notes to Consolidated Financial Statements
      For the year ended December 31, 2004
      (Expressed in Canadian Dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|(d) | Summary of effect of differences in Canadian and US GAAP                                                                                                                    
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | The effect of the above differences between Canadian
        GAAP and US GAAP on the balance sheet and statement of operations and
        deficit is summarized as follows:

| | Total assets                                              |   |             |   |   | 2004       |   |   | 2003       |  
| | --------------------------------------------------------- | - | ----------- | - | - | ---------- | - | - | ---------- | -
| | Total assets under Canadian GAAP                          |   |             |   | $ | 25,460,941 |   | $ | 3,682,646  |  
| | Mark-to-market adjustment, shares of Taseko Mines Limited |   |             |   |   | 169,140    |   |   | –          |  
| | Total assets under US GAAP                                |   |             |   | $ | 25,630,081 |   | $ | 3,682,646  |  
| |                                                           |   |             |   |   |            |   |   |            |  
| |                                                           |   |             |   |   |            |   |   |            |  
| | Loss for the year                                         |   | 2004        |   |   | 2003       |   |   | 2002       |  
| | Loss for the year under Canadian GAAP and                 |   |             |   |   |            |   |   |            |  
| | US GAAP                                                   | $ | (41,698,647 | ) | $ | (8,299,461 | ) | $ | (5,112,493 | )
| | Other comprehensive income                                |   |             |   |   |            |   |   |            |  
| | Mark-to-market
      adjustment on shares of              |   |             |   |   |            |   |   |            |  
| | Taseko Mines Limited                                      |   | 169,140     |   |   | –          |   |   | –          |  
| | Comprehensive loss                                        | $ | (41,529,507 | ) | $ | (8,299,461 | ) | $ | (5,112,493 | )
| |                                                           |   |             |   |   |            |   |   |            |  
| | Loss per share under US GAAP                              | $ | (1.04       | ) | $ | (0.35      | ) | $ | (0.41      | )
| |                                                           |   |             |   |   |            |   |   |            |  
| | Comprehensive loss per share under US                     |   |             |   |   |            |   |   |            |  
| | GAAP                                                      | $ | (1.04       | ) | $ | (0.35      | ) | $ | (0.41      | )

---