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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C.
20549

FORM 20-F

[  ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or
12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 OR

[X] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to
_______________

Commission file number 0-31224



NORTHERN DYNASTY MINERALS LTD.(Exact name of Registrant as specified in its charter)

BRITISH COLUMBIA, CANADA(Jurisdiction of
incorporation or organization)

15th Floor, 1040 West Georgia StreetVancouver,
British Columbia, Canada, V6E 4H1(Address of principal executive
offices)

Marchand Snyman, Chief Financial OfficerFacsimile No.:
604-684-809215th Floor, 1040 West Georgia StreetVancouver, British
Columbia, Canada, V6E 4H1(Name, Telephone, E-mail and/or Facsimile
number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section
12(b) of the Act:

Title of Each Class: Not applicableName of each exchange
on which registered: Not applicable

Securities registered or to be registered pursuant to Section
12(g) of the Act:

Common shares with no par value

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Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the
issuer's classes of capital or common stock as of the close of the period
covered by the annual report:

221,939,376 common shares as of December 31, 2015

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.

[    ]  Yes            [X]  No

If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934.

[    ]  Yes            [X]  No

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

[X]  Yes            [    ]  No

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).

[    ]  Yes             [    ]  No

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of
the Exchange Act. (check one):

Large accelerated filer [   ]
    Accelerated filer [   ]
    Non-accelerated filer [X]


Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:

|U.S.GAAP [   ] | International Financial
      Reporting Standards as issued
      by the International Accounting Standards
    Board [X] | Other [   ]
|-------------- | ------------------------------------------------------------------------------------------------------------------------- | -----------

If "Other" has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant
has elected to follow:

Item 17 [    ]               Item 18 [    ]

If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[    ]  Yes            [X] No

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      2

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

|GENERAL                             |                                                                                    | 4  
|----------------------------------- | ---------------------------------------------------------------------------------- | ---
|ITEM
      1                        | IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS                        | 11 
|ITEM
      2                        | OFFER
      STATISTICS AND EXPECTED TIMETABLE                                      | 11 
|ITEM
      3                        | KEY
      INFORMATION                                                              | 11 
|ITEM
      4                        | INFORMATION
      ON THE COMPANY                                                   | 19 
|ITEM
      4A                       | UNRESOLVED
      STAFF COMMENTS                                                    | 42 
|ITEM
      5                        | OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS                                 | 42 
|ITEM
      6                        | DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES                                   | 51 
|ITEM
      7                        | MAJOR
      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            | 83 
|ITEM
      8                        | FINANCIAL
      INFORMATION                                                        | 87 
|ITEM
      9                        | THE
      OFFER AND LISTING                                                        | 92 
|ITEM
      10                       | ADDITIONAL
      INFORMATION                                                       | 93 
|ITEM
      11                       | QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   | 113
|ITEM
      12                       | DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES                       | 114
|ITEM
      13                       | DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES                              | 114
|ITEM
      14                       | MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 114
|ITEM
      15                       | CONTROLS
      AND PROCEDURES                                                      | 114
|ITEM
      16                       | [RESERVED]                                                                         | 116
|ITEM
      16A                      | AUDIT
      COMMITTEE FINANCIAL EXPERT                                             | 116
|ITEM
      16B                      | CODE
      OF ETHICS                                                               | 116
|ITEM
      16C                      | PRINCIPAL
      ACCOUNTANT FEES AND SERVICES                                       | 117
|ITEM
      16D                      | EXEMPTIONS
      FROM LISTING STANDARDS FOR AUDIT COMMITTEES                       | 117
|ITEM
      16E                      | PURCHASES
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS       | 118
|ITEM
      16F                      | CHANGE
      IN REGISTRANT'S CERTIFYING ACCOUNTANT                                 | 118
|ITEM
      16G                      | CORPORATE
      GOVERNANCE                                                         | 118
|ITEM
      16H                      | MINE
      SAFETY DISCLOSURE                                                       | 119
|ITEM
      17                       | FINANCIAL
      STATEMENTS                                                         | 119
|ITEM
      18                       | FINANCIAL
      STATEMENTS                                                         | 119
|ITEM
      19                       | EXHIBITS                                                                           | 119
|INDEX
      TO FINANCIAL STATEMENTS | 122                                                                               

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GENERAL

In this Annual Report on Form 20-F, all references to "we",
"Northern Dynasty" or the "Company" refer to Northern Dynasty Minerals Ltd.

The Company uses the Canadian Dollar as its reporting currency.
All references in this document to "Dollars" or "$" are expressed in Canadian
Dollars ("CAD", "C$"), unless otherwise indicated. See also Item 3  Key
Informationfor more detailed currency and conversion information.

Except as noted, the information set forth in this Annual
Report is as of April 29, 2016 and all information included in this document
should only be considered correct as of such date.

GLOSSARY OF TERMS

Certain terms used herein are defined as follows:

Alkalic
    Igneous rock containing a relatively high percentage of
      sodium and potassium feldspar; alteration can also introduce alkali
      minerals.Argillic
    Hydrothermal alteration of wall rock which forms clay
      minerals including kaolinite, smectite, illite and other species.CuEQ
    Copper Equivalent.Comminution
    Reduction of solid materials from one average particle
      size to a smaller average particle size by crushing, grinding, cutting,
      vibrating, or other means.Deportment
    Assessment of how minerals contribute to grade, as each
      mineral is likely to behave differently to comminution, flotation or
      leaching.Diorite
    Grey to dark-grey igneous intrusive rock of intermediate
      composition, composed principally of plagioclase feldspar along with
      biotite, hornblende and/or pyroxene.Geometallurgy
    Practice of combining geology and/or geostatistics with
      metallurgy.Graben
    Down-dropped block of land bordered by parallel faults.Granodiorite
    Medium- to coarse-grained acid igneous rock with quartz
      (>20%), plagioclase and alkali feldspar, commonly with minor hornblende
      and/or biotite.HDGI
    Is a reference to Hunter Dickinson Group Inc. (now
      renamed 3537137 Canada Inc.) which is the related party corporation which
      originally held the options to the Pebble Project, and which was acquired
      by the Company in fiscal 2006.Hypogene
    Processes below the earth's surface which, in mineral
      deposits, result in precipitation of primary minerals like sulphides.Hydrothermal mineral
    Any concentration of metallic minerals formed by the
      precipitation of solids fromdeposit
    hot waters (hydrothermal solution). The solutions may be
      sourced from a magma or from deeply circulating water heated by magma.Intrusion
    Medium to coarse grained igneous bodies which
      crystallized at depth within the(batholith, dyke, pluton)
    Earth's crust. Large intrusive bodies are called
      batholiths; smaller bodies are plutons and linear bodies are dykes.Leached Cap
    Rock which originally contained mineralization that was
      subsequently removed due to weathering processes.Locked Cycle Test
    A repetitive batch flotation test used in mineral
      processing laboratories while developing a metallurgical flowsheet.


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Elements
    Au - Gold; Ag - Silver; Al - Aluminum; Cu - Copper; Fe -
      Iron; Mo - Molybdenum; Na - Sodium; O - Oxygen; Pb - Lead; S - Sulphur; Zn
      - Zinc.Monzonite
    Igneous intrusive rock with approximately equal amounts
    of plagioclase and alkali feldspar, and less than 5% quartz by volume.National Instrument 43-101 ("NI 43-101")
    The Canadian securities rule which establishes disclosure
      standards for mineral projects of Canadian resource companies.Kriging
    A method of estimation of a variable value (such as metal
      grade) at an unmeasured location from measured values, weighted by
      distance and orientation, at nearby locations.Porphyry deposit
    A type of mineral deposit genetically related to igneous
      intrusions in which ore minerals are widely distributed, generally of low
      grade but commonly of large tonnage.Potassic
    Hydrothermal alteration which results in the production
      of potassium-bearing minerals such as biotite, muscovite or sericite,
      and/or orthoclase.Pyrophyllite
    Aluminosilicate hydroxide mineral that forms as a result
      of hydrothermal alteration or low grade metamorphism.Sodic
    In this report, refers to a type of hydrothermal
      alteration that contains sodium-bearing minerals, most commonly albite
      feldspar.Subduction
    Process by which one tectonic plate moves under another
      tectonic plate.Supergene
    Refers to processes which occur relatively near the
      surface of the earth which modify or destroy original (hypogene) minerals
      by oxidation and chemical weathering.Superterrane
    A group of physically connected and related geological
      terranes (group of related rock units).


CURRENCY AND MEASUREMENT

All currency amounts in this Annual Report are stated in
Canadian Dollars unless otherwise indicated. Approximate conversion of metric
units into imperial equivalents is as follows:

Metric Units
    Multiply by
    Imperial Unitshectares
    2.471
    = acresmeters
    3.281
    = feetkilometers
    3281
    = feetkilometers
    0.621
    = milesgrams
    0.032
    = ounces (troy)tonnes
    1.102
    = tons (short) (2,000 pounds)grams/tonne
    0.029
    = ounces (troy)/ton


RESOURCE CATEGORY (CLASSIFICATION) DEFINITIONS

The discussion of mineral deposit classifications in this
Annual Report adheres to the mineral resource and mineral reserve definitions
and classification criteria developed by the Canadian Institute of Mining
("CIM") 2014. Estimated mineral resources fall into two broad categories
dependent on whether the economic viability of them has been established and these are namely
"resources" (potential for economic viability) and "reserves" (viable economic
production is feasible). Resources are sub-divided into categories depending on
the confidence level of the estimate based on level of detail of sampling and
geological understanding of the deposit. The categories, from lowest confidence
to highest confidence, are inferred resource, indicated resource and measured
resource. Reserves are similarly sub-divided by order of confidence into
probable (lowest) and proven (highest). These classifications can be more
particularly described as follows:

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|Form 20-F Annual Report | P a g e| 5

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Mineral Resource
    A concentration or occurrence of solid material of
      economic interest in or on the Earths crust in such form, grade or
      quality and quantity that there are reasonable prospects for eventual
      economic extraction. The location, quantity, grade or quality, continuity
      and other geological characteristics of a Mineral Resource are known,
      estimated or interpreted from specific geological evidence and knowledge,
      including sampling.Inferred Mineral Resource
    That part of a Mineral Resource for which quantity and
      grade or quality are estimated on the basis of limited geological evidence
      and sampling. Geological evidence is sufficient to imply but not verify
      geological and grade or quality continuity. It has a lower level of
      confidence than that applying to an Indicated Mineral Resource and must
      not be converted to a Mineral Reserve. It is reasonably expected that the
      majority of Inferred Mineral Resources could be upgraded to Indicated
      Mineral Resources with continued exploration.Indicated Mineral Resource
    That part of a Mineral Resource for which quantity, grade
      or quality, densities, shape and physical characteristics are estimated
      with sufficient confidence to allow the application of Modifying Factors
      in sufficient detail to support mine planning and evaluation of the
      economic viability of the deposit. Geological evidence is derived from
      adequately detailed and reliable exploration, sampling and testing and is
      sufficient to assume geological and grade or quality continuity between
      points of observation. It has a lower level of confidence than that
      applying to a Measured Mineral Resource and may only be converted to a
      Probable Mineral Reserve.Measured Mineral Resource
    That part of a Mineral Resource for which quantity, grade
      or quality, densities, shape, and physical characteristics are estimated
      with confidence sufficient to allow the application of Modifying Factors
      to support detailed mine planning and final evaluation of the economic
      viability of the deposit. Geological evidence is derived from detailed and
      reliable exploration, sampling and testing and is sufficient to confirm
      geological and grade or quality continuity between points of observation.
      It has a higher level of confidence than that applying to either an
      Indicated Mineral Resource or an Inferred Mineral Resource. It may be
      converted to a Proven Mineral Reserve or to a Probable Mineral Reserve.


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|Form 20-F Annual Report | P a g e| 6

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Mineral Reserve
    The economically mineable part of a Measured and/or
      Indicated Mineral Resource. It includes diluting materials and allowances
      for losses, which may occur when the material is mined or extracted and is
      defined by studies at Pre-Feasibility or Feasibility level as appropriate
      that include application of Modifying Factors, which are considerations
      used to convert Mineral Resources to Mineral Reserves and include, but are
      not restricted to, mining, processing, metallurgical, infrastructure,
      economic, marketing, legal, environmental, social and governmental
      factors. Such studies demonstrate that, at the time of reporting,
      extraction could reasonably be justified. The reference point at which
      Mineral Reserves are defined, usually the point where the ore is delivered
      to the processing plant, must be stated. It is important that, in all
      situations where the reference point is different, such as for a saleable
      product, a clarifying statement is included to ensure that the reader is
      fully informed as to what is being reported. The public disclosure of a
      Mineral Reserve must be demonstrated by a Pre-Feasibility Study or
      Feasibility Study.Probable Mineral Reserve
    The economically mineable part of an Indicated, and in
      some circumstances, a Measured Mineral Resource. The confidence in the
      Modifying Factors applying to a Probable Mineral Reserve is lower than
      that applying to a Proven Mineral Reserve.Proven Mineral Reserve
    The economically mineable part of a Measured Mineral
      Resource. A Proven Mineral Reserve implies a high degree of confidence in
the Modifying Factors.


CAUTIONARY NOTES TO UNITED STATES INVESTORS CONCERNING
MINERAL RESERVE AND RESOURCE ESTIMATES

This Annual Report on Form 20-F uses terms that comply with
reporting standards in Canada and certain estimates are made in accordance with
the National Instrument  43-101, Standards of Disclosure for Mineral Projects
("NI 43-101"). NI 43-101 is a rule developed by the Canadian Securities
Administrators that establishes standards for all public disclosure an issuer
makes of scientific and technical information concerning mineral projects.
Unless otherwise indicated, all resource estimates contained in or incorporated
by reference in this prospectus have been prepared in accordance with NI 43-101.
These standards differ significantly from the requirements of the SEC, and
resource information contained herein and incorporated by reference herein may
not be comparable to similar information disclosed by companies in the United
States (US companies).

In addition, this Annual Report on Form 20-F uses the terms
"measured mineral resources", "indicated mineral resources" and "inferred
mineral resources" to comply with the reporting standards in Canada. We advise
United States investors that while those terms are recognized and required by
Canadian regulations, the SEC does not recognize them. United States investors
are cautioned not to assume that any part or all of the mineral deposits in
these categories will ever be converted into mineral reserves. These terms have
a great amount of uncertainty as to their existence, and great uncertainty as to
their economic and legal feasibility.

Further, "inferred resources" have a great amount of
uncertainty as to their existence and as to whether they can be mined legally or
economically. Therefore, United States investors are also cautioned not to
assume that all or any part of the inferred resources exist. In accordance with
Canadian rules, estimates of "inferred mineral resources" cannot form the basis
of feasibility or other economic studies, except in limited circumstances where
permitted under NI 43-101.

It cannot be assumed that all or any part of "measured mineral
resources", "indicated mineral resources", or "inferred mineral resources" will
ever be upgraded to a higher category. Investors are cautioned not to assume
that any part of the reported "measured mineral resources", "indicated mineral
resources", or "inferred mineral resources" in this prospectus is economically
or legally mineable.

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|Form 20-F Annual Report | P a g e| 7

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In addition, disclosure of "contained ounces" is permitted
disclosure under Canadian regulations; however, the SEC only permits issuers to
report mineralization as in place tonnage and grade without reference to unit
measures.

FORWARD LOOKING STATEMENTS

The Annual Report on Form 20-F includes or incorporates by
reference certain statements that constitute "forward-looking statements" within
the meaning of the United States Private Securities Litigation Reform Act of
1995.

Forward-looking statements describe our future plans,
strategies, expectations and objectives, and are generally, but not always,
identifiable by use of the words may, will, should, continue, expect,
anticipate, estimate, believe, intend, plan or project or the
negative of these words or other variations on these words or comparable
terminology. Forward-looking statements contained or incorporated by reference
into this Prospectus Supplement include, without limitation, statements
regarding:

| | the outcome of our multi-dimensional strategy to address the
      Environmental Protection Agencys pre- emptive regulatory process under
      Section 404(c) of the Clean Water Act and prepare the Pebble Project to
      initiate federal and state permitting under the National Environmental
    Policy Act ("Multi-Dimensional Strategy");
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                     
| | the outcome of legal proceedings in which we
      are engaged;                                                                                                                                                                                                                                                                                     
|  |                                                                                                                                                                                                                                                                                                                                                     
| | our expectations regarding the potential for
      permitting of a mine at the Pebble Project;                                                                                                                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                                     
| | our expected financial performance in future
      periods;                                                                                                                                                                                                                                                                                         
|  |                                                                                                                                                                                                                                                                                                                                                     
| | our plan of operations, including our plans to carry out
      and finance the Multi-Dimensional Strategy activities, exploration and
      development activities and legal proceedings;                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                     
| | our ability to raise capital to fund the
      Multi-Dimensional Strategy activities, exploration and development
      activities and operational costs;                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                     
| | our expectations regarding the exploration and
      development potential of the Pebble Project; and                                                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                                                                                                                                     
| | factors relating to our investment decisions.                                                                                                                                                                                                                                                                                                       

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

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

| | that we will be able to secure sufficient capital
      necessary for the Multi-dimensional Strategy activities, litigation,
      continued environmental assessment and permitting activities and
      engineering work which must be completed prior to any potential
      development of the Pebble Project which would then require engineering and
      financing in order to advance to ultimate construction;
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                         
| | that the Company will ultimately be able to demonstrate
      that a mine at the Pebble Project can be developed and operated in an
      environmentally sound and socially responsible manner, meeting all
      relevant federal, state and local regulatory requirements so that we will
      be ultimately able to obtain permits authorizing construction of a mine at
      the Pebble Project;                 

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|Form 20-F Annual Report | P a g e| 8

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| | that the market prices of copper, gold,
      molybdenum and silver will not further significantly decline or stay
      depressed for a lengthy period of time;                                                                                                                        
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                         
| | that key personnel will continue their
      employment with us; and                                                                                                                                                                                                                    
|  |                                                                                                                                                                                                                                                                                         
| | that we will continue to be able to secure
      minimal adequate financing on acceptable terms.                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                         
| | Readers are cautioned that the foregoing list is not
      exhaustive of all factors and assumptions which may have been used.
      Forward looking statements are also subject to the Risk Factor facing the
      business, any of which could have a material impact on our outlook.

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

| | a negative outcome of the Multi-Dimensional Strategy,
      or other legal and political challenges with which we are engaged regarding the
      Pebble Project, which would have a material adverse effect on the Company;
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                             
| | an inability to obtain permitting for a mine at
      the Pebble Project;                                                                                                                                                   
|  |                                                                                                                                                                                                                             
| | an inability to continue to fund the
      exploration and development activities and other operating costs;                                                                                                                
|  |                                                                                                                                                                                                                             
| | the highly cyclical nature of the mineral
      resource exploration business;                                                                                                                                              
|  |                                                                                                                                                                                                                             
| | the pre-development stage economic and
      technical uncertainties of the Pebble Project and the lack of known
      reserves on the Pebble Project;                                                                      
|  |                                                                                                                                                                                                                             
| | an inability to establish that the Pebble
      Project contains commercially viable deposits of ore;                                                                                                                       
|  |                                                                                                                                                                                                                             
| | an inability to recover the financial statement
      carrying values of the Pebble Project if the Company ceases to continue on
      a going concern basis;                                                               
|  |                                                                                                                                                                                                                             
| | the potential for loss of the services of key
      executive officers;                                                                                                                                                     
|  |                                                                                                                                                                                                                             
| | a history of, and expectation of further,
      financial losses from operations impacting our ability to continue on a
      going concern basis;                                                                          
|  |                                                                                                                                                                                                                             
| | the volatility of copper, gold, molybdenum and
      silver prices and mining share prices;                                                                                                                                 
|  |                                                                                                                                                                                                                             
| | the inherent risk involved in the exploration,
      development and production of minerals, and the presence of unknown
      geological and other physical and environmental hazards at the Pebble
      Project;         
|  |                                                                                                                                                                                                                             
| | the potential for changes in, or the introduction of new,
      government regulations relating to mining, including laws and regulations
      relating to the protection of the environment and project legal titles;     
|  |                                                                                                                                                                                                                             
| | potential claims by third parties to titles or
      rights involving the Pebble Project;                                                                                                                                   
|  |                                                                                                                                                                                                                             
| | the possible inability to insure our operations
      against all risks;                                                                                                                                                    
|  |                                                                                                                                                                                                                             
| | the highly competitive nature of the mining
      business;                                                                                                                                                                 
|  |                                                                                                                                                                                                                             
| | the potential equity dilution to current
      shareholders from future equity financings is currently uncertain; and                                                                                                       

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| | that we have never paid dividends and will not
      do so in the foreseeable future.
|- | -------------------------------------------------------------------------------------

This list is not exhaustive of the factors that may affect any
of the Companys forward-looking statements or information. Forward-looking
statements or information are statements about the future and are inherently
uncertain, and actual achievements of the Company or other future events or
conditions may differ materially from those reflected in the forward-looking
statements or information due to a variety of risks, uncertainties and other
factors, including, without limitation, the risks and uncertainties described
above.

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

STATUS AS AN EMERGING GROWTH COMPANY

The Company is an "emerging growth company" as defined in
section 3(a) of the Exchange Act, and the Company will continue to qualify as an
"emerging growth company" until the earliest of:

|(a) | the last day of the fiscal year during which the Company
      has total annual gross revenues of US$1,000,000,000 (as such amount is
      indexed for inflation every 5 years by the SEC) or more;                           
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                
|(b) | the last day of the Company's fiscal year following the
      fifth anniversary of the date of the first sale of common equity
      securities pursuant to an effective registration statement under the
      Securities Act;
|    |                                                                                                                                                                                                                                
|(c) | the date on which the Company has, during the previous
      3-year period, issued more than US$1,000,000,000 in non-convertible debt;
      or                                                                                
|    |                                                                                                                                                                                                                                
|(d) | the date on which the Company is deemed to be a "large
      accelerated filer", as defined in Exchange Act Rule
  12b2.                                                                                                      

Northern Dynasty expects to continue to be an emerging growth
company until December 31, 2020.

Generally, a registrant that registers any class of its
securities under section 12 of the Exchange Act is required to include in the
second and all subsequent annual reports filed by it under the Exchange Act, a
management report on internal control over financial reporting and, subject to
an exemption available to registrants that are neither an "accelerated filer" or
a "larger accelerated filer" (as those terms are defined in Exchange Act Rule
12b-2), an auditor attestation report on management's assessment of internal
control over financial reporting. However, for so long as the Company continues
to qualify as an emerging growth company, the Company will be exempt from the
requirement to include an auditor attestation report in its annual reports filed
under the Exchange Act, even if it were to qualify as an "accelerated filer" or
a "larger accelerated filer". In addition, auditors of an emerging growth
company are exempt from the rules of the Public Company Accounting Oversight
Board requiring mandatory audit firm rotation or a supplement to the auditor's
report in which the auditor would be required to provide additional information
about the audit and the financial statements of the registrant (auditor
discussion and analysis).

The Company has irrevocably elected to comply with new or
revised accounting standards even though it is an emerging growth company.

|                        |            
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|Form 20-F Annual Report | P a g e| 10

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|
|

|ITEM 1 | IDENTITY OF DIRECTORS,
      SENIOR MANAGEMENT AND ADVISORS
|------ | -----------------------------------------------------------

Not applicable for an Annual Report.

|ITEM 2 | OFFER STATISTICS AND
      EXPECTED TIMETABLE
|------ | ---------------------------------------------

Not applicable for an Annual Report.

|ITEM 3 | KEY INFORMATION
|------ | ---------------

|A. | SELECTED FINANCIAL DATA
|-- | -----------------------

The following tables summarize selected financial data for
Northern Dynasty derived from the Company's financial statements,
expressed in thousands of Canadian Dollars, and which have been prepared in
accordance with and using accounting policies in compliance with International
Financial Reporting Standards ("IFRS") as issued by the International Accounting
Standards Board ("IASB"). This selected financial data should be read in
conjunction with the Company's audited financial statements for the fiscal years
then ended.

Statements of Financial Position Data

($ 000s)
    
    2015
    
    
    2014
    
    
    2013
    
    
    2012
    
    
    2011Mineral property, plant and
      equipment, net
    $
    147,088
    
    $
    123,608
    
    $
    108,050
    
    $
    1,055
    
    $
    1,055Total assets
    
    157,704
    
    
    135,510
    
    
    141,784
    
    
    132,934
    
    
    145,241Total liabilities
    
    2,724
    
    
    7,547
    
    
    7,856
    
    
    4,041
    
    
    3,885Working capital
    
    7,892
    
    
    5,869
    
    
    29,681
    
    
    32,134
    
    
    42,474Share capital
    
    435,069
    
    
    389,227
    
    
    389,227
    
    
    389,189
    
    
    388,987Reserves
    
    99,035
    
    
    84,031
    
    
    58,649
    
    
    51,129
    
    
    48,132Accumulated deficit
    
    (379,124
    )
    
    (345,295
    )
    
    (313,948
    )
    
    (311,425
    )
    
    (295,763
    )Net assets
    
    154,980
    
    
    127,963
    
    
    133,928
    
    
    128,893
    
    
    141,356Shareholders' equity
    
    154,980
    
    
    127,963
    
    
    133,928
    
    
    128,893
    
    
    141,356


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|Form 20-F Annual Report | P a g e| 11

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Statements of Comprehensive Loss (Income) Data

($ 000s, except per share amounts and number of
      shares)
    
    2015
    
    
    2014
    
    
    2013
    
    
    2012
    
    
    2011Interest and other income
    $
    (313
    )
    $
    (281
    )
    $
    (1,136
    )
    $
    (887
    )
    $
    (944
    )Exploration expenditures
    
    8,718
    
    
    12,877
    
    
    1,991
    
    
    4,461
    
    
    819General and administrative
      expenses (1)(2)
    
    8,272
    
    
    9,059
    
    
    5,970
    
    
    6,525
    
    
    5,840Legal, accounting and audit (1)
    
    17,001
    
    
    8,325
    
    
    275
    
    
    255
    
    
    328Share-based payments
    
    903
    
    
    3,877
    
    
    641
    
    
    5,225
    
    
    14,205Other
    
    762
    
    
    (221
    )
    
    (340
    )
    
    83
    
    
    (58
    )Gain on discontinuance of
      equity method
    
    
    
    
    
    
    
    (5,062
    )
    
    
    
    
    Deferred income tax
    
    (1,514
    )
    
    (2,289
    )
    
    184
    
    
    
    
    
    (51
    )Net loss for the year
    
    33,829
    
    
    31,347
    
    
    2,523
    
    
    15,662
    
    
    20,139Other comprehensive (income) loss
    
    (23,187
    )
    
    (9,953
    )
    
    (6,887
    )
    
    2,123
    
    
    (2,153
    )Total comprehensive loss (income)
    
    10,642
    
    
    21,394
    
    
    (4,364
    )
    
    17,785
    
    
    17,986Basic and diluted net loss
      per share
    $
    0.23
    
    $
    0.33
    
    $
    0.03
    
    $
    0.16
    
    $
    0.21Weighted average number of common shares outstanding
    
    146,313,397
    
    
    95,009,864
    
    
    95,007,374
    
    
    94,995,127
    
    
    94,851,589


Note

|1. | Comparative information in the statement of loss and
      comprehensive loss has been reclassified to separately reflect legal,
      accounting and audit expenditures as a separate line item. This line item
      is predominantly comprised of legal costs incurred by the Group in
      response to the EPAs activities surrounding the Pebble Project. These
      expenditures were previously included under general and administrative
      expenditures.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|2. | The breakdown of these costs are presented below. The
      latest three years are discussed under Item 5.                                                                                                                                                                                                                                                                                                                                                             

General and administrative expenses
    
    2015
    
    
    2014
    
    
    2013
    
    
    2012
    
    
    2011Conference and travel
    $
    369
    
    $
    323
    
    $
    340
    
    $
    566
    
    $
    525Consulting
    
    232
    
    
    782
    
    
    836
    
    
    1,761
    
    
    Donations
    
    
    
    
    
    
    
    
    
    
    
    
    
    866Insurance
    
    398
    
    
    384
    
    
    342
    
    
    343
    
    
    296Office costs
    
    1,188
    
    
    1,964
    
    
    670
    
    
    702
    
    
    980Management and administration
    
    5,009
    
    
    4,610
    
    
    2,572
    
    
    2,095
    
    
    2,334Shareholder communication
    
    759
    
    
    772
    
    
    983
    
    
    830
    
    
    517Trust and filing
    
    317
    
    
    224
    
    
    227
    
    
    228
    
    
    3228,272
    
    
    9,059
    
    
    5,970
    
    
    6,525
    
    
    5,840


Currency and Exchange Rates

On April 18, 2016, the rate of exchange of the Canadian Dollar,
based on the daily noon rate in Canada as published by the Bank of Canada, was
US$1.00 = C$1.2815. Exchange rates published by the Bank of Canada, available on
its website www.bankofcanada.ca, are nominal quotations  not buying or
selling rates  and are intended for statistical or analytical purposes.

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|Form 20-F Annual Report | P a g e| 12

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The following tables set out the exchange rates, based on the
daily noon rates in Canada as published by the Bank of Canada for the conversion
of Canadian Dollars into U.S. Dollars.

|                      | Year Ended December 31 (Canadian Dollars per U.S. Dollar)
|--------------------- | ---------------------------------------------------------
|                      | 2015                                                     
|Rate at end of year   | $1.3840                                                  
|Average rate for year | $1.2787                                                  
|High for year         | $1.3990                                                  
|Low
      for year    | $1.1728                                                  

|Monthly High and Low Exchange Rate (Canadian Dollar per U.S.
      Dollar)
|--------------------------------------------------------------------------
|Month or Period                                                           
|April 2016 (to April 18, 2016)                                            
|March 2016                                                                
|February 2016                                                             
|January 2016                                                              
|December 2015                                                             
|November 2015                                                             

|B. | CAPITALIZATION AND
INDEBTEDNESS
|-- | -------------------------------

Not applicable for an Annual Report.

|C. | REASONS FOR THE OFFER AND USE OF
  PROCEEDS
|-- | -------------------------------------------

Not applicable for an Annual Report.

|D. | RISK FACTORS
|-- | ------------

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

Inability to Achieve Mine Permitting of the Pebble
Project

The principal risk facing the Company is that it will be
ultimately be unable to secure the necessary permits under United States Federal
and Alaskan State laws to build a mine at Pebble. There are prominent and well
organized opponents of the Pebble Project and the Company may be unable, despite
developing solid scientific and technical evidence of risk mitigation, to
overcome such opposition and convince mining regulatory authorities that a mine
should be permitted at Pebble. If we are unable to secure the necessary permits to build a mine at the Pebble Project, we may be unable
to achieve revenues from operations and/or recover our investment in the Pebble
Project.

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|Form 20-F Annual Report | P a g e| 13

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The Company will be required to seek additional capital; the
Companys inability to obtain additional capital could have a material adverse
effect on its operations

While the Company has prioritized the available resources in
  order to meet key corporate and Pebble Project expenditure requirements, the
  Company will seek to source significant additional financing. Such financing may
  include any of, or a combination of: debt, equity and/or contributions from
  possible new Pebble Project participants. In light of the recent significant
  depreciation of the Canadian dollar and that the vast majority of the Companys
  expenditures are in United States dollars, that the Pebble Project will require
  additional engineering and technical expenditures beyond what is contemplated in
  the current budget, and the possibility that expenditures to pursue the
  Companys Multi-Dimensional Strategy, including legal expenditures may exceed current
  budget expectations, it is possible that additional financing may well be
  required. There can be no assurances that the Company will be successful in
  obtaining any such additional financing. If the Company is unable to raise the
  necessary capital resources to meet obligations as they come due, the Company
will at some point have to further reduce or curtail its operations.

Negative Operating Cash Flow

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

The Company believes it is likely a "passive foreign
investment company" which may have adverse U.S. federal income tax consequences
for U.S. shareholders.

U.S. shareholders should be aware that the Company believes it
was classified as a passive foreign investment company ("PFIC") during one or
more previous tax years, and may be a PFIC in the current tax year and possibly
in subsequent tax years. If the Company is a PFIC for any tax year during a U.S.
shareholder's holding period, then such U.S. shareholder generally will be
required to treat any gain realized upon a disposition of common shares, or any
so-called "excess distribution" received on its common shares, as ordinary
income, and to pay an interest charge on a portion of such gain or
distributions, unless the shareholder makes a timely and effective "qualified
electing fund" election or a "mark-to-market" election with respect to the
common shares. A U.S. shareholder who makes a qualified electing fund election
generally must report on a current basis its share of the Company's net capital
gain and ordinary earnings for any tax year in which the Company is a PFIC,
whether or not the Company distributes any amounts to its shareholders. A U.S.
shareholder who makes the mark-to-market election generally must include as
ordinary income each year the excess of the fair market value of the common
shares over the taxpayer's basis therein. This paragraph is qualified in its
entirety by the discussion below under the heading "Certain United States
Federal Income Tax Considerations." Each U.S. shareholder should consult its own
tax advisor regarding the PFIC rules and the U.S. federal income tax
consequences of the acquisition, ownership, and disposition of common shares.

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|Form 20-F Annual Report | P a g e| 14

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The Pebble Project is Subject to Political and Environmental
Regulatory Opposition

As is typical for a large scale mining project, the Pebble
Project faces concerted opposition from many individuals and organizations who
are motivated to preclude any possible mining in the Bristol Bay Watershed
(“BBW”). The BBW is an important wildlife and salmon habitat area. The United
States Environmental Protection Agency has gone so far as to suggest that it may
peremptorily prevent the Pebble Project from proceeding even before a mine
permitting application is filed. Accordingly one of the greatest risks to the
Pebble Project is seen to be political/permitting risk which may ultimately
preclude construction of a mine at Pebble.

In the event that we are unsuccessful in our litigation against the Environmental Protection Agency, or
  are otherwise unable to reach a settlement with the federal agency, we may never be able to proceed
with permitting with respect to the Pebble Project.

The principal risk currently facing the Company is that we may be unable to settle our ongoing issues with the
  Environmental Protection Agency (the “EPA”) with respect to its regulatory action under Section 404(c) of
  the U.S. Clean Water Act. While we believe our position has merit, the proceedings have been lengthy and have
  required us to expend substantial funds and time. There can be no assurance that the funds allocated for
  combating the EPA action will be sufficient to bring our strategy to completion and we may be unable to raise
  additional funds, causing us to abandon our strategy. Further, even if we are able to raise sufficient funds to
  bring our strategy to completion, there is no assurance that we will ultimately be successful. In the event that
  we are unsuccessful, and the EPA’s regulatory action is upheld, we will be unable to proceed with permitting
  of the Pebble Project and the Company will be materially adversely affected.

Northern Dynasty will require additional funding to meet the
development objectives of the Pebble Project.

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

The Pebble Partnerships mineral property interests do not
contain any ore reserves or any known body of economic mineralization.

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

Mineral Resources disclosed by Northern Dynasty or the
Pebble Partnership for the Pebble Project are estimates only.

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

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

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|Form 20-F Annual Report | P a g e| 15

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

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

Northern Dynasty may not be able to continue as a going
concern.

Northern Dynastys consolidated financial statements have been
prepared on the basis that Northern Dynasty will continue as a going concern. At
December 31, 2015, Northern Dynasty had working capital of approximately $7.9
million. Northern Dynasty has prioritized the allocation of available financial
resources in order to meet key corporate and Pebble Project expenditure
requirements in the near term. Additional financing will be required for
continued corporate expenditures and expenditures at the Pebble Project.
Northern Dynastys continuing operations and the underlying value and
recoverability of the amounts shown for mineral property interest are entirely
dependent upon the existence of economically recoverable mineral reserves at the
Pebble Project, the ability of the Company to finance its operating costs, the
completion of the exploration and development of the Pebble Project, the Pebble
Partnership obtaining the necessary permits to mine, and on future profitable
production at the Pebble Project. Furthermore, failure to continue as a going
concern would require that Northern Dynasty's assets and liabilities be restated
on a liquidation basis, which would likely differ significantly from their going
concern assumption carrying values.

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

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

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

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

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|Form 20-F Annual Report | P a g e| 16

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

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

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

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

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

Government regulations relating to mineral rights tenure,
permission to disturb areas and the right to operate can adversely affect
Northern Dynasty. Northern Dynasty and the Pebble Partnership may not be able to
obtain all necessary licenses and permits that may be required to carry out
exploration at our projects. Obtaining the necessary governmental permits is a
complex, time-consuming and costly process. The duration and success of efforts
to obtain permits are contingent upon many variables not within our control.
Obtaining environmental permits may increase costs and cause delays depending on
the nature of the activity to be permitted and the interpretation of applicable
requirements implemented by the permitting authority. There can be no assurance
that all necessary approvals and permits will be obtained and, if obtained, that
the costs involved will not exceed those that we previously estimated. It is
possible that the costs and delays associated with the compliance with such
standards and regulations could become such that we would not proceed with the
development or operation of a mine at the Pebble Project. Refer to further
discussion in Item 8 - A3. Legal Proceedings.

|                        |            
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|Form 20-F Annual Report | P a g e| 17

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Litigation

The Company is currently and may in future be subject to legal
proceedings in the development of its Pebble Project. Given the uncertain nature
of these actions, the Company cannot reasonably predict the outcome thereof. If
the Company is unable to resolve these matters favorably it may have a material
adverse effect of the Company.

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

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

The market price of Northern Dynastys common shares is
subject to high volatility and could cause investor loss.

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

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

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

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|Form 20-F Annual Report | P a g e| 18

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|ITEM 4 | INFORMATION ON THE
      COMPANY
|------ | --------------------------------

|A. | HISTORY AND DEVELOPMENT OF THE
  COMPANY
|-- | ----------------------------------------

Incorporation

Northern Dynasty is a mineral exploration company incorporated
on May 11, 1983 pursuant to the Company Act of the Province of British Columbia
(predecessor statute to the British Columbia Corporations Act in force since
2004), under the name "Dynasty Resources Inc.". On November 30, 1983 the Company
changed its name to "Northern Dynasty Explorations Ltd." and subsequently, on
October 11, 1997, changed its name to Northern Dynasty Minerals Ltd. Northern
Dynasty became a reporting company in the Province of British Columbia on April
10, 1984 and was listed on the Vancouver Stock Exchange (now the TSX Venture
Exchange and herein generally "TSX Venture") from 1984-1987, listed on the
Toronto Stock Exchange from 1987-1993, and unlisted but continued to comply with
its continuous disclosure obligations from 1993 to 1994, and thereupon listed on
TSX Venture from 1994 to October 30, 2007 when it began trading on the Toronto
Stock Exchange ("TSX"). In November 2004, the common shares of Northern Dynasty
were also listed on the American Stock Exchange ("AMEX"). AMEX was purchased by
the New York Stock Exchange ("NYSE") and the Company now trades on the NYSE MKT
Exchange ("NYSE MKT").

Offices

The head office of Northern Dynasty is located at Suite 1500,
1040 West Georgia Street, Vancouver, British Columbia, Canada V6E 4H1, telephone
(604) 684-6365, facsimile (604) 684-8092. The Companys legal registered office
is in care of its Canadian attorneys, McMillan LLP, Barristers & Solicitors,
at Suite 1500, 1055 West Georgia Street, Vancouver, British Columbia, Canada V6E
4N7, telephone (604) 689-9111, facsimile (604) 685-7084.

The Companys Alaska mineral resource exploration business is
operated through an Alaskan registered limited partnership, the Pebble Limited
Partnership (the "Pebble Partnership" or "PLP"), in which the Company (since
December 2013) owns a 100% interest through subsidiary entities. A 100%
subsidiary of the Company, Pebble Mines Corp. is the general partner of the
Pebble Partnership and responsible for its day-to-day operations. The business
address of the Northern Dynasty Partnership is Suite 602, 3201 C Street,
Anchorage, Alaska, USA, 99503.

Company Development

Northern Dynasty is a mineral exploration company focused on
developing the Pebble Project, a copper-gold-molybdenum-silver mineral project.
The Pebble Project is located in southwest Alaska, approximately 200 miles (320
kilometers) southwest of the city of Anchorage.

To December 31, 2015, approximately $806 million (US$752
million)1 in expenditures have been incurred on the Pebble Project.
Of this amount, approximately $595 million (US$573 million) in funding was
provided to the Pebble Partnership by an affiliate of Anglo American plc
("Anglo American") and expended from 2007 to December 10, 2013 after which time
Northern Dynasty re-acquired Anglo Americans 50% ownership interest in the
Pebble Partnership on the latters withdrawal. Prior to the formation of the
Pebble Partnership in 2007, Northern Dynasty had spent approximately $188
million on exploration activities and a further $106 million in acquisition
costs on the Pebble Project.

_____________________________

1During the period 2007 to 2013, the Pebble
Partnership expended several hundred million dollars on the Pebble Project, a
major portion of which was spent on exploration programs, resource estimates,
environmental data collection and technical studies, with a significant portion
spent on engineering of various possible mine development models, as well as
related infrastructure, power and transportation systems. As a consequence of
several factors, including the Environmental Protection Agency Clean Water Act
404(c) action on the Pebble Project, the withdrawal of Anglo American plc from
the project and the passage of time, technical and engineering studies related
to mine-site and infrastructure development are considered to have very
uncertain and perhaps little value at this time. Environmental baseline studies
and data collection remains a significant legacy asset of the Company from this
period.

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Northern Dynasty does not have any operating revenue, although
currently and historically it has had non-material annual interest revenue as a
consequence of investing its surplus funds.

Significant Acquisitions, Dispositions and Group
Reorganization

Northern Dynasty via 100% owned subsidiaries and other entities
holds indirect interests in mineral claims on State land in southwest Alaska,
USA. These claims (including certain area claims) form what is referred to as
the Pebble Copper-Gold-Molybdenum-Silver Project (the "Pebble Project").

Pebble Limited Partnership and Pebble Project

On July 26, 2007, the Company converted a wholly-owned general
partnership that held its Pebble Project interests into a limited partnership,
the Pebble Partnership. The purpose of the Pebble Partnership is to engineer,
permit, construct and operate a modern, long-life mine at the Pebble Project.
Anglo American through a wholly-owned affiliate subscribed for 50% of the Pebble
Partnership's equity effective July 31, 2007. To maintain its 50% interest in
the Pebble Partnership, Anglo American was required to commit staged cash
investments into the Pebble Partnership aggregating to US$1.5 billion. On
September 15, 2013, Anglo American gave notice to the Company of its withdrawal
from the Pebble Partnership. In December 2013, the Company exercised its right
to acquire Anglo Americans 50% interest and consequently holds a 100% interest
in the Pebble Partnership and Pebble Mines Corp. (the General Partner of the
Pebble Partnership which administers the Pebble Project).

Under the Pebble Partnership Agreement and applicable tax
regulations, neither the Company nor its affiliated general partnership will be
entitled to the benefits for tax purposes of the expenditures incurred by the
Pebble Partnership from Anglo Americans investment, as these benefits accrued
exclusively to Anglo American under the Pebble Partnership Agreement and
applicable tax regulations.

2006 Equity Investment by Rio Tinto Affiliate

In 2006, the Company issued 8,745,845 common shares in
connection with a share purchase agreement with Kennecott Canada Exploration
Inc. ("Kennecott", a subsidiary of Rio Tinto plc) for $10.00 per share for
proceeds of approximately $87 million. In January 2007, Northern Dynasty was
advised by Galahad Gold plc ("Galahad"), a significant shareholder of the
Company that QIT-Fer Et Titane Inc., an affiliate of Rio Tinto, agreed to
purchase 9.4 million shares of Northern Dynasty from Galahad at a price of
$10.00 per share. The share purchase, which closed February 1, 2007, increased
Rio Tintos indirect ownership in Northern Dynasty to approximately 19.8% . In
early 2014, this holding represented approximately 19.1% of Northern Dynastys
outstanding and issued common shares. Rio Tinto plc divested of its shares in
April 2014.

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Special Warrant Financings

In late December 2014 and early January 2015, the Company
completed a financing to raise proceeds of $15.5 million through the issuance of
35,962,735 Special Warrants, each convertible into one common share without
payment of additional consideration. All the Special Warrants were automatically
converted or converted upon election by warrantholders according to their terms
into common shares by September 2015. See Item 10 - C. Material
Contracts.

In September 2015, the Company completed a financing and raised
gross proceeds of approximately $15 million through the issuance of 37,600,000
Special Warrants, each convertible into one common share without payment of
additional consideration. These Special Warrants were automatically converted
into common shares in November 2015. See Item 10 - C. Material Contracts.

Acquisition of Inactive Listed Issuer  Cannon Point
Resources Ltd. ("Cannon Point")

In October 2015, the Company issued 12,881,344 common shares to
acquire Cannon Point, a company with a primary asset of $4.25 million in cash.

Acquisition of Listed Issuer  Mission Gold Ltd.
("Mission Gold")

In December 2015, the Company issued 27,593,341 common shares
to acquire Mission Gold, a company with primary assets of approximately $9
million in cash and a 100% interest in a titanium project that was sold by
Mission Gold to a third party for $1.5 million in marketable securities as part
of the transaction with Northern Dynasty. See Item 10 - C. Material
Contracts.

Private Placement

In December 2015, the Company completed a private placement of
12,573,292 common shares at a price of $0.412 per share for gross proceeds of
approximately $5.2 million.

|B. | THE PEBBLE PROJECT
|-- | ------------------

The Companys business is the exploration and advancement
towards feasibility, permitting and ultimately development of a
copper-gold-molybdenum-silver mineral resource in Alaska, USA known as the
"Pebble Project".

The Pebble Project is Subject to State and Federal
Laws

The Pebble Partnership is required to comply with all Alaska
statutes in connection with the Pebble Project. These statutes govern titles,
operations, environmental, development, operating and generally all aspects of
exploration and development of a mine in Alaska.

Alaska Statute 38.05.185 among others establishes the rights to
mining claims and mineral leases on lands owned by the State of Alaska and open
to mineral entry. This group of statutes also covers annual labor and rental
requirements, and royalties.

Operations on claims or leases on state owned land must be
permitted under a plan of operations as set out in Title 11 of the Alaska
Administrative Code, Chapter 86, Section 800. This regulation generally provides
that the State Division of Mining can be the lead agency in coordinating the
comments of all agencies which must consent to the issuance of a plan of
operations, and sets the requirements for the approval of a plan of operations.

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Environmental conditions are controlled by Alaska Statute 46.08
(which prohibits release of oil and hazardous substances), Alaska Statute
46.03.060 (which sets water quality standards), and Alaska Statute 46.14 (which
sets air quality standards).

Once a decision is made to enter permitting, the Pebble Project
will be required to satisfy permitting requirements at three levels: federal,
state and local (borough). The process takes approximately 3-4 years to complete
and involves 11 regulatory agencies, 60+ categories of permits and significant
ongoing opportunities for public involvement. The Alaska Department of Natural
Resources Large Mine Permitting Team is responsible for coordinating permitting
activities for large mine projects.

To satisfy permitting requirements under the National
Environmental Policy Act ("NEPA") and other regulatory statutes, a project must
provide a comprehensive project design and operating plan for mine-site and
infrastructure facilities; documentation of development alternatives
investigated; mitigation and compensation strategies, and identification of
residual effects; and environmental monitoring, reclamation and closure plans.
The first step is to provide the required information for an Environmental
Impact Statement ("EIS") under NEPA, including a Project Description and
Environmental Baseline Document prepared by a third-party contractor under the
direction of a lead federal agency, expected to be the US Army Corps of
Engineers. The EIS will determine whether sufficient evaluation of the project's
environmental effects and development alternatives has been undertaken. It will
also provide the basis for federal, state and local government agencies to make
individual permitting decisions.

Under the U.S. Clean Water Act, Section 404(c), the
Administrator of the Environmental Protection Agency ("EPA") is given the right
to disallow the specification (including the withdrawal of specification) of any
defined area as a disposal site if he or she determines that the release of such
material will have an unacceptable adverse effect on municipal water supplies,
local wildlife, spawning and breeding areas of fisheries, shellfish beds, and/or
recreational areas. Such decisions made by the Administrator require notice and
opportunity for public hearings, and consultation with the Secretary of the Army
Corp of Engineers. The Administrator shall set forth in writing and make public
his or her findings and reasons for making any determination under this
subsection.

Ownership History

In October 2001, Northern Dynasty acquired, through its Alaskan
subsidiary, a two-part Pebble Property purchase option previously secured by
HDGI from an Alaskan subsidiary of Teck Cominco Limited, now Teck Resources
Limited (Teck). In particular, HDGI assigned 80% of this two-part option (the
Teck Option) to Northern Dynasty while retaining 20% thereof. The first part of
the Teck Option permitted Northern Dynasty to purchase (through its Alaskan
subsidiary) 80% of the previously drilled portions of the Pebble Property on
which the majority of the then known copper mineralization occurred (the
Resource Lands Option). Northern Dynasty could exercise the Resource Lands
Option through the payment of cash and shares aggregating US$10 million prior to
November 30, 2004. The second part of the Teck Option permitted Northern Dynasty
to earn a 50% interest in the exploration area outside of the Resource Lands
(the Exploration Lands Option). Northern Dynasty could exercise the
Explorations Lands Option by doing some 60,000 ft (18,200 m) of exploration
drilling by November 30, 2004, which it completed on time. The HDGI assignment
of the Teck Option also allowed Northern Dynasty to purchase the other 20% of
the Teck Option retained by HDGI for its fair value.

In November 2004, Northern Dynasty exercised the Resource Lands
Option and acquired 80% of the Resource Lands. In February 2005, Teck elected to
sell its residual 50% interest in the Exploration Lands to Northern Dynasty for
US$4 million. Teck still retains a 4% pre-payback advance net profits royalty
interest (after debt service) and 5% after-payback net profits interest royalty
in any mine production from the Exploration Lands portion of the Pebble property
as shown on the figure below.

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In June 2006, Northern Dynasty acquired, through its Alaska
subsidiaries, the remaining HDGI 20% interest in the Resource Lands and
Exploration Lands by acquiring HDGI from its shareholders and through its
various subsidiaries had thereby acquired an aggregate 100% interest in the
Pebble Property, subject only to the Teck net-profits royalties on the
Exploration Lands. At that time, Northern Dynasty operated the Pebble Property
through an Alaskan general partnership with one of its subsidiaries.

In July 2007, the Pebble Partnership was created and an
indirect wholly-owned subsidiary of Anglo American subscribed for 50% of the
Pebble Partnership's equity effective July 31, 2007. Each of Northern Dynasty
and Anglo American effectively had equal control and management rights in the
Pebble Partnership and its general partner, Pebble Mines Corp., through
respective wholly-owned affiliates. The Pebble Partnership's assets include the
shares of two Alaskan subsidiaries, which hold registered title to the claims.
To maintain a 50% interest in the Pebble Partnership, Anglo American was
required to make staged cash investments into the Pebble Partnership,
aggregating $1.5 billion, towards comprehensive exploration, engineering,
environmental and socioeconomic programs and, if warranted, development of the
Pebble Project. On September 15, 2013, Anglo American gave Northern Dynasty a
60-day notice of withdrawal from the Pebble Project. In December 2013, Northern
Dynasty exercised its right to acquire Anglo Americans interest in the Pebble
Partnership and now holds a 100% interest in the Pebble Partnership.

On June 29, 2010, Northern Dynasty entered into an agreement
with Liberty Star Uranium and Metals Corp. and its subsidiary, Big Chunk Corp.
(together, "Liberty Star"), pursuant to which Liberty Star sold 23.8 square
miles of claims (the 95 "Purchased Claims") to a U.S. subsidiary of Northern
Dynasty in consideration for both a $1 million cash payment and a secured
convertible loan from Northern Dynasty in the amount of $3 million. The parties
agreed, through various amendments to the original agreement, to increase the
principal amount of the Loan by $730,174. Northern Dynasty later agreed to
accept transfer of 199 claims (the Settlement Claims) located north of the
ground held 100% by the Pebble Partnership in settlement of the Loan. These
claims are now held by Northern Dynastys subsidiary U5 Resources Inc. See
Property Description below for current claim holding.

On January 31, 2012, the Pebble Partnership entered into a
Limited Liability Company Agreement with Full Metal Minerals (USA) Inc.
(FMMUSA), a wholly-owned subsidiary of Full Metal Minerals Corp., to form
Kaskanak Copper LLC (the LLC). Under the agreement, the Pebble Partnership
could earn a 60% interest in the LLC, which indirectly owned 100% of the
Kaskanak claims, by incurring exploration expenditures of at least US$3 million and making annual payments of $50,000 to
FMMUSA over a period ending on December 31, 2013. On May 8, 2013, the Pebble
Partnership purchased FMMUSAs entire ownership interest in the LLC for a cash
consideration of $750,000. As a result, the Pebble Partnership gained a 100%
ownership interest in the LLC, the indirect owner of a 100% interest in a group
of 542 claims located south and west of other ground held by the Pebble
Partnership. In January 2015, Kaskanak Inc. and its wholly-owned parent,
Kaskanak Copper LLC, were merged with Pebble East Claims Corporation, with the
latter the surviving entity that holds the 464 claims covering 116 square miles.
See Property Description below for current claim holdings.

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TECHNICAL SUMMARY

The following disclosure is mainly summarized from the 2014
  Technical Report on the Pebble Project, Southwest Alaska, USA by J. David
  Gaunt, P.Geo., James Lang, P.Geo., Eric Titley, P.Geo., and Ting Lu, P.Eng.,
  effective date December 31, 2014 (2014 Technical Report), and updated from
  Company files. Additional details can be found in the 2014 Technical Report
  which is filed on the Companys profile at www.sedar.com and as a Form
6-K on the Companys profile at www.sec.gov.

Introduction

The Pebble deposit was originally discovered in 1989 and was
acquired by Northern Dynasty in 2001. Since that time, Northern Dynasty and
subsequently the Pebble Limited Partnership (the Pebble Partnership, in which
Northern Dynasty currently owns a 100% interest) have conducted significant
mineral exploration, environmental baseline data collection, and engineering
work on the Pebble Project to advance it towards development.

Work at Pebble has led to an overall expansion of the Pebble
deposit, as well as the discovery of several other mineralized occurrences along
an extensive northeast-trending mineralized system underlying the property. Over
one million feet of drilling has been completed on the property, a large
proportion of which has been focused on the Pebble deposit.

In light of more recent stakeholder and regulatory feedback,
Northern Dynasty initiated a comprehensive review of previous analyses of the
Pebble Project in late 2013 and in 2014 commissioned the 2014 Technical Report
to update information on the mineral resources and metallurgy for the project.

Property Description and Location

The Pebble Project is located in southwest Alaska,
approximately 200 miles southwest of Anchorage, 17 miles northwest of the
village of Iliamna, 160 miles northeast of Bristol Bay, and approximately 60
miles west of Cook Inlet.

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Northern Dynasty holds, indirectly through wholly-owned
subsidiaries including the Pebble Partnership, a 100% interest in a contiguous
block of 2,402 mineral claims covering approximately 417 square miles (Figure
2). This includes 2,182 claims covering 364.2 square miles (including the Pebble
deposit) held by Pebble Partnership subsidiaries, Pebble East Claims Corporation
and Pebble West Claims Corporation; and 220 claims covering 52.5 square miles
held by Northern Dynasty subsidiary U5 Resources Inc. The details of the mineral
claims are provided as Exhibit 15.01.

State mineral claims in Alaska are kept in good standing by
performing annual assessment work or in lieu of assessment work by paying $100
per year per 40 acre (0.06 square mile) mineral claim, and by paying annual
escalating state rentals. All of the assessment work payment obligations come
due annually on August 31. Credit for excess work can be banked for a maximum of
four years, and can be applied as necessary to continue to hold the claims in
good standing. The Project claims have a variable amount of work credit
available that can be applied in this way and will be applied in
20161. State rentals for 2016 are US$990,390 and are payable no later
than 90 days after the assessment work is due.

_____________________________

2Annual assessment work obligations for the
property of some US$667,700 are due in 2016 and will be covered by banked
assessment credits from work performed in 2015 and prior years.

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The Pebble Partnership currently does not own surface rights
associated with the mineral claims that comprise the Pebble Property. All lands
are held by the State of Alaska, and surface rights may be acquired from the
state government once areas required for mine development have been determined
and permits awarded. Permits necessary for exploration drilling and other field
programs associated with pre-development assessment of the Pebble Project are
applied for each year. There are no existing material environmental liabilities
associated with the Pebble Project.



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Accessibility, Climate, Local Resources, Infrastructure and
Physiography

Current access to the property is by helicopter from Iliamna.
There is a modern airfield at Iliamna, with two paved 4,920 ft airstrips, that
services the communities of Iliamna, Newhalen and Nondalton. The runways are
suitable for DC-6 and Hercules cargo aircraft and commercial jet aircraft.

There are paved roads that connect the villages of Iliamna and
Newhalen to the airport and to each other, and a partly paved, partly gravel
road that extends to a proposed Newhalen River crossing near Nondalton. The
property is currently not connected to any of these local communities by road; a
road would be planned as part of the project design.

There is no access road that connects the communities nearest
the Pebble Project to the coast on Cook Inlet. From the coast, at Williamsport
on Iniskin Bay, there is an 18.6 mile state-maintained road that terminates at
the east end of Iliamna Lake, where watercraft and transport barges may be used
to access Iliamna. The route from Williamsport, over land to Pile Bay on Iliamna
Lake, is currently used to transport bulk fuel, equipment and supplies to
communities around the lake during the summer months. Also during summer,
supplies are barged up the Kvichak River, approximately 43.4 miles southwest of
Iliamna, from Kvichak Bay on the North Pacific Ocean.

A small run-of-river hydroelectric installation on the nearby
Tazamina River provides power for the three communities in the summer months.
Supplemental power generation using diesel generators is required during winter
months.

Iliamna and surrounding communities have a combined population
of just over 400 people. As such, there is limited local commercial
infrastructure except that which services seasonal sports fishing and hunting.

The property is situated at approximately 1,000 ft above mean
sea level in an area described as subarctic tundra. It is characterized by
gently rolling hills and an absence of permafrost. The climate is sufficiently
moderate to allow a well-planned mineral exploration program to be conducted
year-round at Pebble.

Geological Setting and Mineralization

Pebble is a porphyry-style copper-gold-molybdenum-silver
deposit that comprises two adjacent, contiguous, coeval hydrothermal centers
called the Pebble East and Pebble West zones. Mineralization in the Pebble West
zone extends from surface to depths of at least 3,000 ft whereas higher grade
mineralization in the Pebble East zone extends to a depth of at least 5,810 ft
but is concealed beneath an east-thickening wedge of unmineralized rock types.
An important exploration target is represented by high-grade, but as yet
undelineated, mineralization on the far eastern side of the deposit which was
dropped 1,970 to 2,950 ft by normal faults into the northeast-trending East
Graben.

The Pebble deposit formed about 90 million years ago in
response to intrusion of granodiorite magmas generated by subduction of the
Pacific Plate beneath the Wrangellia Superterrane. The Pebble deposit is hosted
by these granodiorite intrusions and by the sedimentary and volcanic rocks of
Jurassic to Cretaceous age, granodiorite and diorite sills and alkalic monzonite
intrusions and associated breccias which host them.

Mineralization at Pebble is predominantly hypogene, although
the Pebble West zone contains a thin zone of variably developed leached cap and
underlying supergene mineralization. Disseminated and vein-hosted
copper-gold-molybdenum-silver mineralization, dominated by chalcopyrite and
locally accompanied by bornite, is associated with early potassic alteration in
the shallow part of the Pebble East zone and with early sodic-potassic
alteration in the Pebble West zone and deeper parts of the Pebble East zone.
High-grade copper-gold mineralization is associated with younger pyrophyllite-
and sericite-bearing subtypes of advanced argillic alteration in the Pebble East
zone. The deposit is surrounded by weakly mineralized quartz-sericite-pyrite
alteration; in the upper center of the deposit quartz-illite-pyrite alteration
is an illite-altered relict of a mostly eroded quartz-sericite-pyrite cap to the
deposit.

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Exploration

Historical

Cominco Alaska, a division of Cominco Ltd. now Teck (Cominco
(Teck)) began reconnaissance exploration in the Pebble region in the mid-1980s
and in 1984 discovered the Sharp Mountain gold prospect near the southern margin
of the current property. Gold was discovered in quartz veins of probable
Tertiary age near the peak of Sharp Mountain. Grab samples of veins in talus
ranged from 0.045 oz/ton Au to 9.32 oz/ton Au and 3.0 oz/ton Ag. In 1987,
examination and sampling of several prominent limonitic and hematitic alteration
zones yielded anomalous gold concentrations from the Sill prospect and the
Pebble discovery outcrop.

Geophysical surveys were conducted on the property between 1988
and 1997. An IP survey in 1989 at Pebble displayed response characteristics of a
large porphyry-copper system. The surveys were dipole-dipole induced
polarization (IP) surveys which defined a chargeability anomaly about 31.1
square miles in extent within Cretaceous age rocks which surround the eastern to
southern margins of the Kaskanak batholith. All known zones of mineralization of
Cretaceous age on the Pebble property occur within the broad IP anomaly.

In 1991, baseline environmental and engineering studies were
initiated and weather stations were established. A preliminary evaluation was
undertaken by Cominco (Teck) in 1991, and updated in 1992. Historical estimates
of the mineral resources for the Pebble deposit were completed by Cominco
(Teck), most recently in 2000.

Northern Dynasty and Pebble Partnership

Between 2001 and 2006, the entire Pebble property was mapped
for rock type, structure and alteration at a scale of 1:10,000, providing an
important geological framework for interpretation of other exploration data. A
geological map of the Pebble deposit was also constructed but, due to a paucity
of outcrop, was based solely on drill hole information. The content and
interpretation of district and deposit scale geological maps have not changed
materially from those presented in 2009 and 2010.

A number of geophysical surveys, including IP, magnetic and
other survey types were completed by Northern Dynasty and the Pebble Partnership
between 2001 and 2010 to test the Pebble deposit and other occurrences on the
Pebble property. Between 2001 and 2003, Northern Dynasty collected 1,026 soil
samples, outlining high-contrast, coincident anomalies in gold, copper,
molybdenum and other metals in an area that measures at least 5.6 miles
north-south by up to 2.5 miles east-west, with strong but smaller anomalies in
several outlying zones. All soil geochemical anomalies lie within the 31.1
square mile IP chargeability anomaly. Limited surficial geochemical surveys were
completed in 2010 and 2011.

Drilling

Extensive drilling totalling 1,042,218 ft has been completed in
1,355 holes on the Pebble Project. These result from annual drill programs which
took place during 19 of the 26 years from 1988 to 2013. Northern Dynasty and the
Pebble Partnership completed drilling for exploration, deposit delineation,
engineering and environmental purposes between 2002 and 2013. Highlights from
exploration and deposit delineation drilling since 2002 include:

| |  | in 2002, drill testing of IP chargeability and
      multi-element geochemical anomalies outside of the Pebble deposit but
      within the larger and broader IP chargeability anomaly discovered the 38
      Zone porphyry copper-gold-molybdenum deposit, the 52 Zone porphyry copper
      occurrence, the 37 Zone gold-copper skarn deposit, the 25 Zone gold
      deposit, and several small occurrences in which gold values exceeded 3.0
      g/t.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | in 2003, drilling took place within and adjacent to the
      Pebble West zone and outside the Pebble deposit to test for extensions and
      new mineralization at four other zones, including the 38 Zone porphyry
      copper-gold-molybdenum deposit and the 37 Zone gold-copper skarn deposit.                                                                                                                                                        

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| |  | in 2004, 147 exploration holes were drilled in the Pebble
      deposit; the Pebble East zone is identified; the 308 Zone porphyry
      copper-gold-molybdenum deposit is discovered.                                                                                       
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                              
| |  | in 2005 and 2006, drilling at Pebble East
      confirms its large size and higher grades of copper, gold and molybdenum.                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                              
| |  | in 2007, 34 holes extend Pebble East to the
      northeast, northwest, south and southeast.                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                              
| |  | in 2008, 31 delineation and infill holes were
      drilled at Pebble East. FMMUSA drilled seven exploration holes on land
      that is now controlled by the Pebble Partnership.                                                                                           
| |   |                                                                                                                                                                                                                                                                              
| |  | in 2009 and 2010, delineation holes were
      drilled at the margins of Pebble West and exploration holes were drilled
      elsewhere on the property.                                                                                                                     
| |   |                                                                                                                                                                                                                                                                              
| |  | in 2011 and 2012, holes drilled at the Pebble West zone
      indicate potential for resource expansion laterally and to depth;
      exploration targets were tested on the Kaskanak claims to the northwest
      and south of Pebble, and on the KAS claims further south.

Drilling for engineering (metallurgical and geotechnical) and
environmental (hydrological) purposes began in 2004 and continued through
2013.

The spatial distribution and type of holes drilled are
illustrated below.



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Most of the footage on the Pebble Project was drilled using
diamond core drills. Only 18,921 ft were percussion-drilled from 223 rotary
drill holes. Many of the cored holes were advanced through overburden using a
tricone bit with no core recovery. These overburden lengths are included in the
core drilling total.

Since early 2004, all Pebble drill core has been geotechnically
logged on a drill run basis. Over 69,000 measurements were made for a variety of
geotechnical parameters on 735,000 ft of core drilling. Recovery is generally
very good and averages 98.5% overall; two-thirds of all measured intervals have
100% core recovery. Additionally, all Pebble drill core from the 2001 through
2013 drill programs was photographed in a digital format.

All drill hole collars have been surveyed using a differential
global positioning system. A digital terrain model for the site was generated by
photogrammetric methods in 2004. All post-Cominco (Teck) drill holes have been
surveyed downhole, typically using a single shot magnetic gravimetric tool. A
total of 989 holes were drilled vertically (-90°) and 192 were inclined from
-42° to -85° at various azimuths.

A summary of drilling by various categories (operator, type,
year and area) to the end of the 2013 exploration program are compiled in the
table below. As shown in Figure 3 and Table 1 (East, West, Main), a large
proportion of the drilling has been directed toward the Pebble deposit.

Table 1 Summary of Drill Holes  Pebble Project

No. of
      Holes
    Feet
    MetresBy OperatorCominco (Teck) 1
    164
    75,741.0
    23,086Northern Dynasty
    578
    495,069.5
    150,897Pebble Partnership 2
    606
    465,957.7
    142,024FMMUSA
    7
    5,450.0
    1,661Total
    1,355
    1,042,218.2
    317,668By TypeCore 1,5
    1,132
    1,023,297.6
    311,901Percussion 6
    223
    18,920.6
    5,767Total
    1,355
    1,042,218.2
317,668


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No. of
      Holes
    Feet
    MetresBy Year1988 1
    26
    7,601.5
    2,3171989 1
    27
    7,422.0
    2,2621990
    25
    10,021.0
    3,0541991
    48
    28,129.0
    8,5741992
    14
    6,609.0
    2,0141993
    4
    1,263.0
    3851997
    20
    14,695.5
    4,4792002
    68
    37,236.8
    11,3502003
    67
    71,226.6
    21,7102004
    267
    165,567.7
    50,4652005
    114
    81,978.5
    24,9872006 3
    48
    72,826.9
    22,1982007 4
    92
    167,666.9
    51,1052008 5
    241
    184,726.4
    56,3052009
    33
    34,947.5
    10,6522010
    66
    57,582.0
    17,5512011
    85
    50,767.7
    15,4742012
    81
    35,760.2
    10,9002013
    29
    6,190.0
    1,887Total
    1,355
    1,042,218.2
317,668


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No.
      ofHoles
    Feet
    MetresBy AreaEast
    141
    446,379.3
    136,056West
    443
    351,986.7
    107,286Main 7
    101
    10,674.7
    3,254NW
    203
    45,948.4
    14,005North
    46
    25,695.9
    7,832NE
    10
    1,097.0
    334South
    98
    50,262.5
    15,32025 Zone
    8
    4,047.0
    1,23437 Zone
    7
    4,252.0
    1,29638 Zone
    20
    14,221.5
    4,33552 Zone
    5
    2,534.0
    772308 Zone
    1
    879.0
    268Eastern
    21
    3,105.0
    946Southern
    153
    60,442.4
    18,423SW
    51
    9,337.8
    2,846Sill
    39
    10,445.5
    3,184Cook Inlet
    8
    909.5
    277Total
    1,355
    1,042,218.2
317,668


Notes to table:
  1. Includes holes drilled on the Sill prospect.
  2. Holes
started by Northern Dynasty and finished by the Pebble Partnership are included
as the Pebble Partnership.3. Drill holes counted in the year in which they
were completed.4. Wedged holes are counted as a single hole including full
length of all wedges drilled.5. Includes FMMUSA drill holes; data acquired
in 2010.6. Shallow (<15 ft) auger holes not included.7. Comprises
holes drilled entirely in Tertiary cover rocks within the Pebble West and Pebble
East areas. Some numbers may not sum exactly due to rounding.

Sampling, Analysis and Security of Samples

The Pebble deposit has been explored by extensive core
drilling, with 80,859 samples having been taken from drill core for assay
analysis. Nearly all potentially mineralized Cretaceous core drilled and
recovered has been sampled by halving in 10 ft lengths. Similarly, all core
recovered from the Late Cretaceous to Early Tertiary cover sequence has also
been sampled, typically on 20 ft sample lengths, with some shorter sample
intervals in areas of geologic interest. Unconsolidated overburden material,
where it exists, is generally not recovered by core drilling and therefore not
usually sampled.

Rock chips from the 222 rotary percussion holes were generally
not sampled for assay analysis, as the holes were drilled for monitoring wells
and environmental purposes. Only 35 samples were taken from the drill chips of
26 rotary percussion holes outside the Pebble deposit area, which were drilled
for condemnation purposes.

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Analytical work in 2002 and from 2004 to 2013 was completed by
ALS Minerals Laboratories of North Vancouver, an ISO 9002 certified laboratory.
Analytical work for the 2003 drilling program was completed by SGS Canada Inc.
of Toronto, ON, an ISO 9002 registered, ISO 17025 accredited laboratory.

Northern Dynasty maintained an effective Quality
Control/Quality Assurance (QA/QC) program consistent with industry best
practices, which has continued from 2007 to 2013 under the Pebble Partnership.
This program is in addition to the QA/QC procedures used internally by the
analytical laboratories. The QA/QC program has also been subject to independent
review by Analytical Laboratory Consultants Ltd. and Nicholson Analytical
Consulting. The analytical consultants provide ongoing monitoring, including
facility inspection and timely reporting of the performance of standards, blanks
and duplicates in the sampling and analytical program. The results of this
program indicate that analytical results are of a high quality, suitable for use
in detailed modelling and resource evaluation studies. The QA/QC sample types
used in the program are described in the table below.

Table 2 Summary of Quality Control/Quality Assurance Sampling
 Pebble Project

QC Code
    Sample Type
    Description
    % of TotalMS
    Regular Mainstream
    Regular samples submitted for
      preparation and analysis at the primary laboratory.
    90%ST
    Standard (CertifiedReference
      Material)
    Mineralized material in pulverized
      form with a known concentration and distribution of element(s) of
      interest. Randomly inserted using pre-numbered sample tags.
    5%or1 in 20DP
    Duplicate or Replicate
    An additional split taken from the
      remaining pulp reject, coarse reject, 1⁄4 core or 1⁄2 core remainder.
      Random selection using pre-numbered sample tags.
    5%or1 in 20SD
    Standard Duplicate
    Standard reference sample submitted
      with duplicates and replicates to the check laboratory.
    <1%BL
    Blank
    Sample containing negligible or
      background amounts of elements of interest, to test for contamination.
    1%


Core was boxed at the rig and transported daily by helicopter
to the secure logging facility in Iliamna. Half cores remaining after sampling
were replaced in the original core boxes and stored at Iliamna, AK in a secure
compound. Crushed reject samples from the 2006 through 2013 analytical programs
are stored in locked containers at Delta Junction, AK. Drill core assay pulps
from the 1989 through 2013 programs are stored at a secure warehouse in Langley,
BC.

Mineral Resources

The current estimate of the mineral resources in the Pebble
deposit is based on approximately 59,000 assays obtained from 699 drill holes
completed to the end of 2013. The resource tabulated below was estimated using
ordinary kriging by David Gaunt, P.Geo., a qualified person who is not
independent of Northern Dynasty.

The tabulation is based on copper equivalency that incorporates
the contribution of copper, gold and molybdenum. Although the estimate includes
silver, it was not used as part of the copper equivalency calculation in order
to facilitate comparison with previous estimates which did not consider the
silver content or its potential economic contribution. A base case cut-off of
0.3% CuEq is highlighted.

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


Table 3 2014 Estimate of Mineral Resources  Pebble Deposit
Measured and Indicated Categories

Threshold CuEq %
    CuEq%
    Tonnes
    Cu (%)
    Au (g/t)
    Mo (ppm)
    Ag (g/t)Measured0.3
    0.65
    527,000,000
    0.33
    0.35
    178
    1.660.4
    0.66
    508,000,000
    0.34
    0.36
    180
    1.680.6
    0.77
    279,000,000
    0.40
    0.42
    203
    1.841.0
    1.16
    28,000,000
    0.62
    0.62
    302
    2.27Indicated0.3
    0.77
    5,912,000,000
    0.41
    0.34
    245
    1.660.4
    0.82
    5,173,000,000
    0.45
    0.35
    260
    1.750.6
    0.99
    3,450,000,000
    0.55
    0.41
    299
    1.991.0
    1.29
    1,411,000,000
    0.77
    0.51
    343
    2.42Measured + Indicated0.3
    0.76
    6,439,000,000
    0.40
    0.34
    240
    1.660.4
    0.81
    5,681,000,000
    0.44
    0.35
    253
    1.750.6
    0.97
    3,729,000,000
    0.54
    0.41
    291
    1.981.0
    1.29
    1,439,000,000
    0.76
    0.51
    342
    2.42


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


Table 4 2014 Estimate of Mineral Resources  Pebble Deposit
Inferred Category

Threshold CuEq %
    CuEq%
    Tonnes
    Cu (%)
    Au (g/t)
    Mo (ppm)
    Ag (g/t)Inferred0.3
    0.54
    4,460,000,000
    0.25
    0.26
    222
    1.190.4
    0.68
    2,630,000,000
    0.33
    0.30
    266
    1.390.6
    0.89
    1,290,000,000
    0.48
    0.37
    291
    1.791.0
    1.20
    360,000,000
    0.69
    0.45
    377
    2.27


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The tabulated mineral resources are subject to the notes below:

These resource estimates have been prepared in accordance with
NI 43-101 and the CIM Definition Standards. Inferred resources have a great
amount of uncertainty as to their existence and whether they can be mined
legally or economically. It cannot be assumed that all or any part of the
Inferred resources will ever be upgraded to a higher category.

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

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

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

Parameter
    Units
    Cost ($)
    ValueMetal Price
    Gold
    US$/oz
    -
    1540.00Copper
    US$/lb
    -
    3.63Molybdenum
    US$/lb
    -
    12.36Metal Recovery
    Copper
    %
    -
    89Gold
    %
    -
    72Molybdenum
    %
    -
    82Operating Cost
    Mining (mineralized material or
      waste)
    $/ton mined
    1.01
    -Added haul lift from depth
    $/ton/bench
    0.03
    -Process Process cost adjusted by total
      crushing energy
    $/ton milled
    4.40
    - Transportation
    $/ton milled
    0.46
    - Environmental
    $/ton milled
    0.70
    - G&A
    $/ton milled
    1.18
    -Block Model
    Current block model
    ft
    -
    75 x 75 x 50Density
    Mineralized material and waste
      rock
    -
    -
    Block modelPit Slope Angles
    
    degrees
    -
42


These mineral resource estimates may ultimately be affected by
a broad range of environmental, permitting, legal, title, socioeconomic,
marketing and political factors commensurate with the specific characteristics
of the Pebble deposit (including its scale, location, orientation and
poly-metallic nature) as well as its setting (from a natural, social,
jurisdictional and political perspective).

Mineral Processing and Metallurgical Testing

Metallurgical testwork for the Pebble Project was initiated by
Northern Dynasty in 2003 and continued under the direction of Northern Dynasty
until 2008. From 2008 to 2013, metallurgical testwork progressed under the
direction of the Pebble Partnership.

Geometallurgical studies were initiated by the Pebble
Partnership in 2008, and continued through 2012. The principal objective of this
work was to quantify significant differences in metal deportment that may result
in variations in metal recoveries during mineral processing. The results of the
geometallurgical studies indicate that the deposit comprises several
geometallurgical (or material type) domains. These domains are defined by distinct, internally consistent copper and gold deportment
characteristics that correspond spatially with changes in silicate alteration
mineralogy.

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The first major distinction between domains is characterized by
hypogene and supergene mineralization. Hypogene mineralization reflects the
copper-, gold- and molybdenum-bearing minerals which precipitated from hot
hydrothermal solutions when the deposit initially formed in the Cretaceous
Period. In contrast, supergene mineralization represents modifications, mostly
to the Cu-bearing minerals present in the near-surface parts of the Pebble West
zone, during a much more recent weathering phase of the deposit when it became
exposed for a time at the surface of the earth. The second critical influence on
metallurgical recoveries is related directly to different alteration assemblages
that formed over time in different parts of the Pebble deposit.

These alteration assemblages as listed in Table 5 include sodic
  potassic, illite-pyrite (described as quartz-illite-pyrite in Geological
    Setting and Mineralization above), K-silicate (potassic in Geological
      Setting and Mineralization), QSP (quartz-sericite-pyrite in Geological
  Setting and Mineralization), QP (pyrophyllite in Geological Setting and
    Mineralization) and sericite types. Each of these assemblages contains a
  distinct suite of minerals that precipitated from hydrothermal fluids under
  different conditions of temperature, pressure and chemical composition, and
  including, in some cases, differences in the types of copper- and gold-bearing
minerals.

Recognition of the relationships between metallurgical behavior
and mineralization styles and alteration assemblages provides significant
technical advantages to further testwork on the Pebble Project. The samples
selected for the comminution, copper-gold-molybdenum bulk flotation, and copper
molybdenum separation testing were representative of the various types and
styles of mineralization present at the Pebble deposit.

Metallurgical testwork and associated analytical procedures
were performed by recognized testing facilities with extensive experience with
this analysis, with this type of deposit, and with the Pebble Project.

The test results on variable mineralization samples derived
from the 103 locked-cycle (LCT) flotation tests indicate that marketable
copper and molybdenum concentrates can be produced with gold and silver contents
that meet or exceed payable levels in representative smelter contracts. Metal
recoveries were projected in the 2014 Technical Report based on the LCT results
of the variability samples, and associated gold leach testwork as well as
SART3 tests. The table summarizes projected overall recoveries from
varied mineralization domains, which include the flotation and gold plant
recoveries.

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Table 5 Projected Metallurgical
Recoveries1 Pebble Project

Domain
    Flotation
      Recovery to Concentrate2
    Gold Plant
      Recovery3
    Overall
    RecoveryCu Con
    Mo Con
    SART
    DoreCu%
    Au%
    Ag%
    Mo%
    Cu%
    Au%
    Ag%
    Cu%
    Au%
    Ag%
    Mo
   %Supergene:Sodic Potassic
    74.7
    60.4
    64.1
    51.2
    1.5
    16.0
    6.0
    76.2
    76.4
    70.2
    51.2Illite Pyrite
    68.1
    43.9
    64.1
    62.6
    3.9
    26.8
    6.0
    72.1
    70.7
    70.2
    62.6Hypogene:Illite Pyrite
    86.4
    43.9
    64.1
    73.2
    1.9
    26.1
    6.0
    88.3
    70.0
    70.2
    73.2Sodic Potassic
    86.2
    60.4
    64.1
    76.6
    1.4
    16.7
    6.0
    87.6
    77.1
    70.2
    76.6K Silicate
    90.3
    61.3
    64.1
    82.3
    0.7
    13.8
    6.0
    91.0
    75.1
    70.2
    82.3QP
    94.3
    65.0
    64.1
    80.1
    1.4
    14.4
    6.0
    95.6
    79.4
    70.2
    80.1Sericite
    86.4
    39.2
    64.1
    73.2
    1.9
    26.7
    6.0
    88.3
    65.8
    70.2
    73.2QSP
    86.0
    31.6
    64.1
    82.5
    2.1
    32.1
    6.0
    88.1
    63.7
    70.2
82.5


|Notes to table:
|---------------
|1.             
|2.             
|3.             

Environmental and Socioeconomic

The Pebble deposit is located on state land that has been
specifically designated for mineral exploration and development. The project
area has been the subject of two comprehensive land-use planning exercises
conducted by the Alaska Department of Natural Resources (the ADNR), the first
in the 1980s and the second completed in 2005. The ADNR identified five land
parcels (including Pebble) within the Bristol Bay planning area as having
significant mineral potential, and where the planning intent is to accommodate
mineral exploration and development. These parcels total 2.7% of the total
planning area (ADNR, 2005).

Environmental standards and permitting requirements in Alaska
are stable, objective, rigorous and science-driven. These features are an asset
to projects like Pebble that are being designed to meet U.S. and international
best practice standards of design and performance.

Environmental Baseline Studies

Northern Dynasty began an extensive field study program in 2004
to characterize the existing physical, chemical, biological, and social
environments in the Bristol Bay and Cook Inlet areas where the Pebble Project
might occur. The Pebble Partnership compiled the data for the 2004-2008 study
period into a multi-volume Environmental Baseline Document1. These
studies have been designed to:

_____________________________

1Baseline data collecting and monitoring has
continued since that time. The program data from 2009 to 2014 is being
integrated with environmental baseline data reports from 2004 to 2008 so that
this information can also be shared with state/federal agencies and the public
as part of the future permitting process under NEPA.

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| |  | Fully characterize the existing biophysical and
      socioeconomic environment;                                                     
| | - | -------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                      
| |  | Support environmental analyses required for
      effective input into Project design;                                               
| |   |                                                                                                                                      
| |  | Provide a strong foundation for internal
      environmental and social impact assessment to support corporate
      decision-making;
| |   |                                                                                                                                      
| |  | Provide the information required for
      stakeholder consultation and eventual mine permitting in Alaska; and,                     
| |   |                                                                                                                                      
| |  | Provide a baseline for long-term monitoring of
      potential changes associated with mine development.                             

The baseline study program
includes:

| |  | surface water                             |  |  | wildlife               
| | - | ----------------------------------------- |  | - | -----------------------
| |   |                                           |  |   |                        
| |  | groundwater                               |  |  | air quality            
| |   |                                           |  |   |                        
| |  | surface and groundwater quality           |  |  | cultural resources     
| |   |                                           |  |   |                        
| |  | geochemistry                              |  |  | subsistence            
| |   |                                           |  |   |                        
| |  | snow surveys                              |  |  | land use               
| |   |                                           |  |   |                        
| |  | fish and aquatic resources                |  |  | recreation             
| |   |                                           |  |   |                        
| |  | noise                                     |  |  | socioeconomics         
| |   |                                           |  |   |                        
| |  | wetlands                                  |  |  | visual aesthetics      
| |   |                                           |  |   |                        
| |  | trace elements                            |  |  | climate and meteorology
| |   |                                           |  |   |                        
| |  | fish habitat  stream flow
      modeling |  |  | Iliamna Lake           
| |   |                                           |  |   |                        
| |  | marine                                    |  |   |                        

Potential Environmental Effects and Proposed Mitigation
Measures

The application of sound engineering, environmental planning
and best management practices, including compliance with existing U.S. federal
and state environmental laws, regulations and guidelines, will ensure that all
of the environmental issues associated with the development and operation of the
Pebble Project can be effectively addressed and managed.

The major environmental components include air, water and
terrestrial resources. During the preliminary stages of the Pebble Project,
Northern Dynasty identified key environmental issues and design drivers that
have formed the basis of baseline data collection, environmental and social
analysis and continuing stakeholder consultations influencing the Pebble Project
design. The effects assessment has confirmed these as important issues and
design drivers, and has identified mitigation measures for each. The key
mitigation strategies for these drivers include:

| |  | Water: development of a water management plan that
      maximizes the collection and diversion of groundwater, snowmelt and direct
      precipitation away from the mine site;                                                                                                                                                                          
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                           
| |  | Wetlands: avoidance and minimization of project effects
      on wetlands and implementation of a water management plan (in accordance
      with US Army Corp of Engineers guidelines and regulations) to reduce
      wetland impacts;                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                           
| |  | Aquatic habitats: development of a water management plan
      and habitat mitigation measures that includes strategies to effectively
      manage the release of treated water in compliance with anticipated
      regulatory requirements to sustain necessary downstream flows and to
      protect downstream fish habitat and aquatic environments;
| |   |                                                                                                                                                                                                                                                                                                                                                           
| |  | Air quality: implementation of air emissions
      and dust suppression strategies;                                                                                                                                                                                                                                                                       

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| |  | Marine environment: minimize the port
      facilitys footprint in the intertidal zone, particularly in soft sediment
      intertidal areas; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                   
| |  | Compensatory mitigation measures to ensure
      compliance with the Clean Water Act.                                                             

Direct integration of these and other appropriate measures into
the Pebble Project design and operational strategies are expected to effectively
mitigate possible environmental effects and minimize residual environmental
effects associated with the construction, operation and eventual closure of any
proposed mine at the Pebble Project.

Community Consultation and Stakeholder Relations

An active program of stakeholder outreach has also been
undertaken at Pebble, and has included community meetings, stakeholder visits,
presentations and event appearances, as well as stakeholder tours to the Pebble
Project site and to operating mines in the United States and Canada. The focus
of these outreach activities is to update stakeholders on the Pebble Project, to
receive feedback on stakeholder priorities and concerns and to advise
participants about modern mining practices.

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

Status of Project Engineering and Previous Mine Planning
Work

During the period 2007 to 2011, the Pebble Partnership expended
several hundred million dollars on the Pebble Project, a major portion of which
was spent on exploration programs, resource estimates, environmental data
collection and technical studies involving engineering of various possible mine
development models, as well as related infrastructure, power and transportation
systems. During this period, the Pebble Partnership was funded by the
international mining company Anglo American through an affiliate which had
acquired a 50% interest in the limited partnership which owns the Pebble Project
contingent on the provision of $1.5 billion in funding for project costs. These
studies informed a preliminary assessment of the project released by the Company
in 2011. As a consequence of several factors, including EPA action on the Pebble
Project discussed under Item 8  A3. Legal Proceedings, the withdrawal of
Anglo American from the project and the passage of time, technical and
engineering studies related to mine-site and infrastructure development are
considered to have very uncertain and perhaps little value at this time.
Environmental baseline studies and data collection remains a significant legacy
asset of the Company from this period. The 2014 Technical Report does not
attempt to build on this previous engineering work given that, unless and until
there is some visibility in the litigation with the EPA in regards to the
possibility of permitting any kind of mine at Pebble, it is not appropriate for
the technical report authors to use or build upon previously posited mine models
or to make large dollar recommendations in furtherance of assessing the
technical or economic feasibility of a potential mine at Pebble.

Plans for 2016

The Companys plans for 2016 listed below are subject to the
Companys ability to raise the necessary capital resources to meet obligations
as they come due.

| |  | Continue to advance a multi-dimensional strategy to
      address the EPAs pre-emptive CWA regulatory action to ensure the Pebble
      Project can initiate federal and state permitting under NEPA unencumbered
      by any extraordinary development restrictions imposed by the EPA.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                           
| |  | Maintain an active corporate presence in Alaska to
      advance relationships with political and regulatory offices of government,
      Alaska Native partners and broader stakeholder relationships.                                                                                   

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|Form 20-F Annual Report | P a g e| 39

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| |  | Maintain the Pebble Project and Pebble claims
      in good standing.                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                             
| |  | Continue general and administration activities
      to maintain the Company in good standing, while continuing to reduce these
      costs.
| |   |                                                                                                                                             
| |  | Continue to work toward securing a transaction
      with a potential partner(s) to further advance the project.                            

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|Form 20-F Annual Report | P a g e| 40

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|C. | ORGANIZATIONAL STRUCTURE
|-- | ------------------------

Structure as at December 31, 2015:



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|Form 20-F Annual Report | P a g e| 41

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|D. | PROPERTY, PLANT AND
EQUIPMENT
|-- | -----------------------------

The Companys principal property is the Pebble Project, as
discussed above in Item 4.B.

The Company has approximately $804,000 in plant and equipment
primarily at the Pebble Project site located in Iliamna.

The Company, through the Pebble Partnership, has leased
premises in Anchorage and at the Pebble Project site and as result the Company
has lease commitments which have been disclosed under Item 5  F. Tabular
Disclosure of Contractual Obligations.

|ITEM 4A | UNRESOLVED STAFF
      COMMENTS
|------- | -------------------------------

There are none.

|ITEM 5 | OPERATING AND FINANCIAL
      REVIEW AND PROSPECTS
|------ | --------------------------------------------------

OVERVIEW

Northern Dynasty is a mineral exploration company which, via
its subsidiaries, holds a 100% interest in mining claims on State of Alaska land
in southwest Alaska, USA ("US") that are part of or in the vicinity of the
Pebble Copper-Gold-Molybdenum-Silver Project (the "Pebble Project" or
Pebble).

None of the Company's properties have any mineral reserves or
have been proven to host mineralized material which can be said to be "ore" or
feasibly economic at current metals prices. The Company incurs significant
exploration expenditures as it carries out its business strategy. As Northern
Dynasty is an exploration stage company, it does not have any revenues from its
operations to offset its exploration expenditures. Accordingly, the Company's
ability to continue exploration of its properties will be contingent upon the
availability of additional financing.

Northern Dynasty's financial statements are prepared on the
basis that it will continue as 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 continue to raise adequate financing and to develop
profitable operations. Northern Dynasty's 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.

The following discussion should be read in conjunction with the
audited annual financial statements for the years ended December 31, 2015, 2014,
and 2013, and the related notes accompanying this Annual Report ("2015 Financial
Statements"). The Company prepares and presents its financial statements in
accordance with International Financial Reporting Standards ("IFRS"), as issued
by the International Accounting Standards Board.

Critical Accounting Policies and Estimates

The preparation of the 2015 Financial Statements requires
management to make estimates, judgments and assumptions that affect the reported
amounts of assets and liabilities at the end of the reporting period presented
and reported amounts of expenses during said reporting period. Actual outcomes
may differ from these estimates.

Areas where significant estimates exist include:

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|i.  | the inputs into the Black Scholes calculation for the
      estimation of the fair value of share purchase options granted,
|--- | ---------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                            
|ii. | assumptions used in the determination of the provision
      for deferred income tax expense (recovery).                   

Areas where significant judgments exist include:

|i.   | assessing the indicators for testing the Company's
      mineral property interest ("MPI") for impairment,        
|---- | ------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                   
|ii.  | determining the functional currencies of the Company and
      its subsidiaries,                                  
|     |                                                                                                                   
|iii. | concluding that going concern was an appropriate basis
      for the preparation of the 2015 Financial
Statements.

Further discussion can be found in note 2 of the 2015 Financial
Statements which form Item 18 of this Annual Report.

Financial Instruments and Other Instruments

The Company has no derivative financial assets or liabilities.

|A. | RESULTS OF OPERATIONS
|-- | ---------------------

The following selected annual information is from the audited
consolidated financial statements for the fiscal years ended December 31which
have been prepared in accordance with IFRS. The 2013 figures include the Pebble
Partnership on a consolidated basis with effect from December 10, 2013. Unless
otherwise stated, all monetary amounts are expressed in thousands of Canadian
dollars except per share amounts, which are expressed in Canadian dollars.

|                                                             |   | Fiscal Year |   |   | Fiscal Year |   |   | Fiscal Year |  
|------------------------------------------------------------ | - | ----------- | - | - | ----------- | - | - | ----------- | -
|Excerpts from Statements of Financial Position               |   | 2015        |   |   | 2014        |   |   | 2013        |  
|Total assets                                                 | $ | 157,704     |   | $ | 135,510     |   | $ | 141,784     |  
|Total non-current liabilities (non-financial)                |   |            |   |   | 1,514       |   |   | 3,803       |  
|Total current liabilities                                    |   | 2,724       |   |   | 6,033       |   |   | 4,053       |  
|                                                             |   |             |   |   |             |   |   |             |  
|Excerpts from Statements of Comprehensive Loss (Income)      |   |             |   |   |             |   |   |             |  
|Exploration and evaluation                                   | $ | 8,718       |   | $ | 12,877      |   | $ | 1,991       |  
|General and administrative                                   |   | 8,272       |   |   | 9,059       |   |   | 5,970       |  
|Legal, accounting and audit                                  |   | 17,001      |   |   | 8,325       |   |   | 275         |  
|Share-based compensation                                     |   | 903         |   |   | 3,877       |   |   | 641         |  
|Other items (i)                                              |   | (1,065      | ) |   | (2,791      | ) |   | (1,292      | )
|Gain
      on discontinuance of equity method (ii)           |   |            |   |   |            |   |   | (5,062      | )
|Loss
      for the year                                      | $ | 33,829      |   | $ | 31,347      |   | $ | 2,523       |  
|                                                             |   |             |   |   |             |   |   |             |  
|Basic and diluted loss per common share                      | $ | 0.23        |   | $ | 0.33        |   | $ | 0.03        |  
|Weighted average number of common shares outstanding (000) |   | 146,313     |   |   | 95,010      |   |   | 95,007      |  

Notes

|(i)  | Other items include interest income, exchange gain or
      loss, other income and deferred income tax.                                                                                                 
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                         
|(ii) | Represents a gain recorded upon discontinuance of equity
      method for accounting for the investment in the Pebble Limited Partnership
      when the Company reacquired control in Q4 of
      2013.

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|Form 20-F Annual Report | P a g e| 43

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Year Ended December 31, 2015 versus Year Ended December 31,
2014

The Company recorded an increase in loss of $2.5 million due
primarily to its ongoing activities around the EPAs pre-emptive regulatory
action as discussed in Item 8  A3. Legal Proceedings which resulted in
an increase in legal, accounting and audit expenses by $8.7 million. The
increase was offset by the reduction of Exploration and Evaluation expenses
("E&E") by $4.2 million and general and administrative expenses ("G&A")
by $0.8 million as the Company allocated its financial resources from operating
activities to these matters.

E&E comprised mainly of the following for the year as
compared to 2014, expressed in thousands of dollars:

|Exploration and evaluation expenses ("E&E") |   | 2015  |  |   | 2014   | 
|------------------------------------------- | - | ----- |  | - | ------ | 
|Engineering                                 | $ | 224   |  | $ | 1,440  | 
|Environmental                               |   | 907   |  |   | 2,322  | 
|Site activities                             |   | 2,176 |  |   | 3,200  | 
|Socio-economic                              |   | 3,963 |  |   | 4,324  | 
|Property fees and assessments               |   | 1,276 |  |   | 1,097  | 
|Other activities and travel                 |   | 172   |  |   | 494    | 
|                                            | $ | 8,718 |  | $ | 12,877 | 

The Company incurred E&E associated with continued Native
community engagement, stakeholder outreach environmental monitoring, annual fees
for claims, payments in respect to site leases and demobilization and
remediation activities at site.

The following table provides a breakdown of G&A, and legal,
accounting and audit expenses incurred in the year as compared to 2014,
expressed in thousands of dollars:

|General and administrative expenses ("G&A") |   | 2015   |  |   | 2014   | 
|------------------------------------------- | - | ------ |  | - | ------ | 
|Conference and travel                       | $ | 369    |  | $ | 323    | 
|Consulting                                  |   | 232    |  |   | 782    | 
|Insurance                                   |   | 398    |  |   | 384    | 
|Office costs                                |   | 1,188  |  |   | 1,964  | 
|Management and administration               |   | 5,009  |  |   | 4,610  | 
|Shareholder communication                   |   | 759    |  |   | 772    | 
|Trust and filing                            |   | 317    |  |   | 224    | 
|Total G&A                                   |   | 8,272  |  |   | 9,059  | 
|Legal, accounting and audit                 |   | 17,001 |  |   | 8,325  | 
|                                            | $ | 25,273 |  | $ | 17,384 | 

Share-based compensation expense ("SBC") has fluctuated due to
the timing of share purchase option grants and the vesting periods associated
with these grants.

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The Company recognized an exchange gain on translation of
subsidiaries which have a U.S. Dollar functional currency of $23.3 million (2014
 $9.9 million) in other comprehensive income with the result that the Company
recorded comprehensive loss for the year of $10.6 million (2014  $21.4
million).

Financial position as at December 31, 2015 versus December
31, 2014

Total assets of the Company increased by $22 million due in
large part to the appreciation in the US dollar in relation to Canadian dollar
and the resultant increase in the value of mineral assets translated to the
Companys reporting currency.

Year Ended December 31, 2014 versus Year Ended December 31,
2013

The Company recorded an increase in loss of $28.8 million due
primarily to the increase in E&E, G&A and SBC. In 2013, the Company
recorded a $5.1 million gain on the discontinuance of the equity method in
accounting for the Pebble Partnership.

E&E increased by $10.9 million as the Company funded all
exploration and evaluation work on the Pebble Project for the full year and
included the updating of information on mineral resources (discussed under
Item 4  Technical Summary), other technical studies, site activities
including payment of annual fees for claims, site leases and land access
agreements, environmental monitoring and Native community engagement. E&E
comprised mainly of the following for the year as compared to 2013, expressed in
thousands of dollars:

|E&E                                |   | 2014   |  |   | 2013  | 
|---------------------------------- | - | ------ |  | - | ----- | 
|Engineering                        | $ | 1,440  |  | $ | 853   | 
|Environmental planning and testing |   | 2,322  |  |   | 270   | 
|Site activities                    |   | 4,297  |  |   | 401   | 
|Socio-economic                     |   | 4,324  |  |   | 26    | 
|Other activities and travel        |   | 494    |  |   | 441   | 
|                                   | $ | 12,877 |  | $ | 1,991 | 

Until December 10, 2013, the Pebble Project was under joint
control with Anglo American with the latter funding exploration and evaluation
work on the Pebble Project. Pursuant to the agreement with Anglo American, the
distribution of losses funded by Anglo American were to be allocated 100% to
Anglo American until satisfaction of Anglo Americans earn-in expenditures, and
as a result Northern Dynasty did not recognize any share of the losses.

G&A increased to $9.0 million from $6.0 million in 2013 due
to the inclusion of the Pebble Partnerships management, administration, and
office expenses for the full year. Legal, accounting and audit costs increased
by $8.0 million as legal costs were incurred in response to the EPAs activities
during the year (see Item 8  A3. Legal Proceedings).

The following table provides a breakdown of G&A incurred in
the year as compared to 2013, expressed in thousands of dollars:

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|G&A                           |   | 2014   |  |   | 2013  | 
|----------------------------- | - | ------ |  | - | ----- | 
|Conference and travel         | $ | 323    |  | $ | 340   | 
|Consulting                    |   | 782    |  |   | 836   | 
|Insurance                     |   | 384    |  |   | 342   | 
|Office costs                  |   | 1,964  |  |   | 670   | 
|Management and administration |   | 4,610  |  |   | 2,572 | 
|Shareholder communication     |   | 772    |  |   | 983   | 
|Trust and filing              |   | 224    |  |   | 227   | 
|Total G&A                     |   | 9,059  |  |   | 5,970 | 
|Legal, accounting and audit   |   | 8,325  |  |   | 275   | 
|Total                         | $ | 17,384 |  | $ | 6,245 | 

SBC increased to $3.9 million from $0.6 million in 2013 as the
Company granted 5.9 million share purchase options in the current year (2013 
no options were granted).

The Company recognized an exchange gain on translation of
subsidiaries which have a U.S. Dollar functional currency of $9.9 million (2013
 $6.9 million) in other comprehensive income with the result that the Company
recorded comprehensive loss for the year of $21.4 million as compared to a
comprehensive gain of $4.4 million in 2013.

Cash Flows for the Year Ended December 31, 2014 versus 2013

Net cash used in operations increased to $27.8 million in 2014
from $7.8 million in 2013, due to the increase in the Companys operating
activities as discussed above. The source of cash and cash equivalents during
2014 included the Companys cash resources and cash received from the issue of
special warrants in a private placement late in December 2014.

Financial position as at December 31, 2014 versus December
31, 2013

Total assets decreased by $6.3 million to $135.5 million. This
decrease was due mainly to the utilization of the Companys cash and cash
equivalents in its operating activities.

Year Ended December 31, 2013 versus Year Ended December 31,
2012

The Company recorded a decrease in loss of $13.1 million due
mainly to the decrease in E&E, SBC and a gain recognized on discontinuance
of the equity method for accounting for the investment in the Pebble
Partnership.

E&E decreased by $2.5 million as the Companys work on
technical studies wound down.

G&A decreased to $6.0 million from $6.5 million in 2012 due
mainly to a reduction in consulting fees paid and conference and travel costs.
In 2012, in response to EPAs initiatives such as the Bristol Bay Watershed
Assessment, the Company retained US political and scientific representatives and
consultants to assist, consult and represent the Company; such costs were lower
in 2013. This was offset by increased shareholder communication in 2013 as the
Company focused more resources in the area of investor relations and shareholder
communication.

The following table provides a breakdown of G&A incurred in
the year as compared to 2012, expressed in thousands of dollars:

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|G&A                           |   | 2013  |  |   | 2012  | 
|----------------------------- | - | ----- |  | - | ----- | 
|Conference and travel         | $ | 340   |  | $ | 566   | 
|Consulting                    |   | 836   |  |   | 1,761 | 
|Insurance                     |   | 342   |  |   | 343   | 
|Office costs                  |   | 670   |  |   | 702   | 
|Management and administration |   | 2,572 |  |   | 2,095 | 
|Shareholder communication     |   | 983   |  |   | 830   | 
|Trust and filing              |   | 227   |  |   | 228   | 
|Total G&A                     |   | 5,970 |  |   | 6,525 | 
|Legal, accounting and audit   |   | 275   |  |   | 255   | 
|Total                         | $ | 6,245 |  | $ | 6,780 | 

SBC decreased to $0.6 million from $5.2 million in 2012 due
mainly to the Company not granting share purchase options in 2013. In 2012 the
Company granted 2.2 million options and recognized an additional $0.5 million
expense for options that were cancelled voluntarily. Although over 2.0 million
options were cancelled voluntarily in 2013, they were fully vested, and there
was no impact on SBC as the Company had previously recognized SBC thereon.

The Company recognized an exchange gain on translation of the
Pebble Partnership, which has a US dollar functional currency, of $6.9 million
(2012  loss of $2.2 million) in other comprehensive income, with the result
that the Company recorded comprehensive income for 2013 of $4.4 million as
compared to a comprehensive loss of $17.8 million in 2012.

Cash Flows for the Year Ended December 31, 2013 versus 2012

Net cash used in operations decreased by $2.7 million to $7.8
million in 2013 due mainly to the decrease in Company corporate activities.

The Company contributed a further $1.0 million to the Pebble
Partnership before the change in control of the Pebble Partnership on December
10, 2013. On assumption of control, the Companys cash resources increased by
$6.5 million.

The Company received $0.6 million in interest on cash balances
as compared to $0.4 million in 2012 as the Companys funds were invested at
higher rates. For the 2013 year, the Company had a net decrease in cash of $1.7
million (2012  $9.9 million).

Financial position as at December 31, 2013 versus December
31, 2012

The Companys total assets increased by $8.9 million to $141.8
million. The increase was mainly the result of consolidating the assets and
liabilities of the Pebble Partnership as a result of assuming control thereof.
In respect to non-current assets, the Company recognized the Pebble mineral
property and plant and equipment as it discontinued the equity method of
accounting for the Pebble Partnership, which including a foreign exchange gain
on translation amounted to an increase of $7.7 million. Current assets increased
by $1.2 million as the Company consolidated amounts receivable and prepaid
expenses, certain restricted cash ($1.2 million) and cash and cash equivalents
from the Pebble Partnership. The additional cash and cash equivalents reduced
the decrease in cash and cash equivalents utilized for the year to $1.7 million.
Other changes included the change in value of the amounts receivable due to
accrued interest ($0.3 million) and foreign exchange gain on translation ($0.5
million).

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The Pebble Partnership under Joint Venture

Until the change of control on December 10, 2013, the Company
accounted for its investment in the Pebble Partnership under the equity
method.

Expenditures incurred by the Pebble Partnership on the Pebble
Project were funded by Anglo American in order to retain its 50% interest in the
Pebble Project. Anglo Americans total contributions from inception of the
Pebble Partnership to December 31, 2013 total $594.9 million (US$573.2 million).
For the period ended January 1 to December 10, 2013, the Pebble Partnership
incurred losses of $68.8 million (December 31, 2012  $102.9 million). E&E
costs decreased to $58.5 million from $93.3 million in the previous year as the
Pebble Partnership focused on various programs to advance the completion of a
prefeasibility study for the Pebble Project and the completion of a Project
Description to support the permit application under NEPA. In Q1 of 2012, the
Pebble Partnership released the 27,000-page Environmental Baseline Document.

The main E&E costs during the period ended January 1 to
December 10, 2013, were:

| | engineering (2013  $10.6 million; December 31,
      2012  $19.1 million);                       
|- | ---------------------------------------------------------------------------------------------------
|  |                                                                                                    
| | environmental planning and testing (2013 
      $13.9 million; December 31, 2012  $20.0 million);
|  |                                                                                                    
| | site activities (2013  $18.8 million; December
      31, 2012  $36.6 million);                   
|  |                                                                                                    
| | corporate affairs (2013  $13.7 million;
      December 31, 2012  $16.5 million); and             
|  |                                                                                                    
| | business development (2013  $1.5 million;
      December 31, 2012  $1.1 million).                

|B. | LIQUIDITY AND CAPITAL
RESOURCES
|-- | -------------------------------

Liquidity

The Company's major sources of funding has been the issuance of
equity securities for cash, primarily through private placements to
sophisticated investors and institutions and the issue of common shares pursuant
to the exercise of share purchase options. The Company has also in fiscal 2015
pursued the strategy of acquiring companies whose primary assets are cash and
equivalents through the issuance of equity securities (see "Significant
Acquisitions, Dispositions and Group Reorganization" in Item 4). The
Company's access to financing is always uncertain. There can be no assurance of
continued access to significant equity or other sources of funding.

As at December 31, 2015, the Companys cash and cash
equivalents were $7.5 million, down from $9.4 million at December 31, 2014 as
the Company used $37 million of its cash in its operating activities and raised
$35.0 million from various financing activities. The Company has prioritized the
allocation of available financial resources in order to meet key corporate and
Pebble Project expenditure requirements in the near term. Additional financing
will be required to pursue corporate activities and work programs at the Pebble
Project. There can be no assurances that the Company will be successful in
obtaining additional financing. The Company has been reducing its operating
costs and will continue to do so given the current market conditions. If the
Company is unable to raise the necessary capital resources to meet obligations
as they come due, the Company will have to further reduce or curtail its
operations.

At December 31, 2015, the Company had working capital of
approximately $7.9 million as compared to $5.9 million at December 31, 2014. The
Company has no long term debt, capital lease obligations, operating leases or
any other long term obligations other than those disclosed below (refer F.
Tabular Disclosure of Contractual Obligations).

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

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|Form 20-F Annual Report | P a g e| 48

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Capital Resources

The Companys capital resources consist of its cash reserves.
  As of December 31, 2015, the Company had no long term debt or commitments for
  material capital expenditures other than what has been disclosed in below in
F. Tabular Disclosure of Contractual Obligations.

The Company has no lines of credit or other sources of
financing which have been arranged or utilized.

Requirement of Financing

Northern Dynasty does not earn any revenues and has
historically had, and will continue to have for the foreseeable future, negative
cash flows. Historically, Northern Dynasty's sole source of funding has been
provided by the sale of equity securities for cash, primarily through private
placements to sophisticated investors and institutions. The Company has in
fiscal 2015 also pursued the strategy of acquiring companies whose primary
assets are cash and equivalents through the issuance of equity securities. Like
all exploration stage companies, Northern Dynasty will need to raise additional
financing to pursue any work programs at the Pebble Project and to meet its
business objectives.

Financial Instruments

The Company has no derivative financial assets or liabilities
and has the following non-derivative financial assets and liabilities.

| |  | Marketable securities              
| | - | -----------------------------------
| |   |                                    
| |  | Amounts receivable                 
| |   |                                    
| |  | Cash and cash equivalents          
| |   |                                    
| |  | Trade and other payables, and      
| |   |                                    
| |  | Amounts payable to a related party.

The Company keeps its financial instruments denominated in US
and Canadian Dollars, depending on expected needs in each currency. The Company
does not engage in any hedging operations with respect to currency or in-situ
minerals. Funds which are excess to Northern Dynasty's current needs are
invested in short-term near-cash investments.

Northern Dynasty does not have any material, legally
enforceable obligations requiring it to make capital expenditures and
accordingly, can remain relatively flexible in gearing its activities to the
availability of funds.

|C. | RESEARCH EXPENDITURES
|-- | ---------------------

Northern Dynasty does not carry out any research or development
activities. Please refer to Item 3 and Item 4 above for a discussion of the
exploration expenditures that the Company has incurred in connection with the
exploration of its mineral properties.

|D. | TREND INFORMATION
|-- | -----------------

Copper prices trended upward from early 2009 until late 2011.
Prices were variable from 2012 to 2015 and weakened overall. Prices continue to
be variable in 2016. The recent closing price is US$2.13/lb.

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The average annual gold price steadily increased from 2008 to
2012. Gold prices trended lower in 2013, and were variable, weakening overall in
2014 and 2015. Gold prices have increased in 2016, related to global economic
uncertainty. The recent closing price is US$1,191/oz.

Molybdenum prices were variable, but improving in 2010 and
2011, and variable but weakening in 2012 and 2013. Following an uptrend from
January to August 2014, prices decreased in 2015 but appear to have stabilized
in 2016. The recent closing price of US$5.58/lb.

Silver prices trended upward in 2010 and 2011, reaching as high
as $43/oz. Prices ranged between $26/oz and $35/oz between October 2011 and
December 2012, and trended downward in 2013. Prices were variable in 2014 and
2015, with an overall decrease in the average price. Prices have shown some
improvement in 2016. The recent closing price is US$16.20/oz.

Average annual prices since 2011 as well as the average prices
so far in 2016 for copper, gold, molybdenum and silver are shown in the
following table:

|                                          | Average Prices
|----------------------------------------- | --------------
|                                          | Copper        
|Year or
      Period                      | US$/lb        
|2011                                      | 4.00          
|2012                                      | 3.61          
|2013                                      | 3.32          
|2014                                      | 3.14          
|2015                                      | 2.49          
|2016 (to the date
      of this Form 20F) | 2.13          

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

|E. | OFF-BALANCE SHEET
ARRANGEMENTS
|-- | ------------------------------

The Company, through the Pebble Partnership, is advancing the
Multi-dimensional Strategy to address the EPAs preemptive regulatory action
under Section 404(c) of the Clean Water Act, through litigation against the EPA
contesting the EPAs statutory authority to act pre-emptively under the Clean
Water Act, and alleging violation of FACA and the unlawful withholding of
documentation under the Freedom of Information Act. The Company has a contingent
liability for additional legal fees and costs that may be due to the Companys
counsel should there be a successful outcome. However, the Company is unable to
estimate or determine the length of time that each of the legal initiatives
mentioned above will take to advance to specific milestone events or final
conclusion. As of December 31, 2015, if there was a
favourable outcome or settlement, the Company estimates there would potentially
be additional legal success fees of $8.3 million (US$6.0 million at closing Bank
of Canada rate on December 31, 2015 of C$1.3214) payable by the Company.

|F. | TABULAR DISCLOSURE OF CONTRACTUAL
    OBLIGATIONS
|-- | -------------------------------------------------

The following commitments and payables (expressed in thousands)
existed at December 31, 2015:

|                           |   | Payments due by period | 
|-------------------------- | - | ---------------------- | 
|                           |   | Total                  | 
|Trade and other payables   | $ | 2,047                  | 
|Payable to a related party |   | 677                    | 
|Lease commitments          |   | 608                    | 
|Total                      | $ | 3,332                  | 

|                        |            
|----------------------- | -----------
|Form 20-F Annual Report | P a g e| 50

---

|
|
|

The Company had no long-term debt obligations, no capital
(finance) lease obligations, no operating lease obligations (other than noted
above), no purchase obligations, or other long-term liabilities.

|G. | SAFE HARBOR
|-- | -----------

The safe harbor provided in Section 27A of the Securities Act
and Section 21E of the Exchange Act applies to forward-looking information
provided pursuant to Item 5.E and Item 5.F above.

|ITEM 6 | DIRECTORS, SENIOR
      MANAGEMENT AND EMPLOYEES
|------ | ------------------------------------------------

|A. | DIRECTORS AND SENIOR
MANAGEMENT
|-- | -------------------------------

The names and municipalities of residence of the directors and
officers of the Company, their principal occupations during the past five years,
and the period of time they have served as directors or officers of Northern
Dynasty are presented in the table below. Except where indicated, each director
and senior officer of Northern Dynasty has held the same or similar principal
occupation with the organization indicated or a predecessor thereof for the last
five years. Where shown the reference to "CEO" refers to "Chief Executive
Officer" and "CFO" to "Chief Financial Officer".

Name
    Year
      born
    Position
    Director or Officer
    SinceDesmond M. Balakrishnan
      Vancouver, BC, Canada
    1971
    Director
    December 2015Marcel H. de Groot
      (1)(2)(3)(4)
      Vancouver, BC, Canada
    1973
    Director
    December 2015David E. De Witt
      (2)(4)
      Vancouver, BC, Canada
    1952
    Director
    February 2016Steven A. Decker
      (2)(4)
      Sherman Oaks, CA, United States
    1960
    Director
    March 2016Robert A. Dickinson
      Lions
      Bay, BC, Canada
    1948
    Chairman of the Board and
      Director
    June 1995Gordon B. Keep
      (1)(3)
      Vancouver, BC, Canada
    1957
    Director
    October 2015Kenneth W. Pickering
      (3)
      Chemainus, BC, Canada
    1947
    Director
    September 2013Marchand Snyman
      West
      Vancouver, BC, Canada
    1967
    CFO
    August 2008Ronald W. Thiessen
      West
      Vancouver, BC, Canada
    1952
    President, CEO and Director
    November 1995Trevor Thomas
      Vancouver,
      BC, Canada
    1967
    Secretary
    February 2008Bruce Jenkins
      Vancouver,
      BC, Canada
    1950
    Senior Vice President, Corporate
      Development
    June 2004Stephen Hodgson
      Vancouver,
      BC, Canada
    1954
    Vice President Engineering
    March 2005


|                        |            
|----------------------- | -----------
|Form 20-F Annual Report | P a g e| 51

---

|
|
|

Name
    Year born
    Position
    Director or Officer SinceSean Magee North
      Vancouver, BC, Canada
    1966
    Vice President Public Affairs
    October 2006Doug Allen
      Vancouver, BC,
      Canada
    1958
    Vice President Corporate
      Communications
    June 2012


|Notes:
|------
|1.    
|2.    
|3.    
|4.    
|5.    

The following is biographical information on each of the
persons listed above.

Desmond M. Balakrishnan BA., LLB.  Director

Mr. Balakrishnan is a lawyer practicing in the areas of
Corporate Finance and Securities, Mergers and Acquisitions, Lending, Private
Equity and Gaming and Entertainment for McMillan LLP, where he has been a
partner since 2004. He has been lead counsel on over $500 million in financing
transactions and in mergers and acquisitions aggregating in excess of $1
billion. He also serves as a director and/or officer of several resource,
finance and gaming firms. He holds CLA and BA from Simon Fraser University and a
Bachelor of Laws (With Distinction) from the University of Alberta.

Mr. Balakrishnan is, or was within the past five years,
an officer and/or director of the following public companies:

Company
    Name of Market
    Positions Held
    From
    ToNorthern Dynasty Minerals Ltd.
    TSX, NYSE MKT
    Director
    December 2015
    PresentAroway Energy Inc.
    TSX-V
    Director
    July 2010
    PresentBig Sky Petroleum Corporation
    TSX-V
    Director
    November 2011
    PresentContagious Gaming Inc.
    TSX-V
    Director
    August 2014
    PresentElectric Metals Inc.
    TSX-V
    Secretary
    June 2009
    September 2013Great Gaming Corporation
    TSX
    Assistant Secretary
    June 2006
    October 2011Hillcrest Petroleum Ltd.
    TSX-V
    Secretary
    January 2008
    August 2015Network Exploration Ltd.
    TSX-V
    Secretary
    May 2008
    PresentPetro Basin Energy Corp.
    TSX-V (NEX)
    Director
    February 2012
    PresentPoydras Gaming Finance Corp.
    TSX-V
    Secretary
    April 2010
    May 2014Red Rock Capital Corp.
    TSX-V (NEX)
    Director
    February 2012
    PresentRooster Energy Ltd.
    TSX-V
    Director
    November 2007
    April 2011Shelby Ventures Inc.
    TSX-V (NEX)
    Director
    December 2010
    PresentYankee Hat Minerals Ltd.
    TSX-V
    Secretary
    January 2005
November 2012


|                        |            
|----------------------- | -----------
|Form 20-F Annual Report | P a g e| 52

---

|
|
|

Marcel H. de Groot, B.Com., CPA, CA  Director

Mr. de Groot is a Chartered Professional Accountant (Chartered Accountant) whose experience as a
director and/or officer of companies in the mineral sector spans some 20 years.
Mr. de Groot is Co-founder and President of Pathway Capital, a venture capital
company that collaborates with successful mining entrepreneurs to create new
ventures. He holds a Bachelor of Commerce degree from the University of British
Columbia.

Mr. de Groot is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Name of Market
    Positions Held
    From
    ToNorthern Dynasty Minerals Ltd.
    TSX, NYSE MKT
    Director
    December 2015
    PresentAnthem United Inc.
    TSX-V
    Director
    April 2014
    PresentAsanko Gold Inc.
    TSX, NYSE MKT
    Director
    July 2009
    PresentEsperanza Resources Corp.1
    TSX-V
    Director
    May 2012
    August 2013Lowell Copper Ltd.
    TSX-V
    President and Director
    March 2007
    PresentLuna Gold Corp.
    TSX-V
    Director and Chairman
    June 2000
    July 2012Premier Royalty Inc.2
    TSX-V
    Director
    May 2013
    October 2013Sandstorm Metals & Energy Ltd.
    TSX-V
    Director
    March 2010
October 2014


David E. De Witt, B.Com., LLB.  Director

Mr. De Witt is a founder and the Chairman of Pathway Capital
Ltd., a Vancouver based private venture capital company. Mr. De Witt has
extensive experience in the areas of corporate and securities law, as well as
mergers and acquisitions. Mr. De Witt graduated with a BCom., LLB from the
University of British Columbia and practiced corporate, securities and mining
law until his retirement from the practice of law in January 1997. He currently
holds directorships in a number of public companies involved in the natural
resource field and has experience in resource projects located in Latin America,
North America and Asia.

Mr. De Witt is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Name of Market
    Positions Held
    From
    ToNorthern Dynasty Minerals Ltd.
    TSX, NYSE MKT
    Director
    February 2016
    PresentBear Creek Mining Corporation
    TSX-V
    Director
    May 2003
    PresentLowell Copper Ltd. formerly Waterloo
      Resources Ltd.
    TSX-V
    Director
    July 2013
    September 2015Mission Gold Ltd.
    TSX-V
    President and Director
    July 2015
    December 2015Nautilus Minerals Inc.
    TSX, AIM
    Director
    May 2006
    June 2012Sandstorm Gold Ltd.
    TSX
    Director
    April 2008
    PresentSandstorm Metals & Energy Ltd.
    TSX-V
    Director
    May 2010
    July 2014Turnberry Resources Ltd.
    TSX-V
    Director
    April 2011
April 2014


_____________________________

1 Acquired by Alamos Gold Inc.2 Acquired by Sandstorm Gold
Ltd.

|                        |            
|----------------------- | -----------
|Form 20-F Annual Report | P a g e| 53

---

|
|
|

Steven A. Decker, CFA  Director

Mr. Decker is a Chartered Financial Analyst® charterholder with
more than 20 years of investment experience as an Analyst and Portfolio Manager.
He holds an MBA in Finance from the Marshall School of Business at the
University of Southern California where he received the Marcia Israel Award for
Entrepreneurship and was a manager of the California Equity Fund.

Mr. Decker is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Name of Market
    Positions Held
    From
    ToNorthern Dynasty Minerals Ltd.
    TSX, NYSE MKT
    Director
    March 2016
Present


Robert A. Dickinson, B.Sc., M.Sc.  Chairman of the Board
and Director

Mr. Dickinson is an economic geologist who has been actively
involved in mineral exploration and mine development for over 45 years. He is
Chairman of HDI and HDSI as well as a director and member of the management team
of a number of the public companies associated with Hunter Dickinson Inc. He is
also President and Director of United Mineral Services Ltd., a private resource
company. He also serves as a Director of the Britannia Mine Museum and a Trustee
of the BC Mineral Resources Education Program. Mr. Dickinson is, or was within
the past five years, an officer and/or director of the following public
companies:

Company
    Name of Market
    Positions Held
    From
    ToNorthern Dynasty Minerals Ltd.
    TSX, NYSE MKT
    Director
    June 1994
    PresentChairman
    April 2004
    PresentAmarc Resources Ltd.
    TSX-V, OTCBB
    Director
    April 1993
    PresentChairman
    April 2004
    PresentContinental Minerals Corporation
    TSX-V, OTCBB
    Director
    June 2004
    April 2011Curis Resources Ltd.
    TSX
    Director
    November 2010
    November 2012Heatherdale Resources Ltd.
    TSX-V
    Director
    November 2009
    PresentNorthcliff Resources Ltd.
    TSX
    Director
    June 2011
    PresentChairman
    June 2011
    January 2013Rathdowney Resources Ltd.
    TSX-V
    Director and Chairman
    March 2011
    December 2011Director
    December 2011
    PresentQuartz Mountain Resources Ltd.
    TSX-V
    Chairman
    December 2011
    November 2012Taseko Mines Limited
    TSX, NYSE MKT
    Director
    January 1991
    Present


Gordon B. Keep, B.Sc., MBA,P.Geo.  Director

Gordon Keep is a Professional Geologist with extensive business
experience in investment banking and creating public natural resource companies.
Mr. Keep is CEO of Fiore Management & Advisory Corp., a private financial
advisory firm. He also serves as an officer and/or director for several natural
resource companies. He holds a B.Sc. in Geological Science from Queen's
University and an MBA from the University of British Columbia.

Mr. Keep is, or was within the past five years, an officer
and/or director of the following public companies:

|                        |            
|----------------------- | -----------
|Form 20-F Annual Report | P a g e| 54

---

|
|
|

Company
    Name of Market
    Positions Held
    From
    ToNorthern Dynasty Minerals Ltd.
    TSX, NYSE MKT
    Director
    October 2015
    PresentCannon Point Resources Ltd.
    TSX-V
    CEO and Director
    July 2009
    October 2015CarbonOne Technologies Inc.
    TSX-V
    Director
    July 2015
    PresentCatalyst Copper Corp.
    TSX-V
    Director
    April 2008
    PresentEastern Platinum Limited
    TSX, JSE
    Director
    November 2003
    PresentEncanto Potash Corp.
    TSX-V
    Director
    December 2008
    PresentChairman
    October 2009
    PresentKlondike Gold Corp.
    TSX-V
    Director
    December 2013
    PresentOceanic Iron Ore Corp.
    TSX-V
    Director
    September 2010
    PresentPacific Topaz Resources Ltd.
    TSX-V (NEX)
    CFO and Secretary
    March 2011
    April 2013Peregrine Diamonds Ltd.
    TSX
    Director
    February 2005
    July 2015Peregrine Metals Ltd.
    TSX
    Director
    June 2009
    October 2011Petroamerica Oil Corp.
    TSX-V
    Secretary
    January 2008
    August 2014Petromanas Energy
      Inc.
    TSX-V
    Director
    August 2010
    PresentSecretary
    November 2006
    June 2011PNO Resources Ltd.
    TSX-V (NEX)
    President and Director
    July 2007
    April 2013Prima Columbia Hardwood Inc.
    TSX-V
    Director
    July 2007
    June 2013Renaissance Oil Corp.
    TSX-V
    Director
    September 2014
    PresentRoyce Resources Corp.
    TSX-V (NEX)
    CFO and Secretary
    March 2011
    April 2013Rusoro Mining Ltd.
    TSX-V
    CFO and Secretary
    November 2003
    PresentSkyridge Resources Ltd.
    TSX-V (NEX)
    Director
    December 2007
    April 2013Tapango Resources Ltd.
    TSX-V (NEX)
    CFO and Secretary
    February 2007
    April 2013Uracan Resources Ltd.
    TSX-V
    Director
    November 2003
    Present


Kenneth W. Pickering., PEng.  Director

Mr. Pickering is a Professional Engineer and mining executive
with 40 years of experience in a variety of capacities in the natural resources
industry. He has led the development, construction and operation of world-class
mining projects in Canada, Chile, Australia, Peru and the United States,
focusing on operations, executive responsibilities and country
accountabilities.

Mr. Pickering is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Name of Market
    Positions Held
    From
    ToNorthern Dynasty Minerals Ltd.
    TSX, NYSE MKT
    Director
    September 2013
    PresentEndeavour Silver Corp.
    TSX, NYSE
    Director
    August 2012
    PresentTHEMAC Resources Group Limited
    TSX-V
    Director
    March 2011
    PresentPan Aust Minerals
    ASX
    Director
    October 2011
    PresentEnaex Chile
    IPSA
    Director
    May 2011
    Present


|                        |            
|----------------------- | -----------
|Form 20-F Annual Report | P a g e| 55

---

|
|
|

Marchand Snyman, CA (SA), CA (Aust.)  Chief Financial
Officer

Marchand Snyman is a member of the Institute of Chartered
Accountants in Australia and of the South African Institute of Chartered
Accountants. He is a director and Chief Operating Officer of HDI and a director
of HDSI. Mr. Snyman has over 17 years of experience in the mining sector. Mr.
Snyman was a director of Muratie Investments Pty Limited between 2003 and 2006,
an Australian mining consultant providing advisory services to businesses in
Australia, China, South Africa and the USA, prior to joining HDI in 2006. Mr.
Snyman was General Manager Corporate Finance and Development for Anglo Platinum
Limited, the world's premier platinum producer from 1999  2002, responsible for
managing diverse projects including joint venture negotiations, corporate tax
structures and offshore corporate operations, having joined Anglo Platinum in
1996 as Corporate Finance Manager. Prior to that, he was a senior financial
advisor for a multi-modal transportation company in South Africa.

Mr. Snyman is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Name of Market
    Positions Held
    From
    ToNorthern Dynasty
      Minerals Ltd.
    TSX, NYSE MKT
    Director
    August 2008
    February 2016CFO
    August 2008
    PresentContinental Minerals
      Corporation
    TSX-V, OTCBB
    CFO
    January 2008
    April 2011Heatherdale Resources Ltd.
    TSX-V
    CFO
    November 2009
    April 2012Northcliff Resources
      Ltd.
    TSX
    Director and Chairman
    January 2013
    Present


Ronald W. Thiessen, FCA  Director, President and Chief
Executive Officer

Ronald Thiessen is a Chartered Accountant with professional
experience in finance, taxation, mergers, acquisitions and re-organizations.
Since 1986, Mr. Thiessen has been involved in the acquisition and financing of
mining and mineral exploration companies. Mr. Thiessen is a director of HDI and
HDSI, a company providing management and administrative services to several
publicly-traded companies and focuses on directing corporate development and
financing activities.

|                        |            
|----------------------- | -----------
|Form 20-F Annual Report | P a g e| 56

---

|
|
|

Mr. Thiessen is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Name of Market
    Positions Held
    From
    ToNorthern Dynasty
      Minerals Ltd.
    TSX, NYSE MKT
    Director
    November 1995
    PresentPresident and CEO
    November 2001
    PresentAmarc Resources Ltd.
    TSX-V, OTCBB
    Director
    September 1995
    PresentCEO
    September 2000
    PresentPresident
    September 2000
    November 2014Atlatsa Resources Corporation
    TSX-V, JSE,
      NYSE  MKT
    Director
    April 1996
    June 2011Continental Minerals
      Corporation
    TSX-V, OTCBB
    Director
    November 1995
    April 2011Co-Chairman
    January 2006
    April 2011Detour Gold Corporation
    TSX
    Director
    July 2006
    May 2012Great Basin Gold Ltd.
    TSX, NYSE MKT, JSE
    Director
    October 1993
    June 2013Chairman
    November 2006
    June 2013Quartz Mountain Resources Ltd.
    TSX-V
    President, CEO and Director
    December 2011
    PresentTaseko Mines Limited
    TSX, NYSE MKT
    Director
    October 1993
    PresentChairman
    May 2006
    Present


Trevor Thomas, LLB  Secretary

Trevor Thomas has practiced in the areas of corporate
commercial, corporate finance, securities and mining law since 1995, both in
private practice environment as well as in house positions and is currently
general counsel for HDI. HDI, he served as in-house legal counsel with Placer
Dome Inc.

Mr. Thomas is, or was within the past five years, an officer of
the following public companies:

Company
    Name of Market
    Positions Held
    From
    ToNorthern Dynasty Minerals Ltd.
    TSX, NYSE MKT
    Secretary
    February 2008
    PresentAmarc Resources Ltd.
    TSX-V, OTCBB
    Secretary
    February 2008
    PresentContinental Minerals Corporation
    TSX-V, OTCBB
    Secretary
    February 2008
    April 2011Curis Resources Ltd.
    TSX
    Secretary
    June 2013
    November 2014Heatherdale Resources Ltd.
    TSX-V
    Secretary
    June 2013
    PresentNorthcliff Resources Ltd.
    TSX
    Secretary
    June 2011
    PresentQuartz Mountain Resources Ltd.
    TSX-V
    Secretary
    June 2013
    PresentRathdowney Resources Ltd.
    TSX-V
    Secretary
    March 2011
    PresentRockwell Diamonds Inc.
    TSX, OTCBB, JSE
    Secretary
    February 2008
    September 2012Taseko Mines Limited
    TSX, NYSE MKT
    Secretary
    July 2008
Present


|                        |            
|----------------------- | -----------
|Form 20-F Annual Report | P a g e| 57

---

|
|
|

Bruce Jenkins  Senior Vice President, Corporate Development

Bruce Jenkins is an environmental and government relations
executive with more than 40 years of experience in project and corporate
management. He supports the Pebble Partnership and helps guide environmental
studies, mitigation planning and permitting activities. Mr. Jenkins is also
Executive Vice President of Environment and Sustainability for Hunter Dickinson
Inc.

Stephen Hodgson  Vice President, Engineering

Stephen Hodgson is a professional engineer with over 35 years
of experience in mine operations, mine development and project engineering. He
is also Executive Vice President of Engineering for Hunter Dickinson Inc.

Mr. Hodgson is, or was within the past five years, an officer
of the following public companies:

Company
    Name of Market
    Positions Held
    From
    ToRathdowney Resources Ltd.
    TSX-V
    Director
    December 2011
August 2014


Sean Magee  Vice President, Public Affairs

Sean Magee is a former journalist and speech writer with more
than 20 years of natural resource industry communications experience. Mr. Magee
has had a working relationship with Hunter Dickinson Inc. for more than 15 years
and is currently HDI's Executive Vice President of Strategic Communications and
Public Affairs.

Doug Allen  Vice President, Corporate Communications

Doug Allen is an asset management industry specialist with more
than 30 years of experience on both the sell-side and the buy-side of the
investment industry. His experience includes extensive investment work in the
mining industry. Mr. Allen serves as the primary liaison between the
broker-dealer and asset management industries and the Company.

|B. | COMPENSATION
|-- | ------------

Named Executive Officers

In this section Named Executive Officer (or "NEO") means each
of the following individuals:

| | the Chief Executive Officer ("CEO");                                                                                                                                                                                                                                                                                                                 
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                      
| | the Chief Financial Officer ("CFO");                                                                                                                                                                                                                                                                                                                 
|  |                                                                                                                                                                                                                                                                                                                                                      
| | each of the three most highly compensated executive
      officers, or the three most highly compensated individuals acting in a
      similar capacity, other than the CEO and CFO, at the end of the most
      recently completed financial year whose total compensation was,
      individually, more than $150,000 for that financial year; and
|  |                                                                                                                                                                                                                                                                                                                                                      
| | each individual who would be an NEO under paragraph (c)
      but for the fact that the individual was neither an executive officer of
      the company, nor acting in a similar capacity, at December 31, 2015.                                                                                                                                    

The following disclosure sets out the compensation that the
Board intended to pay, make payable, award, grant, give or otherwise provide to
each NEO and director for the financial year ended December 31, 2015.

|                        |            
|----------------------- | -----------
|Form 20-F Annual Report | P a g e| 58

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|
|
|

The compensation paid to the NEOs during the Companys three
most recently completed financial years ended December 31 is as set out below
and expressed in Canadian dollars unless otherwise noted:

Name andprincipal
      position
    Year
    Salary($)
    Option-basedawards($)
    Non-equity incentiveplan compensation ($)
    Pensionvalue($)
    All othercompen-sation($)
    Total
   compen-sation($)Annualincentiveplans($)
    Long-term
   incentiveplans($)RonaldThiessen
      (2)(3)President & CEO
    2015
      20142013
    500,500
      500,500460,500
    130,500(4)
     427,200(5)Nil
    Nil
      NilNil
    Nil
      NilNil
    Nil
      NilNil
    Nil
      NilNil
    631,000
      927,700460,500MarchandSnyman
      (2)(3)CFO
    2015
      20142013
    290,500
      240,500198,000
    130,500(4)
     427,200(5)Nil
    Nil
      NilNil
    Nil
      NilNil
    Nil
      NilNil
    Nil
      NilNil
    420,500
      667,700198,000Thomas Collier (8)PLP CEO
    2015
      20142013
    831,202(1)
     635,148(1)Nil
    Nil
     352,500(6)Nil
    673,273
      NilNil
    Nil
      NilNil
    Nil
      NilNil
    104,731(10)(11)
      81,978(10)Nil
    1,609,206
     1,069,626NilPeter Robertson (9)
      PLP Senior VPCorporate Affairs
    2015
      20142013
    530,690(1)
     458,409(1)Nil
    Nil
     58,750(6)Nil
    Nil
      NilNil
    Nil
      NilNil
    Nil
      NilNil
    20,332(10)
     17,231(10)Nil
    551,023
      534,390NilSean Magee (2)(3)VP
      Public Affairs
    2015
      20142013
    341,956
      272,748192,989
    14,500(4)
     167,000(5)(7)Nil
    Nil
      NilNil
    Nil
      NilNil
    Nil
      NilNil
    Nil
      NilNil
    356,456
      439,748192,989


|Notes:
|------
|1.    
|2.    
|3.    
|4.    
|5.    
|6.    

|                        |            
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|Form 20-F Annual Report | P a g e| 59

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|
|
|

|7.  | The options were granted in September 2014 pursuant to
      the Corporations share option plan. For compensation purposes, the
      Black-Scholes option valuation model has been used to determine the fair
      value on the date of grant using the following assumptions: expected life
      of 5 years, expected volatility of 67.42%, expected dividend yield of 0%,
      and risk-free interest rate of 1.69%. The Black-Scholes grant date fair
      value for these awards was Cdn$0.39 per option which was 54% of the option
      exercise price.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8.  | Mr. Collier was appointed to the position of CEO of the
      Pebble Limited Partnership on February 1, 2014 and is employed and paid
      through a subsidiary of the Company.                                                                                                                                                                                                                                                                                                                                                                                    
|9.  | Mr. Robertson holds the position of Senior Vice President
      of Corporate Affairs of the Pebble Limited Partnership and is employed and
      paid through a subsidiary of the Company.                                                                                                                                                                                                                                                                                                                                                                          
|10. | A subsidiary of the Company has a 401(k) retirement
      savings plan for U.S. employees whereby employees are able to contribute a
      portion of their pay and receive a dollar for dollar Company match up to
      6% of their pay, subject to IRS limitations.                                                                                                                                                                                                                                                                                              
|11. | Mr. Collier receives a housing allowance as Mr. Colliers
      primary residence is outside of Alaska.                                                                                                                                                                                                                                                                                                                                                                                                                                                             

Incentive Plan Awards

Outstanding Share-based Awards and Option-based Awards

The Company currently only has an option-based awards plan and
does not have any share based awards plan. The following table sets out the
option-based awards outstanding as at December 31, 2015, for each NEO:

|                                                       | Option-based Awards   
|------------------------------------------------------ | ----------------------
|                                                       |                       
|                                                       | Number of securities  
|                                                       | underlying unexercised
|Name                                                   | options (#)           
|Ronald Thiessen                                        | 450,000               
|President and CEO                                      | 480,000               
|Marchand Snyman                                        | 450,000               
|CFO                                                    | 480,000               
|Thomas Collier 
     PLP CEO                           | 750,000               
|Peter Robertson
       PLP Senior VP Corporate Affairs | 125,000               
|Sean Magee                                             | 50,000                
|VP Public Affairs                                      | 200,000               
|                                                       | 100,000               
|                                                       | 100,000               

|Notes:
|------
|1.    
|2.    
|3.    
|4.    

|                        |            
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|Form 20-F Annual Report | P a g e| 60

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During the most recently completed financial year, the Company
awarded an aggregate of 5,103,000 options. The following is a summary of the
options awarded during the most recently completed financial year:

|1. | On September 15, 2015, the Company granted 200,000
      options with an exercise price of $0.72 per Common Share and a five year
      term an officer of the Company. The options vest in three equal tranches:
      one third vested on date of grant, one third vests 12 months from the
      grant date and one third vests 24 months following the grant
  date.                                                                                                                                                                                                                                                                  
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|2. | On October 20, 2015 the Company granted 3,657,000 options
      with an exercise price of $0.70 per Common Share and a five year term to
      directors, officers, employees and consultants of the Company and to
      employees of the Pebble Partnership. The options have either a three or
      five year term and vest in three equal tranches: one third vested on date
      of grant, one third vests 12 months from the grant date and one third
      vests 24 months following the grant date. Of the options granted, an
      aggregate of 2,450,000 options were awarded to directors and officers of
      the Company.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|3. | On October 29, 2015, pursuant to the acquisition of Canon
      Point, the Company exchanged 1,245,500 Canon Point options for 1,245,500
      options of the Company which immediately vested and are listed
    below:                                                                                                                                                                                                                                                                                                                                                                                                                  

| | Number of | Exercise Price | Expiry Date
| | --------- | -------------- | -----------
| | options   |                | m-dd-yy    
| | 28,200    | $0.37          | Dec-02-2015
| | 47,000    | $0.40          | Dec-02-2015
| | 150,400   | $0.29          | Jan-29-2016
| | 220,900   | $0.37          | Jan-29-2016
| | 150,400   | $0.40          | Jan-29-2016
| | 37,600    | $0.43          | Jan-29-2016
| | 18,800    | $0.37          | Jul-23-2017
| | 56,400    | $0.37          | Jun-30-2019
| | 225,600   | $0.40          | Jun-30-2019
| | 9,400     | $0.37          | Mar-10-2021
| | 150,400   | $0.40          | Mar-10-2021
| | 75,200    | $0.40          | Dec-12-2022
| | 37,600    | $0.37          | Dec-15-2022
| | 37,600    | $0.29          | Dec-08-2024
| | 1,245,500 |                |            

|                        |            
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|Form 20-F Annual Report | P a g e| 61

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Incentive Plan Awards  Value Vested or Earned During the
Year

The following table sets out all incentive plans (value vested
or earned) during the year ended December 31, 2015, for each NEO:

|Name                                                 | Option-based
      awards  Value vestedduring the year(1)
   ($) | Non-equity
      incentive plan compensation Value earned during the year
 ($)
|---------------------------------------------------- | ----------------------------------------------------------------- | -------------------------------------------------------------------------------
|
|
|Ronald ThiessenPresident and CEO                     | Nil                                                               | Nil                                                                            
|
|Marchand SnymanCFO                                   | Nil                                                               | Nil                                                                            
|
|Thomas C. CollierPLP CEO                             | Nil                                                               | Nil                                                                            
|
|Peter RobertsonPLP Senior VP Corporate
      Affairs | Nil                                                               | Nil                                                                            
|
|Sean MageeVP Public Affairs                          | Nil                                                               | Nil                                                                            
|

|Note:
|-----
|1.   

Director Compensation

Philosophy and Objectives

The main objective of director compensation is to attract and
retain directors with the relevant skills, knowledge and abilities to carry out
the Boards mandate.

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|Form 20-F Annual Report | P a g e| 62

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Director Compensation Table

The compensation provided to the directors, excluding a
director who is included in disclosure for an NEO, for the Companys most
recently completed financial year of December 31, 2015 is:

Name
    Fees earned
      ($)
    Share option-**based awards**($)(7)
    Non-equityincentive plancompensation($)
    Pensionvalue($)
    All othercompensation($)
    Total
   ($)Desmond Balakrishnan (5)
    Nil
    Nil
    Nil
    Nil
    Nil
    NilScott Cousens (2)(9)
    40,425
    43,500
    Nil
    Nil
    Nil
    83,925Marcel de Groot (6)
    Nil
    Nil
    Nil
    Nil
    Nil
    NilRobert Dickinson (2)
    165,000
    130,500
    Nil
    Nil
    Nil
    295,500Gordon Fretwell (1)(9)
    44,000
    23,200
    Nil
    Nil
    Nil
    67,200Russell Hallbauer (2)(9)
    40,425
    43,500
    Nil
    Nil
    Nil
    83,925Gordon Keep (4)(8)
    6,750
    Nil
    Nil
    Nil
    Nil
    6,750Wayne Kirk (1)(3)(9)
    84,500
    23,200
    Nil
    Nil
    Nil
    107,700Peter Mitchell(1)(9)
    49,200
    23,200
    Nil
    Nil
    Nil
    72,400Ken Pickering
    40,500
    23,200
    Nil
    Nil
    Nil
63,700


|Notes:
|------
|1.    
|2.    
|3.    
|4.    
|5.    
|6.    
|7.    
|8.    
|9.    

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|Form 20-F Annual Report | P a g e| 63

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Outstanding Share-based Awards and Option-based
Awards

The following table sets out all option-based awards
outstanding as at December 31, 2015 (as mentioned previously the Company does
not have a share-based awards plan) for each director, excluding a director who
is already set out in disclosure for an NEO for the Company:

Name
    Option-based
    AwardsNumber of
      securities underlying unexercised options
      (#)
    Option exercise
      price ($)
    Option expiration
      date m  d  y
    Value of
      unexercised in-the- money options(1)($)Desmond Balakrishnan (5)
    Nil
    
    
    NilScott Cousens (7)
    150,000
      210,000
    0.501.77
    Oct-20-2020(2)Feb-26-2019(3)
    NilMarcel de Groot (6)
    Nil
    
    
    NilRobert Dickinson
    450,000
      480,000
    0.501.77
    Oct-20-2020(2)Feb-26-2019(3)
    NilGordon Fretwell (7)
    80,000
      150,000
    0.501.77
    Oct-20-2020(2)Feb-26-2019(3)
    NilRussell Hallbauer (7)
    150,000
      210,000
    0.501.77
    Oct-20-2020(2)Feb-26-2019(3)
    NilGordon Keep (4)
    37,600
        37,600
        37,600
          9,400
        56,400
    0.370.370.370.400.29
    Jun-30-2019Mar-10-2021Dec-15-2021Dec-12-2022Dec-24-2024
    1,504
      1,5041,504
           94
      6,768Wayne Kirk (7)
    80,000
      270,000
    0.501.77
    Oct-20-2020(2)Feb-26-2019(3)
    NilPeter Mitchell (7)
    80,000
      150,000
    0.501.77
    Oct-20-2020(2)Feb-26-2019(3)
    NilKen Pickering
    80,000
      150,000
    0.501.77
    Oct-20-2020(2)Feb-26-2019(3)
    Nil


|Notes:
|------
|1.    
|2.    
|3.    
|4.    
|5.    
|6.    
|7.    

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|Form 20-F Annual Report | P a g e| 64

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Incentive Plan Awards  Value Vested or Earned During the
Year

The following table sets out all incentive plans (value vested
or earned) during the year ended December 31, 2015, for each director, excluding
a director who is already set out in disclosure for an NEO for the Company:

Name
    Option-based
      awards  Value vestedduring the year(1)($)
    Non-equity
      incentive plan compensation Value earned during the year
   ($)Desmond Balakrishnan (2)
    Nil
    NilScott Cousens (5)
    Nil
    NilMarcel de Groot (3)
    Nil
    NilRobert Dickinson
    Nil
    NilGordon Fretwell (5)
    Nil
    NilRussell Hallbauer (5)
    Nil
    NilGordon Keep (4)
    Nil
    NilWayne Kirk (5)
    Nil
    NilPeter Mitchell (5)
    Nil
    NilKen Pickering
    Nil
Nil


|Notes:
|------
|1.    
|2.    
|3.    
|4.    
|5.    

COMPENSATION ACTIONS, DECISIONS OR POLICIES MADE AFTER
DECEMBER 31, 2015

On February 24, 2016, Messers Cousens, Hallbauer, Snyman,
Kirk, Fretwell, and Mitchell resigned as directors of the Company. Mr. Snyman
retained his position as Chief Financial Officer.

On February 25, 2016, David De Witt became a director of the
Company.

On March 16, 2016, the Company granted 600,000 options with an
exercise price of $0.48 per Common Share and a five year term to an officer and
an employee of the Company. The options vest in three equal tranches: one third
vested on date of grant, one third vests 12 months from the grant date and one
third vests 24 months following the grant date.

On March 23, 2016, Steven Decker became a director of the
Company.

Given the evolving nature of the Corporations business, the
Board continues to review and redesign the overall compensation plan for senior
management so as to continue to address the objectives identified above.

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|Form 20-F Annual Report | P a g e| 65

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CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS

No director or officer of Northern Dynasty other than noted
below, is, as of the date of this Annual Report, or has been within the ten
years before the date of this Annual Report, a director or officer of any
company that while that person was acting in that capacity, was the subject of a
cease trade order, penalties, sanctions or bankruptcy, during the time the
individual was a director or within a one year period thereafter, or was a
director or officer of a company during the time in which an event occurred
which led to a cease trade order, penalties, sanctions or bankruptcy subsequent
to the individual ceasing to act as a director or officer. This information has
been provided by each director or officer, as the Company is unable to verify
these statements independently.

As publicly disclosed at www.sedar.com in September,
2012, Great Basin Gold Ltd. ("GBG"), a company for which Mr. Thiessen formerly
served, became insolvent and was liquidated commencing in September 2012. GBG
was developing two gold projects using substantial debt financing when gold
prices began their precipitous fall. Mr. Thiessen resigned in June 2013.

Gordon Keep is a director of Rusoro Mining Ltd. ("Rusoro"). On
May 21, 2013, the British Columbia Securities Commission ("BCSC") issued a cease
trade order against Rusoro for failure to file its audited financial statements
for the year ended December 31, 2012 and related MD&A. On June 5, 2013, and
June 7, 2013, respectively, similar cease trade orders were issued against
Rusoro by the Ontario Securities Commission ("OSC") and the Autorité des Marchés
Financiers ("AMF"). On August 19, 2013 Rusoro filed its December 31, 2012
financial statements and related MD&A. On August 21, 2013, (BCSC), August
28, 2013 (AMF) and on September 4, 2013 (OSC) granted full revocations of the
cease trade order issued by each of them. Rusoro was unable to file its December
31, 2012 financial statements and MD&A by the required filing deadline
because it experienced significant delays in preparing them due to the
nationalization by the Venezuelan government of Rusoros gold mining assets in
Venezuela.

|C. | BOARD PRACTICES
|-- | ---------------

Of the current Board of Directors, Messrs. Thiessen and Mr.
Dickinson were elected at the annual general meeting of shareholders held on
July 7, 2015. The other directors were appointed subsequently. All directors
have a term of office expiring at the next annual general meeting of the
Company's shareholders. All officers have a term of office lasting until their
removal or replacement by the board of directors (the "Board").

Except as disclosed above in Item 6.B, there were no
arrangements, standard or otherwise, pursuant to which directors were
compensated by Northern Dynasty or its subsidiaries for their services in their
capacity as directors, or for committee participation, involvement in special
assignments or for services as consultants or experts during the most recently
completed financial year. Northern Dynasty does not have any director service
contract, other than noted below, with any of its directors that provide for
termination benefits upon termination of employment.

Pursuant to a Change of Control Agreement dated September 9,
2015 upon termination without cause following a Change of Control, Mr. Thiessen
is entitled to receive a payment equal to two times his annual salary ($920,000)
and any amount earned and payable under any Company incentive plan, or if no
amount is earned for the year in question any incentive plan payment made in the
previous year, and all stock options held thereby will fully vest and be
exercisable until their normal expiry date.

Mandate of the Board of Directors

The Board has a formal mandate as outlined in the Corporate
Governance Policies and Procedures Manual (the "Manual"), dated December 1,
2014. The Manual mandates the Board to: (i) assume responsibility for the
overall stewardship and development of the Company and monitoring of its
business decisions, (ii) identify the principal risks and opportunities of the
Companys business and ensure the implementation of appropriate systems to
manage these risks, (iii) oversee ethical management and succession planning,
including appointing, training and monitoring of senior
management and directors, and (iv) oversee the integrity of the Companys
internal financial controls and management information systems. The Manual also
includes written charters for each committee and it contains a code of ethics,
policies dealing with issuance of news releases and disclosure documents, as
well as share trading black-out periods. Further, in the Manual the Board
encourages but does not require continuing education for all the Companys
directors. A copy of the Manual is available for review on the Companys website
under Corporate Governance at www.northerndynastyminerals.com.

|                        |            
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|Form 20-F Annual Report | P a g e| 66

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Composition of the Board of Directors

Applicable governance policies require that a listed issuers
  board of directors determine the status of each director as independent or not,
  based on each directors interest in or other relationship with, the Company.
  Applicable governance policies recommend that a board of directors be
  constituted with a majority of directors who qualify as independent directors
  (as defined below). A board of directors should also examine its size with a
  view to determining the impact of the number of directors upon the effectiveness
  of the board of directors, and the board of directors should implement a system
  which enables an individual director to engage an outside advisor at the expense
  of the corporation in appropriate circumstances. The Companys policies allow
  for retention of independent advisors for members of the board of directors when
they consider it advisable.

Under the policies, an "independent" director is one who "has
no direct or indirect material relationship" with the Company. Generally
speaking, a director is independent if he or she is free from any employment,
business or other relationship which could, or could reasonably be expected to
materially interfere with the exercise of the directors independent judgment. A
material relationship includes having been (or having a family member who has
been) within the last three years an employee or executive of the Company or
employed by the Companys external auditor. An individual who (or whose family
member) is or has been within the last three years, an executive officer of an
entity where any of the Companys executive officers served at the same time on
that entitys Compensation Committee is deemed to have a material relationship
as is any individual who (or whose family members or partners) received directly
or indirectly, any consulting, advisory, accounting or legal fee or investment
banking compensation from the Company (other than compensation for acting as a
director or as a part time chairman or vice-chairman).

The Board has eight (8) directors, five (5) of whom can be
considered "independent" directors. The "independent" directors are Gordon Keep,
Marcel de Groot, David De Witt, Steven Decker and Ken Pickering. These directors
are considered independent by virtue of not being executive officers of the
Company and having received no compensation other than in their role as
directors. The non-independent directors (and the reasons for that status) are:
Robert Dickinson (Chairman of the Board and geological consultant for the
Company), Ronald Thiessen (President and Chief Executive Officer) and Desmond
Balakrishnan (a partner of McMillan LLP, counsel to the Company).

Messrs. Dickinson and Thiessen serve together on boards of
directors of other publicly traded companies associated with Hunter Dickinson
Inc. ("HDI"), a private company. Messrs. Dickinson and Thiessen are directors of
HDI. As described in Item 7 below, HDI is the parent company of HDSI, which
provides geological, corporate development, administrative and management
services to, and incurs third party costs on behalf of, the Company. HDSI
employs members of the executive management of some of these public companies
(of which the Company is one) including Mr. Snyman, the CFO, who is also a
director of HDI, and in turn invoices those companies for their share of these
services, pursuant to annually set rates.

The Boards Nominating and Governance Committee (the "NG
Committee") formalizes the process of ensuring high caliber directors and proper
director succession planning. The NG Committee currently consists of David De
Witt (Chair), Steven Decker and Ken Pickering, all of whom are independent
(discussed above).

The Board monitors the activities of the senior management
through regular meetings and discussions amongst the Board and between the Board
and senior management. The Board is of the view that its communication policy
between senior management, members of the Board and shareholders is good.

|                        |            
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Meetings of independent directors are not held on a regular
scheduled basis but communications among this group occurs on an ongoing basis
and as needs arise from regularly scheduled meetings of the Board or otherwise.
The number of these meetings has not been recorded but it would be less than
five in the financial year that commenced on January 1, 2015. The Board also
encourages independent directors to bring up and discuss any issues or concerns
and the Board is advised of and addresses any such issues or concerns raised
thereby.

The Board believes that adequate structures and processes are
in place to facilitate the functioning of the Board with a sufficient level of
independence from the Companys management. The Board is satisfied with the
integrity of the Companys internal control and financial management information
systems.

Committees of the Board of Directors

Applicable regulatory governance policies require that (i) the
Boards Audit and Risk Committee be composed only of independent directors, and
the role of the Audit and Risk Committee be specifically defined and include the
responsibility for overseeing managements system of internal controls, (ii) the
Audit and Risk Committee have direct access to the Companys external auditor,
(iii) other committees of the Board be composed of at least a majority of
independent directors (iv) the Board expressly assume responsibility, or assign
to a committee of directors responsibility, for the development of the Companys
approach to governance issues, and (v) the Board appoint a committee, composed
of a majority of independent directors, with the responsibility for proposing
new nominees to the Board and for assessing directors on an ongoing basis.

The following committees have been established by the members
of Northern Dynastys board of directors:

Committee
    MembershipAudit and Risk Committee
    Marcel de Groot
      (Chair)David De WittSteven DeckerCompensation Committee
    Gordon KeepMarcel de GrootKen Pickering (Chair)Nominating and Governance
      Committee
    Steven DeckerMarcel de GrootDavid De Witt (Chair)


Audit and Risk Committee

The mandate of each of these committees is more particularly
described in the Companys Corporate Governance Policies and Procedures Manual
available on the Companys website at: www.northerndynastyminerals.com.

For information concerning the Audit and Risk Committee please
see Item 19 and Appendix of the company Annual Information Form filed under the
Companys profile on SEDAR at www.sedar.comon March 30, 2016 and
under the Companys profile on EDGAR www.sec.gov on April 12, 2016.

Compensation Committee

The Compensation Committee recommends compensation for the
directors and executive officers of the Company. See further disclosure under
the heading, Statement of Executive Compensation. The Compensation Committee
charter is included in the Manual and is available for viewing at or can be downloaded from the Companys website under Corporate
Governance, at www.northerndynastyminerals.com.

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The function of the Compensation Committee includes review, on
an annual basis, of the compensation paid to the Companys executive officers
and directors, review of the performance of the Companys executive officers and
making recommendations on compensation to the Board.

The Compensation Committee administers the Companys share
  option plan and periodically considers the grant of share options. Share options
  have been granted to the executive officers and directors and certain other
  service providers, taking into account competitive compensation factors and the
  belief that share options help align the interests of executive officers,
directors and service providers with the interests of shareholders.

The Compensation Committee also administers the Companys
Restricted Share Unit Plan and its Deferred Share Unit Plan. See Share Ownership
Security Holdings of Directors and Senior Management.

Nominating and Governance Committee ("NG Committee")

The charter for the NG Committee is included in the Manual and
is available for viewing at or can be downloaded from the Companys website
under Corporate Governance, at www.northerndynastyminerals.com.

The NG Committee has been given the responsibility of
developing and recommending to the Board the Companys approach to corporate
governance and of assisting members of the Board in carrying out their duties.
The NG Committee also reviews with the Board the rules and policies applicable
to governance of the Company to assure that the Company remains in full
compliance with proper governance practices.

The nominating function of the NG Committee is to evaluate and
recommend to the Board the size of the Board and persons as nominees for the
position of director of the Company.

The NG Committee does not set specific minimum qualifications
for director positions. Instead, the NG Committee believes that nominations for
election or re-election to the Board should be based on a particular candidates
merits, skills and the Companys needs after taking into account the current
composition of the Board. When evaluating candidates annually for nomination for
election, the NG Committee considers each individuals skills, the overall
diversity needs of the Board (skills mix, age profiles gender, work and life
experience) and independence and time availability.

The NG Committee seeks to achieve for the Board a balance of
industry and business knowledge and experience, including expertise in the
mining industry, in regulatory and public policy issues, in management and
operations and in transactional situations, as well as independence, financial
expertise, public company experience, sound judgment and reputation.

The NG Committee believes that a diverse Board offers depth of
perspective and enhances Board operations. The NG Committee strives to identify
candidates with the ability to strengthen the Board. The NG Committee does not
specifically define diversity, but considers diversity of experience, education,
ethnicity and gender, as part of its overall annual evaluation of director
nominees. The Board appreciates that women have been under represented on
Canadian boards, and the Company believes that enhancing gender diversity will
strengthen the Board. However, the Board does not establish quotas for any
selection criteria, as the composition of the Board is based on numerous factors
and the character of a candidate and the selection is often a function of the
"best available" candidate.

The Company has not adopted an express policy specifically
addressing gender diversity, nor has the Company set any numerical timeline
objectives for increasing gender diversity. The Company currently has no female
board members or senior executives. Due to the relatively smaller size of the
Company, the Board does not consider it necessary to implement a specific gender
diversity policy at this time but the issue remains under review. Should a
specific gender diversity policy be considered to be of increasing importance in
the future, any adopted policy will be explained to shareholders and input will
be welcomed. The Company has not set mandatory age or term limits for its
directors or senior officers as it focuses on measurable performance rather than employing arbitrary age thresholds
which are of dubious legality as a form of age related discrimination. However,
review by the NG Committee of the performance of all Board members and senior
officers of the Company is ongoing and it is within the mandate of the NG
Committee to keep within its scope the possibility of imposing such limits in
the future The Company has formal procedures for assessing the effectiveness of
Board committees as well as the Board as a whole. This function is carried out
annually under the direction of the NG Committee and those assessments are then
provided to the Board.

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Board of Directors Decisions

Good governance policies require the Board of a listed
  corporation, together with its chief executive officer, to develop position
  descriptions for the Board and for the chief executive officer, including the
  definition of limits to managements responsibilities. Any responsibility which
  is not delegated to senior management or to a Board committee remains with the
  full Board. The Board has approved written position descriptions for the
Chairman of the Board and the Chairmen of the Board Committees.

Recruitment of New Directors and Assessment of Board of
Directors Performance

Good governance policies require that (i) the board of
directors of every listed corporation implement a process for assessing the
effectiveness of the Board and its committees, and the contribution of
individual directors, (ii) every corporation provide an orientation and
education program for new directors, and (iii) every board of directors review
the adequacy and form of compensation of directors and ensure that the
compensation realistically reflects the responsibilities and risks involved in
being an effective director. Please see the discussion concerning the Nominating
and Governance Committee above under the heading, Committees of the Board of
Directors.

The following table sets forth the record of attendance of
Board, Audit and Risk, Compensation and NG Committee meetings by Directors for
the 12 month period ended December 31, 2015:

Director
    Board of
      DirectorsMeetings
    Audit and RiskCommitteeMeetings
    NG CommitteeMeetings
    Compensation
   CommitteeMeetingsDesmond Balakrishnan (6)
    N/AScott Cousens (4)(7)
    5 of 5Marcel de Groot (5)
    N/ARobert Dickinson
    5 of 5Gordon Fretwell (1)(7)
    5 of 5
    3 of 4
    1 of 1
    N/ARussell Hallbauer (7)
    5 of 5Gordon Keep (4)
    1 of 1Wayne Kirk (2)(7)
    5 of 5
    3 of 4
    1 of 1
    N/APeter Mitchell (3)(7)
    4 of 5
    4 of 4
    
    N/AKen Pickering
    4 of 5
    
    2 of 2Marchand Snyman (7)
    5 of 5Ronald Thiessen
    5 of 5


|Notes:
|------
|1.    
|2.    

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|Form 20-F Annual Report | P a g e| 70

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|3. | Previous Audit and Risk Committee Chairman.                                                                          
|-- | ---------------------------------------------------------------------------------------------------------------------
|4. | Mr. Keep was appointed to the Board on October 29, 2015.
      There was one Board meeting thereafter in 2015.       
|5. | Mr. de Groot was appointed to the Board on December 24,
      2015. He is the current Audit and Risk Committee Chair.
|6. | Mr. Balakrishnan was appointed to the Board on December
      15, 2015.                                              
|7. | Messrs. Cousens, Fretwell, Hallbauer, Kirk, Mitchell and
      Snyman resigned as directors on February24, 2016.     

Orientation and Continuing Education

The Company has traditionally retained experienced mining
people as directors and hence the orientation needed is minimized. When new
directors are appointed, they generally are acquainted with the Companys
mineral project(s) and the expectations of directors, or they would receive
orientation commensurate with their previous experience on the Companys
properties, business, technology and industry and the responsibilities of
directors. Board meetings generally include presentations by the Companys
senior management and project staff in order to give the directors full insight
into the Companys operations.

To enable each director to better perform his or her duties and
to recognize and deal appropriately with issues that arise, the Company will
provide the directors with appropriate education programs and/or suggestions to
undertake continuing director education, the cost of which will be borne by the
Company.

Ethical Business Conduct

The Board has a formal ethics policy which is contained in the
Manual and which is available for download from the Companys website under
Corporate Governance at www.northendynastyminerals.com. In addition, the
Board has implemented an annual procedure whereby directors and officers sign
off on and ratify that they have read and understand the Companys code of
ethics and that they are unaware of any violations thereof. The Board has found
that the fiduciary duties placed on individual directors by the Companys
governing corporate legislation and the common law and the restrictions placed
by applicable corporate legislation on an individual directors participation in
decisions of the Board in which the director has an interest have been
sufficient to ensure that the Board operates independently of management and in
the best interests of the Company.

Nomination of Directors

The Board considers its size each year when it considers the
number of directors to recommend to the shareholders for election at the annual
meeting of shareholders, taking into account the number required to carry out
the Boards duties effectively and to maintain a diversity of views and
experience. The NG Committee recommended to the Board the nine directors as
nominees for election at the Companys annual general meeting in 2015. See the
description of the NG Committee above under the heading, Committees of the Board
of Directors.

Assessments

The Board monitors the adequacy of information given to
directors, communication between the Board and management and the strategic
direction and processes of the Board and its committees. The NG Committee
oversees an annual formal assessment of the Board and its three main committees
namely the Audit and Risk Committee, Compensation Committee and NG Committee.
The Board is satisfied with the overall project and corporate achievements of
the Company and believes this reflects well on the Board and its practices.

|                        |            
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|Form 20-F Annual Report | P a g e| 71

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Audit Committee

Audit and Risk Committee ("Audit Committee") Charter

The Audit Committee has adopted a charter that sets out its
mandate and responsibilities. A copy of the Audit and Risk Committee Charter,
which is included as part of the Companys Governance Policies and Procedures
Manual, is available for download from the Companys website at
www.northerndynastyminerals.com.

Composition of the Audit Committee

The Audit Committee as stated above currently consists of
Marcel de Groot (Chair), David de Witt and Steven Decker. The Committee reviews
all financial statements of the Company prior to their publication, reviews
audits performed, considers the adequacy of audit procedures, recommends the
appointment of independent auditors, reviews and approves the professional
services to be rendered by them and reviews fees for audit services. The Audit
Committee Charter has set criteria for membership which all members of the Audit
Committee are required to meet consistent with National Instrument 52-110 and
other applicable regulatory requirements. The Audit Committee, as needed, meets
separately (without management present) with the Companys auditors to discuss
the various aspects of the Companys financial statements and the independent
audit.

Each Audit Committee member is an independent director and is
financially literate. Mr. Decker is a Chartered Financial Analyst charterholder
with an MBA, Finance. Mr. De Witt is an experienced securities lawyer with
extensive involvement in raising venture capital and has been a member on other
audit committees of publicly listed companies. Mr. de Groot is a Chartered
Professional Accountant and is a financial expert.

Relevant Education and Experience

As a result of their education and experience, each member of
the Audit Committee has familiarity with, an understanding of, or experience
in:

| |  | the accounting principles used by the Company to prepare
      its financial statements, and the ability to assess the general
      application of those principles in connection with estimates, accruals and
      reserves;                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                 
| |  | reviewing or evaluating financial statements that present
      a breadth and level of complexity of accounting issues that are generally
      comparable to the breadth and complexity of issues that can reasonably be
      expected to be raised by the Company's financial statements, and
| |   |                                                                                                                                                                                                                                                                                                 
| |  | an understanding of internal controls and
      procedures for financial reporting.                                                                                                                                                                                                             

See disclosure regarding biographical information in Item 6.

Reliance on Certain Exemptions Available in NI 52-110

The Companys auditor, Deloitte LLP, has not provided any
material non-audit services during the most recently completed fiscal year.

Pre-Approval Policies and Procedures

The Company has procedures for the review and pre-approval of
any services performed by its auditor. The procedures require that all proposed
engagements of its auditor for audit and non-audit services be submitted to the
Audit Committee for approval prior to the beginning of any such services. The
Audit Committee considers such requests and, if acceptable to a majority of the
Audit Committee members, pre-approves such audit and non-audit services by a
resolution authorizing management to engage the Companys auditor for such audit
and non-audit services, with set maximum dollar amounts for each itemized service. During such deliberations, the Audit Committee
assesses, among other factors, whether the services requested would be
considered "prohibited services" as contemplated by the regulations of the US
Securities and Exchange Commission, and whether the services requested and the
fees related to such services could impair the independence of the auditors.

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|Form 20-F Annual Report | P a g e| 72

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Principal Accountant Fees and Services

The Audit Committee has reviewed the nature and amount of the
  audit and non-audit services provided by Deloitte LLP to the Company to ensure
  auditor independence. Disclosure of fees incurred with Deloitte LLP for audit
  and non-audit services in the last two fiscal years are outlined in Item 16.C.

From time to time, management of the Company recommends to and
requests approval from the audit committee for audit and non-audit services to
be provided by the Company's auditors. The audit committee routinely considers
such requests at committee meetings, and if acceptable to a majority of the
audit committee members, pre-approves such audit and non-audit services by a
resolution authorizing management to engage the Company's auditors for such
non-audit services, with set maximum dollar amounts for each itemized service.
During such deliberations, the audit committee assesses, among other factors,
whether the non-audit services requested would be considered "prohibited
services" as contemplated by the US Securities and Exchange Commission, and
whether the non-audit services requested and the fees related to such services
could impair the independence of the auditors.

Code of Ethics

The Company has adopted a code of ethics that applies to all
directors, officers and employees of the Company. A copy of the Code of Ethics,
which is included as part of the Companys Governance Policies and Procedures
Manual, is available for download from the Companys website at
www.northerndynastyminerals.com and under the Companys profile on SEDAR
at www.sedar.com.

Potential Conflicts of Interest

Directors of Northern Dynasty also serve as directors of other
similar companies involved in natural resource development. Accordingly, it may
occur that properties will be offered to such other companies. Furthermore,
those other companies may participate in the same properties as those in which
Northern Dynasty has an interest. As a result there may be situations which
involve a potential conflict of interest or issues in connection with the
doctrine of "corporate opportunity". In that event, a financially interested
director would not be entitled to vote at meetings of directors in respect of a
transaction involving the Company if it evokes any such conflict. The directors
will attempt to avoid dealing with such other companies in situations where
conflicts or corporate opportunity issues might arise and will at all times use
their best efforts to act in the best interests of Northern Dynasty.

|D. | EMPLOYEES
|-- | ---------

At December 31, 2015, the Company and its subsidiaries had 12
full time employees. Employees of HDSI are seconded to Northern Dynasty on an
as-needed and as-requested basis (seeItem 7 - Major Shareholders and Related
Party Transactions).

|E. | SHARE OWNERSHIP
|-- | ---------------

Security Holdings of Directors and Senior Management

As at April 18, 2016, the directors and officers of Northern
Dynasty, and their respective affiliates, directly and indirectly, own or
control as a group an aggregate of 9,305,668 common shares (4.19%), or
15,603,068 (6.83%) on a diluted basis.

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|Form 20-F Annual Report | P a g e| 73

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|
|

As at April 18, 2016, the Company's directors and senior
management beneficially owned the following number of the Company's common
shares:

Name of Insider
    Number of common Shares
      BeneficiallyOwned or Controlled(1)
    As a % of the outstanding common
    sharesDesmond Balakrishnan
    35,062
    Marcel de Groot
    68,884
    David De Witt
    1,111,288
    0.50%Robert Dickinson (2)
    4,070,620
    1.84%Gordon Keep (3)
    541,936
    0.24%Ken Pickering
    116,000
    0.05%Marchand Snyman
    170,000
    0.08%Ronald Thiessen
    2,758,878
    1.24%Trevor Thomas
    10,000
    Bruce Jenkins
    10,000
    Stephen Hodgson
    136,000
    0.06%Sean Magee
    Nil
    Doug Allen
    270,000
    0.12%Thomas Collier
    Nil
    Peter Robertson
    Nil



|Notes:
|------
|1.    
|2.    
|3.    

As at April 18, 2016, the Company's directors and senior
management beneficially held the following number of share purchase options
(options) to purchase the Company's common shares:

|Name of Insider  | Number of options | Exercise price | Expiry date
|---------------- | ----------------- | -------------- | -----------
|Robert Dickinson | 480,000           | $1.77          | Feb-26,2019
|450,000          | $0.50             | Oct-20-2020   
|                 | 37,600            | 0.37           | Jun-30-2019
|                 | 37,600            | 0.37           | Mar-10-2021
|Gordon Keep (1)  | 37,600            | 0.37           | Dec-15-2021
|                 | 9,400             | 0.40           | Dec-12-2022
|                 | 56,400            | 0.29           | Dec-24-2024
|Marchand Snyman  | 480,000           | $1.77          | Feb-26,2019
|450,000          | $0.50             | Oct-20-2020   
|Ronald Thiessen  | 480,000           | $1.77          | Feb-26,2019
|450,000          | $0.50             | Oct-20-2020   

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|Form 20-F Annual Report | P a g e| 74

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|
|

|Name of Insider | Number of options | Exercise price | Expiry date
|--------------- | ----------------- | -------------- | -----------
|                | 75,000            | $3.00          | Jun-29-2017
|Trevor Thomas   | 70,000            | $1.77          | Feb-26,2019
|                | 80,000            | $0.50          | Oct-20-2020
|                | 100,000           | $3.00          | Jun-29-2017
|Bruce Jenkins   | 100,000           | $1.77          | Feb-26,2019
|                | 90,000            | $0.50          | Oct-20-2020
|                | 100,000           | $3.00          | Jun-29-2017
|Stephen Hodgson | 100,000           | $1.77          | Feb-26,2019
|                | 90,000            | $0.50          | Oct-20-2020
|                | 100,000           | $3.00          | Jun-29-2017
|                | 100,000           | $1.77          | Feb-26,2019
|Sean Magee      | 200,000           | $0.72          | Sep-15-2019
|                | 50,000            | $0.50          | Oct-20-2020
|                | 300,000           | $0.48          | Mar-15-2021
|                | 100,000           | $3.00          | Jun-29-2017
|Doug Allen      | 100,000           | $1.77          | Feb-26,2019
|                | 150,000           | $0.50          | Oct-20-2020
|Thomas Collier  | 750,000           | $0.89          | Apr-16-2019
|Peter Robertson | 125,000           | $0.89          | Apr-16-2019
|300,000         | $0.48             | Mar-15-2021   

|Note:
|-----
|(1)  

Share Option Plan

In order to provide incentive to directors, officers,
employees, management and others who provide services to the Company to act in
the best interests of the Company the Company has adopted a Share Option Plan
(the Plan). As at April 18, 2016, 10,282,000 options were outstanding pursuant
to the Plan, described below, and an aggregate of 11,933,088 common shares
remained available for issuance pursuant to the Plan. A description of the Plan
is provided below.

Under the Plan, options may be granted in an amount up to 10%
of the outstanding shares including any issuances from the Companys Restricted
Share unit and Deferred Share unit plans (discussed below). As outstanding share
options are exercised, additional share options may be granted to replace the
exercised options. In addition, as the number of issued and outstanding Common
Shares of the Company increases, the number of share options available for
granting to eligible optionees will increase. As at the date hereof there are
share options outstanding to purchase an aggregate of 10,282,000 common shares
(representing approximately 4.63% of common shares outstanding.

The following is a summary of the material terms of the
Plan:

|(a) | Persons who are directors, officers, employees, or
      consultants to the Company or its affiliates, or who are employees of a
      management company providing services to the Company are eligible to
      receive grants of options under the Plan.                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(b) | Options may be granted only to an individual or to a
      company that is owned by individuals eligible for an option grant. If the
      option is granted to a company, the company must undertake that it will
      not permit any transfer of its shares, nor issue further shares, to any
      other individual or entity as long as the incentive stock option remains
      in effect without the consent of the TSX.                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(c) | All options granted under the Plan may be exercisable
      only by the Optionee to whom they have been granted and the options are
      non-assignable and non-transferable, except that in the case of the
      death of an Optionee, any vested option held by the deceased Optionee
at the date of death will become exercisable by the Optionees lawful personal
representatives, heirs or executors until the earlier of (1) one year after the
date of death of such Optionee and (2) the date of expiration of the term
otherwise applicable to such Option.

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|Form 20-F Annual Report | P a g e| 75

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|

|(d) | Vesting of options is determined by the Board and subject
      to the following:
|--- | ---------------------------------------------------------------------------------

| |  | where an Optionee has left the Companys employ/office or
      has been advised his or her services are no longer required or his or her
      service contract has expired, subject to other provisions set out in the
      Plan, vested options expire on the earlier of the expiry date of the
      option or 90 days after the date the Optionee ceases to be employed by,
      provide services to, or be a director or officer of, the Company, and all
      unvested options immediately terminate without right to exercise same;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | in the case of the death of an Optionee, any vested
      Option held at the date of death will become exercisable by the Optionees
      lawful personal representatives, heirs or executors until the earlier of
      one year after the date of death of such Optionee and the date of
      expiration of the term otherwise applicable to such Option;                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | in the case of an Optionee being dismissed from
      employment or service for cause, such Optionees options, whether or not
      vested at the date of dismissal, immediately terminate without right to
      exercise same;                                                                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | in the event of a change of control occurring, options
      granted to directors and officers which are subject to vesting provisions
      are deemed to have immediately vested upon the occurrence of the change of
      control; and                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | in the event of a director not being nominated for
      re-election as a director of the Company, although consenting to act and
      being under no legal incapacity which would prevent the director from
      being a member of the Board, options granted which are subject to a
      vesting provision are deemed to have vested on the date of Meeting upon
      which the director is not re-elected;                                                                                                                             

|(e) | All options granted under the Plan are exercisable for a
      period of up to 5 years and will vest at the discretion of the Board,
      provided that the term of such options may be extended in circumstances
      where the expiry date otherwise falls during a black-out period (defined
      below) as determined in accordance with the Companys policies or
      applicable securities legislation, and subject
to:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (i)  | the Optionee remaining employed by or continuing to
      provide services to the Company or any of its subsidiaries and affiliates
      as well as, at the discretion of the Board, achieving certain milestones
      which may be defined by the Board from time to time or receiving a
      satisfactory performance review by the Company or its subsidiary or
      affiliate during the vesting period; or
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (ii) | remaining as a director of the Company or any of its
      subsidiaries or affiliates during the vesting
period.                                                                                                                                                                                                                                                                                                   

A blackout period is any period of
time during which a participant in the Plan is unable to trade securities of the
Company as a consequence of the implementation of a general restriction on
trading by an authorized Officer or Director pursuant to the Companys
governance policies that authorize general and/or specific restrictions on
trading by service providers in circumstances where there may exist undisclosed
material changes or undisclosed material facts in connection with the Companys
affairs. The term of an option will expire on its Expiry Date as defined in the
Plan unless the Expiry Date occurs during a blackout period or within five
business days after the expiry of the blackout period, in which case the Expiry
Date for that Option will be the date that is the tenth business day after the
date the blackout period expires.

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|Form 20-F Annual Report | P a g e| 76

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|(f) | The exercise price of the option is established by the
      Board at the time the option is granted, provided that the minimum
      exercise price shall not be less than the weighted average trading price
      of the Companys shares on the TSX for the five trading days preceding the
      date of the grant.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                         
|(g) | The number of common shares that may be issuable to
      directors who are independent directors of the Company, when combined with
      all of the Companys other share compensation arrangements currently in
      effect for their benefit, may not exceed 1% of the Companys outstanding
      common shares.  
|    |                                                                                                                                                                                                                                                                                                                         
|(h) | Subject to the policies of the TSX, the Plan may be
      amended by the Board without further shareholder approval
  to:                                                                                                                                                                                               

| | (i)   | make amendments which are of a typographical, grammatical
      or clerical nature;                                                                                                                                       
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                           
| | (ii)  | change the vesting provisions of an option granted under
      the Plan;                                                                                                                                                  
| |       |                                                                                                                                                                                                                           
| | (iii) | change the termination provision of an option granted
      under the Plan, if it does not entail an extension beyond the original
      expiry date of such option;                                                      
| |       |                                                                                                                                                                                                                           
| | (iv)  | add a cashless exercise feature payable in cash or Common
      Shares;                                                                                                                                                   
| |       |                                                                                                                                                                                                                           
| | (v)   | make amendments necessary as a result in changes in
      securities laws applicable to the Company;                                                                                                                      
| |       |                                                                                                                                                                                                                           
| | (vi)  | make such amendments as may be required by the policies
      of such senior stock exchange or stock market if the Company becomes
      listed or quoted on a stock exchange or stock market senior to the TSX;
      and
| |       |                                                                                                                                                                                                                           
| | (vii) | make such amendments as reduce, and do not increase, the
      benefits of the Plan to Optionees.                                                                                                                         

|(i) | The Plan has the following additional
  restrictions:
|--- | -----------------------------------------------------

| | (i)   | Common Shares to be issued to Insiders under the Plan,
      when combined with all of the Companys other share compensation
      arrangements, may not exceed 10% of the outstanding Common Shares in any
      12 month period;                                              
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                  
| | (ii)  | Common Shares being issuable to independent directors
      under the Plan, when combined with all of the Companys other share
      compensation arrangements, may not exceed 1% of the outstanding Common
      Shares of the Company from time to time; and                  
| |       |                                                                                                                                                                                                                                                                                  
| | (iii) | a reduction in the exercise price of an option granted
      hereunder to an Insider or an extension of the term of an option granted
      hereunder benefiting an Insider, would require the approval of the
      disinterested shareholders (defined below) of the
  Company.

Disinterested Shareholder approval shall be required in respect
of:

| | a. | any amendment which reduces the Exercise Price of an
      Option;                                          
| | -- | ------------------------------------------------------------------------------------------------------------
| |    |                                                                                                             
| | b. | any amendment to extend the term of an option granted to
      an Insider;                                  
| |    |                                                                                                             
| | c. | amendments to increase any of the limits on the number of
      Options that may be granted;                
| |    |                                                                                                             
| | d. | any amendment that may permit an increase to the proposed
      limit on independent director participation;
| |    |                                                                                                             
| | e. | any amendment relating to the transferability or
      assignability of an Option; and                      
| |    |                                                                                                             
| | f. | any amendments required to be approved by shareholders
      under applicable law.                          

The Plan provides for the granting of Options that meet the
definition of Incentive Stock Options under the United States Internal Revenue
Code. The Plan provides that, subject to adjustment for general changes to the
Common Shares, the total number of Common Shares which may be
issued pursuant to such Incentive Stock Options is limited to 5,000,000 Common
Shares.

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|Form 20-F Annual Report | P a g e| 77

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Definitions:

A "disinterested shareholder" means a shareholder that is not
  an Insider eligible to receive options under the Plan, and who is not an
Associate of an Insider.

An "Insider" is a director or an officer of the Company, a
director or an officer of a company that is itself an Insider or a subsidiary of
an Insider, or a person that has beneficial ownership of and/or control or
direction, either directly or indirectly, over, securities of the Company
carrying more than 10% of the voting rights attached to all the Companys
outstanding voting securities.

Restricted Share Unit Plan and Deferred Share Unit Plan

The Company adopted a Restricted Share Unit Plan (the RSU
Plan) and a Deferred Share Unit Plan (the DSU Plan) in March 2015 which were
approved by the Companys shareholders in June 2015. The material terms of RSU
Plan and the DSU Plan are set out below:

Restricted Share Unit Plan

Summary of the RSU Plan

Set out below is a summary of the RSU Plan. A complete copy of
the RSU Plan is attached as Exhibit 4.02. Capitalized terms used, but not
defined herein have the meaning ascribed to them in the RSU Plan.

Eligible Participants

The RSU Plan would be administered by the Compensation
Committee of the Board. Employees, directors and eligible consultants of the
Company and its designated subsidiaries are eligible to participate in the RSU
Plan. RSUs awarded to participants are credited to them by means of an entry in
a notional account in their favour on the books of the Company. Each RSU awarded
conditionally entitles the participant to receive one Common Share (or the cash
equivalent) upon attainment of the RSU vesting criteria.

Vesting

The vesting (i.e. fulfillment of conditions required for
absolute entitlement) of RSUs is conditional upon the expiry of a time-based
vesting period. The duration of the vesting period and other vesting terms
applicable to the grant of the RSUs shall be determined at the time of the grant
by the Compensation Committee.

Once the RSUs vest, the participant is entitled to receive the
equivalent number of underlying Common Shares or cash equal to the Market Value
of the equivalent number of Common Shares. The vested RSUs may be settled
through the issuance of Common Shares from treasury (subject to the Shareholder
approval being obtained at the Meeting), by the delivery of Common Shares
purchased in the open market, in cash or in any combination of the foregoing (at
the discretion of the Company). If settled in cash, the amount shall be equal to
the number of Common Shares in respect of which the participant is entitled
multiplied by the Market Value of a Common Share on the payout date. Market
Value per share is defined in the RSU Plan and means, as at any date (if the
Common Shares are listed and posted for trading on the TSX), the arithmetical
average of the closing price of the Common Shares traded on the TSX for the five
(5) trading days on which a board lot was traded immediately preceding such
date. The RSUs may be settled on the payout date, which shall generally be
before the third anniversary of the date of the grant. The expiry date of RSUs
will be determined by the Committee at the time of grant. However, the maximum
term for all RSUs is three years. All RSUs for which vesting cannot be satisfied
due to a departure from the Company, would be available for future grants.

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|Form 20-F Annual Report | P a g e| 78

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Maximum Number of Common Shares Issuable

RSUs may be granted in accordance with the RSU Plan provided
the aggregate number of RSUs outstanding pursuant to the RSU Plan from time to
time shall not exceed 3.0% of the number of issued and outstanding Common Shares
from time to time. Furthermore, the maximum number of Common Shares issuable
pursuant to all Security Based Compensation Arrangements (i.e. Option, DSU and
RSU Plans), at any time, shall not exceed 10% of the total number of outstanding
Common Shares.

The RSU Plan provides that the maximum number of Common Shares
issuable to insiders (as that term is defined by the TSX) pursuant to the RSU
Plan, together with any Common Shares issuable pursuant to any other
security-based compensation arrangement of the Company, will not, at any time,
exceed 10% of the total number of outstanding Common Shares.

The RSU Plan provides that the maximum number of Shares issued
to Insiders (as that term is defined by the TSX) pursuant to the RSU Plan,
together with any Common Shares issuable pursuant to any other security-based
compensation arrangement of the Company, within any one year period, shall not
exceed 10% of the total number of weighted average number of common shares
outstanding during the year.

Cessation of Entitlement

Unless otherwise determined by the Company in accordance with
the RSU Plan, RSUs which have not vested on a participants termination date
shall terminate and be forfeited. If a participant who is an employee ceases to
be an employee as a result of termination of employment without cause, in such
case, at the Companys discretion (unless otherwise provided in the applicable
Grant Agreement), all or a portion of such participants RSUs may be permitted
to continue to vest, in accordance with their terms, during any statutory or
common law severance period or any period of reasonable notice required by law
or as otherwise may be determined by the Company in its sole discretion. All
forfeited RSUs are available for future grants.

Transferability

RSUs are not assignable or transferable other than by operation
of law, except, if and on such terms as the Company may permit, to certain
family members and private affiliate companies of the participants.

Amendments to the RSU Plan

In the event of receipt of Shareholders approval for the RSU
Plan, the Board may, without notice, at any time and from time to time, without
shareholder approval, amend the RSU Plan or any provisions thereof in such
manner as the Board, in its sole discretion, determines appropriate including,
without limitation:

|(a) | for the purposes of making formal minor or technical
      modifications to any of the provisions of the RSU Plan;                                    
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                       
|(b) | to correct any ambiguity, defective provision, error or
      omission in the provisions of the RSU Plan;                                             
|    |                                                                                                                                                       
|(c) | to change the vesting provisions of RSUs;                                                                                                             
|    |                                                                                                                                                       
|(d) | to change the termination provisions of RSUs or the RSU
      Plan that does not entail an extension beyond the original expiry date of
      the RSU;
|    |                                                                                                                                                       
|(e) | to preserve the intended tax treatment of the benefits
      provided by the RSU Plan, as contemplated therein; or                                    
|    |                                                                                                                                                       
|(f) | any amendments necessary or advisable because of any
      change in applicable laws;                                                                 

provided, however, that:

|                        |            
|----------------------- | -----------
|Form 20-F Annual Report | P a g e| 79

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|
|
|

|(g) | no such amendment of the RSU Plan may be made without the
      consent of each affected participant if such amendment would adversely
      affect the rights of such affected participant(s) under the RSU Plan;
      and
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                             
|(h) | Shareholder approval shall be obtained in accordance with
      the requirements of the TSX for any amendment that results
  in:                                                                                            

| | i.   | an increase in the maximum number of Common Shares
      issuable pursuant to the RSU Plan other than as already contemplated in
      the RSU Plan;
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                     
| | ii.  | an extension of the expiry date for RSUs granted to
      insiders under the RSU Plan;                                                              
| |      |                                                                                                                                                     
| | iii. | other types of compensation through Common Share
      issuance;                                                                                    
| |      |                                                                                                                                                     
| | iv.  | expansion of the rights of a participant to assign RSUs
      beyond what is currently permitted in the RSU Plan; or                                
| |      |                                                                                                                                                     
| | v.   | the addition of new categories of Participants, other
      than as already contemplated in the RSU Plan.                                           

Certain United States Federal Income Tax Consequences

The following is a summary of the principal U.S. federal income
tax consequences generally applicable to RSUs awarded under the RSU Plan. The
following description applies to RSUs that are subject to U.S. federal income
tax. The grant of RSUs should not result in taxable income to the Participant at
the time of grant. When RSUs are paid out, the Participant will recognize
ordinary income equal to the fair market value of the Common Shares and cash
received in settlement of the RSUs, and the Company will be entitled at that
time to a corporate income tax deduction (for U.S. federal income tax purposes)
for the same amount, subject to the general rules concerning deductibility of
compensation. A Participants basis in any Common Shares received will equal the
fair market value of the Common Shares at the time the Participant recognized
ordinary income. If, as usually is the case, the Common Shares are a capital
asset in the Participants hands, any additional gain or loss recognized on a
subsequent sale or exchange of the Common Shares will not be ordinary income but
will qualify as capital gain or loss.

Deferred Share Unit Plan

Summary of the DSU Plan

Set out below is a summary of the DSU Plan. A complete copy of
the DSU Plan is attached as Exhibit 4.03. Capitalized terms used, but not
defined herein have the meaning ascribed to them in the DSU Plan.

Administration of Plan

The Compensation Committee shall administer the DSU Plan. The
DSU Plan provides that DSUs will be awarded at the discretion of the Board but
also provides that non-executive directors may elect to receive up to 100% of
their annual compensation amount (the Annual Base Compensation) in DSUs. A DSU
is a unit credited to a Participant by way of a bookkeeping entry in the books
of the Company, the value of each DSU is equivalent to one Common Share. All
DSUs paid with respect to Annual Base Compensation will be credited to the
director by means of an entry in a notional account in their favour on the books
of the Company (a DSU Account) when such Annual Base Compensation is payable.
The directors DSU Account will be credited with the number of DSUs calculated
to the nearest thousandth of a DSU, determined by dividing the dollar amount of
compensation payable in DSUs on the payment date by the Share Price of a Common
Share at the time. Share Price is defined in the DSU Plan and means (if the
Common Shares are listed and posted for trading on the TSX) the closing price of
a Common Share on the TSX averaged over the five (5) consecutive trading days
immediately preceding the date of grant or the redemption date, as the case may
be.

|                        |            
|----------------------- | -----------
|Form 20-F Annual Report | P a g e| 80

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|
|
|

Fractional Common Shares will not be issued and any fractional
entitlements will be rounded down to the nearest whole number.

Additionally, the Board may award such number of DSUs to a
non-executive director as the Board deems advisable to provide the director with
appropriate equity-based compensation for the services he or she renders to the
Company. The Board shall determine the date on which such DSUs may be granted
and the date as of which such DSUs shall be credited to the directors DSU
Account. The Company and a director who receives such an additional award of
DSUs shall enter into a DSU award agreement to evidence the award and the terms
applicable thereto.

Generally, a participant in the DSU Plan shall be entitled to
redeem his or her DSUs during the period commencing on the business day
immediately following the date upon which the non-executive director ceases to
hold any position as a director of the Company and its subsidiaries and is no
longer otherwise employed by the Company or its subsidiaries, including in the
event of death of the participant (the Termination Date) and ending on the
90th day following the Termination Date, provided, however that for U.S.
Eligible Participants, redemption will be made upon such Participants
separation from service as defined under Internal Revenue Code Section 409A.
Redemptions of DSUs under the DSU Plan may be in Common Shares issued from
treasury (subject to the Shareholder approval being sought at this Meeting), may
be purchased by the Company on the open market for delivery to the former
director, may be settled in cash, or any combination of the foregoing.

Maximum Number of Common Shares Issuable for DSUs

DSUs may be granted in accordance with the DSU Plan, provided
the aggregate number of DSUs outstanding pursuant to the DSU Plan from time to
time does not exceed 2.0% of the issued and outstanding Common Shares from time
to time. The maximum number of Common Shares issuable pursuant to all Security
Based Compensation Arrangements (including all of Option, DSU and RSU Plans), at
any time, including all Common Shares, options or other rights to purchase or
otherwise acquire Common Shares that are granted to Insiders, shall not exceed
10% of the total number of outstanding Common Shares.

The DSU Plan provides that the maximum number of Common Shares
issuable to insiders (as that term is defined by the TSX) pursuant to the DSU
Plan, together with any Common Shares issuable pursuant to any other security-
based compensation arrangement of the Company, within a one year period, will
not exceed 10% of the total number of outstanding Common Shares.

Transferability

No right to receive payment of deferred compensation or
retirement awards shall be transferable or assignable by any participant under
the DSU Plan except by will or laws of descent and distribution.

Amendments to the DSU Plan

In the event of Shareholder approval of the DSU Plan, the Board
may at any time, and from time to time, and without shareholder approval, amend
any provision of the DSU Plan, subject to any regulatory or stock exchange
requirement at the time of such amendment, including, without limitation:

|(a) | for the purposes of making formal minor or technical
      modifications to any of the provisions of the DSU Plan including
      amendments of a clerical or housekeeping nature;
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                       
|(b) | to correct any ambiguity, defective provision, error or
      omission in the provisions of the DSU Plan;                                                                             
|    |                                                                                                                                                                                       
|(c) | amendments to the termination provisions of the DSU
      Plan;                                                                                                                       
|    |                                                                                                                                                                                       
|(d) | amendments necessary or advisable because of any change
      in applicable laws;                                                                                                     
|    |                                                                                                                                                                                       
|(e) | amendments to the transferability of DSUs;                                                                                                                                            
|    |                                                                                                                                                                                       
|(f) | amendments relating to the administration of the DSU
      Plan; or                                                                                                                   

|                        |            
|----------------------- | -----------
|Form 20-F Annual Report | P a g e| 81

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|
|
|

|(g) | any other amendment, fundamental or otherwise, not
      requiring shareholder approval under applicable
laws;
|--- | --------------------------------------------------------------------------------------------------------------

provided, however, that:

|(h) | no such amendment of the DSU Plan may be made without the
      consent of each affected participant in the DSU Plan if such amendment
      would adversely affect the rights of such affected participant(s) under
      the DSU Plan; and
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                             
|(i) | shareholder approval shall be obtained in accordance with
      the requirements of the TSX for any amendment:                                                                                                                              

| | a. | to increase the maximum number of Common Shares which may
      be issued under the DSU Plan;
| | -- | ---------------------------------------------------------------------------------------------
| |    |                                                                                              
| | b. | to the amendment provisions of the DSU Plan; or                                              
| |    |                                                                                              
| | c. | to expand the definition of
  Participant.                                                 

Certain United States Federal Income Tax Consequences

The following is a summary of the principal U.S. federal income
tax consequences generally applicable to DSUs awarded under the DSU Plan. The
following description applies to DSUs that are subject to U.S. federal income
tax. The grant of DSUs and the crediting of DSUs to a Directors DSU Account
should not result in taxable income to the Director at the time of grant. When
DSUs are paid out, the Director will recognize ordinary income equal to the fair
market value of the Common Shares and cash received in settlement of the DSUs,
and the Company will be entitled at that time to a corporate income tax
deduction (for U.S. federal income tax purposes) for the same amount, subject to
the general rules concerning deductibility of compensation. A Directors basis
in any Common Shares received will equal the fair market value of the Common
Shares at the time the Director recognized ordinary income. If, as usually is
the case, the Common Shares are a capital asset in the Directors hands, any
additional gain or loss recognized on a subsequent sale or exchange of the
Common Shares will not be ordinary income but will qualify as capital gain or
loss. To the extent that a Directors DSUs are subject to U.S. federal income
tax and to taxation under the Income Tax Act (Canada), DSUs awarded under the
DSU Plan are intended to comply with Section 409A of the Internal Revenue Code
and to avoid adverse tax consequences under paragraph 6801(d) of the regulations
under the Income Tax Act (Canada). To that end, the DSU Plan contains certain
forfeiture provisions that could apply to DSUs awarded under the DSU Plan in
limited circumstances.

There are no RSUs or DSUs currently issued and outstanding.

The following table sets out equity compensation plan
information as at the end of the financial year ended December 31, 2015.

|                        |            
|----------------------- | -----------
|Form 20-F Annual Report | P a g e| 82

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|
|
|

Equity Compensation Plan Information

Number of shares to beissued upon exercise ofoutstanding shareoptions, warrants andrights(1)
    Weighted-average exerciseprice of outstanding shareoptions, warrants andrights
    Number of securitiesremaining available forfuture issuance underequity compensationplans (excluding securities
   reflected in column (a))Plan Category
    (a)
    (b)
    (c)Equity compensation
      plan 
             approved by
      security holders        (the
      Share Option Plan)
    9,755,600
    $1.27
    12,438,338Equity compensation plans
      not 
             approved by
      security holders
    
    
    Total
    9,755,600
    $1.27
12,438,338


|Notes:
|------

|1. | The Company has only share options issued and
      outstanding. No RSUs or DSUs are currently issued and outstanding. The
      Company did propose to issue 426,500 RSUs to an NEO in 2015, however, the
      Company did not proceed with that plan.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | These table exclude options issued in exchange for Canon
      Point options pursuant to the acquisition of Canon Point by the Company.
      These options were not issued under the existing compensation
  plan.                                     

|ITEM 7 | MAJOR SHAREHOLDERS AND
      RELATED PARTY TRANSACTIONS
|------ | -------------------------------------------------------

|A. | MAJOR SHAREHOLDERS
|-- | ------------------

Major Shareholders

Northern Dynasty is a publicly-held corporation, with its
shares held by residents of Canada, the United States of America and other
countries. To the best of Northern Dynasty's knowledge, other than as noted
below, no person, corporation or other entity beneficially owns, directly or
indirectly, or controls more than 5% of the common shares of Northern Dynasty,
the only class of securities with voting rights. For these purposes, "beneficial
ownership" means the sole or shared power to vote or direct the voting or to
dispose or direct the disposition of any security.

Name
    Number of common Shares
      BeneficiallyOwned or Controlled
    As a % of the outstanding
    commonshares1Kopernik Global Investors, LLC
    26,948,277
    12.13%Stirling Global Value Fund Inc.
    30,181,119
13.59%


Notes:

|1. | Based on shares outstanding as of April 18, 2015. See
      below.
|-- | ------------------------------------------------------------------

As at April 18, 2016, Northern Dynasty had authorized unlimited
common shares without par value, of which 222,150,876 were issued and
outstanding. Northern Dynasty has 17,265,548 options and warrants issued
pursuant to the acquisition of listed entities (see Item 4  Significant
Acquisitions, Dispositions and Group Reorganization) outstanding which are exercisable on a one-for
one basis into common shares at an average exercise price of $0.95 per common share.

|                        |            
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|Form 20-F Annual Report | P a g e| 83

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|
|

All of the common shares have the same voting rights.

Geographic Breakdown of Shareholders

As of April 18, 2016, Northern Dynasty's register of
shareholders indicates that Northern Dynasty's common shares are held as
follows:

Location
    Number of
      registeredshareholders of record
    Number of
      shares
    Percentage of
   total sharesCanada
    200
    194,959,009
    87.8%United States
    204
    15,118,224
    6.8%Other
    60
    12,073,643
    5.4%TOTALS
    464
    222,150,876
    100.0%


Shares registered in intermediaries were assumed to be held by
residents of the same country in which the clearing house was located.

Northern Dynasty's securities are recorded on the books of its
transfer agent, Computershare Investor Services Inc., located at 510 Burrard
Street, Vancouver, Canada (604) 661-9400 in registered form. However, the
majority of such shares are registered in the name of intermediaries such as
brokerage houses and clearing houses (on behalf of their respective brokerage
clients). Northern Dynasty does not have knowledge or access to the identities
of the beneficial owners of such shares registered through intermediaries.

Control

Northern Dynasty is not directly or indirectly owned or
controlled by any other corporation, by any foreign government or by any other
natural or legal person, severally or jointly, other than as noted above under
Major Shareholders. There are no arrangements known to Northern Dynasty which,
at a subsequent date, may result in a change in control of Northern Dynasty.

Insider Reports under the Securities Acts of British
Columbia and Alberta and Ontario

Since the Company is a reporting issuer under the Securities
Acts of British Columbia and Alberta and Ontario, under National Instrument
55-104  Insider Reporting Requirements and Exemptions, as adopted by the CSA ,
certain "insiders" of the Company (including its directors, certain executive
officers, and persons who directly or indirectly beneficially own, control or
direct more than 10% of its common shares) are generally required to file
insider reports of changes in their ownership of Northern Dynasty's common
shares within five days following the trade. Copies of such reports are
available for public inspection at the offices of the British Columbia
Securities Commission, 9th Floor, 701 West Georgia Street, Vancouver, British
Columbia V7Y 1L2, (604) 899-6500 or at the British Columbia Securities
Commission web site, www.bcsc.bc.ca. In British Columbia, all insider
reports must be filed electronically within five days following the date of the
trade at www.sedi.ca. The public is able to access these reports at
www.sedi.ca.

|B. | RELATED PARTY TRANSACTIONS
|-- | --------------------------

Except as disclosed below, Northern Dynasty has not, since
January1, 2013, and does not at this time propose to:

|                        |            
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|Form 20-F Annual Report | P a g e| 84

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|
|

|(1) | enter into any transactions which are material to
      Northern Dynasty or a related party or any transactions unusual in their
      nature or conditions involving goods, services or tangible or intangible
      assets to which Northern Dynasty or any of its former subsidiaries was a
      party;
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                            
|(2) | make any loans or guarantees directly or through any of
      its former subsidiaries to or for the benefit of any of the following
      persons:                                                                                                                                                         

| | (a) | enterprises directly or indirectly through one or more
      intermediaries, controlling or controlled by or under common control with
      Northern Dynasty;                                                                                                                                        
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                       
| | (b) | associates of Northern Dynasty (unconsolidated
      enterprises in which Northern Dynasty has significant influence or which
      has significant influence over Northern Dynasty) including shareholders
      beneficially owning 10% or more of the outstanding shares of Northern
      Dynasty;
| |     |                                                                                                                                                                                                                                                                                                       
| | (c) | individuals owning, directly or indirectly, shares of
      Northern Dynasty that gives them significant influence over Northern
      Dynasty and close members of such individuals families;                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                       
| | (d) | key management personnel (persons having authority in
      responsibility for planning, directing and controlling the activities of
      Northern Dynasty including directors and senior management and close
      members of such directors and senior management); or                            
| |     |                                                                                                                                                                                                                                                                                                       
| | (e) | enterprises in which a substantial voting interest is
      owned, directly or indirectly, by any person described in (c) or (d) or
      over which such a person is able to exercise significant
  influence.                                                                                       

Hunter Dickinson Services Inc. ("HDSI")

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

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

The business purpose of the related party relationship

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

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

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

The measurement basis used

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

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

|                        |            
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|Form 20-F Annual Report | P a g e| 85

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|
|
|

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

Ongoing contractual or other commitments resulting from the
related party relationship

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

The following summarizes the transactions with HDSI expressed
in thousands of dollars for each fiscal year:

|Transactions                                 |   | 2015  |   |   | 2014  |  |   | 2013  | 
|-------------------------------------------- | - | ----- | - | - | ----- |  | - | ----- | 
|Services rendered by HDSI                    | $ | 4,680 |   | $ | 4,926 |  | $ | 4,181 | 
|Technical                                    |   | 1,600 |   |   | 1,745 |  |   | 1,241 | 
|Engineering                                  |   | 140   |   |   | 540   |  |   | 612   | 
|Environmental                                |   | 580   |   |   | 686   |  |   | 383   | 
|Socioeconomic                                |   | 670   |   |   | 277   |  |   | 85    | 
|Other technical services                     |   | 210   |   |   | 242   |  |   | 161   | 
|General and administrative                   |   | 3,080 |   |   | 3,181 |  |   | 2,940 | 
|Management, financial &
      administration |   | 2,420 |   |   | 2,542 |  |   | 2,245 | 
|Shareholder communication                    |   | 660   |   |   | 639   |  |   | 695   | 
|                                             |   |       |   |   |       |  |   |       | 
|Reimbursement of third party expenses        |   | 610   |   |   | 779   |  |   | 829   | 
|Conferences and travel                       |   | 160   |   |   | 196   |  |   | 234   | 
|Insurance                                    |   | 60    |   |   | 71    |  |   | 57    | 
|Office supplies and other                    |   | 390   |   |   | 512   |  |   | 538   | 
|                                             |   |       |   |   |       |  |   |       | 
|Sale of
      marketable securities to HDSI  |   | (280  | ) |   |      |  |   |      | 
|Total                                        | $ | 5,010 |   | $ | 5,705 |  | $ | 5,010 | 

Key Management Personnel

The required disclosure for the remuneration of the Companys
key management personnel is provided in note 9(a) of the notes to the Financial
Statements which accompany this Annual Report and which are available under the
Companys profile at www.sedar.com.

Financing Activities

December 2014  Special Warrant Offering

In January 2015, 2014 the Company completed a Special Warrant
private placement involving the issuance of an aggregate of 35,962,735 Special
Warrants at a price of $0.431 per special warrant for gross proceeds of
approximately $15,5 million.

Stirling Global Value Fund Inc. ("Stirling"), an insider of the
Company, participated in the Special Warrant Offering and subscribed for
7,180,000 Special Warrants.

Kopernik Global Investors, LLC ("Kopernik"), an insider of the
Company, participated in the Special Warrants Offering and subscribed for
18,714,146 Special Warrants.

|                        |            
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|Form 20-F Annual Report | P a g e| 86

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|
|
|

August 2015  Special Warrant Offering

In September 2015 the Company completed a Special Warrant
private placement involving the issuance of an aggregate of 37,600,000 Special
Warrants at a price of C$0.399 per Special Warrant for gross proceeds of
approximately $15.0 million as follows:

| |  | an initial 25,624,408 Special Warrants were
      issued and sold on August 28, 2015 for gross proceeds of approximately
      $10.2 million; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                  
| |  | a subsequent 11,975,592 Special Warrants were
      issued and sold on September 9, 2015 for gross proceeds of approximately
      $4.8 million. 

Stirling participated in this Special Warrant private placement
and subscribed for 7,518,797 Special Warrants.

Kopernik participated in this Special Warrant private placement
and subscribed for 1,303,258 Special Warrants.

December 2015  Private Placement

In December 2015, the Company completed a private placement of
12,573,292 common shares at $0.412 per share for gross proceeds of approximately
$5.2 million.

Stirling participated in this private placement and subscribed
for 2,582,322 shares.

|C. | INTERESTS OF EXPERTS AND COUNSEL
|-- | --------------------------------

J. David Gaunt, P.Geo., James Lang, P.Geo., Eric Titley, P.Geo., of Hunter Dickson Services Inc., and Ting Lu, P.Eng., Tetra Tech are persons:

(a) who are named as in a report described in a filing. or referred to in a filing, made under the Canadian
  Securities Administrators, National Instrument 51-102 by the Company during, or relating to, the Companys
most recently completed financial year: and

(b) whose profession or business gives authority to the report made by each of them.

Messrs. Gaunt, Lang and Titley hold interests in the common shares of the Company, directly or indirectly, or
  through share purchase options, representing less than 1% of the Companys outstanding share capital. Ms. Lu
holds no interest in the Company.

|ITEM 8 | FINANCIAL
      INFORMATION
|------ | ---------------------------

|A1. | FINANCIAL STATEMENTS AND OTHER FINANCIAL
      INFORMATION
|--- | ----------------------------------------------------------

Item 18 of this Form 20-F contains Northern Dynasty's audited
annual financial statements as at and for the years ended December 31, 2015,
2014 and 2013. These financial statements have been prepared in accordance with
IFRS, as issued by the IASB.

|A2. | DIVIDEND POLICY
|--- | ---------------

The Company has not paid any dividends on its outstanding
common shares since its incorporation and does not anticipate that it will do so
in the foreseeable future. All funds of Northern Dynasty are being retained for
exploration of its projects.

|A3. | LEGAL PROCEEDINGS
|--- | -----------------

Environmental Protection Agency and Bristol Bay Watershed
Assessment

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

|                        |            
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|Form 20-F Annual Report | P a g e| 87

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|
|
|

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

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

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

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

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

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

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

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

|                        |            
|----------------------- | -----------
|Form 20-F Annual Report | P a g e| 88

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

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

On November 24, 2014, a U.S. federal court judge in Alaska
granted the Pebble Partnerships request for a preliminary injunction in
relation to the FACA case. While the preliminary injunction does not resolve the
Pebble Partnerships claims that the EPA actions with respect to the Bristol Bay
Watershed Assessment and subsequent 404c regulatory action violated FACA, the
decision permits the further discovery process of the underlying facts to enable
the court to issue a final decision on the merits of the FACA case. On June 4,
2015, the federal court in Alaska issued an order denying the EPAs motion to
dismiss this case.

Discovery has now commenced in the FACA case. The Pebble
Partnership has filed numerous requests for production of documents and is now
reviewing thousands of documents produced by the EPA. The Pebble Partnership has
also served a number of notices of dispositions for current and former EPA
employees and relevant third parties and depositions have started. Should the
Pebble Partnership prevail in its FACA litigation against the EPA, the federal
agency may be unable to rely upon the Bristol Bay Watershed Assessment as part
of the administrative record for any regulatory action at the Pebble Project.

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

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

|                        |            
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|Form 20-F Annual Report | P a g e| 89

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

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

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

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

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

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

|                        |            
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|Form 20-F Annual Report | P a g e| 90

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

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

In summary, the Pebble Partnership is advancing a
multi-dimensional strategy to address the EPAs preemptive regulatory action
under Section 404(c) of the Clean Water Act, and is working to position the
Pebble Project to initiate federal and state permitting under NEPA unencumbered
by any extraordinary development restrictions imposed by the federal agency.
This strategy includes three discrete pieces of litigation against the EPA,
including:

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

While the litigation process is inherently uncertain, and it is
difficult to predict with confidence the length of time that each of the legal
initiatives described above will take to advance to specific milestone events or
final conclusion, Northern Dynasty expects a final decision by a federal court
judge in Alaska on the Pebble Partnerships FACA case in 2017.

Northern Dynasty cannot predict the outcome of its various
challenges to what it sees as improper, preemptory attempts by the EPA to
prevent or otherwise unduly restrict mineral development at Pebble. If these
challenges all fail and the EPA continues to oppose the Pebble Project by all
legal means, it may have a material adverse effect on the Company.

Nunamta Aulukestai

In October 2011, a lawsuit filed in July 2009 by the Trustees
for Alaska (an environmental law firm) on behalf of Nunamta Aulukestai  an
organization established and funded to oppose development of the Pebble Project
- was rejected by the Anchorage Superior Court. The lawsuit alleged that the
Alaska Department of Natural Resources had violated the state constitution by
granting exploration and temporary water use permits to the Pebble Partnership,
and exploration activities had caused harm to vegetation, water, fish and
wildlife. The Pebble Partnership actively participated in the trial proceedings
after being granted intervener status. Superior Court Judge Aarseth denied each
of the allegations made by Nunamta Aulukestai, and ruled that no evidence of
environmental harm was presented. The plaintiffs have filed an appeal and a
ruling was made on May 29, 2015. The Alaska Supreme Court agreed that there was
no evidence of environmental damage but ruled that the land use permits conveyed
an interest in land and, as such should have been preceded by public notice. The
decision does not change the status of current permits held by the Pebble
Partnership, although drilling permits applied for in future may necessitate
additional public notice and comment requirements. In August 2015, the Supreme
Court ruled in the appeal case that the Alaska Department of Natural Resources
and the Pebble Partnership were jointly and severally liable
for plaintiffs attorney fees in the amount of US$57,082. The case was remanded
back to the trial court for further litigation about the potential award of the
plaintiffs attorneys fees for the trial court portion of the litigation.
Pebble Partnership then negotiated a settlement with the plaintiffs and the case
has been dismissed in it is entirety.

|                        |            
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|Form 20-F Annual Report | P a g e| 91

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|B. | SIGNIFICANT CHANGES
|-- | -------------------

There have been no significant changes to Northern Dynastys
affairs as disclosed in the accompanying financial statements since December 31,
2015, except as disclosed in this Annual Report on Form 20-F.

|ITEM 9 | THE OFFER AND
      LISTING
|------ | ---------------------------

|A. | OFFER AND LISTING DETAILS
|-- | -------------------------

The following tables set forth for the periods indicated the
price history of the Company's common shares on the TSX and on the NYSE MKT.

|                  | Trading under the symbol NDM | Trading under the symbol NAK
|----------------- | ---------------------------- | ----------------------------
|                  | on the TSX                   | on the NYSE MKT             
|                  |                              |                             
|Fiscal Year Ended | High                         | Low                         
|December 31,      | ($)                          | ($)                         
|2015              | 0.83                         | 0.37                        
|2014              | 1.85                         | 0.38                        
|2013              | 4.19                         | 1.07                        
|2012              | 8.13                         | 2.23                        
|2011              | 21.50                        | 5.16                        

|               | Trading under the symbol NDM | Trading under the symbol NAK
|-------------- | ---------------------------- | ----------------------------
|               | on the TSX                   | on the NYSE MKT             
|               |                              |                             
|Fiscal Quarter | High                         | Low                         
|               | ($)                          | ($)                         
|Q1 2016        | 0.58                         | 0.28                        
|Q4 2015        | 0.58                         | 0.38                        
|Q3 2015        | 0.67                         | 0.37                        
|Q2 2015        | 0.54                         | 0.38                        
|Q1 2015        | 0.83                         | 0.45                        
|Q4 2014        | 0.65                         | 0.38                        
|Q3 2014        | 0.95                         | 0.55                        
|Q2 2014        | 1.13                         | 0.67                        
|Q1 2014        | 1.85                         | 0.90                        

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|Form 20-F Annual Report | P a g e| 92

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|                | Trading under the symbol NDM | Trading under the symbol NAK
|--------------- | ---------------------------- | ----------------------------
|                | on the
    TSX               | on the NYSE MKT             
|                |                              |                             
|Last six months | High                         | Low                         
|                | ($)                          | ($)                         
|March 2016      | 0.52                         | 0.41                        
|February 2016   | 0.51                         | 0.36                        
|January 2016    | 0.44                         | 0.28                        
|December 2015   | 0.43                         | 0.38                        
|November 2015   | 0.58                         | 0.38                        
|October 2015    | 0.58                         | 0.40                        

Share trading information is available through free internet
search services (for example, for TSX, refer to www.tmxmoney.com, enter
NDM.TO. For NYSE MKT, use the following:
https://www.nyse.com/listings_directory/stock, enter NAK).

|B. | PLAN OF DISTRIBUTION
|-- | --------------------

Not applicable.

|C. | MARKETS
|-- | -------

Northern Dynasty's common shares have been listed in Canada on
the Toronto Stock Exchange since October 2007, under the symbol NDM, and prior
to that on the TSX Venture Exchange ("TSX-V") since December 1994. The Company's
common shares have been traded in the U.S. on NYSE MKT (formerly known as the
American Stock Exchange "AMEX"), since November 2004, under the symbol NAK.

|D. | SELLING SHAREHOLDERS
|-- | --------------------

Not applicable.

|E. | DILUTION
|-- | --------

Not applicable.

|F. | EXPENSES OF THE ISSUE
|-- | ---------------------

Not applicable.

|ITEM 10 | ADDITIONAL
      INFORMATION
|------- | ----------------------------

|A. | SHARE CAPITAL
|-- | -------------

Not required in an Annual Report.

|B. | MEMORANDUM AND ARTICLES OF
  ASSOCIATION
|-- | ----------------------------------------

The Company was originally incorporated on May 11, 1983
pursuant to the Company Act of the Province of British Columbia
(predecessor statute to the British Columbia Corporations Act in force since
2004), under the name "Dynasty Resources Inc.". On November 30, 1983 the Company
changed its name to "Northern Dynasty Explorations Ltd." and subsequently, on October 11,
1997, changed its name to Northern Dynasty Minerals Ltd.

|                        |            
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|Form 20-F Annual Report | P a g e| 93

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The Companys current Notice of Articles is dated March 24,
2016 and the Companys Articles dated June 10, 2010, as amended on June 19, 2013
are attached to this Annual report on Form 20-F as Exhibit 1.01.

The following is a summary of certain material provisions of
  (i) Northern Dynastys Notice of Articles and Articles, and (ii) certain
  provisions of the British Columbia Business Corporations Act (the
Business Corporations Act) applicable to Northern Dynasty:

|1. | Objects and Purposes
|-- | --------------------

Northern Dynasty's Notice of Articles and Articles do not
specify objects or purposes. Northern Dynasty is entitled under the Business
Corporations Act to carry on all lawful businesses which can be carried on
by a natural person.

|2. | Directors
|-- | ---------

Directors power to vote on a proposal, arrangement or
contract in which the director is interested.

According to the Business Corporations Act, a director
holds a disclosable interest in a contract or transaction if:

|1. | the contract or transaction is material to the
      company;                             
|-- | ------------------------------------------------------------------------------------------
|   |                                                                                           
|2. | the company has entered, or proposes to enter, into the
      contract or transaction, and
|   |                                                                                           
|3. | either of the following applies to the
  director:                                        

| | a. | the director has a material interest in the contract or
      transaction;                                                                                      
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                 
| | b. | the director is a director or senior officer of, or has a
      material interest in, a person who has a material interest in the contract
      or transaction.

However, the Business Corporations Act also provides
that in the following circumstances, a director does not hold a disclosable
interest in a contract or transaction if:

|1. | the situation that would otherwise constitute a
      disclosable interest arose before the coming into force of the Business
      Corporations Actor, if the company was recognized under the
      Business Corporations Act, before that recognition, and was
      disclosed and approved under, or was not required to be disclosed under,
      the legislation that:
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a. | applied to the company on or after the date on which the
      situation arose; and        
| | -- | -------------------------------------------------------------------------------------------
| |    |                                                                                            
| | b. | is comparable in scope and intent to the provisions of
      the Business Corporations Act;

|2. | both the company and the other party to the contract or
      transaction are wholly owned subsidiaries of the same
  corporation;
|-- | ----------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                   
|3. | the company is a wholly owned subsidiary of the other
      party to the contract or transaction;                                 
|   |                                                                                                                                   
|4. | the other party to the contract or transaction is a
      wholly owned subsidiary of the company; or                              

|                        |            
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|Form 20-F Annual Report | P a g e| 94

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|5. | where the director or senior officer is the sole
      shareholder of the company or of a corporation of which the company is a
      wholly owned subsidiary.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

The Business Corporations Act further provides that a
director of a company does not hold a disclosable interest in a contract or
transaction merely because:

|1. | the contract or transaction is an arrangement by way of
      security granted by the company for money loaned to, or obligations
      undertaken by, the director or senior officer, or a person in whom the
      director or senior officer has a material interest, for the benefit of the
      company or an affiliate of the company;
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                              
|2. | the contract or transaction relates to an indemnity or
      insurance;                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                              
|3. | the contract or transaction relates to the remuneration
      of the director or senior officer in that person's capacity as director,
      officer, employee or agent of the company or of an affiliate of the
      company;                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                              
|4. | the contract or transaction relates to a loan to the
      company, and the director or senior officer, or a person in whom the
      director or senior officer has a material interest, is or is to be a
      guarantor of some or all of the loan; or                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                              
|5. | the contract or transaction has been or will be made with
      or for the benefit of a corporation that is affiliated with the company
      and the director or senior officer is also a director or senior officer of
      that corporation or an affiliate of that
corporation.                                                         

Under Northern Dynastys Articles, a director or senior officer
who holds a disclosable interest (as that term is used in the Business
Corporations Act) in a contract or transaction into which Northern Dynasty
has entered or proposes to enter:

|1. | is liable to account to Northern Dynasty for any profit
      that accrues to the director or senior officer under or as a result of the
      contract or transaction only if and to the extent provided in the
    Act;                                                     
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                               
|2. | is not entitled to vote on any directors resolution to
      approve that contract or transaction, unless all the directors have a
      disclosable interest in that contract or transaction, in which case any or
      all of those directors may vote on such resolution;
|   |                                                                                                                                                                                                                                                                               
|3. | and who is present at the meeting of directors at which
      the contract or transaction is considered for approval may be counted in
      the quorum at the meeting whether or not the director votes on any or all
      of the resolutions considered at the meeting.    

A director or senior officer who holds any office or possesses
any property, right or interest that could result, directly or indirectly, in
the creation of a duty or interest that materially conflicts with that
individuals duty or interest as a director or senior officer, must disclose the
nature and extent of the conflict as required by the Business Corporations
Act. No director or intended director is disqualified by his or her office
from contracting with Northern Dynasty either with regard to the holding of any
office or place of profit the director holds with Northern Dynasty or as vendor,
purchaser or otherwise, and no contract or transaction entered into by or on
behalf of Northern Dynasty in which a director is in any way interested is
liable to be voided for that reason.

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|Form 20-F Annual Report | P a g e| 95

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Directors' power, in the absence of an independent
quorum, to vote compensation to themselves or any members of their
body.

The compensation of the directors is decided by the directors
unless the board of directors requests approval to the compensation from the
shareholders by ordinary resolution. The Business Corporations Act
provides that a director of a company does not hold a disclosable interest in a
contract or transaction merely because the contract or transaction relates to
the remuneration of the director or senior officer in that person's capacity as
director, officer, employee or agent of Northern Dynasty or of an affiliate of
Northern Dynasty.

Borrowing powers exercisable by the directors.

Under the Articles, the directors may, on behalf of Northern
Dynasty:

|1. | borrow money in such manner and amount, on such security,
      from such sources and upon such terms, and conditions as they consider
      appropriate;                                                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                       
|2. | issue bonds, debentures, and other debt obligations
      either outright or as a security for any liability or obligation of
      Northern Dynasty or any other person and at such discounts or premiums and
      on such other terms as they consider appropriate;
|   |                                                                                                                                                                                                                                                                       
|3. | guarantee the repayment of money by any other person or
      the performance of any obligation of any other person; and                                                                                                                                              
|   |                                                                                                                                                                                                                                                                       
|4. | mortgage, charge, whether by way of specific or floating
      charge, grant a security interest in, or give other security on, the whole
      or any part of the present and future assets and undertaking of Northern
      Dynasty.                               

Retirement and non-retirement of directors under an age
limit requirement.

There are no such provisions applicable to Northern Dynasty
under its Memorandum or its Articles or the Business Corporations Act.

Number of shares required for a directors
qualification.

Directors need not own any shares of Northern Dynasty in order
to qualify as directors.

|3. | Rights, Preferences and Restrictions Attaching to Each
      Class of Shares
|-- | ----------------------------------------------------------------------------

Authorized Capital

The Companys authorized capital consists of an unlimited
number of common shares.

Common Shares

The rights, preferences and restrictions attached to the
Companys common shares are summarized as follows:

Dividends

|                        |            
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|Form 20-F Annual Report | P a g e| 96

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Subject the provisions of the Business Corporations Act,
the directors may from time to time declare and authorized payments of dividends
out of available assets. Any dividends must be declared and paid according to
the number of shares held. Under the Business Corporations Act, no
dividend may be paid if Northern Dynasty is, or would as a result of payment of
the dividend become, insolvent.

Voting Rights

Each common share is entitled to one vote on matters to which
common shares ordinarily vote including the annual election of directors,
appointment of auditors and approval of corporate changes. Directors are elected
to hold office at each annual meeting and hold office until the ensuing annual
meeting. Directors automatically retire at each annual meeting. There are no
staggered directorships among Northern Dynastys directors. There are no
cumulative voting rights applicable to Northern Dynasty.

Rights to Profits and Liquidation Rights

All common shares of Northern Dynasty participate ratably in
any net profit or loss of Northern Dynasty and participate ratably as to any
distribution of assets in the event of a winding up or other liquidation.

Redemption

The common shares are not subject to any rights of
redemption.

Sinking Fund Provisions

Northern Dynasty has no sinking fund provisions or similar
obligations relating to the common shares.

Shares Fully Paid

All common shares of Northern Dynasty must, under the
Business Corporations Act, be issued as fully paid for cash, property or
services. They are therefore non-assessable and not subject to further calls for
payment.

Pre-emptive Rights

Holders of common shares of Northern Dynasty are not entitled
to any pre-emptive rights which provide a right to any holder to participate in
any further offerings of the Companys equity or other securities.

|4. | Changes to Rights and
      Restrictions to Shares
|-- | --------------------------------------------------

The Articles provide that, subject to the Business
Corporations Act, the Company may, by special resolution:

| | create special rights or restrictions for, and attach
      those special rights or restrictions to, the shares of any class or series
      of shares, whether or not any or all of those shares have been issued; or
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                       
| | vary or delete any special rights or restrictions
      attached to the shares of any class or series of shares, whether or not
      any or all of those shares have been issued.                                    

Subject to the Business Corporations Act, the Company may by
directors resolution subdivide or consolidate all or any of its unissued, or
fully paid issued, shares and, if applicable, alter its Notice of Articles, and,
if applicable, its Articles.

|                        |            
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|Form 20-F Annual Report | P a g e| 97

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The Articles provide that the Company may be directors
resolution authorize an alteration of its Notice of Articles in order to change
its name or adopt or change any translation of that name.

The Companys Articles provide that, subject to the Business
Corporations Act, the Company may by ordinary resolution of shareholders (or
a resolution of the directors in the case of §(c) or §(f) below):

|(a) | create one or more classes or series of shares;                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                    
|(b) | increase, reduce or eliminate the maximum number of
      shares that Northern Dynasty is authorized to issue out of any class or
      series of shares or establish a maximum number of shares that Northern
      Dynasty is authorized to issue out of any class or series of shares for
      which no maximum is established;
|    |                                                                                                                                                                                                                                                                                                                                    
|(c) | subdivide or consolidate all or any of its unissued, or
      fully paid issued, shares;                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                    
|(d) | if the Company is authorized to issue shares of a class
      of shares with par value:                                                                                                                                                                                                                                            

| | o | decrease the par value of those shares; or                                                                         
| | - | -------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                    
| | o | if none of the shares of that class of shares
      are allotted or issued, increase the par value of those shares;

|(e) | change all or any of its unissued, or fully paid issued,
      shares with par value into shares without par value or any of its unissued
      shares without par value into shares with par value;
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                     
|(f) | alter the identifying name of any of its shares;
  or                                                                                                                                               
|    |                                                                                                                                                                                                     
|(g) | otherwise alter its shares or authorized share structure
      when required or permitted to do so by the Act where it does not specify a
      special resolution.                                 

The Articles provide that a special resolution is a resolution
of shareholders that is approved by two thirds (66 2/3%) of those votes cast at
a properly constituted meeting of shareholders. An ordinary resolution is a
resolution of shareholders that is approved by a majority of those votes cast at
a properly constituted meeting of shareholders. Quorum pursuant to the Articles
is two shareholders holding at least 33 1/3% of issued shares.

If special rights and restrictions are altered and any right or
special right attached to issued shares is prejudiced or interfered with, then
the consent of the holders of shares of that class or series by a special
separate resolution will be required.

The Business Corporations Act also provides that a
company may reduce its capital if it is authorized to do so by a court order,
or, if the capital is reduced to an amount that is not less than the realizable
value of the company's assets less its liabilities, by a special resolution or
court order.

Generally, there are no significant differences between British
Columbia and United States law with respect to changing the rights of
shareholders as most state corporation statutes require shareholder approval
(usually a majority) for any such changes that affect the rights of
shareholders.

|5. | Meetings of Shareholders
|-- | ------------------------

The Articles provide that the Company must hold its annual
general meeting once in every calendar year (being not more than 15 months from
the last annual general meeting) at such time and place to be determined by the
directors of Northern Dynasty. Shareholders meetings are governed by the
Articles of Northern Dynasty but many important shareholder protections are
also contained in the Canadian provincial securities laws that are applicable to
Northern Dynasty as a reporting issuer in the Canadian provinces of British
Columbia, Alberta, and Ontario (Canadian Securities Laws) and the British Columbia Corporations Act. The Articles provide that Northern
Dynasty will provide at least 21 days' advance written notice of any meeting of
shareholders and will provide for certain procedural matters and rules of order
with respect to conduct of the meeting. The directors may fix in advance a date,
which is no fewer than 21 days prior to the date of the meeting for the purpose
of determining shareholders entitled to receive notice of and to attend and vote
at a general meeting.

|                        |            
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|Form 20-F Annual Report | P a g e| 98

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Canadian Securities Law and the British Columbia
Corporations Actsuperimpose requirements that generally provide that
shareholders meetings require not less than a 60 day notice period from initial
public notice and that Northern Dynasty makes a thorough advanced search of
intermediary and brokerage registered shareholdings to facilitate communication
with beneficial shareholders so that meeting proxy and information materials can
be sent via the brokerages to unregistered but beneficial shareholders. The form
and content of information circulars and proxies and like matters are governed
by Canadian Securities Lawsand the British Columbia Corporations
Act. This legislation specifies the disclosure requirements for the proxy
materials and various corporate actions, background information on the nominees
for election for director, executive compensation paid in the previous year and
full details of any unusual matters or related party transactions. Northern
Dynasty must hold an annual shareholders meeting open to all shareholders for
personal attendance or by proxy at each shareholder's determination.

Most state corporation statutes require a public company to
  hold an annual meeting for the election of directors and for the consideration
  of other appropriate matters. The state statutes also include general provisions
  relating to shareholder voting and meetings. Apart from the timing of when an
  annual Meeting must be held and the percentage of shareholders required to call
  an annual Meeting or an extraordinary meeting, there are generally no material
  differences between Canadian and United States law respecting annual meetings
and extraordinary meetings.

|6. | Rights to Own Securities
|-- | ------------------------

There are no limitations under Northern Dynasty's Articles or
in the Business Corporations Act on the right of persons who are not
citizens of Canada to hold or vote common shares.

|7. | Restrictions on Changes in Control, Mergers,
      Acquisitions or Corporate Restructuring of the
  Company
|-- | -----------------------------------------------------------------------------------------------------------

The Companys Articles do not contain any provisions that would
have the effect of delaying, deferring or preventing a change of control of the
Company. The Company has implemented a shareholders' rights plan dated effective
May 17, 2013 which was approved by the Board on May 17, 2013 and ratified by the
Company's shareholders in June 2013. A copy is attached as Exhibit 4.04 hereto.
There are no adopted provisions in the Companys Articles triggered by or
affected by a change in outstanding shares which gives rise to a change in
control.

|8. | Ownership Threshold Requiring Public
    Disclosure
|-- | ---------------------------------------------------

The Articles of Northern Dynasty do not require disclosure of
share ownership. Share ownership of director nominees must be reported annually
in proxy materials sent to Northern Dynasty's shareholders. There are no
requirements under British Columbia corporate law to report ownership of shares
of Northern Dynasty but Canadian Securities Law requires disclosure of trading
by insiders (generally officers, directors and holders of 10% of voting shares)
within 5 days of the trade. In addition, Canadian Securities Laws require
disclosure of acquisition of more than 10% of the issued and outstanding shares
of the Company by press release and filing of an early warning report within 2
business days of the acquisition. Canadian Securities Laws also require that we
disclose in our annual general meeting proxy statement, holders who beneficially
own more than 10% of our issued and outstanding shares, and
United States federal securities laws require the disclosure in our annual
report on Form 20-F of holders who own more than 5% of our issued and
outstanding shares.

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|Form 20-F Annual Report | P a g e| 99

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Most state corporation statutes do not contain provisions
governing the threshold above which shareholder ownership must be disclosed.
United States federal securities laws require a company that is subject to the
reporting requirements of the Securities Exchange Act of 1934 to disclose, in
its annual reports filed with the Securities and Exchange Commission those
shareholders who own more than 5% of a corporations issued and outstanding
shares.

|9. | Differences in Law between the US and British
Columbia
|-- | ------------------------------------------------------

Differences in the law between United States and British
Columbia, where applicable, have been explained above within each category.

|10. | Changes in the Capital of the
  Company
|--- | ---------------------------------------

There are no conditions imposed by Northern Dynastys Notice of
Articles or Articles which are more stringent than those required by the
Business Corporations Act.

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|Form 20-F Annual Report | P a g e| 100

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|C. | MATERIAL CONTRACTS
|-- | ------------------

Northern Dynasty's only material contracts as of April 18, 2016
are:

|1. | Corporate Services Agreement between Northern Dynasty and
      Hunter Dickinson Services Inc. dated July 2, 2010. See Item
    7.B.
|-- | ------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                     
|2. | Special Warrant Certificate dated effective December 31,
      2014.                                                                
|   |                                                                                                                                     
|3. | Registration Rights Agreement dated effective December
      31, 2014.                                                              
|   |                                                                                                                                     
|4. | Special Warrant Certificate dated effective August 31 and September 10,
      2015.                                                 
|   |                                                                                                                                     
|5. | Registration Rights Agreement dated effective August 31 and September 10, 2015.                                                     
|   |                                                                                                                                     
|6. | Arrangement Agreement between Northern Dynasty and
      Mission Gold dated October 30, 2015.                                       

Special Warrants

In late December 2014 and early January 2015, the Company
completed a financing to raise proceeds of $15.5 million through the issuance of
35,962,735 special warrants (the "Special Warrants"). Each special warrant
entitled the holder thereof to receive one common share ("Common Share") of the
Company (an "Underlying Share") without payment of additional consideration.

The Company agreed with the investors to use reasonable best
efforts to clear resale restrictions that are or may be applicable to the
Underlying Shares by (i) seeking to clear a final Prospectus in Canada
qualifying the distribution of the Underlying Shares for resale in Canada, and
(ii) concurrently filing a U.S. Registration Statement with the SEC to seek to
qualify the resale of such Underlying Shares in the United States. The Company
further agreed to use reasonable best efforts to cause the U.S. Registration
Statement to be declared effective by the SEC by not later than 90 days after
the Closing Date and to cause such U.S. Registration Statement to remain
continuously effective until the Resale Filing Termination Date. The Company
further agreed to use reasonable best efforts to cause the Prospectus to remain
effective and current until the earlier of: (i) 90 days following the issuance
of a receipt for the Prospectus; and (ii) the expiry of the Canadian hold period
on the Special Warrants.

The Company cleared the distribution of the underlying shares
in Canada and the United States on February 24, 2015. All 35,962,735 Special
Warrants were converted into Common Shares in 2015.

In late August 2015 and early September 2015, the Company
completed a further financing to raise proceeds of $15.0 million through the
issuance of 36,700,000 Special Warrants. Each special warrant entitled the
holder thereof to receive one Common Share (an "Underlying Share") without
payment of additional consideration.

The Company agreed with the investors to use reasonable best
efforts to clear resale restrictions that are or may be applicable to the
Underlying Shares by (i) seeking to clear a final Prospectus in Canada
qualifying the distribution of the Underlying Shares for resale in Canada, and
(ii) concurrently filing a U.S. Registration Statement with the SEC to seek to
qualify the resale of such Underlying Shares in the United States. The Company
further agreed to use reasonable best efforts to cause the U.S. Registration
Statement to be declared effective by the SEC by not later than 90 days after
the Closing Date and to cause such U.S. Registration Statement to remain
continuously effective until the Resale Filing Termination Date. The Company
further agreed to use reasonable best efforts to cause the Prospectus to remain
effective and current until the earlier of: (i) 90 days following the issuance
of a receipt for the Prospectus; and (ii) the expiry of the Canadian hold period
on the Special Warrants.

The Company cleared the distribution of the underlying shares
in Canada and the United States on November 30, 2015. All 37,600,000 Special
Warrants were converted into Common Shares in 2015.

|                        |             
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|Form 20-F Annual Report | P a g e| 101

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Mission Gold

The Company completed a plan of arrangement (the "Arrangement")
in which Northern Dynasty acquired 100% of the issued and outstanding common
shares of Mission Gold. Pursuant to the Arrangement, the Company issued
27,593,341 common shares to the former shareholders of Mission Gold (0.5467 of a
Northern Dynasty common share for each issued Mission Gold common share which
exchange ratio was determined pursuant to the working capital adjustment
provision of the Arrangement). In addition, warrants to purchase 13,801,672
common shares of Mission Gold at a price of $0.50 per share were exchanged for
warrants to purchase 13,801,672 common shares of Northern Dynasty exercisable at
a price of $0.55 per share on or before July 9, 2020, and warrants to purchase
2,871,676 common shares of Mission Gold at a price of $2.72 per share were
exchanged for warrants to purchase 2,871,676 common shares of Northern Dynasty
exercisable at a price of $3.00 per share on or before September 14, 2017.

Other agreements are in the normal course of business.

|D. | EXCHANGE CONTROLS
|-- | -----------------

Northern Dynasty is incorporated pursuant to the laws of the
Province of British Columbia, Canada. There is no law or governmental decree or
regulation in Canada that restricts the export or import of capital, or affects
the remittance of dividends, interest or other payments to a non-resident holder
of Common Shares, other than withholding tax requirements. Any such remittances
to United States residents are generally subject to withholding tax, however no
such remittances are likely in the foreseeable future. See "Taxation",
below.

There is no limitation imposed by Canadian law or by the
charter or other constituent documents of the Company on the right of a
non-resident to hold or vote Common Shares of the Company. However, the
Investment Canada Act (Canada) (the "Investment Act") has rules regarding
certain acquisitions of shares by non-Canadians, along with other requirements
under that legislation.

The following discussion summarizes the principal features of
the Investment Act for a non-Canadian who proposes to acquire Common Shares of
the Company. The discussion is general only; it is not a substitute for
independent legal advice from an investor's own advisor; and, except where
expressly noted, it does not anticipate statutory or regulatory amendments.

The Investment Act is a federal statute of broad application
regulating the establishment and acquisition of Canadian businesses by
non-Canadians, including individuals, governments or agencies thereof,
corporations, partnerships, trusts or joint ventures, Investments by
non-Canadians to acquire control over existing Canadian businesses or to
establish new ones are either reviewable or notifiable under the Investment Act.
If an investment by a non-Canadian to acquire control over an existing Canadian
business is reviewable under the Investment Act, the Investment Act generally
prohibits implementation of the investment unless, after review, the Minister of
Industry (or the Minister of Canadian Heritage and Official Languages for
investments in a Canadian business engaged in any of the activities of a
"cultural business"), is satisfied that the investment is likely to be of net
benefit to Canada.

A non-Canadian would acquire control of the Company for the
purposes of the Investment Act through the acquisition of Common Shares if the
non-Canadian acquired a majority of the Common Shares of the Company.

Further, the acquisition of less than a majority but one-third
or more of the Common Shares of the Company would be presumed to be an
acquisition of control of the Company unless it could be established that, on
the acquisition, the Company was not controlled in fact by the acquirer through
the ownership of Common Shares.

To determine whether an investment is reviewable under the
Investment Act it is necessary to consider whether the investor (or the vendor)
is a WTO investor (i.e. controlled by persons who are citizens of countries that are members of the World Trade Organization
("WTO"); there are currently 160 WTO members); the book value of the assets of
the Canadian business being acquired; and whether the Canadian business being
acquired engages in cultural activities.

|                        |             
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|Form 20-F Annual Report | P a g e| 102

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Where a WTO investor is involved, and if the Canadian business
is being acquired directly and is not engaged in cultural activities, an
investment will be reviewable only if the Canadian operating business being
acquired has an enterprise value in excess of C$600 million for 2015 and 2016.

If the acquisition by a WTO investor is indirect (i.e., the
  acquisition of shares of a foreign corporation that controls a Canadian
  business) the transaction is not reviewable. Where the Canadian business engages
  in any of the activities of a cultural business, or if neither the investor
  nor the vendor are WTO investors, the applicable thresholds for direct and
  indirect investments are assets with a book value of C$5 million or C$50
  million, respectively. (The acquisition of a Canadian business that is a
  "cultural business" is subject to lower review thresholds under the Investment
Act because of the perceived sensitivity of the cultural sector.)

An acquisition of control of a Canadian business by a
non-Canadian that falls below the thresholds for review under the Investment Act
does not require the filing of an application for review. However, even where an
investment falls below the thresholds, it must still be notified by way of a
two-page form to the Investment Review Division of the Department of Industry
(or the Department of Canadian Heritage for cultural cases). Notifications may
be submitted by the investor any time before or up to 30 days after
implementation of the investment.

In 2009, amendments were enacted to the Investment Act
concerning investments that may be considered injurious to national security. If
the Minister of Industry has reasonable grounds to believe that an investment by
a non-Canadian "could be injurious to national security," the Minister of
Industry may send the non-Canadian a notice indicating that an order for review
of the investment may be made. The review of an investment on the grounds of
national security may occur whether or not an investment is otherwise subject to
review on the basis of net benefit to Canada or otherwise subject to
notification under the Investment Canada Act. To date, there is neither
legislation nor guidelines published, or anticipated to be published, on the
meaning of "injurious to national security." Discussions with government
officials suggest that very few investment proposals will cause a review under
these new sections.

Certain transactions, except those to which the national
security provisions of the Investment Act may apply, relating to Common Shares
of the Company are exempt from the Investment Act, including

|(a) | acquisition of Common Shares of the Company by a person
      in the ordinary course of that person's business as a trader or dealer in
      securities,                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                      
|(b) | acquisition of control of the Company in connection with
      the realization of security granted for a loan or other financial
      assistance and not for a purpose related to the provisions on the
      Investment Act, and                                                   
|    |                                                                                                                                                                                                                                                                                      
|(c) | acquisition of control of the Company by reason of an
      amalgamation, merger, consolidation or corporate reorganization following
      which the ultimate direct or indirect control in fact of the Company,
      through the ownership of Common Shares, remained
  unchanged.

|E. | TAXATION
|-- | --------

Certain Canadian Federal Income Tax Information for United
States Residents

The following summarizes the principal Canadian federal income
tax considerations generally applicable to the holding and disposition of common
shares of the Company by a holder who (a), for the purposes of the Income Tax
Act (Canada) (the "Tax Act") and at all relevant times, (i) is not
resident in Canada or deemed to be resident in Canada, (ii) deals at arm's
length and is not affiliated with the Company, (iii) holds the common shares as
capital property and does not use or hold the common shares in the course of
carrying on, or otherwise in connection with, a business in Canada, and (b) who,
for the purposes of the Canada-United States Income Tax Convention (the "Treaty") at all
relevant times, is a resident solely of the United States, has never been a
resident of Canada, has not held or used (and does not hold or use) common
shares in connection with a permanent establishment or fixed base in Canada, and
who qualifies for the full benefits of the Treaty. The Canada Revenue Agency
("CRA") has introduced special forms to be used in order to substantiate
eligibility for Treaty benefits, and affected holders should consult with their
own advisors with respect to these forms and all relevant compliance matters.

|                        |             
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|Form 20-F Annual Report | P a g e| 103

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Holders who meet all such criteria in clauses (a) and (b) above
are referred to herein as a "U.S. Holder" or "U.S. Holders", and
this summary only addresses such U.S. Holders. The summary does not deal with
special situations, such as particular circumstances of traders or dealers in
securities, limited liability companies, tax-exempt entities, insurers,
financial institutions (including those to which the mark-to-market provisions
of the Tax Act apply), specified financial institutions, or entities considered
fiscally transparent under applicable law, or otherwise.

This summary is based on the current provisions of the Tax Act
  and the regulations thereunder, all proposed amendments to the Tax Act and
  regulations publicly announced by the Minister of Finance (Canada) to the date
  hereof, the current provisions of the Treaty and our understanding of the
  current administrative practices of the CRA. It has been assumed that all
  currently proposed amendments to the Tax Act and regulations will be enacted as
  proposed and that there will be no other relevant change in any governing law,
  the Treaty or administrative policy, although no assurance can be given in these
  respects. This summary does not take into account Canadian provincial, U.S. or
  other foreign income tax considerations, which may differ significantly from
those discussed herein.

This summary is not exhaustive of all possible Canadian
income tax consequences. It is not intended as legal or tax advice to any
particular U.S. Holder and should not be so construed. The tax consequences to a
U.S. Holder will depend on that U.S. Holder's particular circumstances.
Accordingly, all U.S. Holders or prospective U.S. Holders should consult their
own tax advisors with respect to the tax consequences applicable to them having
regard to their own particular circumstances. The discussion below is qualified
accordingly.

Dividends

Dividends paid or credited or deemed to be paid or credited by
the Company to a U.S. Holder are subject to Canadian withholding tax. Under the
Treaty, the rate of withholding tax on dividends paid to a U.S. Holder is
generally limited to 15% of the gross dividend (or 5% in the case of a U.S.
holder that is a corporate shareholder owning at least 10% of the Company's
voting shares), provided the U.S. Holder can establish entitlement to the
benefits of the Treaty. We will be required to withhold the applicable
withholding tax from any dividend and remit it to the Canadian government for
the U.S. Holders account.

Disposition

A U.S. Holder is generally not subject to tax under the Tax Act
in respect of a capital gain realized on the disposition of a common share in
the open market, unless the share is "taxable Canadian property" to the holder
thereof and the U.S. Holder is not entitled to relief under the Treaty.

Provided that the Company's common shares are listed on a
"designated stock exchange" for purposes of the Tax Act (which currently
includes the TSX) at the time of disposition, a common share will generally not
constitute taxable Canadian property to a U.S. Holder unless, at any time during
the 60 month period preceding the disposition, (i) the U.S. Holder or persons
with whom the U.S. Holder did not deal at arm's length (or the U.S. Holder
together with such persons) owned 25% or more of the issued shares of any class
or series of the Company AND (ii) more than 50% of the fair market value of the
share was derived directly or indirectly from certain types of assets, including
real or immoveable property situated in Canada, Canadian resource properties or
timber resource properties, and options, interests or rights in respect of any
of the foregoing. Common shares may also be deemed to be taxable Canadian
property under the Tax Act in certain specific circumstances, including in certain circumstances
where shares were acquired for other securities in a tax-deferred transaction
for Canadian tax purposes.

|                        |             
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|Form 20-F Annual Report | P a g e| 104

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If the Companys shares constitute taxable Canadian property to
the U.S. Holder, the U.S. Holder will (unless relieved under the Treaty) be
subject to Canadian income tax on any gain. The taxpayers capital gain or loss
from a disposition of the share is the amount, if any, by which the proceeds of
disposition exceed (or are exceeded by) the aggregate of the adjusted cost base
of the share and reasonable expenses of disposition. One-half of a capital gain
("taxable capital gain") from the disposition of taxable Canadian property
(other than treaty protected properties) is included in computing the income of
a U.S. Holder and one-half of a capital loss ("allowable capital loss) is
deductible from taxable capital gains from dispositions of taxable Canadian
property realized in the same year. Unused allowable capital losses from
previous taxation years generally may be carried back three taxation years or
forward indefinitely and applied to reduce net taxable capital gains realized in
those years by a U.S. Holder from the disposition of a taxable Canadian
property.

A U.S. Holder holding Common shares as taxable Canadian
  property should consult with the U.S. Holder's own tax advisors in advance of
  any disposition of Common shares or deemed disposition under the Tax Act in
  order to determine whether any relief from tax under the Tax Act may be
available by virtue of the Treaty, and any related compliance procedures.

Certain United States Federal Income Tax Considerations

The following is a general summary of certain material U.S.
federal income tax considerations applicable to a U.S. Holder (as defined below)
arising from and relating to the acquisition, ownership, and disposition of the
Companys common shares.

This summary is for general information purposes only and
does not purport to be a complete analysis or listing of all potential U.S.
federal income tax considerations that may apply to a U.S. Holder arising from
and relating to the acquisition, ownership, and disposition of common shares. In
addition, this summary does not take into account the individual facts and
circumstances of any particular U.S. Holder that may affect the U.S. federal
income tax consequences to such U.S. Holder, including specific tax consequences
to a U.S. Holder under an applicable tax treaty. Accordingly, this summary is
not intended to be, and should not be construed as, legal or U.S. federal income
tax advice with respect to any particular U.S. Holder. This summary does not
address the U.S. federal alternative minimum, U.S. federal estate and gift, U.S.
Medicare contribution, U.S. state and local, or non-U.S. tax consequences to
U.S. Holders of the acquisition, ownership, and disposition of common shares.
Except as specifically set forth below, this summary does not discuss applicable
tax reporting requirements. Each U.S. Holder should consult its own tax advisor
regarding all U.S. federal, U.S. state and local, and non-U.S. tax consequences
relating to the acquisition, ownership and disposition of common shares.

No opinion from U.S. legal counsel or ruling from the Internal
Revenue Service (the "IRS") has been requested, or will be obtained, regarding
the U.S. federal income tax consequences of the acquisition, ownership, and
disposition of common shares. This summary is not binding on the IRS, and the
IRS is not precluded from taking a position that is different from, and contrary
to, any position taken in this summary. In addition, because the authorities on
which this summary is based are subject to various interpretations, the IRS and
the U.S. courts could disagree with one or more of the positions taken in this
summary.

Scope of this Summary

Authorities

This summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations (whether final, temporary, or
proposed), published rulings of the IRS, published administrative positions of
the IRS, the Convention Between Canada and the United States of America with
Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended
(the "Canada-U.S. Tax Convention"), and U.S. court decisions that are applicable
and, in each case, as in effect and available, as of the date of this document.
Any of the authorities on which this summary is based could be
changed in a material and adverse manner at any time, and any such change could
be applied on a retroactive or prospective basis which could affect the U.S.
federal income tax considerations described in this summary. This summary does
not discuss the potential effects, whether adverse or beneficial, of any
proposed legislation that, if enacted, could be applied on a retroactive or
prospective basis.

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U.S. Holders

For purposes of this summary, the term "U.S. Holder" means a
  beneficial owner of common shares that is for U.S. federal income tax
purposes:

| | an individual who is a citizen or resident of
      the U.S.;                                                                                                                                                                                                                            
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                          
| | a corporation (or other entity taxable as a corporation
      for U.S. federal income tax purposes) created or organized in or under the
      laws of the U.S., any state thereof or the District of Columbia;                                                                          
|  |                                                                                                                                                                                                                                                                                          
| | an estate the income of which is subject to
      U.S. federal income taxation regardless of its source; or                                                                                                                                                                              
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| | a trust that (1) is subject to the primary supervision of
      a court within the U.S. and the control of one or more U.S. persons for
      all substantial decisions or (2) has a valid election in effect under
      applicable Treasury Regulations to be treated as a U.S. person.

Non-U.S. Holders

For purposes of this summary, a "non-U.S. Holder" is a
beneficial owner of common shares that is not a partnership (or other
pass-through entity) for U.S. federal income tax purposes and is not a U.S.
Holder. This summary does not address the U.S. federal income tax consequences
to non-U.S. Holders arising from and relating to the acquisition, ownership, and
disposition of common shares. Accordingly, a non-U.S. Holder should consult its
own tax advisor regarding all U.S. federal, U.S. state and local, and non-U.S.
tax consequences (including the potential application of and operation of any
income tax treaties) relating to the acquisition, ownership, and disposition of
common shares.

U.S. Holders Subject to Special U.S. Federal Income Tax
Rules Not Addressed

This summary does not address the U.S. federal income tax
considerations applicable to U.S. Holders that are subject to special provisions
under the Code, including, but not limited to, the following: (a) U.S. Holders
that are tax-exempt organizations, qualified retirement plans, individual
retirement accounts, or other tax-deferred accounts; (b) U.S. Holders that are
financial institutions, underwriters, insurance companies, real estate
investment trusts, or regulated investment companies; (c) U.S. Holders that are
broker-dealers, dealers, or traders in securities or currencies that elect to
apply a mark-to-market accounting method; (d) U.S. Holders that have a
"functional currency" other than the U.S. Dollar; (e) U.S. Holders that own
common shares as part of a straddle, hedging transaction, conversion
transaction, constructive sale, or other arrangement involving more than one
position; (f) U.S. Holders that acquired common shares in connection with the
exercise of employee stock options or otherwise as compensation for services;
(g) U.S. Holders that hold common shares other than as a capital asset within
the meaning of Section 1221 of the Code (generally, property held for investment
purposes); or (h) U.S. Holders that own or have owned (directly, indirectly, or
by attribution) 10% or more of the total combined voting power of the
outstanding shares of the Company. This summary also does not address the U.S.
federal income tax considerations applicable to U.S. Holders who are: (a) U.S.
expatriates or former long-term residents of the U.S.; (b) persons that have
been, are, or will be a resident or deemed to be a resident in Canada for
purposes of the Income Tax Act (Canada) (the "Tax Act"); (c) persons that use or
hold, will use or hold, or that are or will be deemed to use or hold common
shares in connection with carrying on a business in Canada; (d) persons whose
common shares constitute "taxable Canadian property" under the Tax Act; or (e)
persons that have a permanent establishment in Canada for the purposes of the
Canada-U.S. Tax Convention. U.S. Holders that are subject to special provisions
under the Code, including, but not limited to, U.S. Holders described
immediately above, should consult their own tax advisors regarding all U.S. federal, U.S. state and local, and
non-U.S. tax consequences relating to the acquisition, ownership and disposition
of common shares.

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If an entity or arrangement that is classified as a partnership
(or other "pass-through" entity) for U.S. federal income tax purposes holds
common shares, the U.S. federal income tax consequences to such entity and the
partners (or other owners) of such entity of the ownership and disposition of
common shares generally will depend on the activities of the entity and the
status of such partners (or other owners). This summary does not address the
U.S. federal income tax consequences to any such entity or its owners. Partners
(or other owners) of entities or arrangements that are classified as
partnerships (or other "pass-through" entities) for U.S. federal income tax
purposes should consult their own tax advisors regarding the U.S. federal income
tax consequences arising from and relating to the acquisition, ownership, and
disposition of common shares.

Passive Foreign Investment Company Rules

If the Company were to constitute a "passive foreign investment
company" within the meaning of Section 1297 of the Code (a "PFIC", as defined
below) for any tax year during a U.S. Holder's holding period, then certain
potentially adverse rules will affect the U.S. federal income tax consequences
to such U.S. Holder resulting from the acquisition, ownership and disposition of
common shares. The Company believes it was a PFIC during one or more prior
years, and, based on current business plans and financial projections, expects
to be a PFIC in the current tax year and possibly in subsequent tax years. The
determination of whether any corporation was, or will be, a PFIC for a tax year
depends, in part, on the application of complex U.S. federal income tax rules,
which are subject to differing interpretations. In addition, whether any
corporation will be a PFIC for any tax year depends on the assets and income of
such corporation over the course of each such tax year and, as a result, cannot
be predicted with certainty before the close of the tax year in question.
Accordingly, there can be no assurance that the Company will or will not be
determined to be a PFIC for the current or any prior or future tax year, or that
the IRS will not challenge any determination made by the Company (or any
subsidiary of the Company) concerning its PFIC status. Each U.S. Holder should
consult its own tax advisor regarding the PFIC status of the Company and any
subsidiary of the Company.

In addition, in any year in which the Company is a PFIC, a U.S.
Holder would be required to file an annual report with the IRS containing such
information as Treasury Regulations and/or other IRS guidance may require. In
addition to penalties, the failure to satisfy such reporting requirements may
result in an extension of the time period during which the IRS can assess a tax.
U.S. Holders should consult their own tax advisors regarding the requirements of
filing such information returns under these rules, including the requirement to
file an IRS Form 8621.

PFIC Status of the Company

The Company generally will be a PFIC for a tax year, if (a) 75%
or more of its gross income is passive income (as defined for U.S. federal
income tax purposes) (the "income test") or (b) 50% or more (by value) of its
assets either produce passive income or are held for the production of passive
income, based on the quarterly average of the fair market value of such assets
(the "asset test"). For purposes of the PFIC provisions, "gross income"
generally includes all sales revenues less the cost of goods sold, plus income
from investments and from incidental or outside operations or sources, and
"passive income" generally includes dividends, interest, certain rents and
royalties, certain gains from the sale of stock and securities, and certain
gains from commodities transactions.

Active business gains arising from the sale of commodities
generally will be excluded from passive income if substantially all (85% or
more) of the Companys commodities are stock in trade or inventory, depreciable
property used in a trade or business, or supplies regularly used or consumed in
a trade or business and certain other requirements are satisfied.

For purposes of the PFIC income test and asset test described
above, if the Company owns, directly or indirectly, 25% or more of the total
value of the outstanding shares of another corporation, the Company will be
treated as if it (a) held a proportionate share of the assets of such other
corporation and (b) received directly a proportionate share of the income of such other
corporation. In addition, for purposes of the PFIC income test and asset test
described above, and assuming certain other requirements are met, "passive
income" does not include certain interest, dividends, rents, or royalties that
are received or accrued by the Company from certain "related persons" (as
defined in Section 954(d)(3) of the Code), to the extent such items are properly
allocable to the income of such related person that is not passive income.

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Under certain attribution rules, if the Company is a PFIC, U.S.
Holders will generally be deemed to own their proportionate share of the
Company's direct or indirect equity interest in any company that is also a PFIC
(a ''Subsidiary PFIC''), and will be subject to U.S. federal income tax on their
proportionate share of (a) any "excess distributions," as described below, on
the stock of a Subsidiary PFIC and (b) a disposition or deemed disposition of
the stock of a Subsidiary PFIC by the Company or another Subsidiary PFIC, both
as if such U.S. Holders directly held the shares of such Subsidiary PFIC. In
addition, U.S. Holders may be subject to U.S. federal income tax on any indirect
gain realized on the stock of a Subsidiary PFIC on the sale or disposition of
common shares. Accordingly, U.S. Holders should be aware that they could be
subject to tax even if no distributions are received and no redemptions or other
dispositions of the Companys common shares are made.

Default PFIC Rules under Section 1291 of the Code

If the Company meets the income test or the asset test for any
tax year during which a U.S. Holder owns common shares, the U.S. federal income
tax consequences to such U.S. Holder of the acquisition, ownership, and
disposition of common shares will depend on whether and when such U.S. Holder
makes an election to treat the Company and each Subsidiary PFIC, if any, as a
"qualified electing fund" or "QEF" under Section 1295 of the Code (a "QEF
Election") or makes a mark-to-market election under Section 1296 of the Code (a
"Mark-to-Market Election"). A U.S. Holder that does not make either a QEF
Election or a Mark-to-Market Election will be referred to in this summary as a
"Non-Electing U.S. Holder."

A Non-Electing U.S. Holder will be subject to the default rules
of Section 1291 of the Code (described below) with respect to (a) any gain
realized on the sale or other disposition (including dispositions and certain
other events that would not otherwise be treated as taxable events) of common
shares and (b) any "excess distribution" received on the common shares. A
distribution generally will be an "excess distribution" to the extent that such
distribution (together with all other distributions received in the relevant tax
year) exceeds 125% of the average annual distribution received during the three
preceding tax years (or during a U.S. Holder's holding period for the common
shares, if shorter).

Under the default rules of Section 1291 of the Code, any gain
realized on the sale or other disposition of common shares (including an
indirect disposition of the stock of any Subsidiary PFIC), and any "excess
distribution" received on common shares or with respect to the stock of a
Subsidiary PFIC, must be ratably allocated to each day in a Non-Electing U.S.
Holder's holding period for the respective common shares. The amount of any such
gain or excess distribution allocated to the tax year of disposition or
distribution of the excess distribution and to tax years before the entity
became a PFIC, if any, would be taxed as ordinary income. The amounts allocated
to any other tax year would be subject to U.S. federal income tax at the highest
tax rate applicable to ordinary income in each such year, and an interest charge
would be imposed on the resulting tax liability for each such year, calculated
as if such tax liability had been due in each such tax year. A Non-Electing U.S.
Holder that is not a corporation must treat any such interest paid as "personal
interest," which is not deductible. Any loss realized on the disposition of
common shares would not be recognized.

If the Company meets the income test or the asset test for any
tax year during which a Non-Electing U.S. Holder holds common shares, the
Company will continue to be treated as a PFIC with respect to such Non-Electing
U.S. Holder, regardless of whether the Company meets the income test or the
asset test in one or more subsequent tax years. A Non-Electing U.S. Holder may
terminate this deemed PFIC status by electing to recognize gain (which will be
taxed under the default rules of Section 1291 of the Code discussed above), but
not loss, as if such common shares were sold on the last day of the last tax
year for which the Company was a PFIC.

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QEF Election

A U.S. Holder that makes a timely and effective QEF Election
for the first tax year in which its holding period of its common shares begins
generally will not be subject to the default rules of Section 1291 of the Code,
discussed above, with respect to its common shares. Instead, such a U.S. Holder
will be required to include currently in gross income for each tax year in which
the Company is a PFIC, such U.S. Holders pro rata share of the Companys net
capital gain and ordinary earnings, if any, regardless of whether such gain or
earnings are actually distributed. If a U.S. Holder that made a timely and
effective QEF Election has an income inclusion, such U.S. Holder may, subject to
certain limitations, elect to defer payment of current U.S. federal income tax
on such amounts, subject to an interest charge. If such U.S. Holder is not a
corporation, any such interest paid will be treated as "personal interest,"
which is not deductible.

A U.S. Holder that makes a timely and effective QEF Election
with respect to the Company generally (a) may receive tax-free distributions
from the Company to the extent that such distribution represents "earnings and
profits" of the Company that were previously included in income by the U.S.
Holder because of such QEF Election and (b) will adjust such U.S. Holder's tax
basis in the common shares to reflect the amount included in income or allowed
as a tax-free distribution because of such QEF Election. In addition, a U.S.
Holder that makes a QEF Election generally will recognize capital gain or loss
on the sale or other taxable disposition of common shares.

The procedure for making a QEF Election, and the U.S. federal
income tax consequences of making a QEF Election, will depend on whether such
QEF Election is timely. A QEF Election will be treated as "timely" if such QEF
Election is made for the first tax year in the U.S. Holder's holding period for
the common shares in which the Company was meets the income test or asset test.
A U.S. Holder may make a QEF Election for a tax year by filing the appropriate
QEF Election documents at the time such U.S. Holder files a U.S. federal income
tax return for such tax year. If a U.S. Holder does not make a timely and
effective QEF Election for the first year in the U.S. Holder's holding period
for the common shares, the U.S. Holder may still be able to make a timely and
effective QEF Election in a subsequent year if such U.S. Holder meets certain
requirements and makes a "purging" election to recognize gain (which will be
taxed under the default rules of Section 1291 of the Code discussed above) as if
such common shares were sold for their fair market value on the day the QEF
Election is effective. If a U.S. Holder owns PFIC stock indirectly through
another PFIC, separate QEF Elections must be made for the PFIC in which the U.S.
Holder is a direct shareholder and the Subsidiary PFIC for the QEF rules to
apply to both PFICs.

A QEF Election will apply to the tax year for which it is
timely made and to all subsequent tax years, unless such QEF Election is
invalidated or terminated or the IRS consents to its revocation. If a U.S.
Holder makes a QEF Election and, in a subsequent tax year, the Company ceases to
be a PFIC, the QEF Election will remain in effect (although it will not be
applicable). Accordingly, if the Company becomes a PFIC in another subsequent
tax year, the QEF Election will be effective and the U.S. Holder will be subject
to the QEF rules described above during any subsequent tax year in which the
Company qualifies as a PFIC.

In light of the adverse tax consequences of the Company being a
PFIC and the uncertainty as to the Companys PFIC status, the Company will
provide to any U.S. Holder, upon written request, the information necessary for
U.S. income tax reporting purposes for such U.S. Holder to make a QEF Election
with respect to the Company. The Company may elect to provide such information
on its website. Each U.S. Holder should consult its own tax advisor regarding
the availability and desirability of, and procedure for making, a QEF Election.

Mark-to-Market Election

A U.S. Holder may make a Mark-to-Market Election only if the
common shares are "regularly traded" on a qualified exchange or other market
(within the meaning of the Code and applicable Treasury Regulations), which
include a national securities exchange that is registered with the Securities
and Exchange Commission, the national market system established pursuant to
section 11A of the Securities and Exchange Act of 1934, and certain foreign
securities exchanges that are regulated or supervised by a governmental
authority of the country in which the market is located. If such stock is traded
on such a qualified exchange or other market, such stock generally will be "regularly traded" for any
calendar year during which such stock is traded, other than in de minimis
quantities, on at least 15 days during each calendar quarter. There is no
assurance that the common shares will be or remain "regularly traded" for this
purpose.

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A U.S. Holder that makes a Mark-to-Market Election with respect
to its common shares generally will not be subject to the default rules of
Section 1291 of the Code, discussed above, with respect to such common shares.
However, if a U.S. Holder does not make a Mark-to-Market Election beginning in
the first tax year of such U.S. Holder's holding period for the common shares or
such U.S. Holder has not made a timely QEF Election, the default rules of
Section 1291 of the Code, discussed above, will apply to certain dispositions
of, and distributions on, the common shares.

A U.S. Holder that makes a Mark-to-Market Election will include
  in ordinary income, for each tax year in which the Company is a PFIC, an amount
  equal to the excess, if any, of (a) the fair market value of the common shares,
  as of the close of such tax year over (b) such U.S. Holder's tax basis in such
  common shares. A U.S. Holder that makes a Mark-to-Market Election will be
  allowed a deduction in an amount equal to the excess, if any, of (a) such U.S.
  Holder's adjusted tax basis in the common shares, as of the close of such tax
  year, over (b) the fair market value of such common shares (but only to the
  extent of the net amount of previously included income as a result of the
Mark-to-Market Election for prior tax years).

A U.S. Holder that makes a Mark-to-Market Election generally
also will adjust such U.S. Holder's tax basis in the common shares to reflect
the amount included in gross income or allowed as a deduction because of such
Mark-to-Market Election. In addition, upon a sale or other taxable disposition
of common shares, a U.S. Holder that makes a Mark-to-Market Election will
recognize ordinary income or ordinary loss (not to exceed the excess, if any, of
(a) the amount included in ordinary income because of such Mark-to-Market
Election for prior tax years over (b) the amount allowed as a deduction because
of such Mark-to-Market Election for prior tax years). Losses that exceed this
limitation are treated as capital losses. Deductions for capital losses are
subject to significant limitations under the Code.

A Mark-to-Market Election applies to the tax year in which such
Mark-to-Market Election is made and to each subsequent tax year, unless the
common shares cease to be eligible for such election or the IRS consents to
revocation of such election. Each U.S. Holder should consult its own tax advisor
regarding the availability of, and procedure for making, a Mark-to-Market
Election.

Although a U.S. Holder may be eligible to make a Mark-to-Market
Election with respect to the common shares, no such election may be made with
respect to the stock of any Subsidiary PFIC that a U.S. Holder is treated as
owning, because such stock is not marketable. Hence, the Mark-to-Market Election
will not be effective to eliminate the application of the default rules of
Section 1291 of the Code described above with respect to deemed dispositions of
Subsidiary PFIC stock or excess distributions with respect to a Subsidiary PFIC.

The PFIC rules are complex, and each U.S. Holder should consult
its own tax advisor regarding the PFIC rules and how the PFIC rules may affect
the U.S. federal income tax consequences of the acquisition, ownership, and
disposition of common shares.

Ownership and Disposition of Common Shares

The following discussion is subject to the rules described
above under the heading "Passive Foreign Investment Company Rules."

Distributions on Common Shares

A U.S. Holder that receives a distribution, including a
constructive distribution, with respect to a common share will be required to
include the amount of such distribution in gross income as a dividend (without
reduction for any Canadian income tax withheld from such distribution) to the
extent of the current or accumulated "earnings and profits" of the Company, as
computed for U.S. federal income tax purposes. To the extent that a distribution
exceeds the current and accumulated "earnings and profits" of the Company, such
distribution will be treated first as a tax-free return of capital to the extent
of a U.S. Holder's tax basis in the common shares and thereafter as gain from the sale or exchange
of such common shares. (See "Sale or Other Taxable Disposition of Common Shares"
below). However, the Company may not maintain the calculations of earnings and
profits in accordance with U.S. federal income tax principles, and each U.S.
Holder should therefore assume that any distribution by the Company with respect
to the common shares will constitute a dividend. Dividends received on common
shares generally will not be eligible for the "dividends received deduction"
available to U.S. corporate shareholders receiving dividends for U.S.
corporations. If the Company is eligible for the benefits of the Canada-U.S. Tax
Convention, dividends paid by the Company to non-corporate U.S. Holders
generally will be eligible for preferential tax rates applicable to long-term
capital gains, provided certain holding period and other conditions are
satisfied, including that the Company not be classified as a PFIC in the tax
year of distribution or in the preceding tax year. The dividend rules are
complex, and each U.S. Holder should consult its own tax advisor regarding the
application of such rules.

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Sale or Other Taxable Disposition of Common Shares

Upon the sale or other taxable disposition of common shares, a
  U.S. Holder generally will recognize capital gain or loss in an amount equal to
  the difference between the amount of cash received plus the fair market value of
  any property received and such U.S. Holder's tax basis in such common shares
  sold or otherwise disposed of. A U.S. Holder's tax basis in common shares
  generally will be such U.S. Holder's U.S. Dollar cost for such common shares.
  Gain or loss recognized on such sale or other disposition generally will be
  long-term capital gain or loss if, at the time of the sale or other taxable
disposition, the common shares have been held for more than one year.

Preferential tax rates currently apply to long-term capital
gain of a U.S. Holder that is an individual, estate, or trust. There are
currently no preferential tax rates for long-term capital gain of a U.S. Holder
that is a corporation. Deductions for capital losses are subject to significant
limitations under the Code.

Receipt of Foreign Currency

The amount of any distribution paid to a U.S. Holder in
connection with the ownership of common shares, or on the sale or other taxable
disposition of common shares, generally will be equal to the U.S. Dollar value
of such foreign currency based on the exchange rate applicable on the date of
receipt (regardless of whether such foreign currency is converted into U.S.
Dollars at that time). A U.S. Holder will have a basis in the foreign currency
equal to its U.S. Dollar value on the date of receipt. Any U.S. Holder who
converts or otherwise disposes of the foreign currency after the date of receipt
may have a foreign currency exchange gain or loss that would be treated as
ordinary income or loss, and generally will be U.S. source income or loss for
foreign tax credit purposes. Different rules apply to U.S. Holders who use the
accrual method with respect to foreign currency received upon the sale, exchange
or other taxable disposition of the common shares. Each U.S. Holder should
consult its own tax advisor regarding the U.S. federal income tax consequences
of receiving, owning, and disposing of foreign currency.

Foreign Tax Credit

Subject to the PFIC rules discussed above, a U.S. Holder that
pays (whether directly or through withholding) Canadian income tax in connection
with the ownership or disposition of common shares generally will be entitled,
at the election of such U.S. Holder, to receive either a deduction or a credit
for such Canadian income tax. Generally, a credit will reduce a U.S. Holder's
U.S. federal income tax liability on a Dollar-for-Dollar basis, whereas a
deduction will reduce a U.S. Holder's income subject to U.S. federal income tax.
This election is made on a year-by-year basis and applies to all creditable
foreign taxes paid (whether directly or through withholding) by a U.S. Holder
during a year.

Complex limitations apply to the foreign tax credit, including
the general limitation that the credit cannot exceed the proportionate share of
a U.S. Holder's U.S. federal income tax liability that such U.S. Holder's
"foreign source" taxable income bears to such U.S. Holder's worldwide taxable
income. In applying this limitation, a U.S. Holder's various items of income and
deduction must be classified, under complex rules, as either "foreign source" or "U.S. source." Generally, dividends
paid by a non-U.S. corporation should be treated as foreign source for this
purpose, and gains recognized on the sale of stock of a non-U.S. corporation by
a U.S. Holder should be treated as U.S. source for this purpose, except as
otherwise provided in an applicable income tax treaty, and if an election is
properly made under the Code. However, the amount of a distribution with respect
to the common shares that is treated as a "dividend" may be lower for U.S.
federal income tax purposes than it is for Canadian federal income tax purposes,
resulting in a reduced foreign tax credit allowance to a U.S. Holder. In
addition, this limitation is calculated separately with respect to specific
categories of income. The foreign tax credit rules are complex, and each U.S.
Holder should consult its own U.S. tax advisor regarding the foreign tax credit
rules.

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Special rules apply to the amount of foreign tax credit that a
U.S. Holder may claim on a distribution from a PFIC. Subject to such special
rules, foreign taxes paid with respect to any distribution in respect of stock
in a PFIC are generally eligible for the foreign tax credit. The rules relating
to distributions by a PFIC and their eligibility for the foreign tax credit are
complicated, and a U.S. Holder should consult with its own tax advisor regarding
the availability of the foreign tax credit with respect to distributions by a
PFIC.

Information Reporting and Backup Withholding

Under U.S. federal income tax law, certain categories of U.S.
Holders must file information returns with respect to their investment in, or
involvement in, a non-U.S. corporation. For example, U.S. return disclosure
obligations (and related penalties) are imposed on individuals who are U.S.
Holders that hold certain specified foreign financial assets in excess of
certain threshold amounts. The definition of specified foreign financial assets
includes not only financial accounts maintained in foreign financial
institutions, but also, if held for investment and not in an account maintained
by certain financial institutions, any stock or security issued by a non-U.S.
person, any financial instrument or contract that has an issuer or counterparty
other than a U.S. person and any interest in a non-U.S. entity. U.S. Holders may
be subject to these reporting requirements unless their common shares are held
in an account at certain financial institutions. Penalties for failure to file
certain of these information returns are substantial. U.S. Holders should
consult with their own tax advisors regarding the requirements of filing
information returns, including the requirement to file an IRS Form 8938.

Payments made within the U.S. or by a U.S. payor or U.S.
middleman, of dividends on, and proceeds arising from the sale or other taxable
disposition of, common shares will generally be subject to information
reporting. In addition, backup withholding, currently, at a rate of 28%, may
apply to such payments if a U.S. Holder (a) fails to furnish such U.S. Holder's
correct U.S. taxpayer identification number (generally on IRS Form W-9), (b)
furnishes an incorrect U.S. taxpayer identification number, (c) is notified by
the IRS that such U.S. Holder has previously failed to properly report items
subject to backup withholding tax, or (d) fails to certify, under penalty of
perjury, that such U.S. Holder has furnished its correct U.S. taxpayer
identification number and that the IRS has not notified such U.S. Holder that it
is subject to backup withholding. Certain exempt persons generally are excluded
from these information reporting and backup withholding rules. Backup
withholding is not an additional tax. Any amounts withheld under the U.S. backup
withholding rules will be allowed as a credit against a U.S. Holder's U.S.
federal income tax liability, if any, or will be refunded, if such U.S. Holder
furnishes required information to the IRS in a timely manner. Each U.S. Holder
should consult its own tax advisor regarding the information reporting and
backup withholding rules.

|F. | DIVIDENDS AND PAYING
AGENTS
|-- | ---------------------------

Not applicable.

|G. | STATEMENT BY EXPERTS
|-- | --------------------

Not applicable.

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 112

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|H. | DOCUMENTS ON DISPLAY
|-- | --------------------

Exhibits attached to this Form 20-F are also available for
viewing on EDGAR, or at the offices of Northern Dynasty, Suite 1500  1040 West
Georgia Street, Vancouver, British Columbia V6E 4H1 or on request of Northern
Dynasty at 604-684-6365, attention: Corporate Secretary. Copies of Northern
Dynasty's financial statements and other continuous disclosure documents
required under the British Columbia Securities Act are available for viewing on
the internet at www.sedar.com.

|I. | SUBSIDIARY INFORMATION
|-- | ----------------------

Not applicable.

|ITEM 11 | QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------------

|A. | TRANSACTION RISK AND CURRENCY RISK
    MANAGEMENT
|-- | -------------------------------------------------

Northern Dynasty's operations do not employ financial
instruments or derivatives which are market sensitive.

|B. | EXCHANGE RATE SENSITIVITY
|-- | -------------------------

Northern Dynasty's administrative operations are in Canada. The
Company typically holds most of its funds in US and Canadian Dollars and
typically acquires foreign currency on an as-needed basis.

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

There has been no change in the Companys objectives and
policies for managing this risk, except for the changes in the carrying amounts
of the financial assets exposed to foreign exchange risk, and there was no
significant change to the Companys exposure to foreign exchange risk during the
year ended December 31, 2015.

The exposure of the Company's US dollar denominated financial
assets and liabilities to foreign exchange risk is as follows, expressed in
thousands of Canadian dollars:

|                                                                          |   | December 31 |   |   | December 31 |  
|------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                                          |   | 2015        |   |   | 2014        |  
|Financial assets:                                                         |   |             |   |   |             |  
|Amounts receivable                                                        | $ | 595         |   | $ | 635         |  
|Cash
      and cash equivalents and restricted cash                       |   | 6,408       |   |   | 1,758       |  
|                                                                          |   | 7,003       |   |   | 2,393       |  
|Financial liabilities: Trade and other payables                           |   | (1,529      | ) |   | 5,225       |  
|Net
      financial assets (liabilities) exposed to foreign currency risk | $ | 5,474       |   | $ | (2,832      | )

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 113

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A 10% depreciation of the Canadian dollar relative to the
United States dollar at December 31, 2015 would result in a gain of
approximately $502 in the year (2014 - $283 loss). This analysis assumes that
all other variables, in particular interest rates, remain constant.

|C. | INTEREST RATE RISK AND EQUITY PRICE
  RISK
|-- | ------------------------------------------

The Company is subject to interest rate risk with respect to
its investments in cash and cash equivalents. There has been no change in the
Companys objectives and policies for managing this risk and no significant
change to the Companys exposure to interest rate risk during the year ended
December 31, 2015.

Assuming that all variables remain constant, a 100 basis points
change in a decrease or increase in interest rates would have resulted in a
decrease or increase in interest income of approximately $85,000 (2014 -
$176,000).

|D. | COMMODITY PRICE RISK
|-- | --------------------

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

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

|ITEM 12 | DESCRIPTION OF
      SECURITIES OTHER THAN EQUITY SECURITIES
|------- | ------------------------------------------------------------

Not applicable.

|ITEM 13 | DEFAULTS, DIVIDEND
      ARREARAGES AND DELINQUENCIES
|------- | -----------------------------------------------------

Not applicable.

|ITEM 14 | MATERIAL MODIFICATIONS
      TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|------- | ----------------------------------------------------------------------------------

Not applicable.

|ITEM 15 | CONTROLS AND
      PROCEDURES
|------- | -----------------------------

DISCLOSURE CONTROLS AND PROCEDURES

At the end of the period covered by this annual report on Form
20-F, an evaluation was carried out with the participation of the Company's
management, including the President and Chief Executive Officer ("CEO") and the
Chief Financial Officer ("CFO"), of the effectiveness of the Company's
disclosure controls and procedures (as defined in Rules 13a  15(e) and 15d
15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Based on that evaluation, the President and
CEO and the CFO have concluded that as of the end of the period covered by this
annual report on Form 20-F, the Company's disclosure controls and procedures are
designed to provide reasonable assurance of achieving their objectives and are
effective at that reasonable assurance level in providing: (i) information
required to be disclosed by the Company in reports that it files or submits to
the SEC under the Exchange Act was recorded, processed, summarized and reported
within the time periods specified in applicable rules and forms, and (ii)
material information required to be disclosed in the Company's reports filed
under the Exchange Act was accumulated and communicated to the Company's
management, including the President and CEO and the CFO, as appropriate, to
allow for accurate and timely decisions regarding required disclosure.

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 114

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MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING

The Company's management, including the President and CEO and
  CFO, is responsible for establishing and maintaining adequate internal control
  over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the
  Exchange Act. The Company's internal control over financial reporting is a
  process designed to provide reasonable assurance regarding the reliability of
  financial reporting and the preparation and fair presentation of financial
  statements for external purposes in accordance with IFRS. The Company's internal
  control over financial reporting includes those policies and procedures
that:

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

With the participation of the President and CEO and CFO,
management conducted an evaluation of the design and operation of the Company's
internal control over financial reporting as of December 31, 2015, based on the
criteria set forth in Internal Control  Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission. This
evaluation included review of the documentation of controls, evaluation of the
design effectiveness of controls, testing of the operating effectiveness of
controls and a conclusion on this evaluation. Based on this evaluation,
management concluded in its report that the Company's internal control over
financial reporting was effective as of December 31, 2015.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

During the period covered by this annual report on Form 20-F,
no changes occurred in the Company's internal control over financial reporting
that have materially affected, or are reasonably likely to materially affect,
the Company's internal control over financial reporting.

LIMITATIONS OF CONTROLS AND PROCEDURES

The Company's management, including its President and CEO and
CFO, does not expect that its disclosure controls and procedures or internal
controls and procedures will prevent all errors and all fraud. A control system,
no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs.

Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the controls. The design of any system of controls is also based in
part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions; over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 115

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|ITEM 16  | [RESERVED]                            
|-------- | --------------------------------------
|         |                                       
|ITEM 16A | AUDIT COMMITTEE
      FINANCIAL EXPERT

Of the members of the Audit and Risk Committee the Board of
Directors has determined that Mr. de Groot qualifies as an audit committee
"financial expert" under the rules of the SEC, based on his education and
experience. Each audit and risk committee member is independent, as the term is
defined in section 803 of the NYSE MKT Company Guide.

Each audit committee member is able to read and understand
fundamental financial statements.

|ITEM 16B | CODE OF ETHICS
|-------- | --------------

The Company's board of directors has adopted a Code of Ethics
governing directors, officers, employees and contractors. The Code of Ethics
sets forth written standards that are designed to deter wrongdoing and to
promote:

|(a) | honest and ethical conduct, including the ethical
      handling of actual or apparent conflicts of interest between personal and
      professional relationships;                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                 
|(b) | full, fair, accurate, timely, and understandable
      disclosure in reports and documents that the Company files with, or
      submits to, securities regulators and in other public communications made
      by the Company;
|    |                                                                                                                                                                                                                                 
|(c) | compliance with applicable laws, rules and
      regulations;                                                                                                                                                                   
|    |                                                                                                                                                                                                                                 
|(d) | the prompt internal reporting of violations of the Code
      of Ethics to an appropriate person or persons identified in the Code;
      and                                                                                   
|    |                                                                                                                                                                                                                                 
|(e) | accountability for adherence to the Code of
  Ethics.                                                                                                                                                                           

The board of directors monitors compliance with the Code of
Ethics by ensuring that all Company personnel have read and understood the Code
of Ethics, and by charging management with bringing to the attention of the
board of directors any issues that arise with respect to the Code of Ethics.

The Company's Code of Ethics is included in the Manual which is
available for download at the Companys website under Corporate Governance at
www.northerndynastyminerals.com. The Company will also provide a copy of
the Code of Ethics to any person without charge, upon request. Requests can be
sent by mail to: 15th floor, 1040 West Georgia Street, Vancouver, British
Columbia V6E 4H1 or on request of the Company at 604-684-6365, attention:
Investor Relations Department.

During the most recently completed fiscal year, the Company has
neither: (a) materially amended its Code of Ethics; nor (b) granted any waiver
(including any implicit waiver) form any provision of its Code of Ethics.

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 116

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|ITEM 16C | PRINCIPAL ACCOUNTANT
      FEES AND SERVICES
|-------- | --------------------------------------------

The following table discloses the aggregate fees billed for
each of the last two fiscal years for professional services rendered by the
Company's audit firm, Deloitte LLP for various services.

|                   |                                                                              | Year ended December 31
|------------------ | ---------------------------------------------------------------------------- | ----------------------
|Services:          | Description of services                                                      | 2015                  
|                   | Includes fees necessary to perform the annual audit
      and quarterly      |                       
|                   | reviews of the Company's
      financial statements. Audit Fees              |                       
|                   | include fees for review
      of tax provisions and for accounting           |                       
|Audit Fees         | consultations on matters
      reflected in the financial statements.        | $ 137,000             
|                   | Audit Fees also include
      audit or other attest services required by     |                       
|                   | legislation or
      regulation, such as comfort letters, consents,          |                       
|                   | reviews of securities
      filings and statutory audits.                    |                       
|                   | Includes services that are traditionally performed
      by the auditor.     |                       
|                   | These audit-related
      services include employee benefit audits, due      |                       
|Audit-related Fees | diligence assistance,
      accounting consultations on proposed             | 70,000                
|                   | transactions, internal
      control reviews and audit or attest services    |                       
|                   | not required by
      legislation or regulation.                             |                       
|                   | Includes fees for all tax services other than those
      included in "Audit |                       
|                   | Fees" and "Audit-related
      Fees". This category includes fees for        |                       
|Tax Fees           | tax
      compliance, tax planning and tax advice. Tax planning and tax      | Nil                   
|                   | advice includes
      assistance with tax audits and appeals, tax advice     |                       
|                   | related to mergers and
      acquisitions, and requests for rulings or       |                       
|                   | technical advice from
      tax authorities.                                 |                       
|All Other Fees     | Includes all other non-audit services.                                       | Nil                   
|Total              |                                                                              | $ 207,000             

From time to time, management of the Company recommends to and
requests approval from the audit committee for non-audit services to be provided
by the Company's auditors. The audit committee routinely considers such requests
at committee meetings, and if acceptable to a majority of the audit committee
members, pre-approves such non-audit services by a resolution authorizing
management to engage the Company's auditors for such non-audit services, with
set maximum Dollar amounts for each itemized service. During such deliberations,
the audit committee assesses, among other factors, whether the services
requested would be considered "prohibited services" as contemplated by the SEC,
and whether the services requested and the fees related to such services could
impair the independence of the auditors. No material non-audit services were
provided by the Company's auditors during the year ended December 31, 2015.

|ITEM 16D | EXEMPTIONS FROM LISTING
STANDARDS FOR AUDIT COMMITTEES
|-------- | ------------------------------------------------------

Not applicable.

|                        |             
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|Form 20-F Annual Report | P a g e| 117

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|ITEM 16E | PURCHASES OF EQUITY
      SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
|-------- | ----------------------------------------------------------------------------

In the year ended December 31, 2015, the Company did not
purchase any of its issued and outstanding Common Shares pursuant to any
repurchase program or otherwise.

|ITEM 16F | CHANGE IN REGISTRANT'S
CERTIFYING ACCOUNTANT
|-------- | --------------------------------------------

None.

|ITEM 16G | CORPORATE GOVERNANCE
|-------- | --------------------

NYSE MKT Corporate Governance

The Company's common shares are listed in the United States on
the NYSE MKT. The Company is considered a "foreign issuer" under the NYSE MKT
Company Guide as it is incorporated under the laws of the Province of British
Columbia. Section 110 of the NYSE MKT Company Guide permits NYSE MKT to consider
the laws, customs and practices of foreign issuers in relaxing certain NYSE MKT
listing criteria, and to grant exemptions from NYSE MKT listing criteria based
on these considerations. A company seeking relief under these provisions is
required to provide written certification from independent local counsel that
the non-complying practice is not prohibited by home country law. We have sought
or intend to seek relief from NYSE MKT for the corporate practices described
below.

The Companys governance practices differ from those followed
by U.S. domesticcompanies pursuant to NYSE MKT listing standards in the
following manner:

Board Meetings

Section 802 (c) of the NYSE MKT Company Guide requires that the
Board of Directors hold meetings on at least a quarterly basis. The Board of
Directors of the Company is not required to meet on a quarterly basis under the
laws of the Province of British Columbia.

Solicitation of Proxies

The NYSE MKT requires the solicitation of proxies and delivery
of proxy statements for all shareholder meetings, and requires that these
proxies shall be solicited pursuant to a proxy statement that conforms to
applicable SEC proxy rules. The Company is a foreign private issuer as defined
in Rule 3b-4 under the 1934 Act, and the equity securities of the Company are
accordingly exempt from the proxy rules set forth in Sections 14(a), 14(b),
14(c) and 14(f) of the Securities Exchange Act of 1934, as amended. The Company
solicits proxies in accordance with applicable rules and regulations in
Canada.

Shareholders Approval for Dilutive Private Placement
Financings

Section 713 of the NYSE MKT Company Guide requires that the
Company obtain the approval of its shareholders for share issuances equal to 20
percent or more of presently outstanding shares for a price which is less than
the greater of book or market value of the shares. This requirement does not
apply to public offerings. There is no such requirement under British Columbia
law or under the Companys home stock exchange rules (TSX) unless the dilutive
financing:

|(i)   | materially affects control of the issuer;                                                                                                                                                           
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                     
|(ii)  | provides consideration to insiders in the aggregate of 10% or greater of the issuer’s market
    capitalization or outstanding shares, or a non-diluted basis, where certain conditions are met; and
|      |                                                                                                                                                                                                     
|(iii) | is in respect of private placement or an acquisition where the issuer will issue shares in excess of 25%
    of its presently outstanding shares, on a non-diluted basis.                           

The Company will seek a waiver from
  NYSE MKTs section 713 requirements should a dilutive private placement
  financing trigger the NYSE MKT shareholders approval requirement in
  circumstances where the same financing does not trigger such a requirement under
  British Columbia law or under TSX rules.

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 118

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Quorum Requirements

Section 123 of the NYSE MKT Company Guide recommends that the
quorum for meetings of shareholders of a listed company be not less than 33-1/3%
of the issued and outstanding shares entitled to vote at a meeting of
shareholders.

The Companys quorum requirement is specified in its Articles
as two persons who are, or who represent by proxy, shareholders who in the
aggregate hold at least 5% of the issued shares entitled to vote at a meeting of
shareholders.

|ITEM 16H | MINE SAFETY
DISCLOSURE
|-------- | ----------------------

Not applicable.

|ITEM 17 | FINANCIAL STATEMENTS
|------- | --------------------

We have elected to provide financial statements for the fiscal
year ended December 31, 2015 and the related information pursuant to Item
18.

|ITEM 18 | FINANCIAL STATEMENTS
|------- | --------------------

The financial statements appear in this annual report on Form
20-F beginning on page 122. The report of the independent registered public
accounting firm appears on page 123.

|ITEM 19 | EXHIBITS
|------- | --------

The following exhibits are included with this Annual Report on
Form 20-F:

|Exhibit Number | Description of Exhibit                                                                          
|-------------- | ------------------------------------------------------------------------------------------------
|               |                                                                                                 
|1.01           | Notice of Articles Dated March
      24, 2016 and Articles Dated June 19, 2013 (5)              
|               |                                                                                                 
|4.01           | Share Option Plan Dated May 16,
      2014 (1)                                                  
|               |                                                                                                 
|4.02           | Restricted Share Unit Plan
      dated effective July 7, 2015 (5)                               
|               |                                                                                                 
|4.03           | Deferred Share Unit Plan dated
      effective July 7, 2015 (5)                                 
|               |                                                                                                 
|4.04           | Form of Special Warrant
      Certificate dated effective December 2014 (2)                     
|               |                                                                                                 
|4.05           | Form of Registration Rights
      Agreement dated effective December 2014 (2)                   
|               |                                                                                                 
|4.06           | Form of Special Warrant
      Certificate dated effective August and September 2015 (3)         
|               |                                                                                                 
|4.07           | Form of Registration Rights
      Agreement dated effective August and September 2015 (3)       
|               |                                                                                                 
|4.08           | Shareholder Rights Plan Dated
      Effective May 17, 2013 (1)                                  
|               |                                                                                                 
|4.09           | Arrangement Agreement between
      Northern Dynasty and Mission Gold dated October 30, 2015 (4)
|               |                                                                                                 
|8.01           | List of Subsidiaries
      (5)                                                                  
|               |                                                                                                 
|11.01          | Code of Ethics (5)                                                                              

|                        |             
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|Form 20-F Annual Report | P a g e| 119

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|Exhibit Number | Description of Exhibit                                                                                                                                                                                        
|-------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                                                                               
|12.01          | Certification of Chief
      Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
      (5)                           
|               |                                                                                                                                                                                                               
|12.02          | Certification of Chief
      Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
      (5)                           
|               |                                                                                                                                                                                                               
|13.01          | Certification of Chief
      Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002 (5)
|               |                                                                                                                                                                                                               
|13.02          | Certification of Chief
      Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002 (5)
|               |                                                                                                                                                                                                               
|15.01          | Pebble Property - List of
      Property Claims (5)                                                                                                                                                           
|               |                                                                                                                                                                                                               
|15.02          | Consent of Independent
      Registered Public Accounting Firm (Deloitte LLP) (5)                                                                                                                             
|               |                                                                                                                                                                                                               
|15.03          | Consent of Independent Auditors
      (Deloitte & Touche LLP) (5)                                                                                                                                             
|               |                                                                                                                                                                                                               
|15.04          | Consent of Expert (David  Gaunt) (5)                                                                                                                                                                          
|               |                                                                                                                                                                                                               
|15.05          | Consent of Expert (James Lang) (5)                                                                                                                                                                            
|               |                                                                                                                                                                                                               
|15.06          | Consent of Expert (Eric Titley) (5)                                                                                                                                                                           
|               |                                                                                                                                                                                                               
|15.07          | Consent of Expert (Ting Lu) (5)                                                                                                                                                                               
|               |                                                                                                                                                                                                               

|Notes to above exhibits:
|------------------------
|1.                      
|2.                      
|3.                      
|4.                      
|5.                      

|                        |             
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|Form 20-F Annual Report | P a g e| 120

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SIGNATURES

The registrant hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this Annual Report on its behalf.

NORTHERN DYNASTY MINERALS LTD.

/s/ Marchand SnymanChief Financial Officer
   
   DATED: May 2, 2016.

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 121

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INDEX TO FINANCIAL STATEMENTS

|                                                                                                              | Page
|------------------------------------------------------------------------------------------------------------- | ----
|                                                                                                              |     
|                                                                                                              |     
|                                                                                                              |     
|Northern Dynasty Minerals Ltd.                                                                                |     
|Report
      of the Company's Independent Registered Public Accounting Firm, Deloitte
      LLP               | 123 
|Consolidated
      statements of financial position as at December 31, 2015 and December 31,
      2014       | 125 
|Consolidated
      statements of comprehensive loss for the years ended December 31, 2015
      2014 and 2013 | 126 
|Consolidated
      statements of cash flows for the years ended December 31, 2015, 2014 and
      2013        | 127 
|Consolidated
      statements of changes in equity for the years ended December 31, 2015,
      2014 and 2013 | 128 
|Notes
      to the consolidated annual financial statements                                                   | 130 

|                                                                                                                |    
|--------------------------------------------------------------------------------------------------------------- | ---
|Pebble Limited Partnership                                                                                      |    
|Independent
      Auditors Report                                                                              | 155
|Consolidated
      statement of loss and comprehensive loss for the period January 1 to
      December 10, 2013 | 156
|Consolidated
      statement of changes in equity for the period January 1 to December 10,
      2013           | 157
|Consolidated
      statement of financial position as at December 10, 2013                                      | 158
|Consolidated
      statement of cash flows for the period from January 1 to December 10, 2013                   | 159
|Notes
      to the consolidated annual financial statements                                                     | 160

|                        |             
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|Form 20-F Annual Report | P a g e| 122

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|                            | Deloitte LLP
|--------------------------- | ------------
|2800  1055 Dunsmuir Street
|4 Bentall Centre           
|P.O. Box 49279             
|Vancouver BC V7X 1P4       
|Canada                     
|                           
|Tel: 604-669-4466          
|                           
|Fax: 778-374-0496          
|                           
|www.deloitte.ca            

Report of Independent RegisteredPublic Accounting
  Firm

To the Board of Directors and Shareholders of Northern Dynasty
  Minerals Ltd.

We have audited the accompanying consolidated statements of
  financial position of Northern Dynasty Minerals Ltd. and subsidiaries (the
  Company) as at December 31, 2015, December 31, 2014, and the related
  consolidated statements of comprehensive loss (income), cash flows and changes
  in equity for the years ended December 31, 2015, 2014, and 2013. 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 the standards of the
  Public Company Accounting Oversight Board (United States) and Canadian generally
  accepted auditing standards. Those standards require that we plan and perform
  the audit to obtain reasonable assurance about whether the financial statements
  are free of material misstatement. The Company is not required to have, nor were
  we engaged to perform, an audit of its internal control over financial
  reporting. Our audits included consideration of internal control over financial
  reporting as a basis for designing audit procedures that are appropriate in the
  circumstances, but not for the purpose of expressing an opinion on the
  effectiveness of the Company's internal control over financial reporting.
  Accordingly, we express no such opinion. 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. We believe that our audits provide a
  reasonable basis for our opinion.

In our opinion, such consolidated financial statements present
  fairly, in all material respects, the financial position of Northern Dynasty
  Minerals Ltd. and subsidiaries as of December 31, 2015, and the results of their
  operations and their cash flows for the years ended December 31, 2015, 2014, and
  2013, in conformity with International Financial Reporting Standards as issued
  by the International Accounting Standards Board.

The accompanying financial statements have been prepared
  assuming that the Company will continue as a going concern. As discussed in Note
  1 of the financial statements, the Company incurred a net loss of $33,829,000
  and $31,347,000 during the year ended December 31, 2015 and 2014, respectively
  and had a deficit of $379,124,000 as at December 31, 2015. This condition, along
  with other matters as set forth in Note 1, indicates the existence of material
  uncertainties that raise substantial doubt about the Companys ability to
  continue as a going concern. Management's plans concerning these matters are
  also discussed in Note 1 to the financial statements. The financial statements
  do not include any adjustments that might result from the outcome of this
  uncertainty.

/s/ Deloitte LLP

Chartered Professional Accountants
  March 29, 2016
  Vancouver, Canada

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 123

---

|
|
|

Consolidated Statements of Financial
  Position
  (Expressed in thousands of Canadian Dollars)

|                                              |  |       |  |   | December 31 |   |   | December 31 |  
|--------------------------------------------- |  | ----- |  | - | ----------- | - | - | ----------- | -
|                                              |  | Notes |  |   | 2015        |   |   | 2014        |  
|                                              |  |       |  |   |             |   |   |             |  
|ASSETS                                        |  |       |  |   |             |   |   |             |  
|                                              |  |       |  |   |             |   |   |             |  
|Non-current assets                            |  |       |  |   |             |   |   |             |  
|Mineral property, plant and
      equipment   |  | 4     |  | $ | 147,088     |   | $ | 123,608     |  
|Total non-current assets                      |  |       |  |   | 147,088     |   |   | 123,608     |  
|                                              |  |       |  |   |             |   |   |             |  
|Current assets                                |  |       |  |   |             |   |   |             |  
|Available-for-sale financial
      assets     |  | 5     |  |   | 1,579       |   |   | 287         |  
|Amounts receivable and prepaid
      expenses |  | 6     |  |   | 1,075       |   |   | 962         |  
|Restricted cash                               |  | 7(b)  |  |   | 453         |   |   | 1,206       |  
|Cash and cash equivalents                     |  | 7(a)  |  |   | 7,509       |   |   | 9,447       |  
|Total current assets                          |  |       |  |   | 10,616      |   |   | 11,902      |  
|                                              |  |       |  |   |             |   |   |             |  
|Total Assets                                  |  |       |  | $ | 157,704     |   | $ | 135,510     |  
|                                              |  |       |  |   |             |   |   |             |  
|EQUITY                                        |  |       |  |   |             |   |   |             |  
|                                              |  |       |  |   |             |   |   |             |  
|Capital and reserves                          |  |       |  |   |             |   |   |             |  
|Share capital                                 |  | 8     |  | $ | 435,069     |   | $ | 389,227     |  
|Reserves                                      |  |       |  |   | 99,035      |   |   | 84,031      |  
|Deficit                                       |  |       |  |   | (379,124    | ) |   | (345,295    | )
|Total Equity                                  |  |       |  |   | 154,980     |   |   | 127,963     |  
|                                              |  |       |  |   |             |   |   |             |  
|LIABILITIES                                   |  |       |  |   |             |   |   |             |  
|                                              |  |       |  |   |             |   |   |             |  
|Non-current liabilities                       |  |       |  |   |             |   |   |             |  
|Deferred income taxes                         |  | 13    |  |   |            |   |   | 1,514       |  
|Total non-current liabilities                 |  |       |  |   |            |   |   | 1,514       |  
|                                              |  |       |  |   |             |   |   |             |  
|Current liabilities                           |  |       |  |   |             |   |   |             |  
|Payable to a related party                    |  | 9     |  |   | 677         |   |   | 383         |  
|Trade and other payables                      |  | 10    |  |   | 2,047       |   |   | 5,650       |  
|Total current liabilities                     |  |       |  |   | 2,724       |   |   | 6,033       |  
|                                              |  |       |  |   |             |   |   |             |  
|Total Liabilities                             |  |       |  |   | 2,724       |   |   | 7,547       |  
|                                              |  |       |  |   |             |   |   |             |  
|Total Equity and Liabilities                  |  |       |  | $ | 157,704     |   | $ | 135,510     |  

Events after the reporting date (note 7(b))
  Commitments
  (note 15)

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

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 124

---

|
|
|

Consolidated Statements of Comprehensive
  Loss (Income)(Expressed in thousands of Canadian Dollars, except
  for share information)

|                                                                               |  |         |  |   | Year ended
      December 31 |  
|------------------------------------------------------------------------------ |  | ------- |  | - | ---------------------------- | -
|                                                                               |  | Notes   |  |   | 2015                         |  
|                                                                               |  |         |  |   |                              |  
|Expenses                                                                       |  |         |  |   |                              |  
|                                                                               |  |         |  |   |                              |  
|Exploration and
      evaluation expenses                                      |  | 4, 12   |  | $ | 8,718                        |  
|General and administrative
      expenses                                      |  | 12      |  |   | 8,272                        |  
|Legal,
      accounting and audit                                              |  | 2(b)    |  |   | 17,001                       |  
|Share-based compensation                                                       |  | 8(d)    |  |   | 903                          |  
|Loss from operating
      activities                                           |  |         |  |   | 34,894                       |  
|Foreign exchange loss (gain)                                                   |  |         |  |   | 618                          |  
|Interest income                                                                |  |         |  |   | (99                          | )
|Interest expense                                                               |  | 3       |  |   | 144                          |  
|Other income                                                                   |  |         |  |   | (214                         | )
|Gain on discontinuance of equity method                                        |  | 4(a)    |  |   |                             |  
|Loss before tax                                                                |  |         |  |   | 35,343                       |  
|Deferred Income tax (recovery) expense                                         |  | 13      |  |   | (1,514                       | )
|Loss for the year                                                              |  |         |  | $ | 33,829                       |  
|                                                                               |  |         |  |   |                              |  
|Other comprehensive
      (income) loss                                        |  |         |  |   |                              |  
|Items that may be subsequently
      reclassified to loss                      |  |         |  |   |                              |  
|Foreign exchange translation
      difference                                  |  | 4, 8(e) |  |   | (23,300                      | )
|Deferred income tax on investment in a
      foreign subsidiary                |  | 8(e)    |  |   |                             |  
|Reversal of deferred income
      tax on investment                            |  | 8(e)    |  |   |                             |  
|Decrease (increase) in fair value of available-for-sale
      financial assets |  | 5       |  |   | 113                          |  
|Other comprehensive income for the year                                        |  |         |  | $ | (23,187                      | )
|                                                                               |  |         |  |   |                              |  
|Total comprehensive loss (income) for the year                                 |  |         |  | $ | 10,642                       |  
|                                                                               |  |         |  |   |                              |  
|Basic and diluted loss per common share                                        |  | 11      |  | $ | 0.23                         |  

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

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 125

---

|
|
|

Consolidated Statements of Cash
  Flows(Expressed in thousands of Canadian Dollars)

|                                                                                                               |  |       |  |   | Year Ended
      December 31 |  
|-------------------------------------------------------------------------------------------------------------- |  | ----- |  | - | ---------------------------- | -
|                                                                                                               |  | Notes |  |   | 2015                         |  
|Operating activities                                                                                           |  |       |  |   |                              |  
|Loss for the year                                                                                              |  |       |  | $ | (33,829                      | )
|Non-cash or non-operating
      items                                                                          |  |       |  |   |                              |  
|Deferred income tax (recovery)
      expense                                                                   |  |       |  |   | (1,514                       | )
|Depreciation                                                                                                   |  |       |  |   | 279                          |  
|Loss on disposal of equipment                                                                                  |  |       |  |   | 5                            |  
|Interest
      received on cash held                                                                           |  |       |  |   | (99                          | )
|Interest receivable on loan                                                                                    |  |       |  |   |                             |  
|Interest accrued
      on loans from Cannon Point and Mission Gold                                             |  |       |  |   | 144                          |  
|Gain on discontinuance of equity
      method                                                                  |  |       |  |   |                             |  
|Gain on disposal
      of surplus site inventory                                                               |  |       |  |   | (173                         | )
|Share-based compensation                                                                                       |  |       |  |   | 903                          |  
|Unrealized
      exchange (gain) loss                                                                          |  |       |  |   |                             |  
|Changes in working capital items                                                                               |  |       |  |   |                              |  
|Restricted cash                                                                                                |  |       |  |   | 826                          |  
|Amounts receivable and prepaid
      expenses                                                                  |  |       |  |   | (8                           | )
|Amounts
      receivable from a related party                                                                  |  |       |  |   |                             |  
|Trade and other payables                                                                                       |  |       |  |   | (4,374                       | )
|Payable to related party                                                                                       |  |       |  |   | 294                          |  
|Net
      cash used in operating activities                                                                    |  |       |  |   | (37,546                      | )
|Investing activities                                                                                           |  |       |  |   |                              |  
|Acquisition of plant and equipment                                                                             |  | 4     |  |   | (28                          | )
|Cash contribution to
      the Pebble Limited Partnership                                                      |  |       |  |   |                             |  
|Net cash received on assuming control
      of the Pebble Limited 
             Partnership                    |  |       |  |   |                             |  
|Proceeds from disposal
      of equipment                                                                      |  | 4     |  |   | 70                           |  
|Proceeds from disposal of
      available-for-sale financial assets                                            |  | 9(b)  |  |   | 280                          |  
|Proceeds from disposal
      of surplus site inventory                                                         |  |       |  |   | 173                          |  
|Interest received on cash and cash equivalents                                                                 |  |       |  |   | 99                           |  
|Net cash from investing activities                                                                             |  |       |  |   | 594                          |  
|Financing activities                                                                                           |  |       |  |   |                              |  
|Cash received on the
      acquisition of Cannon Point and Mission
             Gold, net of transaction costs |  | 3     |  |   | 12,347                       |  
|Net proceeds from the private placement
      of special warrants                                              |  | 8(c)  |  |   | 17,485                       |  
|Net proceeds from the
      private placement of common shares                                                 |  | 8(b)  |  |   | 5,166                        |  
|Proceeds from the exercise of share purchase options                                                           |  | 8(c)  |  |   | 7                            |  
|Net cash from financing activities                                                                             |  |       |  |   | 35,005                       |  
|Net decrease in cash and cash equivalents                                                                      |  |       |  |   | (1,947                       | )
|Effect of exchange rate
      fluctuations on cash and cash equivalents                                        |  |       |  |   | 9                            |  
|Cash
      and cash equivalents at beginning of the year                                                       |  |       |  |   | 9,447                        |  
|Cash and cash equivalents at end of the year                                                                   |  | 7(a)  |  | $ | 7,509                        |  
|Supplementary cash flow information                                                                            |  | 7(a)  |  |   |                              |  

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 126

---

|
|
|

ConsolidatedStatementsofChangesin Equity(Expressed in thousands of
  Canadian Dollars)

|                                                                 |  |       |  |  | Share capital |  |   | Reserves |  |   |              |   |   |             |  |   |             |  
|---------------------------------------------------------------- |  | ----- |  |  | ------------- |  | - | -------- |  | - | ------------ | - | - | ----------- |  | - | ----------- | -
|                                                                 |  |       |  |  |               |  |   |          |  |   | Equity       |   |   |             |  |   |             |  
|                                                                 |  |       |  |  |               |  |   |          |  |   | settled      |   |   | Foreign     |  |   |             |  
|                                                                 |  |       |  |  |               |  |   |          |  |   | share-based  |   |   | currency    |  |   | Investment  |  
|                                                                 |  |       |  |  | Number of     |  |   |          |  |   | compensation |   |   | translation |  |   | revaluation |  
|                                                                 |  | Notes |  |  | shares        |  |   | Amount   |  |   | reserve      |   |   | reserve     |  |   | reserve     |  
|                                                                 |  |       |  |  |               |  |   |          |  |   |              |   |   | (note 8(e)) |  |   |             |  
|                                                                 |  |       |  |  |               |  |   |          |  |   |              |   |   |             |  |   |             |  
|Balance at January 1, 2013                                       |  |       |  |  | 94,999,764    |  | $ | 389,189  |  | $ | 50,784       |   | $ | 347         |  | $ | (2          | )
|Shares issued for cash on
    exercise of share purchase options |  | 8(d)  |  |  | 10,100        |  |   | 30       |  |   |             |   |   |            |  |   |            |  
|Fair value of options allocated
    to shares issued on exercise |  | 8(d)  |  |  |              |  |   | 8        |  |   | (8           | ) |   |            |  |   |            |  
|Share-based compensation                                         |  |       |  |  |              |  |   |         |  |   | 641          |   |   |            |  |   |            |  
|Loss for the year                                                |  |       |  |  |              |  |   |         |  |   |             |   |   |            |  |   |            |  
|Other comprehensive income for the
    year net of tax           |  |       |  |  |              |  |   |         |  |   |             |   |   | 6,887       |  |   |            |  
|Total comprehensive income for the year                          |  |       |  |  |               |  |   |          |  |   |              |   |   |             |  |   |             |  
|Balance at December 31, 2013                                     |  |       |  |  | 95,009,864    |  | $ | 389,227  |  | $ | 51,417       |   | $ | 7,234       |  | $ | (2          | )
|                                                                 |  |       |  |  |               |  |   |          |  |   |              |   |   |             |  |   |             |  
|Balance at January 1, 2014                                       |  |       |  |  | 95,009,864    |  | $ | 389,227  |  |   | 51,417       |   | $ | 7,234       |  | $ | (2          | )
|Special warrants issued net of
    transaction costs             |  | 8(c)  |  |  |              |  |   |         |  |   |             |   |   |            |  |   |            |  
|Share-based compensation                                         |  | 8(d)  |  |  |              |  |   |         |  |   | 3,877        |   |   |            |  |   |            |  
|Loss for the year                                                |  |       |  |  |              |  |   |         |  |   |             |   |   |            |  |   |            |  
|Other comprehensive income for the
    year net of tax           |  |       |  |  |              |  |   |         |  |   |             |   |   | 9,945       |  |   | 8           |  
|Total comprehensive loss for the year                            |  |       |  |  |               |  |   |          |  |   |              |   |   |             |  |   |             |  
|Balance at December 31, 2014                                     |  |       |  |  | 95,009,864    |  | $ | 389,227  |  | $ | 55,294       |   | $ | 17,179      |  | $ | 6           |  

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 127

---

|
|
|

ConsolidatedStatementsofChangesin Equity(Expressed in thousands of
  Canadian Dollars)

|                                                                                              |  |       |  |  | Share capital |  |   | Reserves |  |   |              |  |   |             |  |   |             |  
|--------------------------------------------------------------------------------------------- |  | ----- |  |  | ------------- |  | - | -------- |  | - | ------------ |  | - | ----------- |  | - | ----------- | -
|                                                                                              |  |       |  |  |               |  |   |          |  |   |              |  |   |             |  |   |             |  
|                                                                                              |  |       |  |  |               |  |   |          |  |   | Equity       |  |   |             |  |   |             |  
|                                                                                              |  |       |  |  |               |  |   |          |  |   | settled      |  |   | Foreign     |  |   |             |  
|                                                                                              |  |       |  |  |               |  |   |          |  |   | share-based  |  |   | currency    |  |   | Investment  |  
|                                                                                              |  |       |  |  | Number of     |  |   |          |  |   | compensation |  |   | translation |  |   | Revaluation |  
|                                                                                              |  | Notes |  |  | shares        |  |   | Amount   |  |   | reserve      |  |   | Reserve     |  |   | Reserve     |  
|                                                                                              |  |       |  |  |               |  |   |          |  |   |              |  |   | (note 8(e)) |  |   |             |  
|Balance at January 1, 2015                                                                    |  |       |  |  | 95,009,864    |  | $ | 389,227  |  | $ | 55,294       |  | $ | 17,179      |  | $ | 6           |  
|Special warrants issued net of transaction
      costs                                        |  | 8(c)  |  |  |              |  |   |         |  |   |             |  |   |            |  |   |            |  
|Conversion of special warrants into common
      shares                                       |  | 8(c)  |  |  | 73,562,735    |  |   | 29,037   |  |   |             |  |   |            |  |   |            |  
|Common shares issued pursuant to a private
      placement, net of transaction costs          |  | 8(b)  |  |  | 12,573,292    |  |   | 5,046    |  |   |             |  |   |            |  |   |            |  
|Common shares issued as referral fees
      relating to a private placement                   |  | 8(b)  |  |  | 300,000       |  |   | 120      |  |   |             |  |   |            |  |   |            |  
|Common shares issued for the acquisition of                                                   |  |       |  |  |               |  |   |          |  |   |              |  |   |             |  |   |             |  
|Cannon Point, net of transaction cost                                                         |  | 3(a)  |  |  | 12,881,344    |  |   | 4,062    |  |   |             |  |   |            |  |   |            |  
|Options and warrants issued for the
      acquisition of Cannon Point                         |  | 3(a)  |  |  |              |  |   |         |  |   |             |  |   |            |  |   |            |  
|Common shares issued for the acquisition of
      Mission Gold ("MG")                         |  | 3(b)  |  |  | 27,593,341    |  |   | 7,564    |  |   |             |  |   |            |  |   |            |  
|Options and warrants issued pursuant to the
      acquisition of MG, net of transaction costs |  | 3(b)  |  |  |              |  |   |         |  |   |             |  |   |            |  |   |            |  
|Common shares issued upon exercise of share
      purchase options                            |  | 8(c)  |  |  | 18,800        |  |   | 7        |  |   |             |  |   |            |  |   |            |  
|Fair value allocated to shares issued on
      options exercised                              |  | 8(d)  |  |  |              |  |   | 6        |  |   |              |  |   |            |  |   |            |  
|Share-based compensation                                                                      |  | 8(d)  |  |  |              |  |   |         |  |   | 903          |  |   |            |  |   |            |  
|Loss
      for the year                                                                       |  |       |  |  |              |  |   |         |  |   |             |  |   |            |  |   |            |  
|Other comprehensive income (loss) for the year
      net of tax                               |  |       |  |  |              |  |   |         |  |   |             |  |   | 23,300      |  |   | (113        | )
|Total comprehensive loss for the year                                                         |  |       |  |  |               |  |   |          |  |   |              |  |   |             |  |   |             |  
|Balance at December 31, 2015                                                                  |  |       |  |  | 221,939,376   |  | $ | 435,069  |  | $ | 56,197       |  | $ | 40,479      |  | $ | (107        | )

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 128

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|
|
|

|1. | NATURE AND CONTINUANCE OF
        OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Northern Dynasty Minerals Ltd. (the "Company") is
      incorporated under the laws of the Province of British Columbia, Canada,
      and its principal business activity is the exploration of mineral
      properties. The Company is listed on the Toronto Stock Exchange ("TSX")
      under the symbol "NDM" and on the New York Stock Exchange- MKT
      ("NYSE-MKT") under the symbol "NAK". The Companys corporate office is
      located at 1040 West Georgia Street, 15thfloor, Vancouver,
      British Columbia.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The consolidated financial statements ("Financial
      Statements") of the Company as at and for the year ended December 31,
      2015, include financial information for the Company and its subsidiaries
      (note 2(c)) (together referred to as the "Group" and individually as
      "Group entities"). The Company is the ultimate parent. The Groups core
      mineral property interest is the Pebble Copper-Gold-Molybdenum-Silver
      Project (the "Pebble Project") located in Alaska, United States of America
      ("USA" or "US").                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Group is in the process of exploring and developing
      the Pebble Project and has not yet determined whether the Pebble Project
      contains mineral reserves that are economically recoverable. The Groups
      continuing operations and the underlying value and recoverability of the
      amounts shown for the Groups mineral property interests, is entirely
      dependent upon the existence of economically recoverable mineral reserves;
      the ability of the Group to obtain financing to complete the exploration
      and development of the Pebble Project; the Group obtaining the necessary
      permits to mine; and future profitable production or proceeds from the
      disposition of the Pebble Project.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | During the year ended December 31, 2015, the Company
      raised an aggregate of $23.8 million in cash through the private placement
      of common shares (note 8(b)) and special warrants (note 8(c)) and it
      received an aggregate amount of $12.7 million in cash and cash equivalent
      and approximately $1.7 million in other financial assets (mainly publicly
      traded marketable securities) as a result of the acquisition of two
      publicly listed entities (note 3).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | As at December 31, 2015, the Group has $7.5 million in
      cash and cash equivalents for its operating requirements. The Group has
      prioritized the allocation of available financial resources in order to
      meet key corporate and Pebble Project expenditure requirements in the near
      term. Additional financing will be required in order to progress any
      material expenditures at the Pebble Project. Additional financing may
      include any of or a combination of debt equity and/or contributions from
      possible new Pebble Project participants. There can be no assurances that
      the Group will be successful in obtaining additional financing. If the
      Group is unable to raise the necessary capital resources and generate
      sufficient cash flows to meet obligations as they come due, the Group may,
      at some point, consider reducing or curtailing its operations. As such
      there is material uncertainty that casts substantial doubt about the
      Companys ability to continue as a going concern.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | In July 2014, the United States Environmental Protection
      Agency (the "EPA") announced a proposal under Section 404(c) of the Clean
      Water Act to restrict and impose limitations on all discharges of dredged
      or fill material ("EPA Action") associated with mining the Pebble deposit.
      The Company believes that the EPA does not have the statutory authority to
      impose conditions on the development at Pebble prior to the submission of
      a detailed development plan and its thorough review by federal and state
      agencies, including review under the National Environmental Protection Act
      ("NEPA"). The Pebble Limited Partnership (the Pebble Partnership), a
      wholly-owned subsidiary of the Company, along with the State of Alaska and
      the Alaska Peninsula Corporation, an Alaska Native village corporation
      with extensive land holdings in the Pebble Project area, filed for an
      injunction to stop the EPA Action with the US Federal Court in Alaska (the
      "Court"). However, the Court has deferred judgment thereon until the EPA
      has issued a final determination. The Company appealed the Courts
      decision to the 9thCircuit Court of Appeals. The appeal was
      denied in May 2015. The Pebble Partnership still holds the option to
      pursue its statutory authority case in the instance that EPA finalizes a
      pre-emptive regulatory action under the Clean Water Act 404(c). In
      September 2014, the Pebble Partnership initiated a second action against
      the EPA in federal district court in Alaska charging that the EPA violated
      the Federal Advisory Committee Act ("FACA"). In November 2014, the U.S.
      federal court judge in Alaska granted, in relation to the FACA case, the
      Pebble Partnerships request for a preliminary injunction, which, although
      considered by the Company as a significant procedural milestone in the
      litigation, does not resolve the Pebble Partnerships claims that the EPA
      Actions with respect to the Bristol Bay Assessment and subsequent 404(c)
      regulatory action, violated FACA. In June 2015, the EPAs motion to
      dismiss the FACA case was rejected and as a result the FACA case is moving
      forward. The Company expects its legal rights will be upheld by the Court
      and that the Company will ultimately be able to apply for the necessary
      permits under NEPA. On October 14, 2014, the Pebble Partnership filed suit
      in the federal district court in Alaska charging that the EPA has violated
      the Freedom of Information Act by improperly withholding documents related to the Pebble Project,
      the Bristol Bay Watershed Assessment and consideration of a pre-emptive 404(c)
      veto under the Clean Water Act.

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 129

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|
|
|

|    | The EPA has moved for summary judgment claiming that its
      search for and disclosure of documents was adequate. The Pebble
      Partnership has opposed the motion pointing out several deficiencies in
      the EPAs search parameters and pointing out the agencys overly broad
      assertion of the deliberative process privilege to withhold documents. On
      August 24, 2015, the U.S. federal court judge granted in part and deferred
      in part the EPAs motion for summary judgement on the Freedom of
        Information Act("FOIA") litigation. The court accepted the EPAs
      position that it had made an adequate search for documents but left the
      matter open should the EPA not meet its obligations in the FACA litigation
      or if additional documents surface. Additionally, the judge ordered the
      EPA to produce a sample of 183 partially or fully withheld documents so
      that it could conduct an in camera review of the sample and test the
      merits of the EPAs withholdings under the deliberative process privilege.
      Before producing this sample to the Court, the EPA chose to voluntarily
      release 115 documents (or 63% of the sample ordered by the Court),
      relinquishing its claim of privilege as to these documents.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | In briefings before the Court, the Pebble Partnership
      argued that the voluntary release of 63% of the agencys same documents
      conclusively demonstrated that the EPA had been over broad in its
      assertion of the deliberative process privilege, particularly because the
      content of the voluntarily released documents was not in fact
      deliberative. The Court agreed, finding that EPA "improperly withheld
      documents in full," and that "many of the documents that defendant
      released should have been released to begin with because the portions that
      defendant released were not deliberative." It then ordered the EPA to
      review an additional 65 documents. Of these 65 documents, the EPA
      voluntarily released 55 documents in whole or in part (or 85% of the
      documents). Given the EPAs high rate of release, the Pebble Partnership
      submitted a brief to the Court arguing that the EPA should be forced to
      review the remaining documents being withheld and arguing that judgment
      should not be granted to the agency at this time. A decision has not yet
      been issued. The Court agreed, concluding that it had "no confidence that
      [EPA] has properly withheld documents, either in full or in part, pursuant
      to the deliberative process privilege." The Court reiterated its earlier
      finding that EPA had been withholding documents that "should never have
      been withheld to begin with." As a result, the Court ordered the Agency to
      re-evaluate all remaining documents EPA is withholding in response to the
      Pebble Partnerships January 2014 FOIA request and to submit these
      documents for in-camera review.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|2.  | SIGNIFICANT ACCOUNTING
      POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(a) | Statement of
      Compliance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | These Financial Statements have been prepared in
      accordance with International Financial Reporting Standards ("IFRS") as
      issued by the International Accounting Standards Board ("IASB") and
      interpretations issued by the IFRS Interpretations Committee ("IFRIC"s)
      that are effective for the Groups reporting year ended December 31, 2015.
      These Financial Statements were authorized for issue by the Board of
      Directors on March 23, 2016.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(b) | Basis of Preparation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | These Financial Statements have been prepared on a
      historical cost basis using the accrual basis of accounting, except for
      cash flow information and for financial instruments classified as
      available-for-sale, which are stated at their fair value (note 2(e) and
      note 5). The accounting policies set out below have been applied
      consistently to all periods presented in these Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Comparative information in the statement of loss and
      comprehensive loss has been reclassified to separately reflect legal,
      accounting and audit expenditures as a separate line item. This line item
      is predominantly comprised of legal costs incurred by the Group in
      response to the EPAs activities surrounding the Pebble Project. These
      expenditures were previously included under general and administrative
      expenditures. There is no impact of the expense reclassification on loss
      and comprehensive loss for the year or basic and diluted loss per share.
      Statements of financial position, cash flows and changes in equity are not
      affected.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(c) | Basis of
      Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | These Financial Statements incorporate the financial
      statements of the Company, the Companys subsidiaries, and entities
      controlled by the Company and its subsidiaries listed below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 130

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|
|
|

| | Name of Subsidiary               | Place of          | Principal Activity           | Ownership 
| | -------------------------------- | ----------------- | ---------------------------- | ----------
| |                                  | Incorporation     |                              |           
| | 0796412 BC Ltd.                  | British Columbia, | Not active. Wholly-owned     | 100%      
| |                                  | Canada            | subsidiary of the Company.   |           
| | 3537137 Canada Inc.1             | Canada            | Holding Company. Wholly-     | 100%      
| |                                  |                   | owned subsidiary of the      |           
| |                                  |                   | Company.                     |           
| | Pebble Services Inc.             | Nevada, USA       | Management and services      | 100%      
| |                                  |                   | company. Wholly-owned        |           
| |                                  |                   | subsidiary of the Company.   |           
| | Northern Dynasty Partnership     | Alaska, USA       | Holds 99.9% of the Pebble    | 100%      
| |                                  |                   | Limited Partnership and      | (indirect)
| |                                  |                   | 100% of Pebble Mines Corp.   |           
| | Pebble Limited Partnership       | Alaska, USA       | Holding Company and          | 100%      
| |                                  |                   | Exploration of the Pebble    | (indirect)
| |                                  |                   | Project.                     |           
| | Pebble Mines Corp.               | Delaware, USA     | General Partner. Holds 0.1%  | 100%      
| |                                  |                   | of Pebble Limited            | (indirect)
| |                                  |                   | Partnership.                 |           
| | Pebble West Claims Corporation 2 | Alaska, USA       | Holding Company. Subsidiary  | 100%      
| |                                  |                   | of the Pebble Limited        | (indirect)
| |                                  |                   | Partnership.                 |           
| | Pebble East Claims Corporation 3 | Alaska, USA       | Holding Company. Subsidiary  | 100%      
| |                                  |                   | of the Pebble Limited        | (indirect)
| |                                  |                   | Partnership.                 |           
| | U5 Resources Inc.4               | Nevada, USA       | Holding Company. Wholly-     | 100%      
| |                                  |                   | owned subsidiary of the      |           
| |                                  |                   | Company.                     |           
| | Cannon Point Resources Ltd. 5    | British Columbia, | Not active. Wholly-owned     | 100%      
| |                                  | Canada            | subsidiary of the Company.   |           
| | MGL Subco Ltd. 6                 | British Columbia, | Not active. Wholly-owned     | 100%      
| |                                  | Canada            | subsidiary of the Company.   |           
| | Delta Minerals Inc. 6            | British Columbia, | Not active. Wholly-owned     | 100%      
| |                                  | Canada            | subsidiary of MGL Subco Ltd. | (indirect)
| | Imperial Gold Corporation 6      | British Columbia, | Not active. Wholly-owned     | 100%      
| |                                  | Canada            | subsidiary of Delta Minerals | (indirect)
| |                                  |                   | Inc.                         |           
| | Yuma Gold Inc. 6                 | Nevada, USA       | Not active. Wholly-owned     | 100%      
| |                                  |                   | subsidiary of Imperial Gold  | (indirect)
| |                                  |                   | Corporation.                 |           

Notes to the table above:

| | 1. | Holds 20% interest in the Northern Dynasty Partnership.
      The Company holds the remaining 80% interest.                                                                                                                                                                                                                                               
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                           
| | 2. | Holds certain of the Pebble Project claims.                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                           
| | 3. | Holds certain of the Pebble Project claims and claims
      located south and west of the Pebble Project claims. In January 2015, two
      of the Companys wholly-owned subsidiaries, Kaskanak Inc. and its
      wholly-owned parent, Kaskanak Copper LLC, were merged with Pebble East
      Claims Corporation, with the latter surviving the merger.
| |    |                                                                                                                                                                                                                                                                                                                                                           
| | 4. | Holds certain mineral claims located north of the Pebble
      Project claims.                                                                                                                                                                                                                                                                            

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 131

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|
|
|

| | 5. | Acquired during the year ended December 31, 2015 (note
      3(a)).
| | -- | -------------------------------------------------------------------
| |    |                                                                    
| | 6. | Acquired during the year ended December 31, 2015 (note
      3(b)).

|    | Control is achieved when the Group is exposed, or has
      rights, to variable returns from its involvement with the investee and has
      the ability to affect those returns through its power over the investee.
      Specifically, the Group controls an investee if, and only if, the Company
      has power over the investee (i.e. existing rights that give it the current
      ability to direct the relevant activities of the investee); exposure, or
      rights, to variable returns from its involvement with the investee; and
      the ability to use its power over the investee to affect its
      returns.                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Intra-Group balances and transactions, including any
      unrealized income and expenses arising from intra-Group transactions, are
      eliminated in preparing the Financial Statements. Unrealized gains arising
      from transactions with equity accounted investees are eliminated against
      the investment to the extent of the Groups interest in the investee.
      Unrealized losses are eliminated in the same way as unrealized gains, but
      only to the extent that there is no evidence of impairment.                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(d) | Investment in Joint Ventures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | A joint venture is a joint arrangement whereby the
      parties that have joint control of the arrangement have rights to the net
      assets of the joint arrangement. Joint control is the contractually agreed
      sharing of control of an arrangement, which exists only when decisions
      about the relevant activities require unanimous consent of the parties
      sharing control.                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | An investment in a joint venture is accounted for using
      the equity method. Under the equity method, an investment in a joint
      venture is initially recognized in the consolidated statement of financial
      position at cost and adjusted thereafter to recognize the Groups share of
      changes in net assets of the joint venture attributable to the Group. An
      investment is accounted for using the equity method from the date on which
      the investee becomes a joint venture.                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(e) | Foreign Currencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The functional currency is the currency of the primary
      economic environment in which the entity operates and has been determined
      for each entity within the Group. The functional currency of U5 Resources
      Inc., Pebble Mines Corp., the Pebble Partnership and its subsidiaries, is
      the US dollar and for all other entities within the Group, the functional
      currency is the Canadian dollar. The functional currency determinations
      were conducted through an analysis of the factors for consideration
      identified in IAS 21, The Effects of Changes in Foreign Exchange
        Rates.                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Transactions in currencies other than the functional
      currency are recorded at the rates of exchange prevailing on dates of
      transactions. At the end of each reporting period, monetary assets and
      liabilities that are denominated in foreign currencies are translated at
      the rates prevailing at that date. Non-monetary assets and liabilities
      carried at fair value that are denominated in foreign currencies are
      translated at rates prevailing at the date when the fair value was
      determined. Non-monetary items that are measured in terms of historical
      cost in a foreign currency are not retranslated.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Before assuming control of the Pebble Partnership in
      2013, the Groups investment in the Pebble Partnership under joint venture
      (note 4(a)) was translated at the end of each reporting period and
      exchange differences arising on translation of the US denominated
      investment were recognized directly in the foreign currency translation
      reserve through other comprehensive income or loss (note 8(e)).                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The results and financial position of entities within the
      Group which have a functional currency that differs from that of the Group
      are translated into Canadian dollars as follows:- (i) assets and
      liabilities for each statement of financial position are translated at the
      closing exchange rate at that date; (ii) income and expenses for each
      income statement are translated at average exchange rates for the period;
      and (iii) the resulting exchange differences are included in the foreign
      currency translation reserve within equity.                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(f) | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Non-derivative financial assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The Group has the following non-derivative financial
      assets: available-for-sale financial assets (note 5) and loans and
      receivables.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 132

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|
|
|

Available-for-sale financial assets

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

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

Loans and
  receivables

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

Loans and receivables consist of cash
  and cash equivalents, restricted cash (note 7), and amounts receivable (note 6).

Cash and cash
  equivalents and restricted cash

Cash and cash equivalents and
  restricted cash in the statements of financial position are comprised of cash
  and highly liquid investments having maturity dates of three months or less from
  the date of purchase, which are readily convertible into known amounts of cash.

The Groups cash and cash equivalents
  and restricted cash are invested in business and savings accounts and guaranteed
  investment certificates at major financial institutions and are available on
  demand by the Group for its programs and, as such, are subject to an
  insignificant risk of change in value.

Non-derivative financial
  liabilities:

The Groups non-derivative financial
  liabilities comprise trade and other payables (note 10) and a payable to a
  related party (note 9(b)).

All financial liabilities fall within
  the classification of other financial liabilities versus financial liabilities
  through profit or loss, and are recognized initially at fair value net of any
  directly attributable transaction costs. Subsequent to initial recognition these
  financial liabilities are measured at amortized cost using the effective
  interest method.

Impairment of financial
  assets:

When an AFS financial asset is
  considered to be impaired, cumulative gains or losses previously recognized in
  other comprehensive income or loss are reclassified to profit or loss in the
  period. Financial assets are assessed for indicators of impairment at the end of
  each reporting period. Financial assets are impaired when there is objective
  evidence that, as a result of one or more events that occurred after the initial
  recognition of the financial assets, the estimated future cash flows of the
  investments have been impacted. For marketable securities classified as AFS, a
  significant or prolonged decline in the fair value of the securities below their
  cost is considered to be objective evidence of impairment.

For all other financial assets,
  objective evidence of impairment could include:

 significant financial difficulty of
  the issuer or counterparty; or
   default or delinquency in interest or
  principal payments; or
   it becoming probable that the borrower will enter
  bankruptcy or financial re-organization.

For certain categories of financial
  assets, such as amounts receivable, assets that are assessed not to be impaired
  individually are subsequently assessed for impairment on a collective basis. The
  carrying amount of financial assets is reduced by the impairment loss directly for all
  financial assets with the exception of amounts receivable, where the carrying
  amount is reduced through the use of an allowance account. When an amount
  receivable is considered uncollectible, it is written off against the allowance
  account. Subsequent recoveries of amounts previously written off are credited
  against the allowance account. Changes in the carrying amount of the allowance
  account are recognized in profit or loss.

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 133

---

|
|
|

|    | With the exception of AFS equity instruments, if, in a
      subsequent period, the amount of the impairment loss decreases and the
      decrease can be related objectively to an event occurring after the
      impairment was recognized, the previously recognized impairment loss is
      reversed through profit or loss to the extent that the carrying amount of
      the investment at the date the impairment is reversed does not exceed what
      the amortized cost would have been had the impairment not been recognized.
      In respect of AFS equity securities, impairment losses previously
      recognized through profit or loss are not reversed through profit or loss.
      Any increase in fair value subsequent to an impairment loss is recognized
      directly in equity.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | When an AFS financial asset is considered to be impaired,
      cumulative gains or losses previously recognized in other comprehensive
      income are reclassified to profit or loss in the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Derivative financial assets and
      liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The Group has no derivative financial assets or
      liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(g) | Exploration and Evaluation
        Expenditure                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Exploration and evaluation expenditures include the costs
      of acquiring licenses, costs associated with exploration and evaluation
      activity, and the acquisition date fair value of exploration and
      evaluation assets acquired in a business combination or an asset
      acquisition. Exploration and evaluation expenditures are expensed as
      incurred except for expenditures associated with the acquisition of
      exploration and evaluation assets through a business combination or an
      asset acquisition. Costs incurred before the Group has obtained the legal
      rights to explore an area are expensed.                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Acquisition costs, including general and administrative
      costs, are only capitalized to the extent that these costs can be related
      directly to operational activities in the relevant area of interest where
      it is considered likely to be recoverable by future exploitation or sale
      or where the activities have not reached a stage which permits a
      reasonable assessment of the existence of reserves.                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Exploration and evaluation ("E&E") assets are
      assessed for impairment only when facts and circumstances suggest that the
      carrying amount of an E&E asset may exceed its recoverable amount and
      when the Group has sufficient information to reach a conclusion about
      technical feasibility and commercial viability.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Industry-specific indicators for an impairment review
      arise typically when one of the following circumstances
      applies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| |  | Substantive expenditure on further exploration
      and evaluation activities is neither budgeted nor planned;
| | - | ---------------------------------------------------------------------------------------------------------------
| |  | title to the asset is compromised;                                                                             
| |  | adverse changes in the taxation and regulatory
      environment;                                              
| |  | adverse changes in variations in commodity
      prices and markets; and                                       
| |  | variations in the exchange rate for the
      currency of operation.                                           

|    | Once the technical feasibility and commercial viability
      of the extraction of mineral resources in an area of interest are
      demonstrable, exploration and evaluation assets attributable to that area
      of interest are first tested for impairment and then reclassified to
      mining property and development assets within property, plant and
      equipment.                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Recoverability of the carrying amount of any exploration
      and evaluation assets is dependent on successful development and
      commercial exploitation, or alternatively, sale of the respective
      assets.                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(h) | Mineral property, plant and
        equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Mineral property, plant and equipment are carried at
      cost, less accumulated depreciation and accumulated impairment
      losses.                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The cost of mineral property, plant and equipment
      consists of the acquisition costs transferred from E&E assets, any
      costs directly attributable to bringing the asset to the location and
      condition necessary for its intended use, including costs to further
      delineate the ore body, development and construction costs, removal of
      overburden to initially expose the ore body, an initial estimate of the costs
      of dismantling, removing the item and restoring the site on which it is located
      and, if applicable, borrowing costs.

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 134

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|
|
|

Mineral property acquisition and
  development costs are not currently depreciated as the Pebble Project is still
  in the development stage and no saleable minerals are being produced.

|    | The cost of an item of plant and equipment consists of
      the purchase price, any costs directly attributable to bringing the asset
      to the location and condition necessary for its intended use, and an
      initial estimate of the costs of dismantling and removing the item and
      restoring the site on which it is located.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Depreciation is provided at rates calculated to write off
      the cost of plant and equipment, less their estimated residual value,
      using the declining balance method at various rates ranging from 20% to
      30% per annum.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | An item of equipment is derecognized upon disposal or
      when no future economic benefits are expected to arise from the continued
      use of the asset. Any gain or loss arising on disposal of the asset,
      determined as the difference between the net disposal proceeds and the
      carrying amount of the asset, is recognized in profit or loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Where an item of equipment consists of major components
      with different useful lives, the components are accounted for as separate
      items of equipment. Expenditures incurred to replace a component of an
      item of equipment that is accounted for separately, including major
      inspection and overhaul expenditures, are capitalized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Residual values and estimated useful lives are reviewed
      at least annually.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(i) | Impairment of Non-Financial
        Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | At the end of each reporting period the carrying amounts
      of the Groups non-financial assets are reviewed to determine whether
      there is any indication that these assets are impaired. If any such
      indication exists, the recoverable amount of the asset is estimated in
      order to determine the extent of the impairment loss, if any. Where it is
      not possible to estimate the recoverable amount of an individual asset,
      the Group estimates the recoverable amount of the cash-generating unit to
      which the asset belongs. The recoverable amount is the higher of fair
      value less costs to sell and value in use. Fair value is determined as the
      amount that would be obtained from the sale of the asset in an arms
      length transaction between knowledgeable and willing parties. In assessing
      value in use, the estimated future cash flows are discounted to their
      present value using a pre-tax discount rate that reflects current market
      assessments of the time value of money and the risks specific to the
      asset. If the recoverable amount of an asset is estimated to be less than
      its carrying amount, the carrying amount of the asset is reduced to its
      recoverable amount and the impairment loss is recognized in profit or loss
      for the period. For an asset that does not generate largely independent
      cash inflows, the recoverable amount is determined for the cash generating
      unit to which the asset belongs.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Where an impairment loss subsequently reverses, the
      carrying amount of the asset (or cash-generating unit) is increased to the
      revised estimate of its recoverable amount. This increase in the carrying
      amount is limited to the carrying amount that would have been determined
      had no impairment loss been recognized for the asset (or cash-generating
      unit) in prior years. A reversal of an impairment loss is recognized
      immediately in profit or loss. The Group has not recorded any impairment
      charges in the years presented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(j) | Share Capital and Special
        Warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Common shares and special warrants (note 8(c)) are
      classified as equity. Transaction costs directly attributable to the issue
      of common shares, share purchase options and special warrants are
      recognized as a deduction from equity, net of any tax effects. Upon
      conversion of the special warrants into common shares, the carrying amount
      of the special warrants, net of a pro rata share of the transaction costs,
      is transferred to common share capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(k) | Share-based Payment Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Equity-settled share-based payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The Group operates an equity-settled share-based option
      plan for its employees and service providers (note 8(d)). The fair value
      of share purchase options granted is recognized as an employee or
      consultant expense with a corresponding increase in the equity-settled
      share-based payments reserve in equity. An individual is classified as an employee when the individual is
      an employee for legal or tax purposes ("direct employee") or provides services
      similar to those performed by a direct employee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 135

---

|
|
|

The fair value is measured at grant
  date for each tranche, which is expensed on a straight line basis over the
  vesting period, with a corresponding increase in the equity-settled
    share-based payments reserve in equity. The fair value of the share purchase
  options granted is measured using the Black-Scholes option pricing model, taking
  into account the terms and conditions upon which the share purchase options were
  granted and forfeiture rates as appropriate. At the end of each reporting
  period, the amount recognized as an expense is adjusted to reflect the actual
  number of share purchase options that are expected to vest.

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 136

---

|
|
|

|(l) | Income Taxes
|--- | ------------

Income tax on the profit or loss for
  the years presented comprises current and deferred tax. Income tax is recognized
  in profit or loss except to the extent that it relates to items recognized in
  other comprehensive income or loss or directly in equity, in which case it is
  recognized in other comprehensive income or loss or equity.

Current tax expense is the expected tax
  payable on the taxable income for the year, using tax rates enacted or
  substantively enacted at year end, adjusted for amendments to tax payable with
  regard to previous years.

Deferred tax is provided using the
  balance sheet liability method, providing for unused tax loss carry forwards and
  temporary differences between the carrying amounts of assets and liabilities for
  financial reporting purposes and the amounts used for taxation purposes. The
  following temporary differences are not provided for: goodwill not deductible
  for tax purposes; the initial recognition of assets or liabilities that affect
  neither accounting nor taxable profit; and differences relating to investments
  in subsidiaries, associates, and joint ventures to the extent that they will
  probably not reverse in the foreseeable future. The amount of deferred tax
  provided is based on the expected manner of realization or settlement of the
  carrying amount of assets and liabilities, using tax rates enacted or
  substantively enacted at the end of the reporting period applicable to the
  period of expected realization or settlement.

A deferred tax asset is recognized only
  to the extent that it is probable that future taxable profits will be available
  against which the asset can be utilized.

Additional income taxes that arise from
  the distribution of dividends are recognized at the same time as the liability
  to pay the related dividend.

Deferred tax assets and liabilities are
  offset when there is a legally enforceable right to set off current tax assets
  against current tax liabilities and when they relate to income taxes levied by
  the same taxation authority and the Group intends to settle its current tax
  assets and liabilities on a net basis.

|(m) | Restoration, Rehabilitation, and Environmental
        Obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | An obligation to incur restoration, rehabilitation and
      environmental costs arises when environmental disturbance is caused by the
      exploration or development of a mineral property interest. Such costs
      arising from the decommissioning of plant and other site preparation work,
      discounted to their net present value, are provided for and capitalized at
      the start of each project to the carrying amount of the asset, along with
      a corresponding liability as soon as the obligation to incur such costs
      arises. The timing of the actual rehabilitation expenditure is dependent
      on a number of factors such as the life and nature of the asset, the
      operating license conditions and, when applicable, the environment in
      which the mine operates.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | Discount rates using a pre-tax rate that reflects the
      time value of money are used to calculate the net present value. These
      costs are charged against profit or loss over the economic life of the
      related asset, through amortization using either the unit-of-production or
      the straight line method. The corresponding liability is progressively
      increased as the effect of discounting unwinds, creating an expense
      recognized in profit or loss.                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | Decommissioning costs are also adjusted for changes in
      estimates. Those adjustments are accounted for as a change in the
      corresponding capitalized cost, except where a reduction in costs is
      greater than the unamortized capitalized cost of the related assets, in
      which case the capitalized cost is reduced to nil and the remaining
      adjustment is recognized in profit or loss.                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The operations of the Group 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
      Group are not predictable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Group has no material restoration, rehabilitation and
      environmental obligations as the disturbance to date is
      immaterial.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 137

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|
|
|

|(n) | Loss per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The Group presents basic and diluted loss per share data
      for its common shares, calculated by dividing the loss attributable to
      common shareholders of the Group by the weighted average number of common
      shares and fully prepaid special warrants (note 8(c)) outstanding during
      the year. Diluted loss per share does not adjust the loss attributable to
      common shareholders or the weighted average number of common shares
      outstanding when the effect is anti-dilutive.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(o) | Segment Reporting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The Group operates in a single reportable operating
      segment  the acquisition, exploration and development of mineral
      properties. The Groups core asset is the Pebble Project, which is located
      in Alaska, USA.                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(p) | Accounting Standards, Amendments and Revised Standards
        Not Yet Effective                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Effective for the Groups financial year commencing on
      January 1, 2016                                                                                                                                                                                                                                                                                                                                                                                                                                      

| |  | Amendments to IAS 1, Presentation of
      Financial Statements      
| | - | ---------------------------------------------------------------------
| |  | Amendments to IAS 16, Property, Plant and
      Equipment            
| |  | Amendments to IAS 27, Separate Financial
      Statements            
| |  | Amendments to IAS 28, Investments in
      Associates                
| |  | Amendments to IAS 38, Intangible Assets                              
| |  | Amendments to IFRS 10, Consolidated
      Financial Statements       
| |  | Amendments to IFRS 11, Joint Arrangements                            
| |  | Annual improvements to IFRS 2012  2014
      Cycle ("AIP 2012-2014")

The Group has not early adopted these
  revised standards and amendments and is currently assessing the impact, if any,
  that these amendments will have on the Groups Financial Statements. The annual
  improvements has amendments to four standards and anticipates the amendments
  will have no material effect on the Groups consolidated financial statements.

Effective for
  annual periods commencing on or after January 1, 2018

| |  | IFRS 15, Revenue from Contracts with Customers("IFRS 15"), which was issued by the IASB in May 2014, supersedes IAS
      11, Construction Contracts, IAS 18, Revenue, IFRIC 13, Customer Loyalty Programmes, IFRIC 15, Agreements for the
        Construction of Real Estate, IFRIC 18, Transfers of Assets from
          Customers,and SIC 31, Revenue Barter Transactions
            involving Advertising Services. IFRS 15 establishes a single five-step
      model framework for determining the nature, amount, timing and certainty
      of revenue and cash flows arising from a contract with a customer. IFRS 15
      is effective for annual periods beginning on or after January 1, 2018,
      with early adoption permitted.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Group is currently evaluating the
  impact that IFRS 15 may have on its financial statements.

| |  | IFRS 9, Financial Instruments("IFRS 9"), replaces
      IAS 39, Financial Instruments: Recognition andMeasurement,
      in its entirety. The standard incorporates a number of improvements: a)
      includes a logical model for classification and measurement (IFRS 9
      provides for principle-based approach to classification which is driven by
      cash flow characteristics and the business model in which an asset is
      held); b) includes a single, forward-looking "expected loss" impairment
      model (IFRS 9 will require entities to account for expected credit losses
      from when financial instruments are first recognized and to recognize full
      lifetime expected losses on a timely basis); and c) includes a
      substantially-reformed model for hedge accounting with enhanced
      disclosures about risk management activity (IFRS 9s new model aligns the
      accounting treatment with risk management activities). IFRS 9 is effective
      for annual periods beginning on or after January 1, 2018, with early
      adoption permitted.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Group anticipates that the adoption
  of IFRS 9 will have no material impact on its financial statements given the
  extent of its current use of financial instruments in the ordinary course of
  business.

Effective for
  annual periods commencing on or after January 1, 2019

| |  | On January 13, 2016, IASB issued IFRS 16, Leases("IFRS 16") and revised IAS 17, Leases("IAS 17"). IFRS 16
      specifies how to recognize, measure, present and disclose leases. The
      standard provides a single lessee accounting model, requiring the
      recognition of assets and liabilities for all leases, unless the lease
      term is 12 months or less or the underlying asset has a low value. Lessor
      accounting however remains largely unchanged from IAS 17 and the distinction between operating and
      finance leases is retained. IAS 17, as revised, now prescribes the accounting
      policies and disclosures applicable to leases, both for lessees and lessors.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 138

---

|
|
|

|    | The Group anticipates that the adoption of IFRS 16 will
      not have a significant impact other than the accounting for any office
      lease the Group may have entered into where the minimum lease term is more
      than 12 months. As of the date of these financial statements, the Group
      has not entered into any long term lease (refer note 15(a)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(q) | Significant Accounting Estimates and
        Judgments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | The preparation of these Financial Statements requires
      management to make certain estimates, judgments and assumptions that
      affect the reported amounts of assets and liabilities at the date of the
      Financial Statements and reported amounts of expenses during the reporting
      period. Actual outcomes could differ from these estimates. These Financial
      Statements include estimates which, by their nature, are uncertain. The
      impacts of such estimates are pervasive throughout the Financial
      Statements, and may require accounting adjustments based on future
      occurrences. Revisions to accounting estimates are recognized in the
      period in which the estimate is revised and future periods if the revision
      affects both current and future periods. These estimates are based on
      historical experience, current and future economic conditions and other
      factors, including expectations of future events that are believed to be
      reasonable under the circumstances.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Sources of estimation
      uncertainty                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Significant assumptions about the future and other
      sources of estimation uncertainty that management has made at the end of
      the reporting period, that could result in a material adjustment to the
      carrying amounts of assets and liabilities, in the event that actual
      results differ from assumptions made, relate to, but are not limited to,
      the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| | 1. | The Group uses the Black-Scholes Option Pricing Model to
      calculate the fair value of share purchase options granted for determining
      share-based compensation included in the loss for the year. Inputs used in
      this model require subjective assumptions, including the expected price
      volatility from three to five years. Changes in the subjective input
      assumptions can affect the fair value estimate, and therefore the existing
      models do not necessarily provide a reliable single measure of the fair
      value of the Groups share purchase options. The weighted average
      assumptions applied are disclosed in Note 8(d).
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 2. | Significant assumptions about the future and other
      sources of estimation uncertainty are made in determining the provision
      for any deferred income tax expense included in the loss for the year and
      the composition of deferred income tax liabilities included in the
      Statement of Financial Position.                                                                                                                                                                                                                                                                                                                                                

Critical
  accounting judgments

These include:

| | 1. | In terms of IFRS 6, Exploration and Evaluation of
      Mineral Resources,management identified indicators that required
      testing the Groups mineral property interest ("MPI") for impairment. The
      Group used judgment in determining from an analysis of facts and
      circumstances that no impairment of the MPI was necessary.                                                                                                                                                                                                                                                                                                                                                      
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 2. | IAS 21, The Effects of Changes in Foreign Exchange
      Rates("IAS 21") defines the functional currency as the currency of
      the primary economic environment in which an entity operates. IAS 21
      requires the determination of functional currency to be performed on an
      entity by entity basis, based on various primary and secondary factors. In
      identifying the functional currency of the parent and its subsidiaries,
      management considered the currency in which financing activities are
      denominated and the currency that mainly influences the cost of
      undertaking the business activities in each jurisdiction in which the
      Group operates.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 3. | The Group has employed judgement that going concern was
      an appropriate basis for the preparation of the Financial Statements, as
      the Group has prioritized the allocation of available financial resources
      to meet key corporate Pebble Project expenditure requirements in the near
      term (refer note 1).                                                                                                                                                                                                                                                                                                                                                                     

|3. | ACQUISITIONS                                                                                                              
|-- | --------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                           
|   | During the year ended December 31, 2015, the Company
      acquired two publicly listed entities as described
      below:

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 139

---

|
|
|

|(a) | Acquisition of Cannon Point Resources
        Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | On October 29, 2015, by way of a plan of arrangement (the
      "Cannon Point Arrangement") dated August 31, 2015, the Group acquired 100%
      of the issued and outstanding common shares of Cannon Point Resources Ltd.
      ("Cannon Point"), a TSX-Venture listed entity whose only major asset was
      cash and cash equivalents, by issuing 12,881,344 common shares in the
      Company to the former shareholders of Cannon Point in an exchange ratio of
      0.376 of a Northern Dynasty common share for each issued Cannon Point
      common share. Additionally, the Company issued an aggregate of 4,394,500
      of its warrants and non-employee options (note 8(c)) to the holders of
      Cannon Points outstanding warrants and options. Cannon Point was delisted
      immediately after the acquisition by the Company.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | Prior to the completion of the acquisition and pursuant
      to the Cannon Point Arrangement, on September 1, 2015, Cannon Point
      advanced to the Company $4,250 (the "Cannon Point Cash Advance") with a
      one year term at an interest rate of 15% per annum. The Group accrued $103
      in interest on the Cannon Point Cash Advance up to the date of the
      acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | As of the date of acquisition, Cannon Point did not meet
      the definition of a business under IFRS 3, Business Combinations("IFRS 3"). The Company has accounted for the acquisition of Cannon
      Point as issuance of its equity for cash and cash equivalents and other
      financial assets, net of financial liabilities, under IAS 39, Financial
        Instruments: Recognition and Measurement("IAS 39") and IAS 32, Financial Instruments: Presentation("IAS 32").                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The following are the assets and liabilities of Cannon
      Point acquired and consideration provided by the
      Group:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| |                                                                             |   | Fair value |  
| | --------------------------------------------------------------------------- | - | ---------- | -
| | Cash and cash equivalent, including Cannon
      Point Cash Advance         | $ | 4,397      |  
| | Amounts receivable                                                          |   | 126        |  
| | Accounts payable and accrued liabilities assumed                            |   | (140       | )
| | Fair value of financial instruments acquired                                | $ | 4,383      |  
| |                                                                             |   |            |  
| | Consideration:                                                              |   |            |  
| | Issuance of 12,881,344 common shares in the
      Company                   | $ | 4,166      |  
| | Issuance of 4,394,500 share purchase warrants and options (note
      8(c)) |   | 217        |  
| | Total consideration                                                         | $ | 4,383      |  

The fair value of financial assets and
  liabilities as a result of the acquisition of Cannon Point has been allocated to
  the common shares and share purchase options/warrants issued in proportion to
  their relative fair values determined as follows:

| |  | the fair value of the common shares were
      determined with reference to the quoted market price on the date of
      issuance; and                                                                                                                                                                                                                                            
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                   
| |  | the fair value of the warrants and non-employee options
      were determined using the Black Scholes Options Pricing model and based on
      the following weighted average valuation inputs: Exercise price  $1.63;
      Valuation date share price  $0.55; Expected volatility  87%; Risk free
      rate  0.49%; Remaining life  0.82 years; and Dividend yield  nil%.

|    | The Company incurred $104 in transaction costs relating
      to the acquisition of Cannon Point and recorded it within
      equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(b) | Acquisition of Mission Gold Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | On December 24, 2015, by way of a plan of arrangement
      (the "Mission Gold Arrangement"), the Group acquired 100% of issued and
      outstanding common shares of Mission Gold Ltd. ("Mission Gold"), a
      TSX-Venture listed entity which held cash and cash equivalents of
      approximately $9,000 and common shares of a public listed company with a
      fair value of $1,684; these common shares were received by Mission Gold as
      a consideration for the sale of its Alto Parana titanium project prior to
      and as a condition for closing of the transaction with the
      Company.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Group issued 27,593,341 common shares in the Company
      to the former shareholders of Mission Gold at an exchange ratio of 0.5467
      of a Northern Dynasty common share for each issued and outstanding common
      share of Mission Gold. In addition, the Group issued an aggregate of
      16,673,348 Northern Dynasty warrants (note
      8(c)) to the holders of Mission Golds outstanding warrants.
      Concurrent to its acquisition by the Group, Mission Gold was delisted and
      amalgamated with a wholly-owned subsidiary of the Company; namely, MGL Subco
      Ltd.               

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 140

---

|
|
|

Pursuant to the Mission Gold
  Arrangement, Mission Gold provided the Company with a credit facility of $8.4
  million (the "Mission Gold Credit Facility") with a 6-month term at an interest
  rate of 15% per annum. The Group however, only drew down $2 million of the
  Mission Gold Credit Facility before the acquisition of Mission Gold was
  completed. The Group accrued $41 in interest on the $2 million from the Mission
  Gold Credit Facility up to the date of the acquisition.

As of the date of acquisition, Mission
  Gold did not meet the definition of a business under IFRS 3. The Company has
  accounted for the acquisition of Mission Gold as issuance of its equity for cash
  and cash equivalents and other financial assets, net of financial liabilities,
  under IAS 39 andIAS 32.The following are the assets and
  liabilities of Mission Gold acquired and consideration provided by the
  Group:

| |                                                                                                  |   | Fair value | 
| | ------------------------------------------------------------------------------------------------ | - | ---------- | 
| | Cash and cash equivalent received, including
      draw-down on the Mission Gold Credit Facility | $ | 8,338      | 
| | Common shares of a publicly listed company                                                       |   | 1,684      | 
| | GST
      receivable and other amounts receivable                                                |   | 81         | 
| | Fair value of financial instruments acquired                                                     | $ | 10,103     | 
| |                                                                                                  |   |            | 
| | Consideration:                                                                                   |   |            | 
| | Issuance of 27,593,341 common shares                                                             | $ | 7,838      | 
| | Issuance of share purchase warrants (note 8(c))                                                  |   | 2,265      | 
| | Total consideration                                                                              | $ | 10,103     | 

The fair value of financial assets and
  liabilities as a result of the acquisition of Mission Gold has been allocated to
  the common shares and share purchase warrants issued in proportion to their
  relative fair values determined as follows:

| |  | the fair value of the common shares were determined with
      reference to the quoted market price on the date of issuance; and                                                                                                                                                                                                                        
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                         
| |  | the fair value of the warrants were determined using the
      Black Scholes Options Pricing model and based on the following weighted
      average valuation inputs: Exercise price  $0.97; Valuation date share
      price  $0.43; Expected volatility  83%; Risk free rate  0.59%;
      Remaining life  4.06 year; and Dividend yield  nil%.

The Company incurred $284 in
  transaction costs relating to the acquisition of Mission Gold and recorded it
  within equity.

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 141

---

|
|
|

|4. | MINERAL PROPERTY, PLANT AND
        EQUIPMENT                                      
|-- | -----------------------------------------------------------------------------------
|   |                                                                                    
|   | The Groups exploration and evaluation assets are
      comprised of the following:

| | Year ended December 31,
      2015                  |   | Mineral  |  |   |           |   |   |         |  
| | --------------------------------------------------- | - | -------- |  | - | --------- | - | - | ------- | -
| |                                                     |   | Property |  |   | Plant and |   |   |         |  
| |                                                     |   | interest |  |   | equipment |   |   | Total   |  
| | Cost                                                |   |          |  |   |           |   |   |         |  
| | Beginning balance                                   | $ | 112,541  |  | $ | 1,155     |   | $ | 113,696 |  
| | Additions during the year                           |   |         |  |   | 28        |   |   | 28      |  
| | Dispositions during the year                        |   |         |  |   | (151      | ) |   | (151    | )
| | Ending balance                                      | $ | 112,541  |  | $ | 1,032     |   | $ | 113,573 |  
| |                                                     |   |          |  |   |           |   |   |         |  
| | Accumulated depreciation                            |   |          |  |   |           |   |   |         |  
| | Beginning balance                                   | $ |         |  | $ | (278      | ) | $ | (278    | )
| | Charge for the year(1)                              |   |         |  |   | (279      | ) |   | (279    | )
| | Eliminated on disposal                              |   |         |  |   | 76        |   |   | 76      |  
| | Ending balance                                      | $ |         |  | $ | (481      | ) | $ | (481    | )
| |                                                     |   |          |  |   |           |   |   |         |  
| | Foreign currency translation difference (note 8(e)) |   | 33,743   |  |   | 253       |   |   | 33,996  |  
| | Net carrying value  Ending balance                 | $ | 146,284  |  | $ | 804       |   | $ | 147,088 |  

Year ended December 31, 2014

| |                                                     |   | Mineral  |  |   |           |   |   |         |  
| | --------------------------------------------------- | - | -------- |  | - | --------- | - | - | ------- | -
| |                                                     |   | Property |  |   | Plant and |   |   |         |  
| |                                                     |   | interest |  |   | equipment |   |   | Total   |  
| | Cost                                                |   |          |  |   |           |   |   |         |  
| | Beginning balance                                   | $ | 106,697  |  | $ | 1,222     |   | $ | 107,919 |  
| | Additions during the year (note 4(b))               |   | 5,844    |  |   |          |   |   | 5,844   |  
| | Dispositions during the year                        |   |         |  |   | (67       | ) |   | (67     | )
| | Ending balance                                      | $ | 112,541  |  | $ | 1,155     |   | $ | 113,696 |  
| |                                                     |   |          |  |   |           |   |   |         |  
| | Accumulated depreciation                            |   |          |  |   |           |   |   |         |  
| | Beginning balance                                   | $ |         |  | $ |          |   | $ |        |  
| | Charge for the year(1)                              |   |         |  |   | (282      | ) |   | (282    | )
| | Eliminated on disposal                              |   |         |  |   | 4         |   |   | 4       |  
| | Ending balance                                      | $ |         |  | $ | (278      | ) | $ | (278    | )
| |                                                     |   |          |  |   |           |   |   |         |  
| | Foreign currency translation difference (note 8(e)) |   | 10,095   |  |   | 95        |   |   | 10,190  |  
| | Net carrying value  Ending balance                 | $ | 122,636  |  | $ | 972       |   | $ | 123,608 |  

| | (1) | Depreciation has been included in the loss for the year
      and has been classified as exploration and evaluation
      expenses.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 142

---

|
|
|

Mineral Property
  Interest

| | (a) | Pebble Project
| | --- | --------------

The Pebble Project comprises of a
  contiguous block of 2,402 mineral claims covering approximately 417 square miles
  located in southwest Alaska, 19 miles (30 kilometers) from the villages of
  Iliamna and Newhalen, and approximately 200 miles (320 kilometers) southwest of
  the city of Anchorage. Mineral rights were acquired by the Group in 2001. In
  July 2007, the Group established the Pebble Limited Partnership (the "Pebble
  Partnership") to advance the Pebble Project toward the feasibility stage. The
  Groups contribution to the Pebble Partnership was the Pebble Project. A
  wholly-owned subsidiary of Anglo American plc ("Anglo American") participated in
  the Pebble Partnership and provided approximately $595 million (US$573 million)
  in funding until its withdrawal in December 2013, when the Group re-acquired a
  100% interest in the Pebble Partnership and control of the Pebble Project.

| | (b) | Other Claims
| | --- | ------------

During the year ended December 31,
  2014, the Group received claims from Liberty Star Uranium & Metals Corp. and
  its subsidiary, Big Chunk Corp. ("Liberty Star") in settlement of amounts
  advanced to the arms-length party. These claims form part of the Pebble Project
  claims discussed in (a).

|5. | AVAILABLE-FOR-SALE FINANCIAL
        ASSETS                                                                                                           
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                       
|   | The Groups available-for-sale financial asset is
      comprised of investments in marketable securities of Canadian publicly
      listed companies.

| |                       |   | December 31 |  |   | December 31 | 
| | --------------------- | - | ----------- |  | - | ----------- | 
| |                       |   | 2015        |  |   | 2014        | 
| | Marketable securities | $ | 1,579       |  | $ | 287         | 

|6. | AMOUNTS RECEIVABLE AND PREPAID
        EXPENSES
|-- | -----------------------------------------------

| |                      |   | December 31 |  |   | December 31 | 
| | -------------------- | - | ----------- |  | - | ----------- | 
| |                      |   | 2015        |  |   | 2014        | 
| | Sales tax receivable | $ | 164         |  | $ | 70          | 
| | Amounts receivable   |   | 514         |  |   | 143         | 
| | Prepaid expenses     |   | 397         |  |   | 749         | 
| | Total                | $ | 1,075       |  | $ | 962         | 

|7.  | CASH AND CASH
      EQUIVALENTS AND RESTRICTED CASH
|--- | ---------------------------------------------------
|    |                                                    
|(a) | Cash and Cash
      Equivalents                    

| |                                    |   | December 31 |  |   | December 31 | 
| | ---------------------------------- | - | ----------- |  | - | ----------- | 
| |                                    |   | 2015        |  |   | 2014        | 
| | Business and savings accounts      | $ | 7,509       |  | $ | 9,130       | 
| | Guaranteed investment certificates |   |            |  |   | 317         | 
| | Total                              | $ | 7,509       |  | $ | 9,447       | 

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 143

---

|
|
|

Supplementary
  cash flow information

Non-cash investing and financing
  activities:

| |  | During the year ended December 31, 2015, the
      Group acquired certain entities by issuing equity instruments (note 3).                                                              
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During the year ended December 31, 2014, the
      Group received marketable securities as consideration for 650,000 special
      warrants issued (note 8(c)).                         
| |  | During the year ended December 31, 2014, the
      Group received claims from Liberty Star in settlement of amounts advanced
      to the arms-length party (note 4).                  
| |  | During the year ended December 31, 2013, the
      Group acquired assets and liabilities held in the Pebble Limited
      Partnership upon discontinuance of the equity method (note 4).

|(b) | Restricted Cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | At December 31, 2015, restricted cash in the amount of
      $453 (December 31, 2014  $1,206) was held in the Pebble Partnership for
      certain equipment demobilization expenses relating to its activities
      undertaken while the Pebble Partnership was subject to joint control of
      the Group and Anglo American (note 4(a)). This cash was not available for
      general use by the Group. Subsequent to the reporting period, the Group
      incurred $393 in demobilization expenses which was refunded from
      restricted cash. The remaining unutilized balance of $60 was refunded to
      Anglo American.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|8.  | CAPITAL AND RESERVES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(a) | Authorized Share Capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | At December 31, 2015, the authorized share capital
      comprised an unlimited (2014  unlimited) number of common shares with no
      par value. All issued shares are fully paid.                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(b) | Private Placement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | On December 23, 2015, the Group completed a private
      placement of 12,573,292 common shares in the Company at a price of $0.412
      per share for gross proceeds of approximately $5,180,200. The Group issued
      300,000 common shares as referral fees to an arms length third party and
      recorded the fair value of these common shares of $120 as share issuance
      cost. Other legal and regulatory costs incurred in relation to the private
      placement was $14.                                                                                                                                           

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 144

---

|
|
|

|(c) | Share Purchase Warrants and Options, Other than
        Options Issued under the Groups Incentive Plan                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                            
|    | The following reconciles warrants and non-employee
      options (options which are not issued under the Groups incentive plan
      (note 8(d)), each exercisable to acquire one common share of the Company,
      at the beginning and end of the year:

| |                                                                                              |                      | Year ended December 31, 2015
| | -------------------------------------------------------------------------------------------- | -------------------- | ----------------------------
| | Exercise                                                                                     |                      |                             
| | price per                                                                                    |                      | Balance at                  
| | common                                                                                       |                      | beginning                   
| | share ($)                                                                                    | Expiry date          | of year                     
| |                                                                                              |                      |                             
| | Special warrants issued for cash (1)                                                         |                      |                             
| | nil                                                                                          | Not applicable       | 27,622,642                  
| |                                                                                              |                      |                             
| | Warrants
      and options issued pursuant to the acquisition of Cannon Point (2)(note 3(a)) |                     
| | 0.37                                                                                         | December 2, 2015     |                            
| | 0.40                                                                                         | December 2, 2015     |                            
| | 2.13                                                                                         | December 17, 2015    |                            
| | 0.29                                                                                         | January 29, 2016 (3) |                            
| | 0.37                                                                                         | January 29, 2016 (3) |                            
| | 0.40                                                                                         | January 29, 2016 (3) |                            
| | 0.43                                                                                         | January 29, 2016 (3) |                            
| | 0.37                                                                                         | July 23, 2017 (4)    |                            
| | 0.37                                                                                         | June 30, 2019        |                            
| | 0.40                                                                                         | June 30, 2019        |                            
| | 0.37                                                                                         | March 10, 2021       |                            
| | 0.40                                                                                         | March 10, 2021       |                            
| | 0.37                                                                                         | December 15, 2021    |                            
| | 0.40                                                                                         | December 12, 2022    |                            
| | 0.29                                                                                         | December 8, 2024     |                            
| | Total                                                                                        |                      |                            
| |                                                                                              |                      |                             
| | Warrants
      and options issued pursuant to the acquisition of Mission Gold (2)(note 3(b)) |                     
| | 0.55                                                                                         | July 9, 2020         |                            
| | 3.00                                                                                         | September 14, 2017   |                            
| | Total                                                                                        |                      |                            
| |                                                                                              |                      |                             
| | Grand Total(5)                                                                               | 27,622,642           | 67,007,941                  

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 145

---

|
|
|

| |                                      |                | Year ended December 31, 2014
| | ------------------------------------ | -------------- | ----------------------------
| | Exercise                             |                |                             
| | price per                            |                | Balance at                  
| | common                               |                | beginning                   
| | share ($)                            | Expiry date    | of year                     
| |                                      |                |                             
| |                                      |                |                             
| | Special warrants issued for cash (1) |                |                             
| | nil                                  | Not applicable |                            

| | (1) | The Group issued special warrants for cash during fiscal
      years 2014 and 2015. Each of the Groups share purchase warrants ("Special
      Warrant") was convertible, without payment of any additional consideration
      by the holder, into one common share of the Company, either at the option
      of the holder or automatically within a maximum of a two year period from
      the issuance date. At December 31, 2015, all Special Warrants issued were
      converted into common shares. During the year ended December 31, 2015, the
      Group incurred a total of $1,112 in advisory, finders, regulatory, and
      legal fees on the financing (2014: $353).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (2) | Warrants and options issued pursuant to the acquisition
      of Cannon Point and Mission Gold were recognized at their relative fair
      value (note 3).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (3) | Subsequent to the reporting date, all the options other
      than 75,200 options expired unexercised.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (4) | The options were exercised on November 27, 2015 at an
      average market share price of $0.40.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (5) | At December 31, 2015, warrants and non-employee options
      had a weighted average exercise price of $0.93 and weighted average
      remaining life of 3.94 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|(d) | Share Purchase Option Compensation
        Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The Group has a share purchase option plan approved by
      the Groups shareholders that allows the Board of Directors to grant share
      purchase options, subject to regulatory terms and approval, to its
      officers, directors, employees, and service providers. The share purchase
      option plan (the "2014 Rolling Option Plan") is based on the maximum
      number of eligible shares equaling a rolling percentage of up to 10% of
      the Company's outstanding common shares including any issuances from the
      Groups Restricted Share unit ("RSU") and Deferred Share unit ("DSU")
      plans, calculated from time to time. Pursuant to the 2014 Rolling Option
      Plan, if outstanding share purchase options ("options") are exercised and
      the number of issued and outstanding common shares of the Company
      increases, then the options available to grant under the plan increase
      proportionately (assuming there are no issuances under the RSU and DSU
      plans). The exercise price of each option is set by the Board of Directors
      at the time of grant but cannot be less than the market price, being the
      5- day volume weighted average trading price calculated the day before the
      grant. Options can have a maximum term of five years and typically
      terminate 90 days following the termination of the optionees employment
      or engagement. In the case of death or retirement, any outstanding vested
      options will expire the earlier of the expiry date or one year from date
      of death or retirement. The vesting period for options is at the
      discretion of the Board of Directors at the time the options are
      granted.

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 146

---

|
|
|

The following reconciles the Groups
  options outstanding at the beginning and end of the year:

| |                              |  | 2015       |   |  | 2014       | 
| | ---------------------------- |  | ---------- | - |  | ---------- | 
| |                              |  |            |   |  | Weighted   | 
| |                              |  |            |   |  | average    | 
| |                              |  |            |   |  | exercise   | 
| |                              |  | Number of  |   |  | price      | 
| | Continuity of options        |  | options    |   |  | ($/option) | 
| | Balance at beginning of year |  | 7,687,000  |   |  | 1.95       | 
| | Granted                      |  | 3,657,500  |   |  | 0.50       | 
| | Expired                      |  | (1,241,800 | ) |  | 3.00       | 
| | Forfeited/cancelled          |  | (347,100   | ) |  | 2.09       | 
| | Balance at end of year       |  | 9,755,600  |   |  | 1.27       | 

For options granted in 2015, the
  weighted average fair value was estimated at $0.28 per option (2014  $0.75) and
  was based on the Black-Scholes option pricing model using the following weighted
  average assumptions:

| | Assumptions                   |   | 2015       |  |   | 2014       | 
| | ----------------------------- | - | ---------- |  | - | ---------- | 
| | Risk-free interest rate       |   | 0.78%      |  |   | 1.53%      | 
| | Expected life                 |   | 4.36 years |  |   | 4.56 years | 
| | Expected volatility (1)       |   | 81.76%     |  |   | 67.80%     | 
| | Grant date share price        | $ | 0.47       |  | $ | 1.44       | 
| | Expected dividend
      yield |   | Nil        |  |   | Nil        | 

| | (1) | Expected volatility is based on the historical and
      implied volatility of the Companys common share price on the
      TSX.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------

The following table summarizes
  information about the Groups options outstanding at December 31, 2015:

| | 2015       |  | Options outstanding |  |  | Options exercisable | 
| | ---------- |  | ------------------- |  |  | ------------------- | 
| |            |  |                     |  |  |                     | 
| |            |  |                     |  |  | Weighted            | 
| |            |  | Number              |  |  | average             | 
| |            |  | of                  |  |  | exercise            | 
| | Exercise   |  | options             |  |  | price               | 
| | prices ($) |  | outstanding         |  |  | ($/option)          | 
| | 0.50       |  | 3,639,500           |  |  | 0.50                | 
| | 0.72       |  | 200,000             |  |  | 0.72                | 
| | 0.89       |  | 1,180,500           |  |  | 0.89                | 
| | 1.77       |  | 4,233,600           |  |  | 1.77                | 
| | 3.00       |  | 475,000             |  |  | 3.00                | 
| | 15.44      |  | 27,000              |  |  | 15.44               | 
| |            |  | 9,755,600           |  |  | 1.27                | 

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 147

---

|
|
|

The following table summarizes
  information about the Groups options outstanding at December 31, 2014:

| | 2014       |  | Options outstanding |  |  | Options exercisable | 
| | ---------- |  | ------------------- |  |  | ------------------- | 
| |            |  |                     |  |  |                     | 
| |            |  |                     |  |  | Weighted            | 
| |            |  |                     |  |  | average             | 
| |            |  | Number of           |  |  | exercise            | 
| | Exercise   |  | options             |  |  | price               | 
| | prices ($) |  | outstanding         |  |  | ($/option)          | 
| | 0.72       |  | 200,000             |  |  | 0.72                | 
| | 0.89       |  | 1,180,500           |  |  | 0.89                | 
| | 1.77       |  | 4,454,800           |  |  | 1.77                | 
| | 3.00       |  | 1,824,700           |  |  | 3.00                | 
| | 15.44      |  | 27,000              |  |  | 15.44               | 
| |            |  | 7,687,000           |  |  | 1.95                | 

|(e) | Foreign Currency Translation
        Reserve
|--- | --------------------------------------------

| |                                                                                                                     |   | Year ended December 31 | 
| | ------------------------------------------------------------------------------------------------------------------- | - | ---------------------- | 
| |                                                                                                                     |   | 2015                   | 
| | Balance at beginning of year                                                                                        | $ | 17,179                 | 
| | Foreign exchange translation differences incurred in the year:                                                      |   |                        | 
| | Exchange gain on translation of the
      investment in the Pebble
                 Partnership under joint venture |   |                       | 
| | Exchange gain on translation of foreign subsidiaries                                                                |   | 23,300                 | 
| | Total foreign exchange translation
      differences during the year                                                |   | 23,300                 | 
| | Deferred income tax on investment                                                                                   |   |                       | 
| | Reversal of deferred income tax on investment                                                                       |   |                       | 
| | Balance at the end of year                                                                                          | $ | 40,479                 | 

|      | The foreign currency translation reserve represents
      accumulated exchange differences arising on the translation, into the
      Groups presentation currency (the Canadian dollar), of the results of
      operations and net assets of the Groups subsidiaries with a US dollar
      functional currency. In 2012 and until December 10, 2013, the Pebble
      Partnership was under joint control. The Group then reacquired a 100%
      interest therein. Until the change in control, the investment in the
      Pebble Partnership was accounted for under the equity method with the
      related tax effect recognized in other comprehensive loss.
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|9.    | RELATED PARTY BALANCES AND
        TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      | Balances and transactions between the Company and its
      subsidiaries, which are related parties of the Company, have been
      eliminated on consolidation (note 2(c)). Details between the Group and
      other related parties are disclosed below:                                                                                                                                                                                                                                                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|*(a)* | Transactions and Balances with Key Management
        Personnel                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      | The aggregate value of transactions with key management
      personnel ("KMP"), being the Groups directors and senior management
      including the Senior Vice President ("VP"), Corporate Development, VP,
      Corporate Communications, VP, Engineering, VP, Public Affairs, Chief
      Executive Officer of the Pebble Partnership ("CEO of PLP"), Chairman of
      Pebble Mines Corp ("Chair of PMC"), Senior VP, Corporate Affairs of the
      Pebble Partnership ("PLP Senior VP") and Company Secretary, was as
      follows:                                                                                                                          

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 148

---

|
|
|

| |                                                                 |   | Year ended December 31 |  
| | --------------------------------------------------------------- | - | ---------------------- | -
| | Transaction                                                     |   | 2015                   |  
| | Compensation                                                    |   |                        |  
| | Payments to HDSI for services of KMP
      employed by HDSI (1) | $ | 2,800                  |  
| | Payments to KMP (2)                                             |   | 2,700                  |  
| |                                                                 |   | 5,500                  |  
| | Share-based compensation                                        |   | 500                    |  
| | Total compensation                                              | $ | 6,000                  |  
| |                                                                 |   |                        |  
| | Transfer of resources to the Group(3)(4)                        | $ | (364                   | )

| | (1) | The Groups executive directors and senior management
      (other than disclosed in (2)) are employed by the Group through Hunter
      Dickinson Services Inc. (refer (b)).                                                                                                                                                                                                                          
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                        
| | (2) | The Group directly employs its independent directors, the
      CEO of PLP, the Chair of PMC and PLP Senior VP. Payments represent short
      term employee benefits incurred, including salaries and directors
      fees.                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                        
| | (3) | During the year ended December 31, 2015, 912,336 Special
      Warrants were issued to three directors and officers and spouses of
      officers who participated in the private placement of Special Warrants
      (note 8(c)).                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                        
| | (4) | During the year ended December 31, 2014, 1,737,000
      Special Warrants were issued to eight directors and officers and a spouse
      of an officer who participated in the private placement of Special
      Warrants (note 8(c)) and, as consideration of these Special Warrants,
      received $470 in cash and $279 was received in shares of a Canadian public
      listed company (note 5).

|(b) | Transactions and Balances with other Related
        Parties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Hunter Dickinson Services Inc. ("HDSI") is a private
      company that provides geological, engineering, environmental, corporate
      development, financial administrative and management services to the Group
      and its subsidiaries at annually set rates pursuant to a management
      services agreement. The annually set rates also include a component of
      overhead costs such as office rent, information technology services and
      general administrative support services. HDSI also incurs third party
      costs on behalf of the Group which are reimbursed by the Group at cost.
      Several directors and other key management personnel of HDSI, who are
      close business associates, are also key management personnel of the
      Group.

|                        |             
|----------------------- | ------------
|Form 20-F Annual Report | P a g e| 149

---

|
|
|

The aggregate value of transactions and
  outstanding balances with HDSI were as follows:

Year ended December 31Transactions with HDSI
      
      2015
      
      
      2014
      
      
      2013Services rendered by HDSI:
      $
      4,680
      
      $
      4,926
      
      $
      4,181Technical
      
      1,600
      
      
      1,745
      
      
      1,241Engineering
      
      140
      
      
      540
      
      
      612Environmental
      
      580
      
      
      686
      
      
      383Socioeconomic
      
      670
      
      
      277
      
      
      85Other technical services
      
      210
      
      
      242
      
      
      161General and administrative
      
      3,080
      
      
      3,181
      
      
      2,940Management, financial
        & administration
      
      2,420
      
      
      2,542
      
      
      2,245Shareholder communication
      
      660
      
      
      639
      
      
      695Reimbursement of third party expenses
      
      610
      
      
      779
      
      
      829Conferences and travel
      
      160
      
      
      196
      
      
      234Insurance
      
      60
      
      
      71
      
      
      57Office supplies and other
      
      390
      
      
      512
      
      
      538Sale
        of marketable securities to HDSI (note 5)
      
      (280
      )
      
      
      
      
      Total value of transactions
      $
      5,010
      
      $
      5,705
      
      $
      5,010


December 31
      
      
      December 31Balances payable to HDSI
      
      2015
      
      
      2014Entity with significant influence over the Group
      $
      677
      
      $
      383


|10. | TRADE AND OTHER
        PAYABLES
|--- | --------------------------------

December 31
      
      
      December 31Falling due within the year
      
      2015
      
      
      2014Trade
      $
      1,594
      
      $
      4,444Other (note 7(b))
      
      453
      
      
      1,206Total
      $
      2,047
      
      $
      5,650


|11. | BASIC AND DILUTED LOSS PER SHARE                                                     
|--- | -------------------------------------------------------------------------------------
|    |                                                                                      
|    | The calculation of basic and diluted loss per share was
      based on the following:

Year ended December 312015
      
      
      2014
      
      
      2013Loss attributable to common shareholders
      $
      33,829
      
      $
      31,347
      
      $
      2,523Weighted average number of common shares outstanding(000s)
      
      146,313
      
      
      95,010
      
      
      95,007


Basic loss per share includes the
  effect of Special Warrants issued and outstanding during 2014 and 2015. Diluted
  loss per share does not include the effect of 1,151,500 share purchase options
  and warrants, other than Special Warrants, outstanding as they are anti-dilutive
  (i.e. the diluted loss per share would be reduced).

|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      150

---

|
|
|

|12. | EMPLOYMENT COSTS                                                                                                                                                                                                                                                                  
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                   
|    | During the year ended December 31, 2015, the Group
      recorded $9,900 (2014: $14,084; 2013: $5,022) in salaries and benefits,
      including share-based payments (note 8(d)) and amounts paid to HDSI (note
      9(b)) for services provided to the Group by HDSI personnel.
|    |                                                                                                                                                                                                                                                                                   
|13. | INCOME TAX
        EXPENSE                                                                                                                                                                                                                                                        

Year ended December 312015
      
      
      2014
      
      
      2013Current tax (recovery) expenseCurrent (recovery) expense
      $
      
      
      $
      
      
      $
      Current income tax (recovery) expense
      $
      
      
      $
      
      
      $
      Deferred income tax (recovery) expenseCurrent (recovery) expense
      $
      (1,514
      )
      $
      (2,289
      )
      $
      184Deferred income tax (recovery) expense
      $
      (1,514
      )
      $
      (2,289
      )
      $
      184


Year ended December 31Reconciliation of effective tax rate
      
      2015
      
      
      2014
      
      
      2013Loss for the year
      $
      (33,829
      )
      $
      (31,348
      )
      $
      (2,523
      )Total income tax (recovery) expense
      
      (1,514
      )
      
      (2,289
      )
      
      184Loss
        excluding income tax
      
      (35,343
      )
      
      (33,637
      )
      
      (2,339
      )Income tax using the Company's domestic tax
        rate
      
      (9,189
      )
      
      (8,746
      )
      
      (602
      )Non-deductible expenses and other
      
      (1,245
      )
      
      (1,283
      )
      
      336Increase in statutory tax rates
      
      
      
      
      
      
      
      (1,465
      )Foreign exchange
      
      
      
      
      
      
      
      13Deferred income tax assets not recognized
      
      8,920
      
      
      7,740
      
      
      1,902$
      (1,514
      )
      $
      (2,289
      )
      $
      184


The Company's domestic tax rate for the
  year was 26% (2014  26%, 2013  25.75%) .

|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      151

---

|
|
|

December 31
      
      
      December 31Deferred income tax assets (liabilities)
      
      2015
      
      
      2014Resource pool
      $
      
      
      $
      Tax
        losses
      
      3,117
      
      
      2,547Net deferred income tax assets
      
      3,117
      
      
      2,547Resource property/investment in Pebble
        Partnership
      
      (3,005
      )
      
      (4,012
      )Equipment
      
      (112
      )
      
      (49
      )Net deferred income tax liability
      $
      
      
      $
      (1,514
      )


The Group had the following temporary
  differences at December 31, 2015 in respect of which no deferred tax asset has
  been recognized:

ResourceExpiry
      
      Tax losses
      
      
      pools
      
      
      OtherWithin one year
      $
      
      
      $
      
      
      $
      One to five years
      
      
      
      
      
      
      
      2,957After five years
      
      87,646
      
      
      
      
      
      No
        expiry date
      
      78
      
      
      101,343
      
      
      148Total
      $
      87,724
      
      $
      101,343
      
      $
      3,105


|    | The Group has taxable temporary differences in relation
      to investments in foreign subsidiaries or branches for which deferred tax
      liabilities have not been recognized of approximately $7.3 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|14. | FINANCIAL RISK
      MANAGEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Group is exposed in varying degrees to a variety of
      financial instrument related risks. The Board approves and monitors the
      risk management processes, inclusive of documented investment policies,
      counterparty limits, and controlling and reporting structures. The type of
      risk exposure and the way in which such exposure is managed is provided as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(a) | Credit Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Credit risk is the risk of potential loss to the Group if
      a counterparty to a financial instrument fails to meet its contractual
      obligations. The Groups credit risk is primarily attributable to its
      liquid financial assets, including cash and cash equivalents, restricted
      cash and amounts receivable. The Group limits the exposure to credit risk
      by only investing its cash and cash equivalents and restricted cash with
      high-credit quality financial institutions in business and saving
      accounts, guaranteed investment certificates, and in government treasury
      bills which are available on demand by the Group for its programs. Amounts
      receivable (note 6) include receivable balances with government agencies
      and refundable deposits.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(b) | Liquidity Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Liquidity risk is the risk that the Group will not be
      able to meet its financial obligations when they become due. The Group
      ensures, as far as reasonably possible, it will have sufficient capital in
      order to meet short to medium term business requirements, after taking
      into account cash flows from operations and the Groups holdings of cash
      and cash equivalents and restricted cash. The Groups cash and cash
      equivalents and restricted cash are currently invested in business
      accounts.                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Groups financial liabilities are comprised of trade
      and other payables (note 10) and a payable to a related party (note 9(b)),
      which are due for payment within 12 months from the reporting date. The
      carrying amounts of the Groups financial liabilities represent the
      Groups contractual obligations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      152

---

|
|
|

Foreign exchange risk

The Company is subject to both currency
  transaction risk and currency translation risk: the Pebble Partnership and U5
  Resources Inc. both have the US dollar as functional currency, and certain of
  the Companys corporate expenses are incurred in US dollars. The operating
  results and financial position of the Group are reported in Canadian dollars in
  the Groups consolidated financial statements. The fluctuation of the US dollar
  in relation to the Canadian dollar will consequently have an impact upon the
  losses incurred by the Group as well as the value of the Groups assets and the
  amount of shareholders equity.

The Group has not entered into any
  agreements or purchased any instruments to hedge possible currency risks.

The
  exposure of the Group's US dollar- denominated financial assets and liabilities
  to foreign exchange risk is as follows:

December 31
      
      
      December 312015
      
      
      2014Financial assets:Amounts receivable
      $
      595
      
      $
      635Cash and cash equivalents and restricted
        cash
      
      6,408
      
      
      1,7587,003
      
      
      2,393Financial liabilities: Trade and other payables
      
      (1,529
      )
      
      5,225Net
        financial assets (liabilities) exposed to foreign currency risk
      $
      5,474
      
      $
      (2,832
      )


|    | Based on the above net exposures and assuming that all
      other variables remain constant, a 10% depreciation of the Canadian dollar
      relative to the US dollar would result in a gain of approximately $502 in
      the year (2014  $283 loss). This sensitivity analysis includes only
      outstanding foreign currency denominated monetary items.                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(c) | Interest rate risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Group is subject to interest rate cash flow risk with
      respect to its investments in cash and cash equivalents. The Groups
      policy is to invest cash at fixed rates of interest and cash reserves are
      to be maintained in cash and cash equivalents in order to maintain
      liquidity, while achieving a satisfactory return for shareholders.
      Fluctuations in interest rates when cash and cash equivalents mature
      impact interest income earned.                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Assuming that all other variables remain constant, a 100
      basis points change representing a 1% increase or decrease in interest
      rates would have resulted in a decrease or increase in loss of $85 (2014:
      $176).                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(d) | Capital Management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Group's policy is to maintain a strong capital base
      so as to maintain investor and creditor confidence and to sustain future
      development of the business. The capital structure of the Group consists
      of equity, comprising share capital, reserves and Special Warrants, net of
      accumulated deficit. There were no changes in the Group's approach to
      capital management during the year. The Group is not subject to any
      externally imposed capital requirements.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(e) | Fair value                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The fair value of the Groups financial assets and
      liabilities approximates the carrying amount. The fair value of the AFS
      financial asset is classified into level 1 of the fair value hierarchy as
      quoted market prices are used in the fair value
      determination.                                                                                                                                                                                                                

|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      153

---

|
|
|

|15. | COMMITMENTS AND
      CONTINGENCIES
|--- | -----------------------------------
|    |                                    
|(a) | Leases                             

The Group has the following commitments
  as of December 31, 2015:

2016
      
      
      Total(000s
      )
      
      (000s
      )Anchorage office lease (i)
      
      US$ 407
      
      
      US$ 407Pebble Project
        site lease (ii)
      
      32
      
      
      32Total
      
      US$
        439
      
      
      US$
        439Total in
        Canadian dollars(iii)
      
      $ 608
      
      
      $ 608


| | (i)   | The initial 5 year lease term expires on October 31,
      2016.                               
| | ----- | -----------------------------------------------------------------------------------------------
| | (ii)  | Initial lease for hanger at site expires on May 1,
      2016.                                 
| | (iii) | Converted at closing rate of $1.3840 per US$ on December
      31, 2015, as per Bank of Canada.

The Group has a sub-lease agreement in
  respect of a portion of the Anchorage office space subject to the operating
  lease for an average annual rent, expressed in thousands, of approximately
  US$259 ($187). The term of the sub-lease expires on October 31, 2016.

|(b) | Legal                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The Group, through the Pebble Partnership, is advancing
      its multi-dimensional strategy to address the EPAs preemptive regulatory
      action under Section 404(c) of the Clean Water Act, through litigation
      against the EPA contesting the EPAs statutory authority to act
      pre-emptively under the Clean Water Act, and alleging violation of FACA
      and the unlawful withholding of documentation under the Freedom of
      Information Act. The Group has a contingent liability for additional legal
      fees and costs that may be due to the Groups counsel should there be a
      successful outcome. However, the Group is unable to estimate or determine
      the length of time that each of the legal initiatives mentioned above will
      take to advance to specific milestone events or final conclusion. As of
      the reporting date, if there was a favourable outcome or settlement, the
      Company estimates there would potentially be additional legal fees of $8.3
      million (US$6.0 million at closing Bank of Canada rate on December 31,
      2015 of C$1.3840) payable by the Company.

|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      154

---

INDEPENDENT AUDITORS' REPORT

We have audited the accompanying consolidated financial
  statements of Pebble Limited Partnership and its subsidiaries (the
  "Partnership"), which comprise the consolidated statement of financial position
  as of December 10, 2013 and the related consolidated statements of loss and
  comprehensive loss, changes in equity, and cash flows, for the period from
  January 1 to December 10, 2013, and the related notes to the consolidated
  financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair
  presentation of these consolidated financial statements in accordance with
  accounting principles generally accepted in the United States of America; this
  includes the design, implementation, and maintenance of internal control
  relevant to the preparation and fair presentation of consolidated financial
  statements that are free from material misstatement, whether due to fraud or
  error.

Auditors' Responsibility

Our responsibility is to express an opinion on these
  consolidated financial statements based on our audit. We conducted our audit in
  accordance with auditing standards generally accepted in the United States of
  America. Those standards require that we plan and perform the audit to obtain
  reasonable assurance about whether the consolidated financial statements are
  free from material misstatement.

An audit involves performing procedures to obtain audit
  evidence about the amounts and disclosures in the consolidated financial
  statements. The procedures selected depend on the auditor's judgment, including
  the assessment of the risks of material misstatement of the consolidated
  financial statements, whether due to fraud or error. In making those risk
  assessments, the auditor considers internal control relevant to the
  Partnership's preparation and fair presentation of the consolidated financial
  statements in order to design audit procedures that are appropriate in the
  circumstances, but not for the purpose of expressing an opinion on the
  effectiveness of the Partnership's internal control. Accordingly, we express no
  such opinion. An audit also includes evaluating the appropriateness of
  accounting policies used and the reasonableness of significant accounting
  estimates made by management, as well as evaluating the overall presentation of
  the consolidated financial statements.

We believe that the audit evidence we have obtained is
  sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred
  to above present fairly, in all material respects, the financial position of
  Pebble Limited Partnership and subsidiaries as of December 10, 2013 and the
  results of their operations and their cash flows for the period January 1 to
  December 10, 2013 in accordance with accounting principles generally accepted in
  the United States of America.

Emphasis of Matter Regarding Going Concern

The accompanying consolidated financial statements have been
  prepared assuming that the Partnership will continue as a going concern. As
  discussed in Note 1 to the consolidated financial statements, the Partnership is
  experiencing difficulty in generating sufficient cash flow to meet its
  obligations and sustain its operations, which raises substantial doubt about its
  ability to continue as a going concern. Management's plans in regard to these
  matters are also discussed in Note 1 to the consolidated financial statements.
  The consolidated financial statements do not include any adjustments that might
  result from the outcome of this uncertainty. Our opinion is not modified with
  respect to this matter.

DELOITTE & TOUCHE LLP

Portland, Oregon

May 15, 2015

|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      155

---

| | Pebble Limited Partnership
| | --------------------------
| |                           

|Consolidated Statement of Loss and Comprehensive Loss  
|-------------------------------------------------------
|(Expressed in
      thousands of United States dollars)

|                                           |       |   | Period from  | 
|------------------------------------------ | ----- | - | ------------ | 
|                                           |       |   | January 1 to | 
|                                           |       |   | December 10  | 
|                                           | Notes |   | 2013         | 
|                                           |       |   |              | 
|Expenses                                   |       |   |              | 
|Depreciation                               | 3     | $ | 265          | 
|Exploration expenditures                   | 7     |   | 53,180       | 
|Legal and accounting                       |       |   | 2,631        | 
|Office and administration                  |       |   | 8,864        | 
|Travel                                     |       |   | 1,504        | 
|Operating loss                             |       |   | 66,444       | 
|Impairment loss on IDC receivable          | 4     |   | 1,262        | 
|Foreign exchange loss                      |       |   | 102          | 
|Loss and comprehensive loss for the period |       | $ | 67,808       | 
|                                           |       |   |              | 
|Allocated as follows:                      |       |   |              | 
|Limited partners' interests                |       | $ | 67,808       | 
|General partner's interest                 |       |   |             | 
|                                           |       | $ | 67,808       | 

See accompanying notes to the consolidated financial
  statements.

|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      156

---

| | Pebble Limited Partnership
| | --------------------------
| |                           

|Consolidated Statement of Changes in Equity            
|-------------------------------------------------------
|For the period from January 1 to December 10, 2013     
|(Expressed in
      thousands of United States dollars)

|                                                                                                 |   | Limited  |   |   | General |  |   |          |  
|------------------------------------------------------------------------------------------------ | - | -------- | - | - | ------- |  | - | -------- | -
|                                                                                                 |   | Partners |   |   | Partner |  |   | Total    |  
|                                                                                                 |   |          |   |   |         |  |   |          |  
|Capital                                                                                          |   |          |   |   |         |  |   |          |  
|Balance, January 1, 2013                                                                         | $ | 604,041  |   | $ | 10      |  | $ | 604,051  |  
|Contributions for the period from January 1
      to December 10 , 2013                          |   | 69,895   |   |   |        |  |   | 69,895   |  
|Balance, December 10, 2013                                                                       | $ | 673,936  |   | $ | 10      |  | $ | 673,946  |  
|                                                                                                 |   |          |   |   |         |  |   |          |  
|                                                                                                 |   |          |   |   |         |  |   |          |  
|Deficit                                                                                          |   |          |   |   |         |  |   |          |  
|Balance, January 1, 2013                                                                         | $ | (500,429 | ) | $ |        |  | $ | (500,429 | )
|Loss and comprehensive loss for the period
                  from January 1 to December 10, 2013 |   | (67,808  | ) |   |        |  |   | (67,808  | )
|Balance, December 10, 2013                                                                       | $ | (568,237 | ) | $ |        |  | $ | (568,237 | )
|                                                                                                 |   |          |   |   |         |  |   |          |  
|Partners' equity at December 10, 2013                                                            | $ | 105,699  |   | $ | 10      |  | $ | 105,709  |  

See accompanying notes to the consolidated financial
  statements.

|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      157

---

| | Pebble Limited Partnership
| | --------------------------
| |                           

|Consolidated Statement of Financial Position           
|-------------------------------------------------------
|(Expressed in
      thousands of United States dollars)

|                                       |       |   | December 10 |  
|-------------------------------------- | ----- | - | ----------- | -
|                                       | Notes |   | 2013        |  
|                                       |       |   |             |  
|ASSETS                                 |       |   |             |  
|                                       |       |   |             |  
|Non-current assets                     |       |   |             |  
|Tangible assets, net                   | 3     | $ | 100,497     |  
|Due from general partner               | 4     |   | 99          |  
|Total non-current assets               |       |   | 100,596     |  
|                                       |       |   |             |  
|Current assets                         |       |   |             |  
|Other receivables                      | 4     |   | 850         |  
|Due from limited partner               | 4     |   | 4,900       |  
|Cash                                   |       |   | 1,319       |  
|Total current assets                   |       |   | 7,069       |  
|                                       |       |   |             |  
|Total assets                           |       | $ | 107,665     |  
|                                       |       |   |             |  
|PARTNERS' EQUITY                       |       |   |             |  
|Capital                                |       | $ | 673,946     |  
|Deficit                                |       |   | (568,237    | )
|Total partners' equity                 |       |   | 105,709     |  
|                                       |       |   |             |  
|LIABILITIES                            |       |   |             |  
|                                       |       |   |             |  
|Current liabilities                    |       |   |             |  
|Trade and other payables               |       |   | 1,956       |  
|Total current liabilities              |       |   | 1,956       |  
|                                       |       |   |             |  
|Total partners' equity and liabilities |       | $ | 107,665     |  

See accompanying notes to the consolidated financial
  statements.

|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      158

---

| | Pebble Limited Partnership
| | --------------------------
| |                           

|Consolidated Statement of Cash Flows                   
|-------------------------------------------------------
|(Expressed in
      thousands of United States dollars)

|                                                                      |   | Period from  |  
|--------------------------------------------------------------------- | - | ------------ | -
|                                                                      |   | January 1 to |  
|                                                                      |   | December 10  |  
|                                                                      |   | 2013         |  
|                                                                      |   |              |  
|Cash flows used in operating activities                               |   |              |  
|Loss for the period                                                   | $ | (67,808      | )
|Adjustment for items not
      affecting cash or operating activities |   |              |  
|Depreciation                                                          |   | 265          |  
|Impairment loss on IDC
      receivable and interest                  |   | 1,262        |  
|                                                                      |   | (66,281      | )
|Change in
      other receivables                                     |   | 683          |  
|Change in trade and other
      payables                              |   | (8,237       | )
|Net cash used in operating activities                                 |   | (73,835      | )
|                                                                      |   |              |  
|Cash flows used in investing activity                                 |   |              |  
|Additions to tangible assets                                          |   | (258         | )
|                                                                      |   |              |  
|Cash flows from financing activity                                    |   |              |  
|Capital contributions by limited partners                             |   | 64,995       |  
|                                                                      |   |              |  
|Decrease in cash                                                      |   | (9,098       | )
|Cash, beginning of period                                             |   | 10,417       |  
|Cash, end of period                                                   | $ | 1,319        |  
|                                                                      |   |              |  
|Non-cash financing activity                                           |   |              |  
|Contribution receivable from limited partner                          | $ | 4,900        |  

See accompanying notes to the consolidated financial
  statements.

|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      159

---

| | Pebble Limited Partnership
| | --------------------------
| |                           

|1. | Primary business activity
|-- | -------------------------

The Pebble Limited Partnership (the
  "Pebble Partnership") was formed pursuant to a limited partnership agreement
  dated July 26, 2007 and first amended and restated as of July 31, 2007, with a
  subsequent amendment as of September 14, 2007 (the "Agreement"). The purpose of
  the Pebble Partnership is to engineer, permit, construct and operate a modern,
  long-life mine at the Pebble Project near Iliamna, located approximately 200
  miles (320 kilometers) southwest of the city of Anchorage in the State of
  Alaska.

Until December 10, 2013, Northern
  Dynasty Partnership ("Northern Dynasty") and Anglo American US (Pebble) LLC.
  ("Anglo"), wholly-owned US affiliates of Northern Dynasty Minerals Ltd. and
  Anglo American plc. respectively, had equal rights in the Pebble Partnership as
  the limited partners, and each owned 50% of the outstanding shares of the
  general partner, Pebble Mines Corp. To maintain its 50% interest in the Pebble
  Partnership, Anglo was required to make staged cash investments into the Pebble
  Partnership aggregating to $1.5 billion (described below). On September 15,
  2013, Anglo gave notice to Northern Dynasty of its withdrawal from the Pebble
  Partnership. On December 10, 2013, Northern Dynasty exercised its right to
  acquire Anglos 50% interest and consequently holds a 100% interest in the
  Pebble Partnership and in the Pebble Partnerships general partner, Pebble Mines
  Corp. (which administers the Pebble Project). Anglo contributed $573.2 million
  to the Pebble Partnership as of December 10, 2013.

Anglo Americans staged investment
  requirements included an initial minimum expenditure of $125 million (completed
  in 2008) towards a prefeasibility report. The prefeasibility report was to be
  approved by the Board of Pebble Mines Corp., and was to summarize all previous
  prefeasibility studies. The Board of Pebble Mines Corp. was also to approve the
  alternatives for a final feasibility study. Anglo was required, in order to
  retain its 50% interest in the Pebble Partnership, to commit within 90 days of
  the later of the receipt of the approved prefeasibility report and the approved
  study alternatives, to fund further expenditures which would bring its total
  investment to at least $450 million, which amount was to be expended in
  producing a final feasibility study and in related activities, which was
  expected to take the Pebble Partnership to a production decision. Upon an
  affirmative decision by the Pebble Partnership to develop a mine, Anglo was
  required to commit to the remaining portion of the total investment of $1.5
  billion in order to retain its interest in the Pebble Partnership. To December
  10, 2013, Anglo American funded $573.2 million. The Pebble Partnership agreement
  provided for equal project control rights for both partners with no operators
  fees payable to either party.

Northern Dynastys contribution to the
  Pebble Partnership was the Pebble mineral property. The mineral property was
  recorded by the Pebble Partnership at the carrying value of the property in
  Northern Dynasty prior to the Agreement date and is comprised of acquisition
  costs and related expenses.

Cash distributions to the partners are
  first allocated to the limited partners based on capital contributions in excess
  of any previous distributions made and then to the limited partners and the
  general partner in proportion to their ownership interests.

These consolidated financial statements
  are for the period from January 1 to December 10, 2013.

|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      160

---

| | Pebble Limited Partnership
| | --------------------------
| |                           

|2.  | Significant accounting policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(a) | Basis of presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | These consolidated financial statements have been
      prepared in accordance with accounting principles generally accepted in
      the United States, and are expressed in United States ("US") dollars,
      which is the currency of the primary economic environment in which the
      Pebble Partnership operates, with the assumption that the Pebble
      Partnership will be able to realize its assets and discharge its
      liabilities in the normal course of business rather than through a process
      of forced liquidation. During the period from January 1 to December 10,
      2013, the Pebble Partnership incurred a loss of $67,808 and used cash from
      operating activities of $73,835. Continued operations of the Pebble
      Partnership are dependent on its ability to develop its mineral property
      claims, receive continued financial support from its limited partner(s),
      or generate profitable operations in the future. These circumstances raise
      substantial doubt about the Pebble Partnerships ability to continue as a
      going concern. The financial statements do not include any adjustment to
      assets and liabilities should the Pebble Partnership be unable to continue
      as a going concern.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | There can be no assurance that the Pebble Partnership
      will continue to receive financial support, in which case it will be
      unable to meet its obligations. Should the Pebble Partnership be unable to
      realize its assets and discharge its liabilities in the normal course of
      business, the net realizable value of its assets may be materially less
      than the amounts recorded in these consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The Pebble Partnership has early adopted the amendments
      pursuant to Financial Accounting Standards Boards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | June 2014 Accounting Standards Update 2014-10,
      Development Stage Entities (Topic 915), Elimination ofCertain
        Financial Reporting Requirements, Including an Amendment to Variable
        Interest Entities Guidance in Topic810, Consolidation(the
      "Update").The amendments in this Update remove the definition of a
      development stage entity from the Master Glossary of the Accounting
      Standards Codification, thereby removing the financial reporting
      distinction between development stage entities and other reporting
      entities from US Generally Accepted Accounting Principles. In addition,
      the amendments inter alia eliminate the requirements for development stage
      entities to (1) present inception-to-date information in the statements of
      operations and comprehensive loss, partners equity and cash flows, (2)
      label the financial statements as those of a development stage entity, and
      (3) disclose a description of the development stage activities in which
      the entity is engaged.                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The consolidated financial statements have been prepared
      under the historical cost convention. A summary of the significant
      accounting policies are provided below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(b) | Basis of consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | These consolidated financial statements
      incorporate the financial statements of the Pebble Partnership and the
      subsidiaries controlled by the Pebble Partnership listed below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

Proportion ofPlace of
      ownershipName of
        subsidiary
      incorporation
      interest
      Principal activityPebble East Claims Corporation
      Alaska, USA
      100%
      Title holding companyPebble West Claims Corporation
      Alaska, USA
      100%
      Title holding companyKaskanak Copper LLC
      Delaware, USA
      100%
      Holding companyKaskanak Inc.
      Alaska, USA
      100%
      Title holding company


Control exists when the Pebble
  Partnership has the power, directly or indirectly, to govern the financial and
  operating policies of an entity so as to obtain benefits from its activities.
  The financial statements of subsidiaries are included in the consolidated
  financial statements from the date that control commences until the date that
  control ceases. All significant intercompany transactions and balances have been
  eliminated.

|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      161

---

| | Pebble Limited Partnership
| | --------------------------
| |                           

|(c) | Recently issued accounting
      pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The new mandatory effective accounting pronouncements did
      not impact the Pebble Partnerships financial statements. The Pebble
      Partnership does not believe that there are any new accounting
      pronouncements that have been issued that are expected to have a material
      impact on its financial position or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(d) | Significant accounting judgments and
      estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The preparation of financial statements requires
      management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities and disclosures of contingent assets and
      liabilities at the date of the financial statements and the reported
      amounts of expenses during the reporting period. Actual outcomes could
      differ from these estimates. The consolidated financial statements include
      estimates which, by their nature, are uncertain. The impacts of such
      estimates are pervasive throughout the consolidated financial statements,
      and may require accounting adjustments based on future occurrences.
      Revisions to accounting estimates are recognized in the period in which
      the estimates are revised and the revisions affect both current and future
      periods.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Significant accounts that require estimates as the basis
      for determining the stated amounts include the mineral property interest,
      plant and equipment, Iliamna Development Corporation ("IDC") loan
      receivable and restoration, rehabilitation and environmental
      costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Depreciation and depletion of the mineral property
      interest and plant and equipment assets are dependent upon estimates of
      useful lives and reserves estimates, both of which are determined with the
      exercise of judgment. The assessment of any impairment of property, plant
      and equipment is dependent upon estimates of fair value that take into
      account factors such as reserves, economic and market conditions and the
      useful lives of assets.                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(e) | Foreign currencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The functional and presentation currency of the Pebble
      Partnership is the US dollar.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Transactions in currencies other than the functional
      currency are recorded at the rates of exchange prevailing on dates of
      transactions. At the end of each reporting period, monetary assets and
      liabilities that are denominated in foreign currencies are translated
      using the period end foreign exchange rate. Non-monetary items that are
      measured in terms of historical cost in a foreign currency are translated
      using the historical rate on the date fair value was determined.                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(f) | Tangible assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Property, plant and equipment ("PPE") are carried at
      cost, less accumulated depreciation and include accumulated impairment
      losses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The cost of an item of PPE consists of the purchase
      price, any costs directly attributable to bringing the asset to the
      location and condition necessary for its intended use and an initial
      estimate of the costs of dismantling and removing the item and restoring
      the site on which it is located.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Depreciation is provided at rates calculated to write off
      the cost of PPE, less their estimated residual value, using the declining
      balance method at various rates ranging from 20% - 30% per
      annum.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The estimated useful lives, residual values and
      depreciation method are reviewed at least annually, with the effect of any
      changes in estimates accounted for on a prospective basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | An item of PPE is derecognized upon disposal or when no
      future economic benefits are expected to arise from the continued use of
      the asset. Any gain or loss arising on disposal of the asset, determined
      as the difference between the net disposal proceeds and the carrying
      amount of the asset, is recognized in the consolidated statement of loss
      and comprehensive loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Where an item of plant and equipment consists of major
      components with different useful lives, the components are accounted for
      as separate items of PPE. Expenditures incurred to replace a component of
      an item of PPE that is accounted for separately, including major
      inspection and overhaul expenditures, are capitalized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(g) | Impairment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Unlike goodwill and indefinite-lived intangible assets,
      the accounting rules do not provide for an annual impairment test in
      determining whether tangible assets are impaired. Instead, they require
      that a triggering event occur before testing an asset for
      impairment. Examples of such triggering events include a significant disposal of
      a portion of such assets, an adverse change in the market involving the business
      employing the related asset, a significant decrease in the benefits realized
      from an acquired business, difficulties or delays in integrating the business,
      and a significant change in the operations of an acquired business.                                                                                                                                                         

|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      162

---

| | Pebble Limited Partnership
| | --------------------------
| |                           

|    | Once a triggering event has occurred, the impairment test
      employed is based on whether the intent is to hold the asset for continued
      use or to hold the asset for sale. If the intent is to hold the asset for
      continued use, the impairment test involves a comparison of undiscounted
      cash flows against the carrying value of the asset as an initial test. If
      the carrying value of such asset exceeds the undiscounted cash flow, the
      asset would be deemed to be impaired. Impairment would then be measured as
      the difference between the fair value of the fixed or amortizing
      intangible asset and the carrying value to determine the amount of the
      impairment. The Company generally determines fair value by using the
      discounted cash flow method. If the intent is to hold the asset for sale
      and certain other criteria are met (i.e., the asset can be disposed of
      currently, appropriate levels of authority have approved sale, and there
      is an actively pursuing buyer), the impairment test is a comparison of the
      assets carrying value to its fair value less costs to sell. To the extent
      that the carrying value is greater than the assets fair value less costs
      to sell, an impairment loss is recognized for the difference. Assets held
      for sale are separately presented on the balance sheet and are no longer
      depreciated.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Pebble Partnership has not recorded any impairment
      charges on its tangible assets in the periods presented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(h) | Exploration and evaluation expenditures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Exploration and evaluation expenditures include the costs
      of acquiring licenses, costs associated with exploration and evaluation
      activity, and the acquisition date fair value of exploration and
      evaluation assets acquired in a business combination or an asset
      acquisition. Exploration and evaluation expenditures are expensed as
      incurred except for expenditures associated with the acquisition of
      exploration and evaluation assets through a business combination or an
      asset acquisition. Costs incurred before the Pebble Partnership has
      obtained the legal rights to explore an area are expensed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Acquisition costs, including general and administrative
      costs, are only capitalized to the extent that these costs can be related
      directly to operational activities in the relevant area of interest where
      it is considered likely to be recoverable by future exploitation or sale
      or where the activities have not reached a stage which permits a
      reasonable assessment of the existence of reserves.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Exploration and evaluation assets are assessed for
      impairment only when facts and circumstances suggest that the carrying
      amount exceeds the recoverable amount and when the Pebble Partnership has
      sufficient information to reach a conclusion about the technical
      feasibility and commercial viability of the assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Once the technical feasibility and commercial viability
      of the extraction of mineral resources in an area of interest are
      demonstrable, exploration and evaluation assets attributable to that area
      of interest are first tested for impairment and then reclassified to
      mining property and development assets within PPE.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Recoverability of the carrying amount of any exploration
      and evaluation assets is dependent on successful development and
      commercial exploitation, or alternatively, sale of the assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(i) | Asset retirement obligation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | An obligation to incur restoration, rehabilitation and
      environmental costs arises when environmental disturbance is caused by the
      exploration, development or ongoing production of a mineral property
      interest. Such costs arising from the decommissioning of plant and other
      site preparation work, discounted to their net present value, are provided
      for and capitalized at the start of each project, as soon as the
      obligation to incur such costs arises. These costs are charged against
      profits over the life of the operation, through the amortization and the
      unwinding of the discounted provision.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Pebble Partnership has no material restoration,
      rehabilitation and environmental costs as the disturbance to date is
      minimal.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(j) | Financial assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Financial assets are classified into loans and
      receivables. The Pebble Partnership does not hold any financial assets
      classified as any of financial assets at fair value through profit or
      loss, held to maturity instruments or available for sale financial assets.
      The classification depends on the nature and purpose of the financial assets and
      is determined at the time of initial recognition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      163

---

| | Pebble Limited Partnership
| | --------------------------
| |                           

|    | Loans and receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Pebble Partnership has classified other receivables
      as loans and receivables. Loans and receivables are financial assets
      with fixed or determinable payments that are not quoted in an active
      market.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Loans and receivables are initially recognized at the
      transaction value and subsequently carried at amortized cost less
      impairment losses. The impairment loss of receivables is based on a review
      of all outstanding amounts at period end. Bad debts are written off during
      the year in which they are identified. Interest income is recognized by
      applying the effective interest rate, except for short-term receivables
      when the recognition of interest would be immaterial.                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Derecognition of financial liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Pebble Partnership derecognizes financial liabilities
      when, and only when, the Pebble Partnerships obligations are discharged,
      cancelled or they expire.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(k) | Leases                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Rental costs under operating leases are charged to the
      consolidated statement of loss and comprehensive loss in equal amounts
      over the lease term.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(l) | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The partners are individually liable for any taxes
      related to their respective shares of the Pebble Partnerships taxable
      income or loss. Accordingly, no provision for income taxes is required.
      Additionally, distributions of tax losses are allocated based on funding
      contributions made by each partner.                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(m) | Provisions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Provisions are recorded when a present legal or
      constructive obligation exists as a result of past events where it is
      probable that an outflow of resources embodying economic benefits will be
      required to settle the obligation, and a reliable estimate of the amount
      of the obligation can be made.                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The amount recognized as a provision is the best estimate
      of the consideration required to settle the obligation at the financial
      position reporting date, taking into account the risks and uncertainties
      surrounding the obligation. Where a provision is measured using the cash
      flows estimated to settle the present obligation, its carrying amount is
      the present value of those cash flows. When some or all of the economic
      benefits required to settle an obligation are expected to be recovered
      from a third party, the receivable is recognized as an asset if it is
      virtually certain that reimbursement will be received and the amount
      receivable can be measured reliably.

|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      164

---

| | Pebble Limited Partnership
| | --------------------------
| |                           

|3. | Tangible assets
|-- | ---------------

Mineral
      
      
      Plant andproperty
      
      
      equipment
      
      
      TotalCostAt January 1, 2013
      $
      99,347
      
      $
      1,906
      
      $
      101,253Additions
      
      
      
      
      258
      
      
      258At December 10, 2013
      $
      99,347
      
      $
      2,164
      
      $
      101,511Accumulated depreciationAt January 1, 2013
      $
      
      
      $
      749
      
      $
      749Depreciation
      
      
      
      
      265
      
      
      265At December 10, 2013
      $
      
      
      $
      1,014
      
      $
      1,014Carrying valueAt December 10, 2013
      $
      99,347
      
      $
      1,150
      
      $
      100,497


|4. | Receivables
|-- | -----------

December 102013Non-currentAmounts due from general partner
      $
      99CurrentContribution receivable from limited partner
      $
      4,900Prepayments and deposits
      
      850$
      5,750


Loan Receivable

The Pebble Partnership committed a loan
  in the amount of $3,156 to the Iliamna Development Corporation ("IDC"). This
  loan was initiated on April 15, 2009 at a value of $1,712 with an increase of
  $200 on February 1, 2010 and an increase of $1,244 on April 1, 2010. A lien on
  all IDC assets was granted as the security for the loan. The original maturity
  date of this loan was December 31, 2011. In 2011, $1,894 was written off in
  relation to the loan receivable to reflect managements expectation of future
  recoverability of the loan. This adjustment included consideration of a
  renegotiated payment plan with IDC that was completed in early 2012 and treated
  as an adjusting item as at December 31, 2011. As at December 10, 2013, the loan
  was considered not recoverable as the Pebble Partnership had not received
  payment thereon notwithstanding the payment plan in place and an impairment loss
  was recognized in the consolidated statement of loss and comprehensive loss.

|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      165

---

| | Pebble Limited Partnership
| | --------------------------
| |                           

|5. | Related party balances and transactions                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                           
|   | Transactions between the Pebble Partnership and its
      subsidiaries have been eliminated on consolidation and are not disclosed
      in this note. The undernoted summarizes related party activities other
      than those identified elsewhere in these financial
      statements:

Period fromJanuary 1 toDecember 10Transactions
      
      2013For services rendered and expenses reimbursedAnglo American plc and
        subsidiaries (a)
      $
      1,392Hunter Dickinson Services Inc. (b)
      
      1,641$
      3,033


| | (a) | Anglo American plc and its subsidiaries provided
      technical, geological, corporate development, administrative, safety and
      community services to, and incurred third party costs on behalf of, the
      Pebble Partnership on a full cost recovery basis pursuant to the technical
      services agreements dated July 8, 2008 and further provided in the
      addendum to the said agreements dated November 20, 2009.                                                                                                                                                                                                                                                       
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (b) | Hunter Dickinson Services Inc. (HDSI) is a private
      company which has directors and other key management personnel, who are
      close business associates that are also key management personnel of
      Northern Dynasty Minerals Ltd., which owns the Northern Dynasty
      Partnership. HDSI provides geological, site operations, engineering,
      corporate development, administrative and management services to, and
      incurs third party costs on behalf of, the Pebble Partnership on a full
      cost recovery basis pursuant to an agreement dated July 8, 2008 and
      further provided in the addendum to the said agreement dated November 20,
      2009.

|6.  | Financial instruments and risk management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The Pebble Partnerships financial instruments consist of
      cash, amounts due from the general partner, related parties and other
      unrelated parties, and trade and other payables. All of the Pebble
      Partnerships financial instruments have carrying values which are
      considered to be reasonable approximations of fair value due to the
      short-term nature of these instruments.                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The Pebble Partnerships financial instruments are
      exposed to a number of financial and market risks, including credit,
      liquidity and foreign exchange risks. The Pebble Partnership may, or may
      not, establish from time to time active policies to manage these risks.
      The Pebble Partnership does not currently have in place any active hedging
      or derivative trading policies to manage these risks as the Pebble
      Partnerships management does not believe that the current size, scale and
      pattern of its operations would warrant such hedging activities.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(a) | Credit risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Credit risk is the risk that a counterparty to a
      financial instrument will not discharge its obligations, resulting in a
      financial loss to the Pebble Partnership. The Pebble Partnership has
      procedures in place to minimize its exposure to credit risk. The Pebble
      Partnership management evaluates credit risk on an ongoing basis,
      including evaluation of counterparty credit rating.                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The primary sources of credit risk for the Pebble
      Partnership arise from the following financial assets: (1) cash balances
      and until recently amounts due from IDC which the Pebble Partnership
      impaired during the period from January 1 to December 10, 2013 (note 4).
      Except as discussed in Note 4, the Pebble Partnership does not expect to
      have any credit losses in the future. At December 10, 2013, the Pebble
      Partnership has no financial assets that are past due or impaired due to
      credit risk defaults.                                           

|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      166

---

| | Pebble Limited Partnership
| | --------------------------
| |                           

The Pebble Partnerships maximum
  exposure to credit risk at the reporting date is as follows:

December 102013Cash
      $
      1,319Due from general partner
      
      99Due from limited
        partner
      
      4,900$
      6,318


|(b) | Liquidity risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Liquidity risk is the risk that the Pebble Partnership
      will not be able to meet its obligations with respect to financial
      liabilities as they fall due. The Pebble Partnerships financial
      liabilities are comprised of trade and other payables. The Pebble
      Partnership frequently assesses its liquidity position by reviewing the
      timing of amounts due and the Pebble Partnerships current cash flow
      position to meet its obligations.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | As discussed in Note 1, the Pebble Partnership is reliant
      on financial support from its limited partners, which subsequent to
      December 10, 2013, is only Northern Dynasty, to meet cash flow
      requirements.                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | The Pebble Partnerships financial liabilities arise as a
      result of ongoing exploration of its mineral property interest and
      corporate expenses. Payment terms on these liabilities are typically 30 to
      60 days from receipt of invoice and do not generally bear interest. The
      following table summarizes the remaining contractual maturities of the
      Pebble Partnerships financial liabilities:                                               

December 102013Trade and other
        payables
      $
      1,956


|(c) | Market risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Market risk is the risk that the fair value for assets
      classified as fair value through profit and loss and available-
      for-sale or future cash flows for assets or liabilities considered to be
      held-to-maturity, other financial liabilities, and loans or
      receivables will fluctuate because of changes in market conditions. The
      Pebble Partnership evaluates market risk on an ongoing basis and has
      established policies and procedures for mitigating its exposure to foreign
      exchange fluctuations. The Pebble Partnership is not exposed to interest
      rate risk, as it does not hold debt balances and is not charged interest
      on its trade payables balances.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(d) | Foreign exchange risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Pebble Partnership is exposed to foreign exchange
      risk as some of its operating expenses are incurred in Canadian ("Cdn")
      dollars and certain of its liabilities are denominated in Cdn dollars. The
      Pebble Partnership does not use any derivative instruments to reduce its
      exposure to fluctuations in foreign currency exchange rates.                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The appreciation of the Cdn dollar against the US dollar
      can increase the costs of operations in US dollar terms. The Pebble
      Partnership maintains its cash balances in US dollars and until December
      10, 2013, exchanged currency to meet its Cdn dollar obligations on an as
      needed basis, thereby reducing the exchange risk on cash
      balances.                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Pebble Partnership is exposed to currency risk
      through the following US dollar equivalent of financial assets and
      liabilities denominated in currencies other than US
      dollars:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

December 10Currency
      
      2013Canadian dollar exposureTrade and other payables
      $
      132


|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      167

---

| | Pebble Limited Partnership
| | --------------------------
| |                           

|   | Based on the above net exposures and assuming all other
      variables remain constant, a 10% depreciation or appreciation in the Cdn
      dollar against the US dollar would result in a $13 decrease or increase in
      the Pebble Partnerships net loss.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                 
|7. | Exploration expenditures                                                                                                                                                                                                                                        

Period fromJanuary 1 toDecember 102013Assays and analysis
      $
      45Engineering
      
      8,992Environmental
      
      13,145Equipment rental
      
      38Freight
      
      449Option payment for Kaskanak claims
      
      750Public affairs
      
      4,125Site activities
      
      15,477Socioeconomic
      
      7,361Transportation
      
      2,798Incurred during the period / year
      $
      53,180


|8. | Commitments                                                                   
|-- | ------------------------------------------------------------------------------
|   |                                                                               
|   | The Pebble Partnership has the following non-cancellable
      leases to 2016:

Commitment
      
      2014
      
      
      2015
      
      
      2016Office lease
      $
      740
      
      $
      763
      
      $
      651Site leases
      
      780
      
      
      260
      
      
      Other leases
      
      144
      
      
      84
      
      
      $
      1,664
      
      $
      1,107
      
      $
      651


Rent expense under non-cancellable
  operating leases was $1,627 for the period from January 1 to December 10,
  2013.

|9. | Subsequent events                                                                                                                                                                     
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                       
|   | The Pebble Partnership has evaluated subsequent events
      for recognition or disclosure through May 15, 2015, which represents the
      date the financial statements were issued.

|                        |                   
|----------------------- | ------------------
|Form 20-F Annual Report | P a g e|
      168

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