CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

THREE MONTHS ENDED
MARCH 31, 2012

(Expressed in thousands of Canadian Dollars)

(Unaudited)

Northern Dynasty Minerals Ltd.
Condensed Consolidated Interim Statements of Financial Position
(Unaudited - Expressed in thousands of Canadian Dollars)

			As at
			March 31			December 31
	Notes		2012			2011
ASSETS
Non-current assets
Investment in the Pebble Limited Partnership	3	$	99,595		$	101,542
Exploration and evaluation assets	4		1,055			1,055
			100,650			102,597
Current assets
Balances receivable from a related party	8		115			483
Amounts receivable and other assets	5		4,969			4,704
Cash and cash equivalents	6		35,727			37,457
			40,811			42,644
Total Assets		$	141,461		$	145,241
EQUITY
Share capital	7	$	389,153		$	388,987
Reserves			47,953			48,132
Deficit			(299,824	)		(295,763	)
			137,282			141,356
LIABILITIES
Non-current liabilities
Deferred income taxes			3,643			3,715
			3,643			3,715
Current liabilities
Amounts payable and other liabilities			536			170
			536			170
Total Liabilities			4,179			3,885
Total Equity and Liabilities		$	141,461		$	145,241

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

These condensed consolidated interim financial statements are authorized for issue by the Board of Directors on May 8, 2012. They are signed on the Company's behalf by:

/s/ Ronald W. Thiessen	/s/ Robert A. Dickinson
Ronald W. Thiessen	Robert A. Dickinson
Director	Director

Page 2

Northern Dynasty Minerals Ltd.
Condensed Consolidated Interim Statements of Comprehensive Loss
(Unaudited - Expressed in thousands of Canadian Dollars, except for share information)

			Three months ended March 31
	Notes		2012			2011
Expenses
Exploration and evaluation			1,269			316
General and administrative			1,178			1,478
Share-based compensation			1,777			6,501
Loss from operating activities			4,224			8,295
Interest income			(163	)		(197	)
Loss before tax			4,061			8,098
Income tax (recovery) expense			–			–
Loss for the period		$	4,061		$	8,098
Other comprehensive loss (income)
Exchange difference arising on translation of investment in the Pebble Limited Partnership	3		1,947			2,496
Deferred income tax on investment			(72	)		(91	)
Other comprehensive loss for the period		$	1,875		$	2,405
Total comprehensive loss for the period		$	5,936		$	10,503
Basic and diluted loss per common share	9	$	0.04		$	0.09

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

Page 3

Northern Dynasty Minerals Ltd.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited - Expressed in thousands of Canadian Dollars)

			Three months ended March 31
	Note		2012			2011
Cash flows from operating activities
Loss for the period		$	(4,061	)	$	(8,098	)
Adjustments for items not affecting cash:
Foreign exchange loss			82			79
Interest income			(163	)		(197	)
Share-based compensation			1,777			6,501
			(2,365	)		(1,715	)
Changes in non-cash working capital items
(Increase) in amounts receivable and other assets			(241	)		(79	)
Decrease in balances receivable from related parties			368			–
Increase (decrease) in amounts payable and other liabilities			366			(313	)
Increase in balances payable to related parties			–			123
			493			(269	)
Net cash used in operating activities			(1,872	)		(1,984	)
Cash flows from investing activities
Interest received			56			132
Net cash from investing activities			56			132
Cash flows from financing activity
Common shares issued for cash, net of issue costs	7		85			3,203
Net cash from financing activity			85			3,203
Net (decrease) increase in cash and cash equivalents			(1,731	)		1,351
Effect of exchange rate fluctuations on cash held			1			–
Cash and cash equivalents at beginning of the year			37,457			40,402
Cash and cash equivalents at end of the period		$	35,727		$	41,753

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

Page 4

Northern Dynasty Minerals Ltd.
Condensed Consolidated Interim Statements of Changes in Equity
(Unaudited - Expressed in thousands of Canadian Dollars, except for share information)

	Share capital				Reserves
					Equity			Foreign
					settled			currency
					share-based			translation			Investment
	Number of				payments			reserve			revaluation						Total
	shares		Amount		reserve			(note 7(c))			reserve			Deficit			equity
Balance at January 1, 2011	94,177,066	$	380,570	$	34,799		$	316		$	(1	)	$	(275,624	)	$	140,060
Shares issued for cash on exercise of share purchase options	573,083		3,203		–			–			–			–			3,203
Fair value of share options allocated to shares issued on exercise	–		1,785		(1,785	)		–			–			–			–
Share-based compensation	–		–		6,501			–			–			–			6,501
Loss for the period	–		–		–			–			–			(8,098	)		(8,098	)
Other comprehensive loss for the period net of tax	–		–		–			(2,405	)		–			–			(2,405	)
Balance at March 31, 2011	94,750,149	$	385,558	$	39,515		$	(2,089	)	$	(1	)	$	(283,722	)	$	139,261
Balance at January 1, 2012	94,978,764	$	388,987	$	45,664		$	2,470		$	(2	)	$	(295,763	)	$	141,356
Shares issued for cash on exercise of share purchase options	17,000		85		–			–			–			–			85
Fair value of share options allocated to shares issued on exercise	–		81		(81	)		–			–			–			–
Share-based compensation	–		–		1,777			–			–			–			1,777
Loss for the period	–		–		–			–			–			(4,061	)		(4,061	)
Other comprehensive loss for the period net of tax	–		–		–			(1,875	)		–			–			(1,875	)
Balance at March 31, 2012	94,995,764	$	389,153	$	47,360		$	595		$	(2	)	$	(299,824	)	$	137,282

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

Page 5

Northern Dynasty Minerals Ltd.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2012 and 2011

(Unaudited - Expressed in thousands of Canadian Dollars, unless otherwise stated)

1.	NATURE OF OPERATIONS 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’s corporate office is located at 1040 West Georgia Street, 15th floor, Vancouver, British Columbia. The condensed consolidated interim financial statements ("Financial Statements") of the Company as at and for the period ended March 31, 2012, include financial information for the Company and its subsidiaries (note 2(c)) (together referred to as the "Group" and individually as "Group entities") and the Group’s interest in jointly controlled entities. The Company is the ultimate parent. The Group owns a 50% share in the Pebble Limited Partnership (the "Pebble Partnership") (note 3). The Pebble Partnership owns the Pebble Copper-Gold- Molybdenum Project (the "Pebble Project"), the Group’s principal mineral property interest located in Alaska, United States of America ("USA" or "US").
	The Group is in the process of exploring 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 investment in the Pebble Partnership is entirely dependent upon the existence of economically recoverable mineral reserves; the ability of the Group to obtain financing of its share to complete the exploration and development of the Pebble Project; the Pebble Partnership obtaining the necessary permits to mine; and future profitable production or proceeds from the disposition of the investment in the Pebble Partnership.
2.	SIGNIFICANT ACCOUNTING POLICIES

(a)	Statement of Compliance
	These Financial Statements have been prepared in accordance with IAS 34, Interim Financial Reporting, as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the IFRS Interpretations Committee (IFRICs). They do not include all of the information required by International Financial Reporting Standards ("IFRS") for complete annual financial statements, and should be read in conjunction with the Group’s consolidated financial statements as at and for the year ended December 31, 2011. Accordingly accounting policies applied other than as noted in Note 2(e) are the same as those applied in the Group’s annual financial statements which were filed under the Company’s profile on SEDAR at www.sedar.com.
(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 modified as required for financial instruments classified as available-for-sale which are stated at their fair value.

Page 6

Northern Dynasty Minerals Ltd.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2012 and 2011

(Unaudited - Expressed in thousands of Canadian Dollars, unless otherwise stated)

(c)	Basis of Consolidation
	These Financial Statements incorporate the financial statements of the Company and all of its subsidiaries listed below:

		Proportion
		of
		Ownership
Name of Subsidiary	Place of Incorporation	Interest	Principal Activity
3537137 Canada Inc.	Canada	100%	Holding Group
0796412 BC Ltd.	British Columbia, Canada	100%	Not active
Northern Dynasty Partnership1	Alaska, USA	100%	Holding Group
			Holding
U5 Resources Inc.2	Nevada, USA	100%	Company

1	Holds the Group’s 50% interest in Pebble Mines Corp. and the Pebble Partnership (note 3).
2	Holds the Group’s claims purchased from Liberty Star (note 4).

	The Group has determined that its investment in the Pebble Partnership, a 50:50 limited partnership between the Group and Anglo American plc ("Anglo American"), qualifies as an interest in a jointly controlled entity under IAS 31, Interests in Joint Ventures. The Group elected and applies the equity method to account for its interest in the Pebble Partnership. The investment is carried in the statement of financial position at cost and adjusted by post-acquisition changes in the Group’s share of the net assets of the joint venture, less any impairment losses. As the Group’s investment is carried in US dollars, the investment is translated at the end of each reporting period (note 3).
	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)	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.

Page 7

Northern Dynasty Minerals Ltd.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2012 and 2011

(Unaudited - Expressed in thousands of Canadian Dollars, unless otherwise stated)

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:

i.	Inputs used in measuring share-based compensation; and
ii.	Provision for the deferred income tax expense and the composition of deferred income tax liabilities.

Critical accounting judgments

These include:

i.	Recoverability of amounts receivable;
ii.	Recoverability of the carrying value of the investment in the Pebble Partnership and the Group’s exploration and evaluation assets; and
iii.	Determination of categories of financial assets and financial liabilities which has been identified as an accounting policy which involves assessments made by management.

(e)	New Accounting Standards, Interpretations and Amendments to Existing Standards
	New and amended standards adopted by the Group
	Effective January 1, 2012, the Group adopted amendments to IFRS 7, Financial Instruments: Disclosures that were issued by the IASB. The application of these amendments has not had any material impact on current and prior year disclosures but may affect disclosures for future transactions or arrangements.
	New or revised standards, interpretations and amendments to existing standards not yet effective
	(i)	Effective for annual periods beginning on or after July 1, 2012
		•	Amendments to IAS 1, Presentation of Financial Statements
	(ii)	Effective for annual periods beginning on or after January 1, 2013
		•	New standard IFRS 10, Consolidated Financial Statements.
		•	New standard IFRS 11, Joint Arrangements
		•	New standard IFRS 12, Disclosure of Interests in Other Entities
		•	New standard IFRS 13, Fair Value Measurement
		•	Reissued IAS 27, Separate Financial Statements
		•	Reissued IAS 28, Investments in Associates and Joint Ventures

The Group has not early adopted these new or reissued standards and is currently assessing the impact that these standards will have on the Group’s consolidated financial statements.

Page 8

Northern Dynasty Minerals Ltd.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2012 and 2011

(Unaudited - Expressed in thousands of Canadian Dollars, unless otherwise stated)

	•	New interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine
	•	This interpretation and the requirements for accounting for stripping costs will only be applicable to the Group once it is in the production phase.
(iii)	Effective for annual periods beginning on or after January 1, 2015
	•	New standard IFRS 9, Financial Instruments, Classification and Measurement The Group anticipates that the adoption of this standard will have no material impact except for additional disclosures.

3. INVESTMENT IN THE PEBBLE LIMITED PARTNERSHIP

On July 26, 2007, the Group converted a wholly-owned general partnership that held its Pebble Property interest into a limited partnership, the Pebble Partnership. Anglo American plc ("Anglo American") through a wholly-owned subsidiary subscribed for 50% of the Pebble Partnership's equity effective July 31, 2007. The Group (through a wholly-owned subsidiary) and Anglo American have equal rights in the Pebble Partnership. To maintain its 50% interest in the Pebble Partnership, Anglo American is required to commit staged cash investments into the Pebble Partnership aggregating to US$1.5 billion.

Anglo American’s staged investment requirements include an initial minimum expenditure of US$125 million (completed in 2008) towards a prefeasibility report. The prefeasibility report is to be approved by the Board of the general partner (Pebble Mines Corp.), and is to summarize all previous prefeasibility studies. The Board of the general partner is also to approve the alternatives for a final feasibility study. Anglo American is 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 US$450 million, which amount is to be expended in producing a final feasibility study and in related activities, which is expected to take the Pebble Partnership to a production decision. Upon an affirmative decision by the Pebble Partnership to develop a mine, Anglo American is required to commit to the remaining portion of the total investment of US$1.5 billion in order to retain its interest in the Pebble Partnership. Following completion of the US$1.5 billion expenditure, any further expenditure will be funded by Anglo American and the Group on a 50/50 basis. To March 31, 2012, Anglo American has funded US$417 million ($437 million). The Pebble Partnership agreement provides for equal project control rights for both partners with no operator’s fees payable to either party.

The Group has determined that its investment in the Pebble Partnership qualifies as an interest in a jointly controlled entity under IAS 31, Interests in Joint Ventures, and applies the equity method in accounting for this interest. The Group has not recognized any share of the losses in the Pebble Partnership since inception as the Group has no obligation in respect to these losses as the agreement with Anglo American states that the distribution of losses funded by Anglo American are allocated 100% to Anglo American until the total investment of US$1.5 billion is met. For the period ended March 31, 2012, the Pebble Partnership has incurred losses totaling $18,065 (2011 – $9,777). Cumulative losses since inception of the Pebble Partnership to March 31, 2012 total $437,111 (2011 – $342,633). The accounting policies of the Pebble Partnership are the same as those followed by the Group. The Group’s investment in the Pebble Partnership is carried in US dollars. Exchange differences arising from the translation of the Group’s investment in the Pebble Partnership are recognized directly in the foreign currency translation reserve through other comprehensive loss.

Page 9

Northern Dynasty Minerals Ltd.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2012 and 2011

(Unaudited - Expressed in thousands of Canadian Dollars, unless otherwise stated)

Investment in the Pebble Partnership		As at March 31			As at December 31
		2012			2011
Carrying value at the beginning of the year	$	101,542		$	99,306
Foreign currency translation (note 7(c))		(1,947	)		2,236
Carrying value at the end of the period	$	99,595		$	101,542

Summary financial information for the equity accounted investee, not adjusted for the 50% ownership held by the Group, is as follows:

Assets and Liabilities		As at March 31		As at December 31
		2012		2011
Non-current assets	$	100,608	$	101,311
Current assets		9,861		14,095
Total assets	$	110,469	$	115,406
Current liabilities		8,680		10,522
Total liabilities	$	8,680	$	10,522

Losses		For the three months ended March 31
		2012		2011
Net loss for the period	$	18,065	$	9,777
Net cumulative losses		437,111		342,633

	The net loss and the cumulative losses of the Pebble Partnership have not been included in the Financial Statements of the Group.
4.	EXPLORATION AND EVALUATION ASSETS

		As at March 31		As at December 31
		2012		2011
Cost at beginning of year	$	1,055	$	1,055
Additions		–		–
Cost at end of period	$	1,055	$	1,055

On June 29, 2010, the Group entered into a binding letter agreement with Liberty Star Uranium & Metals Corp. and its subsidiary, Big Chunk Corp. (together, "Liberty Star"), pursuant to which Liberty Star sold 60.7 square kilometers of mineral claims located to the west of the Pebble Project in consideration for a US$1 million (approximately $1.1 million) cash payment. In addition, a loan of US$3 million ($3.1 million) was provided by the Group to Liberty Star (note 5(a)). The Pebble Partnership had the right to acquire these claims from the Group but declined to exercise that right.

Page 10

Northern Dynasty Minerals Ltd.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2012 and 2011

(Unaudited - Expressed in thousands of Canadian Dollars, unless otherwise stated)

5. AMOUNTS RECEIVABLE AND OTHER ASSETS

		As at March 31		As at December 31
		2012		2011
Amounts receivable	$	179	$	236
Loan receivable (a)		4,316		4,292
Other assets – prepayments		474		176
Total	$	4,969	$	4,704

(a)	Loan receivable
	The Group advanced to Liberty Star US$3 million ($3.1 million) pursuant to a letter agreement dated June 29, 2010. Pursuant to amendments to the letter agreement dated September 8, 2011 and November 14, 2011, the principal amount of the loan was increased for the amounts expended by the Group in 2011 and 2010 on annual assessment work, rental and related fees relating to Liberty Star’s claims in Alaska.
	The following summarizes the movement in the loan receivable:

		As at March 31			As at December 31
		2012			2011
Balance at beginning of year	$	4,292		$	3,136
Additions
Expenses paid		–			740
Interest		107			334
Foreign exchange (loss) gain		(83	)		82
Balance at end of period	$	4,316		$	4,292

The loan receivable accrues interest at 10% per annum compounded monthly and is secured by assets and mining claims owned by Liberty Star in Alaska, USA. The loan and accrued interest is repayable on demand and will be due within 45 days thereof, or convertible into Liberty Star shares, provided the Group has spent at least a minimum amount (the “Minimum Expenditure”) earning into a joint venture (which has still to be formed as of the date of these Financial Statements – see below). The Minimum Expenditure was originally set at US$1 million, but the Group and Liberty Star subsequently agreed on November 14, 2011 to reduce the Minimum Expenditure to US$272 as a result of the additions to the loan. The Group has still to complete this expenditure requirement.

Page 11

Northern Dynasty Minerals Ltd.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2012 and 2011

(Unaudited - Expressed in thousands of Canadian Dollars, unless otherwise stated)

Subject to negotiating and signing a definitive earn-in option and joint venture agreement ("JV Agreement"), the Group can earn a 60% interest in certain of Liberty Star’s properties in Alaska by spending US$10 million in exploration and claim maintenance on those properties over six years. The initial loan advanced plus accrued interest may be applied as part of the earn-in requirements, at the Group’s discretion. Should a JV Agreement be entered into, the loan plus accrued interest is to be paid back to the Group upon 45 days’ notice after the earlier of:

a.	The completion of the earn-in expenditure; or
b.	The Group decides to voluntarily terminate the JV Agreement provided the Group has spent at least the Minimum Expenditure; or
c.	Liberty Star terminates the JV Agreement due to a superior 3rd party offer.

The loan is convertible at the option of the Group, until the loan is repaid or deemed repaid, into common shares of Liberty Star based on a 5 day volume weighted average share price less the maximum allowable discount applicable as if Liberty Star shares were listed on the TSX Venture Exchange, provided that the Group has spent the Minimum Expenditure. The loan may be pre- paid by Liberty Star without penalty at any time on 10 days’ prior notice, during which the Group’s conversion rights will be unaffected.

6.

CASH AND CASH EQUIVALENTS

		As at March 31		As at December 31
		2012		2011
Business and savings accounts	$	16,339	$	28,055
Guaranteed investment certificates		19,388		9,402
Total	$	35,727	$	37,457

7. CAPITAL AND RESERVES

(a)	Authorized Share Capital
	At March 31, 2012, the authorized share capital comprised an unlimited number of common shares. The common shares do not have a par value. All issued shares are fully paid.
(b)	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 "2011 Rolling Option Plan") is based on the maximum number of eligible shares equaling a rolling percentage of 10% of the Group's outstanding common shares, calculated from time to time. Pursuant to the 2011 Rolling Option Plan, if outstanding share purchase options are exercised and the number of issued and outstanding common shares of the Group increases, then the share purchase options available to grant under the plan increase proportionately. The exercise price of each share purchase 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. Share purchase options can have a maximum term of ten years (although share purchase options have generally been granted with a term of up to five years) and typically terminate 90 days following the termination of the optionee’s employment or engagement, except in the case of retirement or death. The vesting period for share purchase options is at the discretion of the Board of Directors at the time the options are granted.

Page 12

Northern Dynasty Minerals Ltd.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2012 and 2011

(Unaudited - Expressed in thousands of Canadian Dollars, unless otherwise stated)

The following summarizes the changes in the Group’s outstanding share purchase options for the period ended March 31, 2012 and 2011:

			2012				2011
			Weighted				Weighted
	Number of		average	Number of			average
	share		exercise	share			exercise
	purchase		price	purchase			price
Continuity of share options	options		($/option)	options			($/option)
Balance at beginning of year	8,306,782		8.71	6,795,110		$	6.19
Granted	–		–	2,198,400		$	15.44
Exercised	(17,000	)	5.00	(573,083	)	$	5.59
Forfeited	–		–	(33,000	)	$	7.59
Balance at the end of the period	8,289,782		8.72	8,387,427		$	8.65

Share purchase options exercised during the period were as follows:

		Weighted average	Weighted average
	Share purchase	exercise price	share price
Period	options exercised	($/option)	($)
January 1 – March 31, 2012	17,000	5.00	7.85
	17,000	5.00	7.85

The weighted average fair value of share purchase options outstanding as at March 31, 2012 was $3.55 (2011 – $4.07) . In the period ended March 31, 2012, no share purchase options were granted. For the period ended March 31, 2011, the fair value was estimated based on the Black-Scholes option pricing model using the following weighted average assumptions:

		For the three
		months ended
		March 31
		2011
Risk-free interest rate		2.29%
Expected life		4.15 years
Expected volatility		64%
Grant date share price	$	13.78
Expected dividend yield		Nil

Option pricing models require the input of highly subjective assumptions including the expected price volatility. The Group determines volatility using historical closing prices as a basis for expected volatility from three to five years. Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable measure of the fair value of the Group's share purchase options.

Page 13

Northern Dynasty Minerals Ltd.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2012 and 2011

(Unaudited - Expressed in thousands of Canadian Dollars, unless otherwise stated)

(c) Foreign Currency Translation Reserve

		For the three months ended March 31
		2012			2011
				$
Balance at beginning of year	$	2,470			316
Exchange loss on translation of investment in the Pebble Partnership		(1,947	)		(2,496	)
Deferred income tax on investment		72			91
				$
Balance at the end of period	$	595			(2,089	)

	The foreign currency translation reserve represents accumulated exchange differences arising on the translation of the investment in the Pebble Partnership which has a US dollar functional currency and the related tax effect that has been recognized in other comprehensive loss.
8.	RELATED PARTY BALANCES AND TRANSACTIONS
	Transactions and balances with Key Management Personnel
	The aggregate value of transactions with key management personnel being directors and senior management comprising the Senior Vice President ("VP"), Corporate Development; VP, Engineering and VP, Public Affairs were as follows:

		For the three months ended March 31
Compensation		2012		2011
Short-term employee benefits (1)	$	401	$	410
Share-based compensation		958		3,439
Total	$	1,359	$	3,849

(1) Short-term employee benefits include salaries and directors fees.

Transactions and balances with other Related Parties

The aggregate value of transactions and outstanding balances with related parties were as follows:

		For the three months ended March 31
Transactions		2012		2011
Entity with significant influence (a)
Services rendered to the Group	$	730	$	870
Reimbursement of third party expenses incurred on behalf of the Group		653		317
Total paid by the Group	$	1,383	$	1,187

Page 14

Northern Dynasty Minerals Ltd.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2012 and 2011

(Unaudited - Expressed in thousands of Canadian Dollars, unless otherwise stated)

		As at March 31		As at December 31
Balances receivable from related parties		2012		2011
Entity with significant influence (a)	$	115	$	483
Total	$	115	$	483

(a) A private company provides geological, corporate development, administrative and management services to the Group and its subsidiaries at annually set rates pursuant to a management services agreement. The private company also incurs third party costs on behalf of the Group which is reimbursed by the Group at cost. The Group may also make pre-payments for services under terms of the services agreement. Several directors and other key management personnel of the private company, who are close business associates, are also key management personnel of the Group.

9.	BASIC AND DILUTED LOSS PER SHARE
	The calculation of basic and diluted loss per share for the period ended March 31, 2012 was based on the following:

		As at March 31		As at March 31
		2012		2011
Loss attributable to common shareholders	$	4,061	$	8,098
Weighted average number of common shares outstanding		94,989,599		94,567,497

	Diluted loss per share did not include the effect of 8,289,782 (2011 – 8,387,427) share purchase options as they are anti-dilutive.
10.	EMPLOYMENT COSTS
	The amount of salaries and benefits included in expenses are as follows:

		For the three months ended March 31
		2012		2011
Exploration
Salaries	$	233	$	178
Administration
Salaries		536		778
Share-based compensation		1,777		6,501
Total	$	2,546	$	7,457

11.	COMMITMENTS AND CONTINGENCIES
	Due to the nature of the Group’s operations, various legal and tax matters are outstanding from time to time. In the opinion of management, there are no matters that could have a material effect on the Group’s condensed consolidated interim financial position or results of operations which require additional disclosure in these Financial Statements.

Page 15