EXHIBIT 99.2

CONSOLIDATED

FINANCIAL STATEMENTS

FOR THE YEARS ENDED

DECEMBER 31, 2023 AND 2022

(Expressed in thousands of Canadian Dollars)

Northern Dynasty Minerals Ltd.
Consolidated Financial Statements
Table of Contents	Page
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 1208)	2
Opinion on the Financial Statements
Opinion on Internal Control over Financial Reporting
Consolidated Statements of Financial Position	5
Consolidated Statements of Comprehensive Loss	6
Consolidated Statements of Cash Flows	7
Consolidated Statements of Changes in Equity	8
Notes to the Consolidated Financial Statements	9-41

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

Northern Dynasty Minerals Ltd.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial position of Northern Dynasty Minerals Ltd. and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive loss, cash flows, and changes in equity, for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and its financial performance and its cash flows for each of the two years in the period ended December 31, 2023, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 1, 2024, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company incurred a consolidated net loss of $21 million during the year ended December 31, 2023 and, as of that date, the Company’s consolidated deficit was $697 million. These conditions, along with other matters set forth in Note 1, raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which it relates.

Mineral property, plant and equipment – Assessment of Whether Indicators of Impairment Exist – Refer to Notes 1 and 2(r) to the financial statements

Critical Audit Matter Description

At the end of each reporting period, the carrying amounts of the Company’s non-financial assets are reviewed to determine whether there is any indication that these assets are impaired. The Company holds the rights to the Pebble exploration stage mineral property (the “Pebble Project”). In 2020, the US Army Corps of Engineers (“USACE”) issued a negative Record of Decision (the “ROD”) on the Pebble Partnership’s permit application for the Pebble Project. The Company submitted its request for appeal of the ROD with the USACE Pacific Ocean Division on January 19, 2021, which was remanded back to USACE Alaska District on April 24, 2023. On January 30, 2023 the Environment Protection Agency (“EPA”) issued its Final Determination imposing limitations on the use of certain waters in the Bristol Bay watershed as disposal sites for certain discharges of dredged or fill material associated with development of a mine at the Pebble deposit. On March 15, 2024, the Company announced that it had filed two separate actions in the US federal courts challenging the Final Determination. Taking into consideration the Company’s options in the event the ROD appeal is successful or unsuccessful, the outcome of the Final Determination challenge and the Company’s market capitalization as at December 31, 2023, the Company concluded there were no indicators of impairment on the Pebble Project as at December 31, 2023.

While there are several factors that must be considered to determine whether or not an indicator of impairment exists for the Pebble Project, the judgments associated with the Company’s ability to develop the Pebble Project including the options to obtain federal and state permits, the outcome of the Final Determination challenge and the considerations of the Company’s market capitalization excess are the most subjective factors. Auditing these judgments required a high degree of subjectivity in applying audit procedures and in evaluating the results of those procedures. This resulted in an increased extent of audit effort.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s assessment of indicators of impairment of whether there were events or change in circumstances that may suggest that the carrying amount of the Pebble Project is impaired included the following, among others:

· Evaluated the effectiveness of controls over management’s assessment of indicators of impairment relating to the Pebble Project, including the identification of events or changes in circumstances that may suggest that the carrying amount of the Pebble Project is impaired.

· Evaluated the reasonableness of the Company’s ability and options to obtain federal and state permits to develop the Pebble Project, including consideration of the outcome of the Final Determination challenge by:

○	Evaluating regulatory developments relating to federal and state permitting processes and the impact on the Company’s ability to continue to explore and develop the Pebble Project.
○	Evaluating the reasonableness of management’s assessment of potential alternatives for the future permitting and development of the Pebble Project by having discussions with the Company’s internal legal counsel and reviewing legal opinion provided by the Company’s external counsel.
○	Read internal communications to management and the board of directors, external communications by management to analysts and investors, and other publicly available information to evaluate whether there was evidence of indicators of impairment that contradicted management’s assessment.

· Evaluated the reasonableness of management’s considerations of the excess of the Company’s market capitalization compared to its asset carrying value in its assessment of impairment indicators.

Convertible Notes – Valuation of Embedded Conversion Features – Refer to Notes 1, 2(r) and 7 to the financial statements

Critical Audit Matter Description

In December 2023, the Company issued convertible notes which in addition to the host notes contain a conversion feature, a change of control option and a redemption option that are recorded as derivatives (the “derivative on convertible notes”). Management estimated the fair value of the derivative on convertible notes using a binomial option pricing model with formulae based on the Cox-Ross-Rubenstein approach (the “model”) at both inception and year-end. Management made judgments on the selection of an appropriate valuation model and the estimates and assumptions used including stock price volatility, risk-free interest rates, and expected life of the derivative on convertible notes.

While there are several estimates and assumptions that are required to determine the fair value of the derivative on convertible notes, the estimate and assumption with the highest degree of subjectivity is the Company’s stock price volatility (the “volatility”).  Auditing the model and the volatility required a high degree of auditor judgments and an increased extent of audit effort including the involvement of fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the model and the volatility used to determine the fair value of the derivative on convertible notes included the following, among others:

· Evaluated the effectiveness of controls over the Company’s determination of fair value of the derivative on convertible notes, including those over the model and the volatility.

· With the assistance of fair value specialists, evaluated the model and the volatility used to determine the fair value of the derivative on convertible notes by:

o Evaluating the volatility with consideration of the credit spread on the host notes and comparing that result to management’s financial statement disclosures.

o Developing a range of independent estimates of the derivative on convertible notes and comparing those to the fair value recorded at both inception and as of December 31, 2023.

/s/ Deloitte LLP

Chartered Professional Accountants

Vancouver, Canada

April 1, 2024

We have served as the Company’s auditor since 2009.

Page | 3

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

Northern Dynasty Minerals Ltd.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Northern Dynasty Minerals Ltd. and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated April 1, 2024, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) 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.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte LLP

Chartered Professional Accountants

Vancouver, Canada

April 1, 2024

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Northern Dynasty Minerals Ltd.

Consolidated Statements of Financial Position

(Expressed in thousands of Canadian Dollars)

		December 31			December 31
	Notes	2023			2022
ASSETS
Non-current assets
Restricted Cash	5(b)	$	872		$	852
Mineral property, plant and equipment	3		121,851			127,531
Total non-current assets			122,723			128,383
Current assets
Receivable from related party	8		17			–
Amounts receivable and prepaid expenses	4		2,908			2,662
Cash and cash equivalents	5(a)		18,200			14,173
Total current assets			21,125			16,835
Total Assets		$	143,848		$	145,218
EQUITY
Capital and reserves
Share capital	6	$	702,950		$	700,278
Reserves	6		117,292			118,369
Deficit			(696,958	)		(675,962	)
Total equity			123,284			142,685
LIABILITIES
Non-current liabilities
Trade and other payables	9		338			463
Total non-current liabilities			338			463
Current liabilities
Convertible notes liability	7		2,197			–
Derivative on convertible notes	7		16,687			–
Payables to related parties	8		287			237
Trade and other payables	9		1,055			1,833
Total current liabilities			20,226			2,070
Total liabilities			20,564			2,533
Total Equity and Liabilities		$	143,848		$	145,218

Nature and continuance of operations (note 1)

Commitments and contingencies (note 15)

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

These consolidated financial statements are signed on the Company's behalf by:

/s/ Ronald W. Thiessen	/s/ Christian Milau
Ronald W. Thiessen	Christian Milau
Director	Director

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Northern Dynasty Minerals Ltd.
Consolidated Statements of Comprehensive Loss
(Expressed in thousands of Canadian Dollars, except for share information)
		Year ended December 31
	Notes	2023			2022
Expenses
Exploration and evaluation expenses	10,11	$	7,729		$	9,269
General and administrative expenses	10,11		10,161			9,026
Legal, accounting and audit	10		3,389			4,010
Share-based compensation	6(d),(e)		1,068			2,301
Loss from operating activities			22,347			24,606
Foreign exchange loss (income)			149			(55	)
Interest income			(270	)		(279	)
Finance expense			81			67
Other income			(22	)		(3	)
(Gain) loss on disposal of plant and equipment			–			(1	)
Gain on change in fair value of convertible notes derivative	7		(1,179	)		–
Net loss before tax		$	21,106		$	24,335
Income tax (recovery) expense			(110	)		107
Net loss		$	20,996		$	24,442
Other comprehensive loss (income)
Items that may be subsequently reclassified to net loss
Foreign exchange translation difference	6(f)		2,858			(9,333	)
Other comprehensive loss (income)		$	2,858		$	(9,333	)
Total comprehensive loss		$	23,854		$	15,109
Basic and diluted loss per share	12	$	0.04		$	0.05

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

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Northern Dynasty Minerals Ltd.
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian Dollars)
		Year ended December 31
	Notes	2023			2022
Operating activities
Net loss		$	(20,996	)	$	(24,442	)
Non-cash or non operating items
Depreciation	3		164			259
Interest income			(270	)		(279	)
Gain on disposal of plant and equipment			–			(1	)
Gain on change in fair value of convertible notes derivative	7		(1,179	)		–
Share-based compensation			1,068			2,301
Unrealized exchange (gain) loss			(58	)		31
Changes in working capital items
Amounts receivable and prepaid expenses			(242	)		(565	)
Amounts receivable from related party			(17	)		–
Trade and other payables			(799	)		(1,120	)
Payables to related parties			52			(141	)
Net cash used in operating activities			(22,110	)		(23,957	)
Investing activities
Acquisition of plant and equipment			–			(31	)
Disposal of plant and equipment			1			1
Proceeds from royalty transactions on mineral property interest	3		2,761			15,463
Interest received on cash and cash equivalents			186			238
Net cash from investing activities			2,948			15,671
Financing activities
Proceeds from private placement of units	7(b)		3,422			–
Transaction costs on private placement of units	7(b)		(37	)		–
Payments of principal portion of lease liabilities	9		(153	)		(129	)
Proceeds on issue of convertible notes	7		20,100			–
Transaction costs on issue of convertible notes	7		(22	)		–
Net cash from (used in) financing activities			23,310			(129	)
Net increase (decrease) in cash and cash equivalents			4,148			(8,415	)
Effect of exchange rate fluctuations on cash and cash equivalents			(121	)		297
Cash and cash equivalents - beginning balance			14,173			22,291
Cash and cash equivalents - ending balance	5(a)	$	18,200		$	14,173

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

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Northern Dynasty Minerals Ltd.

Consolidated Statements of Changes in Equity

(Expressed in thousands of  Canadian Dollars, except for share information)

	Notes	Share capital				Reserves
						Equity -			Foreign
						settled			currency						Share
		Number of				share-based			translation			Investment			Purchase
		shares				compensation			reserve			revaluation			Warrants					Total
		(note 6(a))		Amount		reserve			(note 6(f))			reserve			(note 6(c))		Deficit			equity
Balance at January 1, 2022			529,779,388	$	700,278	$	77,723		$	28,758		$	(17	)	$	271	$	(651,520	)	$	155,493
Share-based compensation	6(d),(e)		–		-		2,301			-			-			-		-			2,301
Net loss			–		-		-			-			-			-		(24,442	)		(24,442	)
Other comprehensive income net of tax			–		-		-			9,333			-			-		-			9,333
Total comprehensive loss																					15,109
Balance at December 31, 2022			529,779,388	$	700,278	$	80,024		$	38,091		$	(17	)	$	271	$	(675,962	)	$	142,685
Balance at January 1, 2023			529,779,388	$	700,278	$	80,024		$	38,091		$	(17	)	$	271	$	(675,962	)	$	142,685
Private placement of units comprising of one share and one warrant, net of transactions costs	6(b)		8,555,000		2,573		-			-			-			812		-			3,385
Shares issued upon redemption of Deferred Share Units	6(e)		143,622		99		(99	)		-			-			-		-			-
Share-based compensation	6(d),(e)		–		-		1,068			-			-			-		-			1,068
Net loss			–		-		-			-			-			-		(20,996	)		(20,996	)
Other comprehensive income net of tax			–		-		-			(2,858	)		-			-		-			(2,858	)
Total comprehensive loss																					(23,854	)
Balance at December 31, 2023			538,478,010	$	702,950	$	80,993		$	35,233		$	(17	)	$	1,083	$	(696,958	)	$	123,284

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

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Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

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 NYSE American Exchange (“NYSE American”) under the symbol “NAK”.  The Company’s corporate office is located at 1040 West Georgia Street, 14^th floor, Vancouver, British Columbia. 

The consolidated financial statements (“Financial Statements”) of the Company as at and for the year ended December 31, 2023, include financial information for the Company and its subsidiaries (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-Rhenium Project (the “Pebble Project”) located in Alaska, United States of America (“USA” or “US”).  All US dollar amounts when presented are denoted “US$” and expressed in thousands, unless otherwise stated.

The Group is in the process of exploring and evaluating 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 quarter ended December 31, 2023, the Group raised aggregate gross proceeds of $26,283.  Proceeds were raised through (i) a US$2,000 ($2,761) investment towards the second tranche pursuant to the royalty agreement (see below), (ii) the private placement of equity units for $3,422 (note 6(b)), and (iii) the issue in aggregate of US$15,000 ($20,100) in convertible notes (note 7). 

As of December 31, 2023, the Group had $18,200 (2022 – $14,173) in cash and cash equivalents for its operating requirements and working capital (current assets minus current liabilities) of $899 (2022 – $14,765).  These Financial Statements have been prepared based on a going concern, which assumes that the Group will be able to raise sufficient funds to continue its exploration and development activities and satisfy its obligations as they come due.  For the year ended December 31, 2023, the Group incurred a net loss of $20,996 (2022 – $24,442), and had a deficit of $696,958 as of December 31, 2023 (2022 – $675,962).  The Group has prioritized the allocation of its financial resources to meet key corporate and Pebble Project expenditure requirements in the near term, including funding the ongoing activities relating to the appeal and remand of the Record of Decision (the “ROD”) and the Group’s response to the US Environmental Protection Agency (“EPA”)’s final determination (both discussed below).  Additional financing will be required to progress any material expenditures relating to the permitting of the Pebble Project.  Additional financing may include any of or a combination of debt, equity (subject to terms of the convertible notes (note 7)), royalties and/or contributions from possible new Pebble Project participants.  The Group received a US$2,000 investment towards the second US$12,000 tranche on execution of an amendment to the royalty agreement. The amendment provides the royalty holder with the right to fund the remainder of the second trance in five US$2,000 investments (note 3).  There can be no assurances that the Group will be successful in obtaining additional financing or funding when required.  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 raises substantial doubt about the Group’s ability to continue as a going concern. 

These Financial Statements do not reflect adjustments to the carrying values and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern, and such adjustments could be material.   

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Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

The Group, through the Pebble Limited Partnership (“Pebble Partnership”), initiated federal and state permitting for the Pebble Project under the National Environmental Protection Act (“NEPA”) by filing documentation for a Clean Water Act (“CWA”) 404 permit with the US Army Corps of Engineers (“USACE”) in December 2017.  The USACE published a draft Environmental Impact Statement (“EIS”) in February 2019 and completed a 120-day public comment period thereon on July 2, 2019.  In late July 2019, the EPA withdrew the determination initiated under Section 404(c) of the CWA in 2014 for the waters of Bristol Bay (“Proposed Determination”), which attempted to pre-emptively veto the Pebble Project before it received an objective, scientific regulatory review under NEPA.  On July 24, 2020, the USACE published the final EIS.  On November 25, 2020, the USACE issued a ROD rejecting the Pebble Partnership’s permit application, finding concerns with the proposed compensatory mitigation plan and determining the project would be contrary to the public interest.  The ROD rejected the compensatory mitigation plan as “non-compliant” and determined the project would cause “significant degradation” and was contrary to the public interest.  Based on this finding, the USACE rejected Pebble Partnership’s permit application under the CWA.  On January 19, 2021, the Pebble Partnership submitted its request for appeal of the ROD with the USACE Pacific Ocean Division (“USACE POD”) (the “RFA”).  On February 24, 2021, the USACE POD notified the Pebble Partnership that the RFA was complete and met the criteria for appeal and assigned a review officer (“RO”) to oversee the administrative appeal process at that time but subsequently assigned a new RO.  The USACE POD also indicated that due to the complexity of issues and volume of materials associated with the Pebble Project case, the review would take additional time than what federal regulations suggest, which was that the appeal should conclude within 90 days, and no case extend beyond one year.  In June 2021, the USACE POD completed the ‘administrative record’ for the appeal and provided a copy to the Pebble Partnership, following which the Pebble Partnership and its legal counsel reviewed the voluminous record for completeness and relevance to the USACE’s permitting decision, and its sufficiency to support a fair, transparent and efficient review.  An appeal conference was held in July 2022.  On April 24, 2023, the USACE POD issued its decision to remand the permit application denial to the USACE Alaska District (the “District”) so the District can re-evaluate specific issues.  As a result of the remand decision and in light of the EPA’s Final Determination (discussed below), the District was instructed to review the appeal decision and had 45 days to notify the parties how it plans to proceed.  Six extensions have been requested and granted.  The District’s current deadline was until the US Supreme Court acted on the State of Alaska’s bill of complaint challenging the EPA’s exercise of its CWA, Section 404(c) authority.  The State of Alaska had filed a Motion for Leave to File a Bill of Complaint with the US Supreme Court challenging the Final Determination on July 26, 2023, but subsequent to the reporting date on January 8, 2024, the Supreme Court announced they would not hear the State’s complaint directly and it would have to go through the normal US federal court process.  The District has not acted on this decision, but the Division Commander has informed the Company that it will provide an update on its decision, with no specific timeline for that response.  As a result, the outcome from the remand remains uncertain.  

On October 29, 2021, the court granted the EPA’s motion for remand, and vacated the EPA’s 2019 withdrawal of the Proposed Determination decision, thus reinstating the Proposed Determination.  The court declined to impose a schedule on the EPA’s proceedings on remand.  On May 25, 2022, the EPA announced that it intended to advance its pre-emptive veto of the Pebble Project and issued a Revised Proposed Determination.  Public comments on the revised Proposed Determination closed on September 6, 2022.  The Pebble Partnership submitted extensive comments on the Revised Proposed Determination, objecting to the EPA’s pre-emptive veto of the Pebble Project and stating its concerns about legal and factual flaws therein.  On January 30, 2023, the EPA issued a Final Determination under Section 404(c) of the CWA, imposing limitations on the use of certain waters in the Bristol Bay watershed as disposal sites for certain discharges of dredged or fill material associated with development of a mine at the Pebble deposit.  This Final Determination is the concluding step in the administrative process set forth in 40 C.F.R. Part 231, which governs the EPA’s authority under Section 404(c) to veto permit decisions.  The Administrative Procedure Act (“APA”), 5 USC §551 et seq., which governs judicial review of agency decisions, provides that individuals aggrieved by agency action may seek judicial review of any “final agency action.”  The EPA’s administrative determination can be challenged by filing a lawsuit in US federal district court seeking reversal of that decision. 

The Company and the Pebble Partnership are seeking judicial review of the Final Determination.  Subsequent to the reporting date, on March 15, 2024, the Company announced that it and the Pebble Partnership had filed two separate actions in the US federal courts challenging the federal government’s actions to prevent it and the Pebble Partnership from building a mine at the Pebble Project.  

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Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

2.	MATERIAL 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 for the year ended December 31, 2023.  These Financial Statements were authorized for issue by the Board of Directors on April 1, 2024. 

(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 financial instruments carried at fair value.  The accounting policies set out below have been applied consistently to all periods presented in these Financial Statements unless otherwise stated. 

(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:  

Name of Subsidiary	Place of Incorporation	Principal Activity	Percent owned
3537137 Canada Inc. 1	Canada	Holding Company. Wholly-owned subsidiary of the Company.	100%
Pebble Services Inc.	Nevada, USA	Management and services company. Wholly-owned subsidiary of the Company.	100%
Northern Dynasty Partnership	Alaska, USA	Holds 99.9% interest in the Pebble Partnership and 100% of Pebble Mines.	100% (indirect)
Pebble Limited Partnership (“Pebble Partnership”)	Alaska, USA	Limited Partnership. Ownership and Exploration of the Pebble Project.	100% (indirect)
Pebble Mines Corp. (“Pebble Mines”)	Delaware, USA	General Partner. Holds 0.1% interest in the Pebble Partnership.	100% (indirect)
Pebble West Claims Corporation 2	Alaska, USA	Holding Company. Subsidiary of the Pebble Partnership.	100% (indirect)
Pebble East Claims Corporation 2	Alaska, USA	Holding Company. Subsidiary of the Pebble Partnership.	100% (indirect)
Pebble Pipeline Corporation	Alaska, USA	Holding Company. Subsidiary of the Pebble Partnership.	100% (indirect)
Pebble Performance Dividend LLC	Alaska, USA	Holding Company. Subsidiary of the Pebble Partnership.	100% (indirect)
U5 Resources Inc.	Nevada, USA	Holding Company. Wholly-owned subsidiary of the Company.	100%
Cannon Point Resources Ltd.	British Columbia, Canada	Not active. Wholly-owned subsidiary of the Company.	100%

Page | 11

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

Name of Subsidiary	Place of Incorporation	Principal Activity	Percent owned
MGL Subco Ltd. (“MGL”)	British Columbia, Canada	Not active. Wholly-owned subsidiary of the Company.	100%
Delta Minerals Inc. (“Delta”)	British Columbia, Canada	Not active. Wholly-owned subsidiary of MGL.	100% (indirect)
Imperial Gold Corporation (“Imperial Gold”)	British Columbia, Canada	Not active. Wholly-owned subsidiary of Delta.	100% (indirect)
Yuma Gold Inc.	Nevada, USA	Not active. Wholly-owned subsidiary of Imperial Gold.	100% (indirect)

Notes:

1.	Holds a 20% interest in the Northern Dynasty Partnership. The Company holds the remaining 80% interest.
2.	Both entities together hold 1,840 claims comprising the Pebble Project.

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) 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 Services Inc., Pebble Mines Corp., the Pebble Partnership and its subsidiaries, and Yuma Gold Inc. 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 the 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. 

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.

Page | 12

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

(e) Financial Instruments

On initial recognition, a financial asset is classified as measured at amortized cost; fair value through other comprehensive income (“FVTOCI”) (debt / equity investment); or fair value through profit or loss (“FVTPL”).  A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition.

The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. 

Classification of financial assets

Amortized cost

For a financial asset to be measured at amortized cost, it needs to meet both of the following conditions and not be designated as at FVTPL: 

· it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

· its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

The Group’s financial assets at amortized cost consist of restricted cash, amounts receivable, and cash and cash equivalents. 

Fair value through other comprehensive income (“FVTOCI”)

For a debt investment to be measured at FVTOCI, it needs to meet both of the following conditions and not be designated as at FVTPL:

· it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

· its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Equity instruments at FVTOCI

On initial recognition, the Group may irrevocably elect to present subsequent changes in the instrument’s fair value in other comprehensive income (“OCI”) provided it is not held for trading.  This election is made on an investment-by-investment basis.

Fair Value through profit or loss (“FVTPL”)

All financial assets not class ified as measured at amortised cost or FVTOCI are measured at FVTPL.  This includes all derivative financial assets.  On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVTOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. 

Page | 13

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

The following accounting policies apply to the subsequent measurement of financial assets:

Financial assets at FVTPL	These assets are subsequently measured at fair value.  Net gains and losses, including any interest or dividend income, are recognised in profit or loss.
Financial assets at amortized cost	These assets are subsequently measured at amortised cost using the effective interest method.  The amortized cost is reduced by impairment losses (see below).  Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss.  Any gain or loss on derecognition is recognised in profit or loss.
Debt investments at FVTOCI	These assets are subsequently measured at fair value.  Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in OCI.  On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.
Equity investments at FVTOCI	These assets are subsequently measured at fair value.  Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment.  Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.

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 FVTOCI, a significant or prolonged decline in the fair value of the securities below their cost is considered to be objective evidence of impairment. 

Financial liabilities

Derivative financial liabilities:

The Group has a derivative financial liability which relates to the derivative on the US denominated convertible notes (note 7). 

Derivative financial liabilities are stated at fair value, with any gains or losses on re-measurement after initial recognition recognized in the Statement of Loss.  Any attributable transactions costs are expensed as incurred. 

Fair value is determined in the manner described in the policy note (i) below and further discussed in Note 7. 

Non-derivative financial liabilities:

The Group has non-derivative financial liabilities which consist of trade and other payables and payables to related parties. 

All financial liabilities that are not held for trading or designated as at FVTPL are recognized initially at fair value net of any directly attributable transaction costs.  After initial recognition these financial liabilities are measured at amortized cost using the effective interest method.

(f) 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.

Page | 14

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

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 or 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.

(g) 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. 

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.  Amounts received pursuant to the royalty arrangement (note 3), and which will be in set amounts, are recognized as sales of mineral property interests.  No gain or loss is recognized until the consideration received is in excess of the carrying amount. 

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 such as through sales pursuant to the royalty arrangement as noted above. 

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 straight-line method at various rates ranging from 10% to 50% 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.

Page | 15

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

(h) 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 of disposal 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. 

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. 

(i) Convertible Notes

Convertible Notes issued by the Group represent a compound financial instrument that includes the host debt component and a foreign exchange equity conversion component, with the proceeds received allocated between the two components at the date of issue.  The Group assesses whether the convertible component qualifies as equity or is considered a derivative liability.  The debt liability component is initially recognized at the difference between the fair value of the convertible notes as a whole and the fair value of the derivative liability component, using a Binomial Option Pricing Model with formulae based on the Cox-Ross-Rubenstein approach.  The debt liability component is subsequently remeasured at amortized cost, with the proportionate share of the transaction costs offset against the balance.  The transaction costs allocated to the derivative liability component are recognized in the consolidated statement of loss at the initial recognition date.  The debt liability component is subsequently accreted to the face value of the debt liability component of the convertible notes at the effective interest rate.  The derivative liability component is re-measured at fair value at each reporting period with fair value gains or losses recognized in the Statement of Comprehensive Loss. 

(j) Leases

At inception of a contract, the Group assesses whether the contract is, or contains, a lease.  A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.  The Group has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less, and leases of low-value assets.  For these leases, the Group recognizes the lease payments as an expense in loss on a straight-line basis over the term of the lease. 

The Group recognizes a lease liability and a right-of-use asset (“ROU Asset”) at the lease commencement date. 

The lease liability is initially measured as the present value of future lease payments discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, using the Group’s incremental borrowing rate.  Generally, the Group uses its incremental borrowing rate as the discount rate.  The incremental borrowing rate is the rate which the Group would have to pay to borrow, over a similar term and with a similar security, the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment. 

Page | 16

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

Lease payments included in the measurement of the lease liability comprise the following:

· fixed payments, including in-substance fixed payments, less any lease incentives receivable;

· variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

· amounts expected to be payable by the Group under residual value guarantees;

· the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and

· payments of penalties for terminating the lease, if the Group expects to exercise an option to terminate the lease.

The lease liability is subsequently measured by:

· increasing the carrying amount to reflect interest on the lease liability;

· reducing the carrying amount to reflect the lease payments made; and

· remeasuring the carrying amount to reflect any reassessment or lease modifications.

The lease liability is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option. 

The ROU Asset is initially measured at cost, which comprises the following:

· the amount of the initial measurement of the lease liability;

· any lease payments made at or before the commencement date, less any lease incentives received;

· any initial direct costs incurred by the Group; and

· an estimate of costs to be incurred by the Group in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories.

The ROU Asset is subsequently measured at cost, less any accumulated depreciation and any accumulated impairment losses, and adjusted for any remeasurement of the lease liability.  It is depreciated from the commencement date to the earlier of the end of its useful life or the end of the lease term using either the straight-line or units-of-production method depending on which method more accurately reflects the expected pattern of consumption of the future economic benefits. 

Each lease payment is allocated between the lease liability and finance cost.  The finance cost is charged to the Statement of Comprehensive Loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. 

On the balance sheet, the ROU Assets are presented in “Mineral property, plant and equipment” (note 3) and the lease liabilities are presented in “Trade and other payables” (note 8). 

(k) Share Capital, Special Warrants, Warrants and Subscriptions for Shares

Common shares (“shares”), special warrants, warrants and subscriptions received for shares are classified as equity. Transaction costs directly attributable to the issue of these instruments are recognized as a deduction from equity, net of any tax effects. Where units comprising of shares and warrants are issued the proceeds and any transaction costs are apportioned between the shares and warrants according to their relative fair values.

Upon conversion of special warrants and warrants into shares and the issue of shares for subscriptions received, the carrying amount, net of a pro rata share of the transaction costs, is transferred to share capital.

Page | 17

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

(l) Insurance Recoveries

Insurance recoveries received from the Group’s insurance carriers are recognized when the proceeds have been received, including after the reporting period before the Financial Statements are authorized for issue.  The proceeds are recorded as reduction in the costs incurred in the Statement of Comprehensive Loss.   

(m) Share-based Payment Transactions

Equity-settled Share-based Option Plan

The Group operates an equity-settled share-based option plan for its employees and service providers (note 6(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 (the “Equity Reserve”).  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.

The fair value is measured at grant date for each tranche and is expensed on a straight-line basis over the vesting period, with a corresponding increase in the Equity Reserve.  The fair value 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. 

Equity-settled share-based payment transactions with non-employees are measured at the fair value of the goods or services received.  However, if the fair value cannot be estimated reliably, the share-based payment transaction is measured at the fair value of the equity instruments granted at the date the Group obtains the goods or the counterparty renders the service. 

Deferred Share Unit (“DSU”) Plan

The Group has a DSU plan for its non-executive directors (note 6(e)).  The Group determines whether to account for DSUs as equity-settled or cash-settled based on who determines settlement and past practice.  The fair value is recognized at grant date as an employee expense with a corresponding increase in the Equity Reserve if deemed equity-settled or a liability if deemed cash-settled. 

The fair value is estimated by multiplying the number of DSUs with the TSX quoted market price of the Company’s shares at grant date and expensed over the vesting period as share-based compensation in the Statement of Loss until the DSUs are fully vested.  If the DSUs are cash-settled, the expense and liability are adjusted each reporting period for changes in the TSX quoted market price of the Company’s shares. 

Restricted Share Unit (“RSU”) Plan

The Group has a RSU plan for its employees, executive directors and eligible consultants of the Group.  The Group determines whether to account for the RSUs as equity-settled or cash-settled based who determines settlement and past practice.  The fair value of RSUs is recognized as an employee expense with a corresponding increase in the Equity Reserve if deemed equity–settled or a liability if deemed cash-settled at grant date. 

The fair value is estimated by multiplying the number of RSUs with the TSX quoted market price of the Company’s common shares at the grant date.  It is then expensed over the vesting period with the credit recognized in equity in the Equity Reserve.  If cash-settled, the expense and liability are adjusted each reporting period for changes in the TSX quoted market price of the Company’s common shares.  

No RSUs have been issued or are outstanding in the years presented.  

Page | 18

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

(n) Income Taxes

Income tax on the profit or loss for the years presented consists of 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.

(o) 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 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. 

Page | 19

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

The Group has no material restoration, rehabilitation and environmental obligations as the disturbance to date is not significant.  The Group has posted two bonds with the Alaskan regulatory authorities as performance guarantees for any potential reclamation liability incurred as a condition for: (i) the issue of the Miscellaneous Land Use Permit at the Pebble Project (note 5(b)), and (ii) the granting of a pipeline right-of-way (note 15(b)). 

(p) Loss per Share

The Group presents basic and diluted loss per share information for its common shares, calculated by dividing the loss attributable to common shareholders of the Company by the weighted average number of common shares and any fully prepaid special warrants 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. 

(q) Segment Reporting

The Group operates in a single reportable operating segment – the acquisition, exploration and development of mineral properties.  The Group’s core asset, the Pebble Project, is in Alaska, USA.   

(r) Significant Accounting Estimates and Judgements

The preparation of these Financial Statements requires management to make certain estimates, judgements 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, if 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 an estimate of the fair value of share purchase options granted during the year. The fair value calculated is used to determine share-based compensation that is included in the Statement of Loss for the year. Inputs used in this model require subjective assumptions, including the expected price volatility from less than one year to five years. Changes in the subjective input assumptions can affect the fair value estimate.
2.	Estimates were used in determining the fair value of the derivative on the convertible notes including subjective assumptions on expected price volatility. Changes in these assumptions can materially affect the fair value estimate. The valuation method (note 2(i)) and underlying assumptions used in the measurement of the derivative on convertible notes is disclosed in Note 7.
3.	Significant assumptions about the future and other sources of estimation uncertainty are made in determining the provision for any deferred income tax expense that is included in the loss for the year and the composition of any deferred income tax liabilities included in the Statement of Financial Position.

Page | 20

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

Critical accounting judgements

These include:

1. The Group used judgement in concluding that no impairment indicators exist in relation to the Pebble Project, notwithstanding the receipt of the ROD denial of the permit by the USACE for the Pebble Project and the Final Determination issued by the EPA that prohibits the disposal of dredged or fill material for the Pebble Project, both of which may be considered an indicator under IFRS 6, Exploration for and Evaluation of Mineral Resources, for testing for impairment. Key to the Group’s judgement conclusion include the following:

· The Group submitted an administrative appeal with the USACE POD on the permit denial and the USACE POD has remanded the permit decision to the USACE Alaska District to re-evaluate specific issues. The Group is awaiting the USACE Alaska District’s next steps in this regard;

· The Group has legal avenues to challenge the EPA’s Final Determination (see note 1); and

· The Company’s market capitalization on December 31, 2023, and the date the Financial Statements were authorized for issuance, exceeded the carrying value of the Pebble Project and the Group’s net asset value.

2.	The Group used judgement that going concern is an appropriate basis for the preparation of the Financial Statements, as the Group considered existing financial resources in determining that such financial resources can meet key corporate and Pebble Project expenditure requirements for at least the next twelve months (note 1).
3.	The Group used judgement in assessing the appropriate accounting treatment for the transaction relating to a long-term royalty agreement linked to production at the Pebble Project (note 3). The Group considered the substance of the agreement to determine whether the Group has disposed of an interest in the reserves and resources of the Pebble Project. This assessment considered the stage of development of the Pebble Project, the legal rights the counterparty has in the event of bankruptcy, as well as what the counterparty is entitled to and the associated risks and rewards attributable to them over the life of the mine at the Pebble Project. The Group also determined that the proceeds received on each investment is a recovery of mineral property costs with no gain or loss being recorded.
4.	Pursuant to IAS 21, The Effects of Changes in Foreign Exchange Rates (“IAS 21”), in determining the functional currency of the parent and its subsidiaries, the Group used judgement in identifying 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 each entity operates.
5.	The Group used judgement in terms of accounting for leases in accordance with IFRS 16, Leases (“IFRS 16”). IFRS 16 applies a control model to the identification of leases and the determination of whether a contract contains a lease based on whether the customer has the right to control the use of an identified asset for a fixed period. In determining the appropriate term for a lease, the Group considered the right of either the lessee or lessor to terminate the lease without permission from the other party with no more than an insignificant penalty as well as whether the Group is reasonably certain to exercise the extension options on the contract.
6.	The Group used judgement in concluding that the convertible notes are hybrid financial instruments as a result of the embedded derivative liability that is the foreign exchange equity conversion i.e., the Group can issue a fixed number of the Company’s shares for a variable amount depending on the US$/C$ exchange rate.

Page | 21

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

(s) Recent Accounting Pronouncements

Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB.  The following was adopted by the Group on January 1, 2023:

· IAS 1, Presentation of Financial Statements (“IAS 1”) and IFRS Practice Statement 2, Making Materiality Judgements - Disclosure of Accounting Policies (the “Practice Statement”): In February 2021, the IASB issued amendments to IAS 1 and the Practice Statement to provide guidance on the application of materiality judgements to accounting policy disclosures. The amendments to IAS 1 replace the requirement to disclose ‘significant’ accounting policies with a requirement to disclose ‘material’ accounting policies. Guidance and illustrative examples are added in the Practice Statement to assist in the application of materiality concept when making judgments about accounting policy disclosures. The adoption of these amendments did not have a material impact on the Financial Statements.

· IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors (“IAS 8”): In February 2021, the IASB issued amendments to IAS 8 – Definition of Accounting Estimates to help entities to distinguish between accounting policies and accounting estimates. The amendments clarify that accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty” and that a change in an accounting estimate that results from new information or new developments is not the correction of an error. In addition, the effects of a change in an input or a measurement technique used to develop an accounting estimate are changes in accounting estimates if they do not result from the correction of prior period errors. The adoption of these amendments had no impact on the Financial Statements.

· IAS 12, Deferred Tax related to Assets and Liabilities arising from a Single Transaction: The amendments require companies to recognize deferred tax on particular transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. The amendments typically apply to transactions such as leases for the lessee and decommissioning and restoration obligations related to assets in operation. . The adoption of these amendments had no impact on the Financial Statements.

· IAS 1, Classification of Debt with Covenants as Current or Non-current: In October 2022, the IASB issued amendments to IAS 1 titled “Non-current Liabilities with Covenants”. These amendments seek to improve the information that an entity provides when its right to defer settlement of a liability is subject to compliance with covenants within 12 months after the reporting period. These amendments to IAS 1 override but incorporate the previous amendments, Classification of Debt as Current or Non-current, issued in January 2020, which clarified that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Liabilities should be classified as non-current if an entity has a substantive right to defer settlement for at least 12 months at the end of the reporting period. The amendments are effective January 1, 2024, with early adoption permitted. Retrospective application is required on adoption. The Group has early adopted these amendments effective January 1, 2023. The Group has provided all necessary disclosures within note 7 which relates to the convertible notes. There was no impact on prior year numbers presented.

The following has not yet been adopted by the Group:

· IFRS 16, Sale and Leaseback Transactions: In September 2022, the IASB issued amendments to IFRS 16, Leases, which add requirements explaining how to account for a sale and leaseback after the date of the transaction. The amendments are effective for annual reporting periods beginning on or after January 1, 2024. Earlier application is permitted. The Group anticipates these amendments will only have an impact when these transactions are incurred.

Page | 22

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

3. MINERAL PROPERTY, PLANT AND EQUIPMENT

The Group’s exploration and evaluation assets are comprised of the following:

Year ended December 31, 2023	Mineral   Property   Interest 1			Plant and  Equipment 3			Total
Cost
Beginning Balance	$	97,078		$	2,435		$	99,513
Additions		–			16			16
Disposal of plant and equipment		–			(6	)		(6	)
Disposal of mineral property interest 2		(2,761	)		–			(2,761	)
Derecognition of right-of-use asset		–			(196	)		(196	)
Ending balance		94,317			2,249			96,566
Accumulated depreciation
Beginning Balance		–			(2,129	)		(2,129	)
Depreciation charge for the period 3		–			(164	)		(164	)
Derecognition on disposal of plant and equipment		–			6			6
Derecognition of right-of-use asset		–			191			191
Ending balance		–			(2,096	)		(2,096	)
Foreign currency translation difference
Beginning Balance		29,922			225			30,147
Movement from derecognition of right-of-use asset		–			(3	)		(3	)
Movement for the period		(2,764	)		1			(2,763	)
Ending balance		27,158			223			27,381
Net carrying value – December 31, 2023	$	121,475		$	376		$	121,851

Page | 23

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

Year ended December 31, 2022	Mineral   Property   Interest 1			Plant and  Equipment 3			Total
Cost
Beginning Balance	$	112,541		$	2,412		$	114,953
Addition		–			31			31
Disposal of plant and equipment		–			(8	)		(8	)
Disposal of mineral property interest 2		(15,463	)		–			(15,463	)
Ending balance		97,078			2,435			99,513
Accumulated depreciation
Beginning Balance		–			(1,877	)		(1,877	)
Depreciation charge for the year 4		–			(260	)		(260	)
Derecognition on disposal of plant and equipment		–			8			8
Ending balance		–			(2,129	)		(2,129	)
Foreign currency translation difference
Beginning Balance		21,079			184			21,263
Movement for the year		8,843			41			8,884
Ending balance		29,922			225			30,147
Net carrying value – December 31, 2022	$	127,000		$	531		$	127,531

 Notes to table:  

1.              Mineral Property Interest

Comprises the Pebble Project, a contiguous block of 1,840 mineral claims covering approximately 274 square miles located in southwest Alaska, 17 miles (30 kilometers) from the villages of Iliamna and Newhalen, and approximately 200 miles (320 kilometers) southwest of the city of Anchorage. 

2.  Disposal of Mineral Property Interest - Royalty Agreement

In July 2022, the Group entered into an agreement (the “Agreement”) with an investor (the “Royalty Holder”) to receive up to US$60 million over the next two years until July 2024, in return for the right to receive a portion of the future gold and silver production from the Pebble Project for the life of the mine (see further below). 

The Royalty Holder made the initial payment of US$12 million in exchange for the right to receive 2% of the payable gold production and 6% of the payable silver production from the Pebble Project, in each case after accounting for a notional payment by the Royalty Holder of US$1,500.00 per ounce of gold and US$10.00 per ounce of silver, respectively, for the life of the mine. If, in the future, spot prices exceed US$4,000.00 per ounce of gold or US$50.00 per ounce of silver, then the Group will share in 20% of the excess price for either metal. Additionally, the Company will retain a portion of the metal produced for recovery rates greater than 60% for gold and 65% for silver, and so is incentivized to continually improve operations over the life of the mine. 

Pursuant to the terms of the Agreement, the Royalty Holder has the right but is under no obligation to invest additional non-refundable funds, in US$12 million increments, to an aggregate total of US$60 million, within two years of the date of the Agreement, in return for the right to receive up to 10% of the payable gold and up to 30% of the payable silver (in each case, in the aggregate) on the same terms as the first tranche. 

Page | 24

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

In November 2023, the Group and the Royalty Holder amended the terms of the Agreement (the “Amendment”).  Under the revised agreement, the Royalty Holder received the right to fund the second US$12 million tranche in six equal installments of US$2 million each (“Additional Payment Installment”), with the right to receive approximately 0.33% of the payable gold production and 1% of the payable silver production from the Pebble Project per Additional Payment Installment made (representing 1/6 of the aggregate royalty under the second tranche).  The Company received the first US$2 million upon execution of the Amendment.  

The Amendment also extends the original expiry date by another year to July 26, 2025, in the event the Royalty Holder completes all six installments (for a total of US$12 million) on or before July 26, 2024. 

Based on the contractual terms of the Agreement, as well as the Group’s specific facts and circumstances, the Group accounted for both investments of US$2 million ($2.8 million) and US$12 million ($15.5 million) as a partial sale of mineral property interest.  The Agreement provides the Royalty Holder with rights akin to ownership of an undivided interest in the Pebble Project.  The consideration received has been recorded as a recovery of mineral property costs.  Accordingly, no gain or loss was recognized on the transactions.

3. Plant and Equipment include Right-of-Use Assets (“ROU Assets”)

ROU Assets, which relate to the use of office space, office equipment and yard storage are included under plant and equipment.  The following comprises ROU Assets: 

Year ended December 31, 2023	Land and Buildings			Equipment			Total
Cost
Beginning	$	1,024		$	32		$	1,056
Addition		–			16			16
Derecognition of ROU Asset		(196	)		–			(196	)
Ending balance		828			48			876
Accumulated depreciation
Beginning balance		(510	)		(30	)		(540	)
Depreciation charge for the period 4		(147	)		(4	)		(151	)
Derecognition of ROU Asset		191			–			191
Ending balance		(466	)		(34	)		(500	)
Foreign currency translation difference
Beginning balance		2			(1	)		1
Movement from derecognition of ROU Asset		5			–			5
Movement for the period		(9	)		(1	)		(10	)
Ending balance		(2	)		(2	)		(4	)
Net carrying value – December 31, 2023	$	360		$	12		$	372

4. For the year ended December 31, 2023, total depreciation was $164 (2022 – $260) of which ROU Asset depreciation was $151 (2022 – $150). ROU Asset depreciation of $101 (2022 – $104) is included in general and administrative expenses (note 10(b)). The remainder of the depreciation is included in exploration and evaluation expenses.

Page | 25

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

4. AMOUNTS RECEIVABLE AND PREPAID EXPENSES

	December 31		December 31
	2023		2022
Sales tax receivable	$	63	$	66
Interest, refundable deposits, and other receivables 1		595		64
Prepaid expenses 2		2,250		2,532
Total	$	2,908	$	2,662

Notes to table:

1.	Includes the Group’s insurance carrier’s reimbursement of $532 of legal costs incurred on class actions and the Alaska Grand Jury investigation (note 15(a)).
2.	Includes prepaid insurance, which is amortized over the insurance term.

5.	CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
(a)	Cash and Cash Equivalents

The Group’s cash and cash equivalents on December 31, 2023, and 2022, consisted of cash on hand and was invested in business and savings accounts. 

(b) Restricted Cash

The Group has cash deposited with a United States financial institution that has been pledged as collateral to the surety provider for a US$2,000 surety bond that was placed with the Alaskan regulatory authorities for a performance guarantee related to any potential reclamation liability as a condition of the Miscellaneous Land Use Permit granted to the Pebble Partnership for its ongoing activities on the Pebble Project.  The cash deposit will be released once any reclamation work required has been performed and assessed by the Alaskan regulatory authorities.  The cash is invested in a money market fund.  For the year ended December 31, 2023, the Group earned income of $40 (2022 – $10) which was re-invested.  

6.	CAPITAL AND RESERVES
(a)	Authorized Share Capital

At December 31, 2023, and 2022, authorized share capital consisted of an unlimited number of common shares (“Shares”) with no par value, of which 538,478,010 (2022 – 529,779,388) Shares were issued and fully paid.  

(b) Unit Private Placement

In December 2023, the Group completed a non-brokered private placement of 8,555,000 units in the capital of the Company (the “Units”) at a price of $0.40 per unit for gross proceeds of $3,422.  Each Unit consisted of one Share and one Share purchase warrant (a “Warrant”), which entitles the holder to purchase an additional Share at a price of $0.45 per Share until December 14, 2025.  The Warrants are subject to an accelerated expiry upon 30 calendar days’ notice from the Group in the event the Company’s Shares trade for 20 consecutive trading days any time after December 21, 2023, at a volume weighted average price of at least $0.90 on either the TSX or the NYSE American.  No commission or finders’ fees were payable.  The Shares and Warrants are subject to resale restrictions under applicable securities laws in Canada and the United States. 

Page | 26

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

As of the reporting date, the Group incurred a total of $37 in issuance costs related to regulatory and legal fees.  The Group apportioned the gross proceeds and issuance costs between share capital and Warrants based on their relative fair values on date of issue; share capital at the TSX quoted market price for Shares on date of issue, Warrants estimated based on the Black Scholes option pricing model using the following inputs: exercise price - $0.45, valuation date share price – $0.41, expected volatility – 58.4%, risk free rate – 3.91%, expected term – 2 years, and dividend –nil%.  Accordingly, net proceeds of $2,573 were allocated to share capital and $812 to Warrants. 

(c) Options not Issued under the Group’s Incentive Plan

The following reconciles outstanding non-employee options (options that were not issued under the Group’s incentive plan (see (c) below)), each exercisable to acquire one share, for the year ended December  31, 2023, and 2022 respectively: 

Continuity	Number of options 1			Weighted average exercise price ($/options)
Balance January 1, 2022		94,000			0.36
Expired		(56,400	)		0.40
Balance December 31, 2022, and December 31, 2023		37,600			0.29

Notes to table:

1.	The Group issued options in exchange for those which were outstanding in Cannon Point Resources Ltd. on the acquisition of the company in October 2015. The remaining options expire on December 8, 2024.
2.	As of December 31, 2023, the remaining life was 0.94 (2022 – 1.94) 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 “2021 Rolling Option Plan”) is based on the maximum number of eligible shares (including any issuances from the Group’s RSU and DSU plans ) equaling a rolling percentage of up to 8% of the Company’s outstanding Shares, calculated from time to time.  Pursuant to the 2021 Rolling Option Plan, if outstanding share purchase options (“options”) are exercised and the number of issued and outstanding 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. 

Page | 27

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

The following reconciles the issued and outstanding options pursuant to the Group’s incentive plan for the years ended December 31, 2023, and 2022:  

Continuity of options	Number of   options			Weighted average   exercise price   ($/option)
Balance January 1, 2022		20,825,500			1.45
Expired		(4,386,000	)		1.75
Granted 1		11,254,000			0.41
Balance December 31, 2022		27,693,500			0.98
Expired		(3,375,000	)		0.80
Balance December 31, 2023		24,318,500			1.00

Note

1. The weighted average fair value was estimated at $0.29 per option, based on the Black-Scholes option pricing model using weighted average assumptions: risk free rate – 3.07%, expected life – 5 years, expected volatility – 99.02%, grant date share price – $0.39 and expected dividend yield – nil. Expected volatility was based on the historical and implied volatility of the Company’s share price on the TSX.

For the year ended December 31, 2023, the Group recognized share-based compensation (“SBC”) for options of $1,043 (2022 – $2,277) in the Statement of Comprehensive Loss. 

The following table summarizes information on options outstanding as at the reported dates:  

		December 31, 2023						December 31, 2022
Exercise prices ($)		Number of options outstanding		Number of options exercisable		Weighted Average Remaining contractual  life  (years)		Number of options outstanding		Number of options exercisable		Weighted Average Remaining contractual  life  (years)
	0.41		11,254,000		11,254,000		3.63		11,254,000		5,627,000		4.63
	0.76		–		–		–		3,300,000		3,300,000		0.61
	0.99		6,368,500		6,368,500		0.74		6,368,500		6,368,500		1.74
	2.01		6,696,000		6,696,000		1.55		6,696,000		6,696,000		2.55
	2.34		–		–		–		75,000		75,000		0.58
Total			24,318,500		24,318,500				27,693,500		22,066,500

The weighted average contractual life for options outstanding and which were all exercisable, was 2.30 (2022 – 2.97) years per option.  Options exercisable on December 31, 2022, had a weighted average contractual life of 2.55 years and an exercise price of $1.12 per option. 

(e) Deferred Share Units (“DSUs”)

The Group has a DSU plan approved by the Group’s shareholders, which allows the Board, at its discretion, to award DSUs to non-executive directors for services rendered to the Group and provides that non-executive directors may elect to receive up to 100% of their annual compensation in DSUs.  The aggregate number of DSUs outstanding pursuant to the DSU plan may not exceed 1% of the issued and outstanding shares from time to time provided the total does not result in the total shares issuable under all the Group’s share-based compensation plans (i.e. including the Group’s option and restricted share unit plans) exceeding 8% of the total number of issued outstanding shares.  DSUs are payable when the non-executive director ceases to be a director including in the event of death.  DSUs may be settled in shares issued from treasury, by the delivery to the former director of shares purchased by the Group in the open market, payment in cash, or any combination thereof, at the discretion of the Group. 

Page | 28

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

The following reconciles DSUs outstanding for the years ended December 31, 2023, and 2022:

Continuity of DSUs	Number of   DSUs			Weighted average  fair value  ($/DSU)
Balance January 1, 2022		477,711			0.69
Granted		61,575			0.39
Balance December 31, 2022		539,286			0.65
Granted		74,683			0.34
Redeemed		(143,622	)		0.69
Balance December 31, 2023		470,347			0.59

For the year ended December 31, 2023, the Group recognized SBC of $25 (2022 – $24) for DSU grants in the Statement of Comprehensive Loss, based on the aggregate market value of Shares on grant date, with a corresponding increase in the equity-settled share payment reserve in equity. 

During the year ended December 31, 2023, 143,622 DSUs with a fair value of $0.69 on date of grant were redeemed and paid out in Shares. 

After the reporting period the Group issued 15,937 DSUs with a fair value of $0.34 per DSU on date of grant (note 8(a)).

(f) Foreign Currency Translation Reserve

Continuity
Balance January 1, 2022	$	28,758
Gain on translation of foreign subsidiaries		9,333
Balance December 31, 2022		38,091
Loss on translation of foreign subsidiaries		(2,858	)
Balance December 31, 2023	$	35,233

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.

7. CONVERTIBLE NOTES LIABILITY AND DERIVATIVE ON CONVERTIBLE NOTES

In December 2023, pursuant to an investment agreement, Kopernik Global Investors, LLC, on behalf of its clients (collectively the “Investor”), purchased convertible notes having an aggregate principal amount of US$15 million (the “Notes”).  The Notes have a term of 10 years from the date of issuance, being December 18, 2023, and bear interest at a rate of 2.0% per annum, payable in cash semi-annually in arrears on December 31 and June 30 of each year, commencing on June 30, 2024.  The principal amount of the Notes is convertible at any time at the option of the Investor at a per share conversion price of US$0.3557 (the “Conversion Price”), subject to adjustment in certain circumstances (i.e., including a change of control).  If the Group proceeds with an equity financing in the future, the terms of the Notes require that the Group redeem the Notes at 150% of the principal amount of the Notes, in cash or convert at the Conversion Price (the “financing redemption option”), at the election of the Investor, and pay any accrued but unpaid interest in cash. This financing is subject to customary exclusions for non-financing issuances of the Company’s equity securities. In addition, the Notes include change of control provisions under which (i) the Investor may elect to convert the Notes concurrent with a change of control transaction at the lower of the fixed Conversion Price and the price per common share implied by the change of control transaction, and (ii) if the Investor does not elect to convert, the Group will be required to offer to repurchase the Notes at 101% of the principal amount ( the "CoC option"), plus accrued but unpaid interest.  

Page | 29

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

As the amount of the Notes to be settled is a fixed US Dollar amount which when converted back to the Company’s functional currency results in a variable amount of cash (i.e., a variable carrying amount for the financial liability that arise from changes in the USD/CAD exchange rate), the fixed-for-fixed criterion for equity classification is not met.  The conversion option, financing redemption option and the CoC option are derivative liabilities, with their value dependent on the USD/CAD exchange rate and so are embedded derivatives.  The Notes as a result include a debt host, which is accounted for at amortised cost, and the embedded derivatives, which are separated from the debt host and accounted for at fair value with changes in fair value recorded in the Statement of Comprehensive Loss. 

The debt host has been accounted for at amortised cost with a 30.14% effective interest rate.  Transaction costs of $196 were incurred on the issue of the Notes of which $22 has been allocated to the debt host with the balance recorded in the Statement of Comprehensive Loss.  The following reconcile the movement:

Continuity	Debt Host			Derivative  on Notes			Total
Recognition on issue date	$	2,234		$	17,866		$	20,100
Transaction costs		(22	)		–			(22	)
Interest accretion		26			–			26
Interest accrued		(15	)		–			(15	)
Gain on change in fair value		–			(1,179	)		(1,179	)
Exchange difference		(26	)		-			(26	)
As at December 31, 2023	$	2,197		$	16,687		$	18,884

The fair value of the conversion option was estimated using the Binomial Option Pricing Model with formulae based on the Cox-Ross-Rubenstein approach with the following inputs and assumptions on each date : 

Input/Assumption	Issue Date			December 31, 2023
Share price on valuation date	US$0.34			US$0.32
Volatility		95.8232	%		95.4459	%
Strike price on conversion	US$0.3557			US$0.3557
Time to expiration	3653 days			3640 days
Risk free interest rate		5.221	%		5.153	%
Dividend Yield	Nil%			Nil%

The estimated value for the conversion option under the model was US $12,876 ($17,253) on date of issue and US $12,048 ($15,960) on December 31, 2023.

For the financing redemption and CoC options, the Group estimated the discounted cash flow ("DCF") value of the options assuming the events that trigger these options occur mid-point between the Notes issuance and maturity.  The Group determined from the DCF analysis that there was additional value over and above the conversion option.  As such, the Group estimated at both the issue date and at December 31, 2023, a 10% probability for either option occurring with an 80% probability of conversion at the Conversion Price. Accordingly, the estimated value for the embedded derivative was estimated at US$13,333 ($17,866) on issue date, and US$12,597 ($16,687) on December 31, 2023, and as a result the Group recorded a gain in the change in fair value of $1,179 for the embedded derivative.  

The valuation of the embedded derivative is sensitive to changes in the Company’s share price and assumed volatility of the Company’s share price.  If the assumed volatility decreases by 10%, the fair value of the embedded derivative decreases by approximately 4%.  If the share price is reduced/increased by 10%, the fair value of the embedded derivative reduces/increases by approximately 10%. 

As the conversion feature may be exercised by the holder at any time, the Group does not have the right to defer its settlement for at least twelve months.  Accordingly, debt host and derivative on notes is classified as a current liability. 

Page | 30

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

8. RELATED PARTY BALANCES AND TRANSACTIONS

The components of transactions to related parties is as follows:  

	December 31		December 31
Receivable from related party	2023		2022
Hunter Dickinson Services Inc. (“HDSI”) (b)	$	17	$	–
Total	$	17	$	–

	December 31		December 31
Payables to related parties	2023		2022
Key management personnel (“KMP”) (a)	$	34	$	35
Hunter Dickinson Services Inc. (b)		253		202
Total	$	287	$	237

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation.  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 KMP, which are the Group’s directors that includes the Chief Executive Officer (“CEO”) and senior management: the Chief Financial Officer (“CFO”), Company Secretary and General Counsel, Executive Vice President (“EVP”), Environment and Sustainability, EVP, Corporate Development, Vice President (“VP”), Investor Relations, VP, Engineering, and the Pebble Partnership’s CEO, VP, Public Affairs and Senior Permitting Advisor, was as follows for the years ended December 31, 2023 and 2022: 

Transaction	2023		2022
Compensation
Amounts paid and payable to HDSI for services of KMP employed by HDSI 1	$	2,441	$	2,499
Amounts paid and payable to KMP 2		1,768		1,913
		4,209		4,412
Share-based compensation 3		661		1,441
Total compensation	$	4,870	$	5,853

Notes to table:

1.	The Group’s CEO, CFO, Board Chair and senior management, other than disclosed in note 2 below, are employed by the Group through HDSI (refer (b) below).
2.	Represents short-term employee benefits, including cash director’s fees paid to the Group’s independent directors, and salaries paid and payable to the Pebble Partnership’s CEO, VP, Public Affairs and Senior Permitting Advisor.
3.	SBC relates to options issued and/or vesting and DSUs granted during the respective periods (notes 6(d)-(e)).

Page | 31

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

After the reporting period, 15,937 DSUs were issued to a director (note 6(e)).

(b) Transactions and Balances with other Related Parties

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. 

For the years ended December 31, 2023 and 2022, transactions with HDSI were as follows: 

Transactions	2023		2022
Services rendered by HDSI:
Technical 1
Engineering	$	363	$	372
Environmental		321		508
Other technical services		125		44
		809		924
General and administrative
Management, consulting, corporate communications, secretarial, financial and administration		2,450		2,223
Shareholder communication		695		727
		3,145		2,950
Total for services rendered		3,954		3,874
Reimbursement (refund) of third-party expenses
Conferences and travel		246		124
Insurance		87		48
Office supplies and information technology 2		575		532
Total reimbursed		908		704
Total	$	4,862	$	4,578

Notes to table:

1.	Included in exploration and evaluation expenses.
2.	Includes payments made for the use of offices and shared space of $166 (2022 – $151). The Company signed an office use agreement effective May 1, 2021, for a five-year term ending April 29, 2026. As of December 31, 2023, the remaining undiscounted commitment was $238 (note 15(d)).

Pursuant to the management services agreement between HDSI and the Company, following a change of control, the Company is subject to termination payments if the management services agreement is terminated.  The Company will be required to pay HDSI $2,800 and an aggregate amount equal to six months of annual salaries payable to certain individual service providers under the management services agreement and their respective employment agreements with HDSI. 

Page | 32

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

9. TRADE AND OTHER PAYABLES 

	December 31		December 31
Current liabilities	2023		2022
Falling due within the year
Trade	$	929	$	1,683
Lease liabilities 1		126		150
Total	$	1,055	$	1,833

	December 31		December 31
Non-current liabilities	2023		2022
Lease liabilities 1	$	338	$	463
Total	$	338	$	463

Notes to tables:

1. Lease liabilities relate to leases of offices, office equipment and for yard storage, which have remaining lease terms of 7 to 77 months and interest rates of 9.5% – 12% over the term of the leases. During the year ended December 31, 2023, the Group recognized interest expense on lease liabilities of $55 (2022 – $67) respectively.

The following summarizes lease liabilities for the reporting periods indicated:  

	December 31			December 31
Lease liabilities	2023			2022
Beginning balance	$	613		$	687
Interest expense		55			67
Lease payments		(208	)		(196	)
Lease recognition		16			10
Foreign currency translation difference		(12	)		45
Ending balance		464			613
Current portion		126			150
Non-current portion		338			463
Total	$	464		$	613

The following table provides the schedule of undiscounted lease liabilities as at December 31, 2023:  

	Total
Less than one year	$	164
One to five years		399
Later than 5 years		34
Total undiscounted lease liabilities	$	597

The Group had short-term lease commitments of less than a year relating to a property lease totaling $55 as of January 1, 2023.  During the year ended December 31, 2023, the Group incurred $nil in short-term lease commitments (2022 – $157) and expensed $55 (2022 - $158).

Page | 33

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

10.	EXPLORATION AND EVALUATION, GENERAL AND ADMINISTRATIVE, LEGAL ACCOUNTING AND AUDIT EXPENSES
(a)	Exploration and Evaluation Expenses (“E&E”)

For the years ended December 31, 2023 and 2022, E&E consisted of the following: 

E&E	2023			2022
Engineering	$	2,140		$	1,390
Environmental		974			2,187
Property fees		1,252			1,194
Site activities		937			1,565
Socio-economic		2,386			2,242
Transportation		(71	)		620
Other activities and travel		111			71
Total	$	7,729		$	9,269

(b) General and Administrative Expenses (“G&A”)

For the years ended December 31, 2023 and 2022, G&A consisted of the following: 

G&A	2023		2022
Conference and travel	$	477	$	248
Consulting		855		651
Depreciation of right-of-use assets		101		104
Insurance		3,227		2,422
Office costs, including information technology		765		769
Management and administration		3,172		3,130
Shareholder communication		1,229		1,276
Trust and filing		335		426
Total	$	10,161	$	9,026

Page | 34

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

(c) Legal, Accounting and Audit Expenses

For the years ended December 31, 2023 and 2022, the following table provides further details: 

	2023			2022
Legal	$	6,459		$	4,212
Insurance cost recoveries		(3,617	)		(710	)
Accounting		130			119
Audit and reviews		417			389
Total	$	3,389		$	4,010

11. EMPLOYMENT COSTS

For the years ended December 31, 2023 and 2022, the Group recorded the following:  

	2023		2022
Exploration and evaluation
Salaries and benefits	$	1,701	$	2,267
Amounts paid for services by HDSI personnel (note 6(b))		809		923
		2,510		3,190
General and administrative
Salaries and benefits		1,439		1,407
Amounts paid for services by HDSI personnel (note 6(b))		2,544		2,433
		3,983		3,840
Share-based payments		1,068		2,301
	$	7,561	$	9,331

12. BASIC AND DILUTED LOSS PER SHARE

The calculation of basic and diluted loss per share for the year ended December 31, 2023 and 2022 was based on the following:   

	2023		2022
Loss attributable to shareholders	$	20,996	$	24,442
Weighted average number of shares outstanding (000s)		530,272		529,779

For the years ended December 31, 2023 and 2022, basic and diluted loss per share does not include the effect of employee share purchase options outstanding (2023 –24,318,500, 2022 – 27,693,500), non-employee share purchase options (2023 – 37,600, 2022 – 37,600) and DSUs (2023 – 470,347, 2022 – 539,286), as they were anti-dilutive.

Page | 35

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

13. INCOME TAX

	Year ended December 31
Reconciliation of effective tax rate	2023			2022
Net loss	$	(20,996	)	$	(24,442	)
Total income tax (recovery) expense		(110	)		107
Loss excluding income tax		(21,106	)		(24,335	)
Income tax recovery using the Company's domestic tax rate		(5,699	)		(6,570	)
Non-deductible expenses and other		318			631
Change in tax rates		–			–
Deferred income tax assets not recognized		5,491			5,832
	$	110		$	(107	)

The Company's domestic tax rate for the year was 27% (2022 – 27%). 

	Year ended December 31
Deferred income tax assets (liabilities)	2023			2022
Tax losses	$	2,262		$	2,167
Net deferred income tax assets		2,262			2,167
Resource property/investment in Pebble Partnership		(2,262	)		(2,167	)
Net deferred income tax liability	$	–		$	–

The Group had the following temporary differences on December 31, 2023, in respect of which no deferred tax asset has been recognized:

			Resource
Expiry	Tax losses		pools		Other
Within one year	$	–	$	–	$	–
One to five years		–		–		1,300
After five years		339,693		–		–
No expiry date		37,595		93,248		190
Total	$	377,288	$	93,248	$	1,490

The Group has net operating tax losses in the US totaling $37.6 million that can be only utilized to a maximum of 80% of taxable income. 

The Group has taxable temporary differences in relation to investments in foreign subsidiaries or branches of $8.0 million (2022 – $7.6 million) which has not been recognized because the Group controls the reversal of liabilities, and it is expected it will not reverse in the foreseeable future. 

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 as follows: 

Page | 36

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

(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, in government treasury bills, low risk corporate bonds and money market funds which are available on demand by the Group when required.  Amounts receivable in the table below exclude receivable balances with government agencies (note 4).  The Group’s maximum exposure was as follows: 

	December 31		December 31
Exposure	2023		2022
Interest, refundable deposits, and other receivables	$	595	$	64
Restricted cash		872		852
Cash and cash equivalents		18,200		14,173
Total exposure	$	19,667	$	15,089

(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 to meet short to medium term business requirements, after considering cash flows from operations and the Group’s holdings of cash and cash equivalents and restricted cash, where applicable.  However, the Group has noted material uncertainty that raises substantial doubt about the Group’s ability to continue as a going concern (note 1).  The Group though has been successful in the past in raising funds when needed.  The Group’s cash and cash equivalents at the reporting date were invested in business and savings accounts (note 5(a)).  

The Group’s financial liabilities are comprised of current trade and other payables (note 8), payables to related parties (note 8), which are due for payment within 12 months from the reporting date, and non-current trade payables, which are due for payment more than 12 months from the reporting date.  The convertible notes are convertible into common shares at a fixed conversion price at any time at the option of the Investor (note 7) until December 18, 2033.  The carrying amounts of the Group’s financial liabilities represent the Group’s contractual obligations. 

(c) Foreign Exchange Risk

The Company is subject to both currency transaction risk and currency translation risk: the Pebble Partnership, Pebble Services Inc. and U5 Resources Inc. have the US dollar as functional currency, and certain of the Company’s corporate expenses are incurred in US dollars.  The operating results and financial position of the Group are reported in Canadian dollars in these Financial Statements.  As a result, the fluctuation of the US dollar in relation to the Canadian dollar will 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. 

Page | 37

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

The exposure of the Group's US dollar-denominated financial assets and liabilities to foreign exchange risk was as follows:  

	December 31			December 31
	2023			2022
Financial assets:
Amounts receivable	$	676		$	108
Cash and cash equivalents and restricted cash		18,069			7,347
		18,745			7,455
Financial liabilities:
Non-current trade payables		(338	)		(463	)
Convertible notes		(18,884	)		–
Current trade and other payables		(724	)		(1,383	)
Payables to related parties		(134	)		(71	)
		(20,080	)		(1,917	)
Net financial (liabilities) assets exposed to foreign currency risk	$	(1,335	)	$	5,538

Based on the above net exposures and assuming all other variables remain constant, a 10% change in the value of the Canadian dollar relative to the US dollar would result in a gain or loss of $133 (2022 – $554) in the reported period.  This sensitivity analysis includes only outstanding foreign currency denominated monetary items.  

(d) 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 or short-term low risk investments 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 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 $82 (2022 – $182). 

(e) Capital Management

The Group's policy is to maintain a strong capital base 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 and reserves, net of accumulated deficit.  There were no changes in the Group's approach to capital management during the period.  The Group is not subject to any externally imposed capital requirements.

(f) Fair Value

The fair value of the Group’s financial assets and liabilities approximates the carrying amount. 

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values.  The three levels of the fair value hierarchy are:

· Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

· Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

· Level 3 – Inputs that are not based on observable market data.

The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.  Fair value measurements, which are determined by using valuation techniques, are classified in their entirety as either Level 2 or Level 3 based on the lowest level input that is significant to the measurement. 

The Group has categorized the fair value measurement of the derivative on the convertible notes within Level 2 of the hierarchy as it is exposed to market risk; it employs the quoted market price of the Company’s shares, and foreign exchange rates. 

Page | 38

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

15.	COMMITMENTS AND CONTINGENCIES
(a)	Legal Proceedings

 

Class Action Litigation following the USACE’s Record of Decision

United States

On December 4 and December 17, 2020, separate putative shareholder class action lawsuits were filed against the Company and certain of its current and former officers and directors in the U.S. District Court for the Eastern District of New York (Brooklyn) regarding the drop in the price of the Company’s stock following the ROD by the USACE regarding the Pebble Project.  These cases are captioned Darish v. Northern Dynasty Minerals Ltd. et al., Case No. 1:20-cv-05917-ENV-RLM, and Hymowitz v. Northern Dynasty Minerals Ltd. et al., Case No. 1:20-cv-06126-PKC-RLM.  Each of the complaints was filed on behalf of a purported class of investors who purchased shares of the Company’s stock from December 21, 2017, through November 25, 2020, the date the USACE announced its decision, and seeks damages allegedly caused by violations of the federal securities laws.  On March 17, 2021, the two cases were consolidated, and a lead plaintiff and counsel were appointed.  A consolidated and amended complaint was filed in June 2021, naming the Company, the Company’s CEO and the Pebble Partnership’s former CEO as defendants.  The Company filed a motion to dismiss the complaint on behalf of all defendants, which the Court denied on January 25, 2023.  On April 17, 2023, the parties notified the Court that, following mediation between the parties and the insurance carriers, an agreement-in-principle was reached to settle the consolidated action and that the parties expect to finalize the agreement over the coming weeks.  On June 7, 2023, the parties filed the executed settlement agreement with the Court, which (a) provides for a settlement amount within insurance policy limits, and (b) makes clear that the defendants deny any liability whatsoever and makes no admission of wrongdoing.  On July 24, 2023, the Court held a Fairness Hearing to determine if it would grant preliminary approval of the settlement agreement.  Consistent with guidance from the Court at the Fairness Hearing, the parties submitted modest revisions to the settlement agreement documents on July 26, 2023.  On August 24, 2023, the Court granted preliminary approval of the settlement agreement and scheduled a final settlement hearing for December 7, 2023.  Following the final settlement, hearing, on January 26, 2024, the Court granted final approval of the settlement agreement.  The final step in the process will be the plaintiffs’ motion for approval of distribution of funds to the class members and the Court’s analysis of the motion.  It is anticipated that this will occur in mid-2024. 

On September 22, 2023, the settlement amount of US$6,375 ($8,445) was paid by the Company’s insurance carriers to the plaintiff’s firm on counsel’s instructions.  

Canada

On December 3, 2020, a putative shareholder class action lawsuit was filed against the Company, certain of its current and former officers and directors, and one of its underwriters in the Supreme Court of British Columbia regarding the decrease in the price of the Company’s stock following the USACE’s November 25, 2020, decision regarding the Pebble Project.  The case is captioned Haddad v. Northern Dynasty Minerals Ltd. et al., Case No. VLC-S-S-2012849.  The claim was filed on behalf of a purported class of investors, wherever they may reside, who acquired common shares of the Company’s stock between December 21, 2017, and November 25, 2020, and sought damages for (i) alleged misrepresentations in the Company’s primary market offering documents and continuous disclosure documents, and (ii) its allegedly oppressive conduct.  The underwriter  asserted contractual rights of indemnification against the Company for any loss that the underwriter may incur in connection with the lawsuit.  On April 20, 2022, the putative plaintiff filed and subsequently served an application to amend his pleadings to harmonize with the pleadings in the Woo case described below, add Mr. Woo as a plaintiff, and add new underwriter defendants.  Also on April 20, 2022, the putative plaintiff filed and subsequently served an application for leave to commence a secondary market liability claim under s. 140.3 of the B.C. Securities Act, for an order certifying the action as a class action, and for related relief. 

Page | 39

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

On February 17, 2021, a putative shareholder class action lawsuit was filed against the Company, certain of its current and former officers and directors, and certain of its underwriters in the Supreme Court of British Columbia regarding the decrease in the price of the Company’s stock following (i) the USACE’s August 24, 2020 announcement that the Pebble Project could not be permitted as proposed, and (ii) the USACE’s November 25, 2020 decision regarding the Pebble Project.  The case is captioned Woo v. Northern Dynasty Minerals Ltd. et al., Case No. VLC-S-S-211530.  The claim was filed on behalf of a purported class of investors, wherever they may reside, who purchased securities of the Company between June 25, 2020, and November 25, 2020, and sought damages for (i) alleged misrepresentations in the Company’s primary market offering documents and continuous disclosure documents, (ii) allegedly oppressive conduct, (iii) alleged unjust enrichment, and (iv) negligence.  The underwriters asserted contractual rights of indemnification against the Company for any loss that they may incur in connection with the lawsuit.

In April 2023, an agreement-in-principle was reached to settle the Haddad and Woo actions following mediation between the parties and the insurance carriers.  The parties subsequently executed a settlement agreement which (a) provides for a settlement amount within insurance policy limits, and (b) makes clear that the defendants deny any liability whatsoever and makes no admission of wrongdoing.  A copy of the settlement agreement has been shared with the Court.  On October 8, 2023, the settlement amount of US$2,125 ($2,886) was paid by the Company’s insurance carriers to the plaintiff’s firm on counsel’s instructions.  On November 3, 2023, the Court discontinued the Woo action, approved consent certification for settlement purposes, approved notice to the class of the settlement, and dismissed the case against the underwriters.  On February 23, 2024, the Court approved the settlement, a distribution protocol and additional notice to class members, and dismissed the Haddad action without costs and with prejudice.  Absent any issues the administration or enforcement of the settlement agreement, the Court’s dismissal with prejudice of the case will be the Court’s final action in this case. 

On March 5, 2021, a putative shareholder class action lawsuit was filed against the Company, certain of its current and former officers and directors, and certain of its underwriters in the Ontario Superior Court of Justice regarding the decrease in the price of the Company’s stock following the USACE’s November 25, 2020, decision regarding the Pebble Project.  The case is captioned Pirzada v. Northern Dynasty Minerals Ltd. et al., Case No. CV-21-00658284-00CP.  The claim was filed on behalf of a purported class of investors, wherever they may reside, who acquired securities of the Company between June 25, 2020, and November 25, 2020, and sought damages for (i) alleged misrepresentations in the Company’s primary market offering documents and continuous disclosure documents, (ii) allegedly oppressive conduct, and (iii) alleged negligence.  On March 30, 2022, the plaintiff made a motion to discontinue the claim without costs and the court granted the discontinuance in April 2022. 

Grand Jury Subpoena

On February 5, 2021, the Company announced that the Pebble Partnership and its former CEO, had each been served with a subpoena issued by the United States Attorney’s Office for the District of Alaska to produce documents in connection with a grand jury investigation.  The Company is not aware of any civil or criminal charges having been filed against any entity or individual in this matter.  The Company also self-reported this matter to the US Securities and Exchange Commission (“SEC”) and responded to a related inquiry being conducted by the enforcement staff of the SEC’s San Francisco Regional Office.  On August 3, 2023, the SEC notified the Company that the SEC had terminated its investigation, which did not result in an enforcement action.   

Indemnification Obligations

The Company is subject to certain indemnification obligations to both present and former officers and directors, including the Pebble Partnership’s former CEO, in respect to the legal proceedings described above.  These indemnification obligations will be subject to limitations prescribed by law and the articles of the Company and may also be subject to contractual limitations. 

Page | 40

Northern Dynasty Minerals Ltd.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(Expressed in thousands of Canadian Dollars, unless otherwise stated, and except per equity unit) 

(b) Pipeline Right-of-Way Bond Commitment

The Group has a bond of US$300 with the Alaskan regulatory authorities for a performance guarantee related to any potential reclamation liability as a condition for a pipeline right-of-way to a subsidiary of the Pebble Partnership, the Pebble Pipeline Corporation.  The Group is liable to the surety provider for any funds drawn by the Alaskan regulatory authorities.  

(c) Pebble Performance Dividend Commitment

The Group has a future commitment beginning at the outset of project construction at the Pebble Project to distribute cash generated from a 3% net profits royalty interest in the Pebble Project to adult residents of Bristol Bay villages that have subscribed as participants, with a guaranteed minimum aggregate annual payment of US$3,000 each year the Pebble mine operates. 

(d) Office Use Commitment

The Company has an office use agreement with HDSI ending April 29, 2026 (note 7(b)).  The commitment is a flow through cost at market rates.  At December 31, 2023, the remaining undiscounted commitment was $238, and is summarized as follows: 

	Total
Less than one year	$	104
One to five years		134
Total	$	238

(e) Contingent Legal Fees Payable

The Group has legal fees totalling US$635 payable to certain legal counsel on completion of a transaction that secures a partner for the Pebble Partnership.  

Page | 41