NAK

Business Context and Reporting Period

Company: Northern Dynasty Minerals Ltd.
Filing Date: November 2, 2004
Subject: Completion of a Preliminary Assessment for the Pebble gold-copper-molybdenum project in southwestern Alaska.
Current Status: Exploration/Pre-feasibility stage. The company is advancing a $25 million work program to complete a Bankable Feasibility Study in 2005 and secure necessary permits.

Key Financial Metrics and Project Economics

The filing presents a Preliminary Assessment based on inferred mineral resources (2.74 billion tonnes), not proven reserves. Financial models are pre-tax and 100% equity financed. Three production scenarios were analyzed:

• Case 1: 100,000 tonnes per day (tpd) milling rate.
• Case 2: 200,000 tpd milling rate.
• Case 3: Phased expansion from 100,000 to 200,000 tpd in Year 6.

Capital and Operating Costs (2004 USD)

Financial Returns (Base Case: Long-term avg metal prices)

Base metal prices used: Copper $0.95/lb, Gold $395/oz, Silver $5.00/oz, Molybdenum $5.00/lb.

• Internal Rate of Return (IRR): 15.3% to 20.3%.
• Net Present Value (NPV @ 5% discount): $1.047 Billion to $2.091 Billion.
• Sensitivity: At higher recent metal prices (Cu $1.25/lb, Au $415/oz), IRR ranges from 33.0% to 40.8% and NPV ranges from $3.511 Billion to $5.972 Billion.

Material Changes and Project Scope

This filing represents a significant step forward from previous exploration data, quantifying cost parameters for the first time. Key project parameters include:

• Resource Estimate: 26.5 million ounces of gold and 16.5 billion pounds of copper contained in the inferred resource.
• Mine Life: 31 to 62 years depending on production rate.
• Infrastructure: Requires an 86-mile road and a deep-sea port. The assessment assumes the State of Alaska will fund the road and port ($103 million estimated cost), which are excluded from the project's capital cost calculations in the financial model.
• Power: Estimated at $0.054/kWh; options include grid connection or new generation.

Guidance, Outlook, and Risks

Management Commentary and Outlook

Management views the project as having "excellent potential for a long life mine" with "large-scale, low cost metal production." The immediate focus is on completing a six-rig drill program to upgrade inferred resources to measured and indicated categories and finalizing a Bankable Feasibility Study in 2005.

Risks and Contingencies

• Resource Classification: All data is based on inferred resources, which are too speculative to be categorized as reserves. There is no assurance these can be converted to reserves.
• Engineering Uncertainty: Cost estimates are order-of-magnitude approximations, not based on systematic engineering studies. Actual costs may vary widely.
• Permitting: No permits have been applied for. Timely approval of environmental and other permits is not assured.
• Infrastructure Dependency: Project viability relies on the State of Alaska developing the road and port. Financing for these facilities is not guaranteed.
• Commodity Prices: Financial models are highly sensitive to metal prices, which are historically volatile.
• Financing: The project requires major debt and equity financing, availability of which is uncertain.

Investor Verification Checklist

• Verify the status of the State of Alaska's commitment to fund the $103 million road and port infrastructure.
• Monitor the results of the ongoing drill program to determine if inferred resources can be upgraded to measured/indicated categories.
• Review the upcoming Bankable Feasibility Study (expected 2005) for refined capital and operating cost estimates.
• Assess the timeline and likelihood of securing environmental permits and the Environmental Impact Statement.
• Confirm the final power supply agreement and actual cost per kWh versus the $0.054 estimate.