Northern Dynasty Minerals : First Quarter Financial Report for the period ending March 31, 2024

CONDENSED CONSOLIDATED INTERIM

FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED

MARCH 31, 2024 AND 2023

(Expressed in thousands of Canadian Dollars)

(Unaudited)

Notice of No Auditor Review of

Condensed Consolidated Interim Financial Statements

In accordance with National Instrument 51-102 Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of these condensed consolidated interim financial statements they must be accompanied by a notice indicating that the condensed consolidated interim financial statements have not been reviewed by an auditor.

The accompanying unaudited condensed consolidated interim financial statements of the Company have been prepared by and are the responsibility of the Company's management.

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Northern Dynasty Minerals Ltd.

Condensed Consolidated Interim Statements of Financial Position

(Unaudited - Expressed in thousands of Canadian Dollars)

			March 31	December 31
	Notes		2024		2023
ASSETS
Non-current assets
Restricted Cash	5(b)	$	902	$	872
Mineral property, plant and equipment	3		124,502		121,851
Total non-current assets			125,404		122,723
Current assets
Receivable from related party	8		-		17
Amounts receivable and prepaid expenses	4		1,971		2,908
Cash and cash equivalents	5(a)		15,179		18,200
Total current assets			17,150		21,125
Total Assets		$	142,554	$	143,848
EQUITY
Capital and reserves
Share capital	6	$	702,713	$	702,950
Reserves	6		120,006		117,292
Deficit			(702,049)		(696,958)
Total equity			120,670		123,284
LIABILITIES
Non-current liabilities
Trade and other payables	9		333		338
Total non-current liabilities			333		338
Current liabilities
Convertible notes liability	7		2,318		2,197
Derivative on convertible notes	7		17,055		16,687
Payables to related parties	8		502		287
Trade and other payables	9		1,676		1,055
Total current liabilities			21,551		20,226
Total liabilities			21,884		20,564
Total Equity and Liabilities		$	142,554	$	143,848
Nature and continuance of operations (note 1)
Commitments and contingencies (note 14)

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

These condensed consolidated interim 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.

Condensed Consolidated Interim Statements of Comprehensive Loss

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

		Three months ended March 31
	Notes		2024		2023
Expenses
Exploration and evaluation expenses	10, 11	$	1,763	$	2,274
General and administrative expenses	10, 11		2,611		2,445
Legal, accounting and audit	10		934		2,025
Share-based compensation	6(c),(d)		5		413
Loss from operating activities			5,313		7,157
Foreign exchange income			(296)		(14)
Interest income			(241)		(97)
Finance expense			184		15
Other income			-		(1)
Loss on change in fair value of convertible notes derivative	7		368		-
Net loss		$	5,328	$	7,060
Other comprehensive (income) loss
Items that may be subsequently reclassified to net loss
Foreign exchange translation difference	6(e)		(2,709)		341
Other comprehensive (income) loss		$	(2,709)	$	341
Total comprehensive loss		$	2,619	$	7,401
Basic and diluted loss per share	12	$	0.01	$	0.01

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

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Northern Dynasty Minerals Ltd.

Condensed Consolidated Interim Statements of Cash Flows (Unaudited - Expressed in thousands of Canadian Dollars)

		Three months ended March 31
	Notes		2024		2023
Operating activities
Net loss		$	(5,328)	$	(7,060)
Non-cash or non operating items
Depreciation	3		41		41
Interest income			(241)		(97)
Loss on change in fair value of convertible notes derivative	7		368		-
Share-based compensation			5		413
Unrealized exchange gain			(130)		(5)
Changes in working capital items
Amounts receivable and prepaid expenses			1,006		618
Amounts receivable from related party			17		-
Trade and other payables			711		1,197
Payables to related parties			215		148
Net cash used in operating activities			(3,336)		(4,745)
Investing activities
Disposal of plant and equipment			-		1
Interest received on cash and cash equivalents			157		62
Net cash from investing activities			157		63
Financing activities
Payments of principal portion of lease liabilities	9		(40)		(37)
Net cash used in financing activities			(40)		(37)
Net decrease in cash and cash equivalents			(3,219)		(4,719)
Effect of exchange rate fluctuations on cash and cash equivalents			198		(13)
Cash and cash equivalents - beginning balance			18,200		14,173
Cash and cash equivalents - ending balance	5(a)	$	15,179	$	9,441

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

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Northern Dynasty Minerals Ltd.

Condensed Consolidated Interim Statements of Changes in Equity (Unaudited - 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
			(note 6(a))		Amount			reserve		(note 6(e))		reserve		(note 6(b))		Deficit	Total equity
	Balance at January 1, 2023		529,779,388	$	700,278	$	80,024	$	38,091	$	(17)	$	271	$	(675,962)	$	142,685
	Share-based compensation	6(c),(d)	-		-			413		-		-		-		-		413
	Net loss		-		-			-		-		-		-		(7,060)		(7,060)
	Other comprehensive loss net of tax		-		-			-		(341)		-		-		-		(341)
	Total comprehensive loss																	(7,401)
	Balance at March 31, 2023		529,779,388	$	700,278	$	80,437	$	37,750	$	(17)	$	271	$	(683,022)	$	135,697
	Balance at January 1, 2024		538,478,010	$	702,950	$	80,993	$	35,233	$	(17)	$	1,083	$	(696,958)	$	123,284
	Shares returned to treasury and cancelled		(753,729)		(237)			-		-		-		-		237		-
	Share-based compensation	6(d)	-		-			5		-		-		-		-		5
	Net loss		-		-			-		-		-		-		(5,328)		(5,328)
	Other comprehensive income net of tax		-		-			-		2,709		-		-		-		2,709
	Total comprehensive loss																	(2,619)
	Balance at March 31, 2024		537,724,281	$	702,713	$	80,998	$	37,942	$	(17)	$	1,083	$	(702,049)	$	120,670

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

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Northern Dynasty Minerals Ltd.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024, and 2023

(Unaudited - 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, 14th floor, Vancouver, British Columbia.

The condensed consolidated interim financial statements ("Financial Statements") of the Company as at and for the three months ended March 31, 2024, 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.

As of March 31, 2024, the Group had $15,179 (December 31, 2023 - $18,200) in cash and cash equivalents for its operating requirements and a negative working capital (current assets minus current liabilities) of $4,401 (as compared to working capital of $899 at December 31, 2023) as a result of recognizing the Convertible notes liability and derivative in current liabilities (note 7). 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. During the three months ended March 31, 2024, the Group incurred a net loss of $5,328 (2023 - $7,060) and had a deficit of $702,049 as of March 31, 2024 (December 31, 2023 - $696,958). 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 Group's response to the US Environmental Protection Agency ("EPA")'s final determination and appeal and remand of the Record of Decision (the "ROD") (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 in November 2023. The amendment provides the royalty holder with the right to fund the remainder of the second trance in five US$2,000 investments. 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 a result, 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.

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

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Northern Dynasty Minerals Ltd.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024, and 2023

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

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 the 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 were requested and granted. The District's last extension 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. On January 8, 2024, the US 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. In April 2024, the District advised that, after months of successive delays, it has declined to engage in the remand process related to the November 25, 2020, denial of a permit application for the Pebble Project, citing the EPA's intervening veto of the development at Pebble. The Group is reviewing the District's decision not to engage in the remand process and is evaluating appropriate next steps regarding the announcement, including any available actions to challenge this decision. In the absence of a successful challenge to the Final Determination or a successful challenge to the District's decision not to engage in the remand process, it is unlikely that the Group will be able to have the District reconsider its position as per its April 2024 decision. If the Group is successful in challenging the Final Determination, the Group expects that the District will re-engage on the remand process and the Group will pursue reversal of the ROD. The Group notes that the District's decision not to engage in the remand process at this time is without prejudice and not based on the merits of the many technical issues raised in its appeal.

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.

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Northern Dynasty Minerals Ltd.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024, and 2023

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

The Company and the Pebble Partnership are seeking judicial review of the Final Determination. 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.

On March 14, 2024, the State of Alaska filed a "takings" action in the US Court of Federal Claims in Washington, DC. On April 11, 2024, the State of Alaska filed an action in Federal District Court in Alaska seeking to vacate the EPA veto of a development at Pebble.

2. MATERIAL ACCOUNTING POLICIES

1. Statement of Compliance
   These Financial Statements have been prepared in accordance with IAS 34, Interim Financial Reporting, as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the IFRS Interpretations Committee ("IFRIC"s). They do not include all of the information required by IFRS for complete annual financial statements and should be read in conjunction with the Group's consolidated financial statements as at and for the year ended December 31, 2023 (the "2023 annual financial statements"). These Financial Statements were authorized for issue by the Audit and Risk Committee on May 13, 2024.
2. Significant Accounting Estimates and Judgements
   In preparing these Financial Statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
   There was no change in the use of significant estimates and judgements during the current period as compared to those described in Note 2 in the 2023 annual financial statements, and which three are discussed below:
   Critical accounting judgements
3. 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:
   2. • The Group submitted an administrative appeal with the USACE POD on the permit denial and the USACE POD remanded the permit decision to the District to re-evaluate specific issues. Although the District has declined to engage in the remand process, citing the EPA intervening veto of development at Pebble, the Group notes that this decision is without prejudice and not based on the merits of the many technical issues raised in the Group's appeal;
      • The Group has legal avenues to challenge the EPA's Final Determination and has filed actions thereto (see note 1); and
      • The Company's market capitalization on March 31, 2024, 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.
   3. 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).

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Northern Dynasty Minerals Ltd.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024, and 2023

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

1. 3. The Group used judgement in concluding that the convertible notes are hybrid financial instruments because 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.

2. 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, 2024:
   • 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 adoption had no impact on the Financial Statements as the Group did not incur any of these transactions in the reporting period.

3. MINERAL PROPERTY, PLANT AND EQUIPMENT

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

Three months ended March 31, 2024		Mineral
		Property		Plant and
		Interest 1	Equipment 2		Total
Cost
Beginning and ending balance	$	94,317	$	2,249	$	96,566
Accumulated depreciation
Beginning Balance		-		(2,096)		(2,096)
Depreciation charge for the period 3		-		(41)		(41)
Ending balance		-		(2,137)		(2,137)
Foreign currency translation difference
Beginning Balance		27,158		223		27,381
Movement for the period		2,684		8		2,692
Ending balance		29,842		231		30,073
Net carrying value - December 31, 2023	$	121,475	$	376	$	121,851
Net carrying value - March 31, 2024	$	124,159	$	343	$	124,502

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. 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:

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