| CONSOLIDATED FINANCIAL STATEMENTS |
| THREE MONTHS ENDED MARCH 31, 2006 |
| (Expressed in Canadian Dollars) |
| (Unaudited) |
These financial statements have not been reviewed by the Company's auditors
| NORTHERN DYNASTY MINERALS LTD. |
| Consolidated Balance Sheets |
| (Expressed in Canadian Dollars) |
| March 31 | December 31 | |||||
| 2006 | 2005 | |||||
| (unaudited) | ||||||
| Assets | ||||||
| Current assets | ||||||
| Cash and equivalents | $ | 10,722,854 | $ | 12,948,640 | ||
| Marketable securities (note 2) | – | 363,906 | ||||
| Amounts receivable and prepaids | 644,679 | 416,971 | ||||
| Balances receivable from related parties (note 4) | 517,347 | 448,360 | ||||
| 11,884,880 | 14,177,877 | |||||
| Equipment | 393,636 | 411,205 | ||||
| Mineral property interests | 16,706,930 | 16,706,930 | ||||
| Total Assets | $ | 28,985,446 | $ | 31,296,012 | ||
| Liabilities and Shareholders' Equity | ||||||
| Current liabilities | ||||||
| Accounts payable and accrued liabilities | $ | 2,986,512 | $ | 3,161,012 | ||
| Shareholders' equity | ||||||
| Share capital (note 3) | 138,009,137 | 132,361,949 | ||||
| Contributed surplus (note 3(e)) | 8,391,924 | 7,289,377 | ||||
| Deficit | (120,402,127 | ) | (111,516,326 | ) | ||
| 25,998,934 | 28,135,000 | |||||
| Commitments (notes 3(b) and 5) | ||||||
| Subsequent events (note 6) | ||||||
| Total Liabilities and Shareholders' Equity | $ | 28,985,446 | $ | $ 31,296,012 |
The accompanying notes are an integral part of these consolidated financial statements.
Approved by the Board of Directors
| /s/ Ronald W. Thiessen | /s/ Jeffrey R. Mason |
| Ronald W. Thiessen | Jeffrey R. Mason |
| Director | Director |
| NORTHERN DYNASTY MINERALS LTD. |
| Consolidated Statements of Operations |
| (Unaudited-Expressed in Canadaian Dollars) |
| Three months ended March 31 | ||||||
| 2006 | 2005 | |||||
| Expenses | ||||||
| Amortization | $ | 17,569 | $ | 19,468 | ||
| Conference and travel | 178,101 | 83,399 | ||||
| Exploration (see schedule of exploration expenses) | 6,877,060 | 5,582,068 | ||||
| Foreign exchange loss (gain) | (64,601 | ) | 19,843 | |||
| Interest expense (income) | (132,391 | ) | (118,413 | ) | ||
| Legal, accounting and audit | 163,259 | 49,576 | ||||
| Office and administration | 748,506 | 492,580 | ||||
| Shareholder communication | 83,342 | 89,191 | ||||
| Stock-based compensation - exploration | 382,773 | 584,895 | ||||
| Stock-based compensation - administration | 719,774 | 805,824 | ||||
| Trust and filing | 106,790 | 67,105 | ||||
| Net loss before the following | 9,080,182 | 7,675,536 | ||||
| Gain on sale of marketable securities | (194,381 | ) | – | |||
| Loss for the period | $ | 8,885,801 | $ | 7,675,536 | ||
| Basic and diluted loss per common share | $ | 0.15 | $ | 0.16 | ||
| Weighted average number of | ||||||
| common shares outstanding | 60,803,556 | 49,350,622 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| Consolidated Statements of Deficit | ||||||
| (Unaudited - Expressed in Canadian Dollars) | ||||||
| Three months ended March 31 | ||||||
| 2006 | 2005 | |||||
| Deficit, beginning of period | $ | 111,516,326 | $ | 61,198,495 | ||
| Loss for the period | 8,885,801 | 7,675,536 | ||||
| Deficit, end of period | $ | 120,402,127 | $ | 68,874,031 | ||
The accompanying notes are an integral part of these consolidated financial statements.
| NORTHERN DYNASTY MINERALS LTD. |
| Consolidated Statements of Cash Flows |
| (Unaudited - Expressed in Canadian Dollars) |
| Three months ended March 31 | ||||||
| 2006 | 2005 | |||||
| Operating activities | ||||||
| Loss for the period | $ | (8,885,801 | ) | $ | (7,675,536 | ) |
| Items not involving cash | ||||||
| Amortization | 17,569 | 19,468 | ||||
| Gain on sale of marketable securities | (194,381 | ) | – | |||
| Stock-based compensation | 1,102,547 | 1,390,719 | ||||
| Changes in non-cash working capital items | ||||||
| Amounts receivable and prepaids | (227,708 | ) | (194,648 | ) | ||
| Accounts payable and accrued liabilities | (174,500 | ) | 677,476 | |||
| Balances receivable from and payable to | ||||||
| related parties | (68,987 | ) | 201,608 | |||
| Cash and equivalents used for operating activities | (8,431,261 | ) | (5,580,913 | ) | ||
| Investing activities | ||||||
| Purchase of equipment | – | (26,181 | ) | |||
| Proceeds on sale of marketable securities | 558,287 | – | ||||
| Cash and equivalents provided by (used for) investing activities | 558,287 | (26,181 | ) | |||
| Financing activities | ||||||
| Common shares issued for cash, net of issue costs | 5,647,188 | 31,432,158 | ||||
| Increase (decrease) in cash and equivalents | (2,225,786 | ) | 25,825,064 | |||
| Cash and equivalents, beginning of period | 12,948,640 | 12,476,047 | ||||
| Cash and equivalents, end of period | $ | 10,722,854 | $ | 38,301,111 | ||
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||
| Non-cash investing activities | ||||||
| Issuance of shares for mineral property interests | $ | 4,918,309 | ||||
| Fair value of stock options allocated to shares issued | ||||||
| upon exercise | $ | – | ||||
| NORTHERN DYNASTY MINERALS LTD. |
| Consolidated Schedules of Exploration Expenses |
| (Unaudited - Expressed in Canadian Dollars) |
| Other | |||||||||
| Pebble Property | Properties | Total | |||||||
| Exploration expenses for the three months ended March 31, 2006 | – | ||||||||
| Assays and analysis | $ | 50,511 | $ | – | $ | 50,511 | |||
| Drilling | 9,037 | – | 9,037 | ||||||
| Engineering | 2,363,905 | – | 2,363,905 | ||||||
| Environmental | 2,670,257 | – | 2,670,257 | ||||||
| Equipment rental | 13,217 | – | 13,217 | ||||||
| Freight | 86,930 | – | 86,930 | ||||||
| Geological | 163,393 | – | 163,393 | ||||||
| Graphics | 7,788 | – | 7,788 | ||||||
| Helicopter | 95,386 | – | 95,386 | ||||||
| Property fees and assessments | 39,184 | – | 39,184 | ||||||
| Site activities | 422,866 | – | 422,866 | ||||||
| Socioeconomic | 836,650 | – | 836,650 | ||||||
| Travel and accommodation | 117,936 | – | 117,936 | ||||||
| Incurred during the period | 6,877,060 | – | 6,877,060 | ||||||
| Cumulative expenditures, December 31, 2005 | 86,727,794 | (66,418 | ) | 86,661,376 | |||||
| Cumulative expenditures, March 31, 2006 | $ | 93,604,854 | $ | (66,418 | ) | $ | 93,538,436 | ||
| Exploration expenses for the three months ended March 31, 2005 | |||||||||
| Assays and analysis | $ | 57,803 | $ | – | $ | 57,803 | |||
| Drilling | 100,599 | – | 100,599 | ||||||
| Engineering | 1,303,372 | – | 1,303,372 | ||||||
| Environmental | 3,004,656 | – | 3,004,656 | ||||||
| Equipment rental | 8,105 | – | 8,105 | ||||||
| Freight | 73,005 | – | 73,005 | ||||||
| Geological | 116,234 | – | 116,234 | ||||||
| Graphics | 23,481 | – | 23,481 | ||||||
| Helicopter | 215,330 | – | 215,330 | ||||||
| Property fees and assessments | 49,758 | – | 49,758 | ||||||
| Site activities | 137,658 | – | 137,658 | ||||||
| Socioeconomic | 406,355 | – | 406,355 | ||||||
| Travel and accommodation | 85,712 | – | 85,712 | ||||||
| Incurred during the period | 5,582,068 | – | 5,582,068 | ||||||
| Cumulative expenditures, December 31, 2004 | 43,661,377 | (66,418 | ) | 43,594,959 | |||||
| Cumulative expenditures, March 31, 2005 | $ | 49,243,445 | $ | (66,418 | ) | $ | 49,177,027 | ||
The accompanying notes are an integral part of these consolidated financial statements.
| NORTHERN DYNASTY MINERALS LTD. |
| Notes to Consolidated Financial Statements |
| Three months ended March 31, 2006 |
| (Unaudited - Expressed in Canadian Dollars) |
| 1. | BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION |
These interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles. They do not include all the disclosures as required for annual financial statements under generally accepted accounting principles. However, these interim consolidated financial statements follow the same accounting policies and methods of application as the Company’s most recent annual financial statements. These interim consolidated financial statements should be read in conjunction with the Company’s annual consolidated financial statements, which are available atwww.sedar.com.
Operating results for the three months ended March 31, 2006 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2006.
| 2. | MARKETABLE SECURITIES |
| Number | Carrying | ||||||||||||
| of shares | Cost | Market value | value | ||||||||||
| March 31, 2006 | |||||||||||||
| Taseko Mines Limited common shares | nil | $ | – | $ | – | $ | – | ||||||
| December 31, 2005 | |||||||||||||
| Taseko Mines Limited common shares | 256,272 | $ | 715,000 | $ | 533,046 | $ | 363,906 |
The Company’s investment in 256,272 common shares of Taseko Mines Limited was sold during the three months ended March 31, 2006 for proceeds of $558,287.
| 3. | SHARE CAPITAL |
| (a) | Authorized share capital |
The Company's authorized share capital consists of an unlimited number of common shares, without par value. | |
| (b) | Issued and outstanding common shares |
| Number of | |||||||
| Shares | Amount | ||||||
| Balance at December 31, 2005 | 60,092,607 | $ | 132,361,949 | ||||
| Issued during fiscal 2006 | |||||||
| Options exercised | 391,332 | 1,956,203 | |||||
| Warrants exercised | 738,197 | 3,690,985 | |||||
| Balance at March 31, 2006 | 61,222,136 | $ | 138,009,137 |
The Company is committed to issue 14,002,268 common shares in connection with its acquisition of Hunter Dickinson Group Inc., ("HDGI"), a related party to the Company, which holds a 20% carried contractual interest in the Pebble copper-gold-molybdenum property in southwestern Alaska. These shares will be issued to the shareholders of HDGI in consideration for the entire issued share capital of HDGI.
| NORTHERN DYNASTY MINERALS LTD. |
| Notes to Consolidated Financial Statements |
| Three months ended March 31, 2006 |
| (Unaudited - Expressed in Canadian Dollars) |
| (c) | Share purchase warrants |
The continuity of share purchase warrants (each warrant exercisable for one common share) for the period ended March 31, 2006 is: |
| Exercise | Dec 31 | Expired/ | Mar 31 | ||||||||||||||||
| Expiry date | price | 2005 | Issued | Exercised | cancelled | 2006 | |||||||||||||
| Sept. 18, 2006 | $ 5.00 | 6,985,344 | – | (738,197 | ) | – | 6,247,147 | ||||||||||||
| Weighted average exercise price | $ 5.00 | $ – | $ 5.00 | $ – | $5.00 | ||||||||||||||
| (d) | Share purchase options |
The continuity of share purchase options for the period ended March 31, 2006 is: |
| Exercise | Dec 31 | Expired / | Mar 31 | ||||||||||||||||
| Expiry date | price | 2005 | Granted | Exercised | cancelled | 2006 | |||||||||||||
| November 30, 2006 | $ 4.65 | 100,000 | – | – | – | 100,000 | |||||||||||||
| November 30, 2006 | $ 5.00 | 1,897,500 | – | (366,766 | ) | – | 1,530,734 | ||||||||||||
| September 28, 2007 | $ 5.40 | 150,000 | – | – | – | 150,000 | |||||||||||||
| November 30, 2007 | $ 4.50 | 170,000 | – | (9,966 | ) | – | 160,034 | ||||||||||||
| November 30, 2007 | $ 5.31 | 641,666 | – | (14,600 | ) | (10,000 | ) | 617,066 | |||||||||||
| December 14, 2007 | $ 5.37 | 15,000 | – | – | – | 15,000 | |||||||||||||
| 2,974,166 | – | (391,332 | ) | (10,000 | ) | 2,572,834 | |||||||||||||
| Weighted average exercise price | $ | 5.05 | $ | – | $ | 5.00 | $ | 5.31 | $ | 5.06 | |||||||||
| Contributed surplus, December 31, 2005 | $ | 7,289,377 | ||
| Changes during the period | ||||
| Non-cash stock-based compensation | 1,102,547 | |||
| Contributed surplus, March 31, 2006 | $ | 8,391,924 |
| (e) | Contributed surplus |
| 4. | RELATED PARTY BALANCES AND TRANSACTIONS |
| Three months ended March 31 | |||||||
| Transactions | 2006 | 2005 | |||||
| Services rendered and expenses reimbursed | |||||||
| Hunter Dickinson Inc. | $ 764,403 | $ 484,660 | |||||
| Hunter Dickinson Group Inc. | – | 3,200 | |||||
| Sidev Holdings Ltd. | 51,713 | 48,750 | |||||
| Galahad Gold plc | – | 78,987 | |||||
| Beattie Consulting Ltd. | 1,950 | – | |||||
| NORTHERN DYNASTY MINERALS LTD. |
| Notes to Consolidated Financial Statements |
| Three months ended March 31, 2006 |
| (Unaudited - Expressed in Canadian Dollars) |
| Balances receivable (payable) | At March 31, 2006 | At December 31, 2005 | |||||
| Hunter Dickinson Inc. | $ 517,347 | $ 451,560 | |||||
| Hunter Dickinson Group Inc. | – | (3,200 | ) | ||||
| Galahad Gold plc and subsidiary | – | – | |||||
| $ 517,347 | $ 448,360 |
| 5. | COMMITMENTS |
The Company is committed to guarantee the resale of 1,772,775 common shares of the Company (“NDM Resource Land shares”) issued to Teck Cominco American Incorporated (“Teck Cominco”) pursuant to an agreement to acquire the Resource Lands of the Pebble gold-copper-molybdenum property, for proceeds of US$9,938,600. At December 31, 2005, 473,700 of the 1,772,775 NDM Resource Land shares had been sold for proceeds of US$2,039,902. During the quarter ended March 31, 2006, the Company managed the sale of an additional 1,276,414 NDM Resource Land shares for proceeds paid to Teck Cominco of US$7,893,984. Consequently, as at March 31, 2006, the Company was required to manage the resale of the remaining 23,661 NDM Resource Land shares where Teck Cominco would be guaranteed resale proceeds of US$4,714. Any of the 23,661 NDM Resource Land shares remaining after the guaranteed resales proceeds of $4,714 have been paid to Teck Cominco will be returned to the Company’s treasury. | |
The Company is also committed to guarantee the resale of 977,795 common shares of the Company (“NDM Exploration Lands shares”) for proceeds of US$4 million to Teck Cominco pursuant to an agreement to acquire the Exploration Lands of the Pebble copper-gold-molybdenum property. At March 31, 2006, the Company had managed the sale of 653,686 NDM Exploration Lands shares for proceeds paid to Teck Cominco of approximately US$3,994,028. The Company is required to manage the resale of the remaining 324,109 NDM Exploration Lands shares where Teck Cominco would be guaranteed resale proceeds of US$5,972. Any of the 324,109 NDM Exploration Lands shares remaining after the guaranteed resales proceeds of $5,972 have been paid to Teck Cominco will be returned to the Company’s treasury. | |
Upon payment in full by the Company of the guaranteed amount of the combined US$14 million of resale proceeds to Teck Cominco, the exercise of the Exploration Lands Option and the Resource Lands Option will be completed and the Company will vest its interest and take registered title to the claims comprising them, subject to acquisition of HDGI’s interest. | |
| 6. | SUBSEQUENT EVENTS |
Subsequent to March 31, 2006 and prior to May 1, 2006, the Company issued 562,028 common shares pursuant to the exercise of 339,834 share purchase options and 222,194 share purchase warrants for proceeds of approximately $2.8 million. The Company also granted 1,596,500 share purchase options with an exercise price of $7.25 per common share, of which 471,500 share purchase options expire on April 30, 2009 and the remaining 1,125,000 share purchase options expire on April 30, 2011. |