UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16
OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
As at November 19, 2015
Commission File Number: 001-32210
NORTHERN DYNASTY MINERALS LTD.
(Translation of registrant's name into English)
15th Floor - 1040 W. Georgia St.
Vancouver, British Columbia
Canada V6E 4H1
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will
file annual reports under cover Form 20-F or Form 40-F.
[ x ]
Form 20-F [ ] Form 40-F
Indicate by check mark if the registrant is submitting the Form
6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
Indicate by check mark if the registrant is submitting the
Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
SUBMITTED HEREWITH
Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
Northern Dynasty Minerals Ltd. |
|
(Registrant) |
|
|
|
Date: November 19, 2015 |
By: |
/s/ Marchand Snyman |
|
|
|
|
|
Marchand Snyman |
|
Title: |
Director, Chief Financial Officer |
CONDENSED CONSOLIDATED
INTERIM
FINANCIAL
STATEMENTS
THREE AND NINE MONTHS ENDED
SEPTEMBER 30,
2015
(Expressed in thousands of Canadian Dollars)
(Unaudited)
Northern Dynasty Minerals
Ltd.
Condensed Consolidated Interim
Statements of Financial Position
(Unaudited - Expressed in
thousands of Canadian Dollars)
|
|
|
|
|
September 30 |
|
|
December 31 |
|
|
|
Notes |
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
|
Mineral property, plant and equipment |
|
3 |
|
$ |
141,900 |
|
$ |
123,608 |
|
Total non-current assets |
|
|
|
|
141,900 |
|
|
123,608 |
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
Available-for-sale financial
assets |
|
4 |
|
|
|
|
|
287 |
|
Amounts receivable and prepaid
expenses |
|
5 |
|
|
942 |
|
|
962 |
|
Restricted cash |
|
6(b) |
|
|
1,165 |
|
|
1,206 |
|
Cash and cash equivalents |
|
6(a) |
|
|
12,606 |
|
|
9,447 |
|
Total current assets |
|
|
|
|
14,713 |
|
|
11,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
|
|
$ |
156,613 |
|
$ |
135,510 |
|
|
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
|
|
|
|
Share capital |
|
7 |
|
$ |
404,154
|
|
$ |
389,227 |
|
Reserves |
|
|
|
|
105,242 |
|
|
84,031 |
|
Deficit |
|
|
|
|
(366,716 |
) |
|
(345,295 |
) |
Total Equity |
|
|
|
|
142,680 |
|
|
127,963 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
|
|
|
|
|
1,514 |
|
Total non-current liabilities |
|
|
|
|
|
|
|
1,514 |
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
Loan |
|
8 |
|
|
4,303 |
|
|
|
|
Payables to a related parties
|
|
9 |
|
|
1,634 |
|
|
383 |
|
Trade and other payables |
|
10 |
|
|
7,996 |
|
|
5,650 |
|
Total current liabilities |
|
|
|
|
13,933 |
|
|
6,033 |
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
|
|
13,933 |
|
|
7,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity and Liabilities |
|
|
|
$ |
156,613 |
|
$ |
135,510 |
|
Continuance of Operations (note 1)
Commitments (note 13)
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/ Peter Mitchell |
|
|
Ronald W. Thiessen |
Peter Mitchell |
Director |
Director |
Page 2
Northern Dynasty Minerals
Ltd.
Condensed Consolidated Interim
Statements of Comprehensive Loss
(Unaudited - Expressed in
thousands of Canadian Dollars, except for share information)
|
|
|
|
|
Three months ended September 30 |
|
|
Nine months ended September 30 |
|
|
|
|
|
|
2015
|
|
|
2014 |
|
|
2015
|
|
|
2014 |
|
|
|
Notes |
|
|
|
|
|
(note 2(b)) |
|
|
|
|
|
(note 2(b)) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration and evaluation
expenses |
|
12 |
|
$ |
1,786 |
|
$ |
2,436 |
|
$ |
5,344 |
|
$ |
9,416 |
|
General and administrative
expenses |
|
12 |
|
|
3,076 |
|
|
2,120 |
|
|
6,459 |
|
|
6,940 |
|
Legal, accounting and audit |
|
|
|
|
4,452 |
|
|
1,957 |
|
|
10,622 |
|
|
3,393 |
|
Share-based compensation |
|
7(c) |
|
|
33 |
|
|
557 |
|
|
434 |
|
|
3,355 |
|
Loss from operating activities |
|
|
|
|
9,347 |
|
|
7,070 |
|
|
22,859 |
|
|
23,104 |
|
Foreign exchange loss (gain) |
|
|
|
|
(1 |
) |
|
19 |
|
|
106 |
|
|
(266 |
) |
Interest income |
|
|
|
|
(2 |
) |
|
(15 |
) |
|
(83 |
) |
|
(304 |
) |
Interest payable on loan |
|
8 |
|
|
53 |
|
|
|
|
|
53 |
|
|
|
|
Loss before tax |
|
|
|
|
9,397 |
|
|
7,074 |
|
|
22,935 |
|
|
22,534 |
|
Deferred income tax recovery |
|
|
|
|
|
|
|
(986 |
) |
|
(1,514 |
) |
|
(1,112 |
) |
Loss for the period |
|
|
|
$ |
9,397 |
|
$ |
6,088 |
|
$ |
21,421 |
|
$ |
21,422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss (income) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that may be reclassified
subsequently to loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation
gain |
|
7(d) |
|
|
(8,668 |
) |
|
(5,629 |
) |
|
(17,986 |
) |
|
(5,868 |
) |
Change in fair value of available-for-sale
financial assets |
|
4 |
|
|
(112 |
) |
|
|
|
|
8 |
|
|
|
|
Other comprehensive (income) for the period |
|
|
|
$ |
(8,780 |
) |
$ |
(5,629 |
) |
$ |
(17,978 |
) |
$ |
(5,868 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the period |
|
|
|
$ |
617 |
|
$ |
459 |
|
$ |
3,443 |
|
$ |
15,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share |
|
11 |
|
|
0.07 |
|
|
0.06 |
|
|
0.16 |
|
|
0.22 |
|
The accompanying notes are an integral part of these
condensed consolidated interim financial statements.
Page 3
Northern Dynasty Minerals
Ltd.
Condensed Consolidated Interim
Statements of Cash Flows
(Unaudited - Expressed in thousands of
Canadian Dollars)
|
|
|
|
|
Nine months ended
September 30 |
|
|
|
Notes |
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
Loss for the period |
|
|
|
$ |
(21,421 |
) |
$ |
(21,422 |
) |
Adjustments for items not
affecting cash or operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
210 |
|
|
211 |
|
Deferred income
tax recovery |
|
|
|
|
(1,514 |
) |
|
(1,112 |
) |
Foreign exchange
loss (gain) |
|
|
|
|
388 |
|
|
(307 |
) |
Interest payable
on loan |
|
8 |
|
|
53 |
|
|
|
|
Interest received
on cash held |
|
|
|
|
(83 |
) |
|
(171 |
) |
Interest
receivable on loan prior to settlement |
|
|
|
|
|
|
|
(133 |
) |
Loss on disposal
of plant and equipment |
|
|
|
|
5 |
|
|
59 |
|
Share-based
compensation |
|
|
|
|
434 |
|
|
3,355 |
|
Changes in non-cash working
capital items |
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
6(b) |
|
|
148 |
|
|
169 |
|
Amounts receivable
and prepaid expenses |
|
|
|
|
59 |
|
|
(91 |
) |
Trade and other
payables |
|
|
|
|
1,636 |
|
|
802 |
|
Payables to
related parties |
|
|
|
|
1,251 |
|
|
(183 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities |
|
|
|
|
(18,834 |
) |
|
(18,823 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
Acquisition of plant and
equipment |
|
3 |
|
|
(28 |
) |
|
|
|
Disposal of equipment |
|
3 |
|
|
70 |
|
|
86 |
|
Proceeds from disposal of
available-for-sale financial assets |
|
|
|
|
280 |
|
|
|
|
Interest received on cash held |
|
|
|
|
83 |
|
|
171 |
|
Net
cash from investing activities |
|
|
|
|
405 |
|
|
257 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
Loan proceeds |
|
8 |
|
|
4,250 |
|
|
|
|
Special Warrants issued, net of issuance costs |
|
7(b) |
|
|
17,726 |
|
|
|
|
Net
cash from financing activities |
|
|
|
|
21,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents |
|
|
|
|
3,547 |
|
|
(18,566 |
) |
Effect of exchange rate
fluctuations on cash held |
|
|
|
|
(388 |
) |
|
113 |
|
Cash and cash equivalents at beginning of the
period |
|
|
|
|
9,447 |
|
|
25,795 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the period |
|
6(a) |
|
$ |
12,606 |
|
$ |
7,342 |
|
Non-cash investing and financing activities: |
The Company converted Special Warrants on
a one-for-one basis into common shares at no additional cost to holder
(note 7(b)) |
The
Group received title to mineral claims in settlement of a loan receivable
in 2014 (note 3) |
The accompanying notes are an integral part of these
condensed consolidated interim financial statements.
Page 4
Northern Dynasty
Minerals Ltd.
Condensed
Consolidated Interim Statements of Changes in
Equity
(Unaudited - Expressed in thousands of Canadian
Dollars, except for number of shares)
|
|
Share capital
|
|
|
Reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity settled |
|
|
currency |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
share-based |
|
|
translation |
|
|
Investment |
|
|
Special |
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
payments |
|
|
reserve |
|
|
revaluation |
|
|
Warrants |
|
|
|
|
|
|
|
|
|
shares |
|
|
Amount |
|
|
reserve |
|
|
(note 7(d)) |
|
|
reserve |
|
|
(note 7 |
(b)) |
|
Deficit |
|
|
Total equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2014 |
|
95,009,864 |
|
$ |
389,227 |
|
$ |
51,417 |
|
$ |
7,234 |
|
$ |
(2 |
) |
$ |
|
|
$ |
(313,948 |
) |
$ |
133,928 |
|
Share-based compensation |
|
|
|
|
|
|
|
3,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,355 |
|
Loss for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,422 |
) |
|
(21,422 |
) |
Other comprehensive income for the
period |
|
|
|
|
|
|
|
|
|
|
5,868 |
|
|
|
|
|
|
|
|
|
|
|
5,868 |
|
Total comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,554 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2014 |
|
95,009,864 |
|
$ |
389,227 |
|
$ |
54,772 |
|
$ |
13,102 |
|
$ |
(2 |
) |
$ |
|
|
$ |
(335,370 |
) |
$ |
121,729 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2015 |
|
95,009,864 |
|
$ |
389,227 |
|
$ |
55,294 |
|
$ |
17,179 |
|
$ |
6 |
|
$ |
11,552 |
|
$ |
(345,295 |
) |
$ |
127,963 |
|
Conversion of Special Warrants into common
shares |
|
35,962,735 |
|
|
14,927 |
|
|
|
|
|
|
|
|
|
|
|
(14,927 |
) |
|
|
|
|
|
|
Special Warrants issued, net of transaction
costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,726 |
|
|
|
|
|
17,726 |
|
Share-based compensation |
|
|
|
|
|
|
|
434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
434 |
|
Loss for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,421 |
) |
|
(21,421 |
) |
Other comprehensive income (loss)
for the period |
|
|
|
|
|
|
|
|
|
|
17,986 |
|
|
(8 |
) |
|
|
|
|
|
|
|
17,978 |
|
Total comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,443 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2015 |
|
130,972,599 |
|
$ |
404,154 |
|
$ |
55,728 |
|
$ |
35,165 |
|
$ |
(2 |
) |
$ |
14,351 |
|
$ |
(366,716 |
) |
$ |
142,680 |
|
The accompanying notes are an
integral part of these condensed
consolidated interim financial
statements.
Page 5
Northern Dynasty Minerals Ltd.
|
Notes to the Condensed Consolidated
Interim Financial Statements |
For the three and nine months ended September 30, 2015 and
2014 |
(Unaudited
Expressed in thousands of Canadian Dollars, unless otherwise stated,
except per share or option) |
1. |
NATURE AND CONTINUANCE OF
OPERATIONS |
Northern Dynasty Minerals Ltd. (the
"Company" or Northern Dynasty) 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 New York Stock Exchange-MKT
("NYSE-MKT") under the symbol "NAK". The Companys corporate office is located
at 1040 West Georgia Street, 15th floor, Vancouver, British Columbia.
The condensed consolidated interim
financial statements ("Financial Statements") of the Company as at and for the
period ended September 30, 2015, include financial information for the Company
and its subsidiaries (note 2(c)) (together referred to as the "Group" and
individually as "Group entities"). The Company is the ultimate parent. The Group
operates in a single and geographical reportable operating segment which is the
acquisition, exploration and development of its core mineral property interest,
the Pebble Copper-Gold-Molybdenum Project (the "Pebble Project") located in
Alaska, United States of America ("USA" or "US").
The Group is in the process of
exploring and developing the Pebble Project and has not yet determined whether
the Pebble Project contains mineral reserves that are economically recoverable.
The Groups continuing operations, and the underlying value and recoverability
of the amounts shown for the Groups mineral property interest, are 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 at September 30, 2015, the Group had
$12.6 million in cash and cash equivalents for its operating requirements. The
Group has prioritized the allocation of these funds to meet key corporate and
Pebble Project expenditure requirements in the near term however additional
financing will be required to fund key activities and progress material Pebble
Project expenditures in 2016. The Group continues to seek additional financing
which may include any of or a combination of debt, equity and/or contributions
from possible new Pebble Project participants as well as the acquisition of
entities whose primary asset is cash. The Group has announced that it is to
acquire TSX Venture listed company, Mission Gold Ltd., whose primary assets are
approximately $9 million in cash (note 14). There can be no assurances that the
Group will be successful in obtaining additional financing. 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 casts substantial doubt about the Companys ability to continue
as a going concern. Management has concluded that presentation as a going
concern is appropriate in these Financial Statements due to the anticipated
acquisition discussed above.
In July 2014, the United States
Environmental Protection Agency (the "EPA") announced a proposal under Section
404(c) of the Clean Water Act to restrict and impose limitations on all
discharges of dredged or fill material ("EPA Action") associated with mining the
Pebble deposit. The Company believes that the EPA does not have the statutory
authority to impose conditions on the development at Pebble prior to the
submission of a detailed development plan and its thorough review by federal and
state agencies, including review under the National Environmental Protection Act
("NEPA"). The Pebble Limited Partnership (the Pebble Partnership), a
wholly-owned subsidiary of the Company, along with the State of Alaska and the
Alaska Peninsula Corporation, an Alaska Native village corporation with
extensive land holdings in the Pebble Project area, filed for an injunction to
stop the EPA Action with the US Federal Court in Alaska (the "Court"). However,
the Court has deferred judgment thereon until the EPA has issued a final
determination. The Company appealed the Courts decision to the 9th
Circuit Court of Appeals. The appeal was denied in May 2015. The Pebble
Partnership still holds the option to pursue its statutory authority case in the
instance that EPA finalizes a pre-emptive regulatory action under the Clean
Water Act 404(c). In September 2014, the Pebble Partnership initiated a second
action against the EPA in federal district court in Alaska charging that the EPA
violated the Federal Advisory Committee Act ("FACA"). In November 2014, the U.S. federal court judge in
Alaska granted, in relation to the FACA case, the Pebble Partnerships request
for a preliminary injunction, which, although considered by the Company as a
significant procedural milestone in the litigation, does not resolve the Pebble
Partnerships claims that the EPA Actions with respect to the Bristol Bay
Assessment and subsequent 404(c) regulatory process, violated FACA. In June
2015, the EPAs motion to dismiss the FACA case was rejected and as a result the
FACA case is moving forward. The Company expects its legal rights will be upheld
by the Court and that the Company will ultimately be able to apply for the
necessary permits under NEPA. On October 14, 2014, the Pebble Partnership filed
suit in the federal district court in Alaska charging that the EPA has violated
the Freedom of Information Act by improperly withholding documents related to
the Pebble Project, the Bristol Bay Watershed Assessment and consideration of a
pre-emptive 404(c) veto under the Clean Water Act. The EPA has moved for summary
judgment claiming that its search for and disclosure of documents was adequate.
The Pebble Partnership has opposed the motion pointing out several deficiencies
in the EPAs search parameters and pointing out the agencys overly broad
assertion of the deliberative process privilege to withhold documents. On August
24, 2015, the U.S. federal court judge granted in part and deferred in part the
EPAs motion for summary judgement on the Freedom of Information Act ("FOIA") litigation. The court accepted the EPAs position that it had made an
adequate search for documents but left the matter open should the EPA not meet
its obligations in the FACA litigation or if additional documents surface.
Additionally, the judge ordered the EPA to produce a sample of 183 partially or
fully withheld documents so that it could conduct an in camera review of the
sample and test the merits of the EPAs withholdings under the deliberative
process privilege. Before producing this sample to the Court, the EPA chose to
voluntarily release 115 documents (or 63% of the sample ordered by the Court),
relinquishing its claim of privilege as to these documents. The parties are
currently briefing the application of the deliberative process privilege with
respect to the sample of documents.
Page 6
Northern Dynasty Minerals Ltd.
|
Notes to the Condensed Consolidated
Interim Financial Statements |
For the three and nine months ended September 30, 2015 and
2014 |
(Unaudited
Expressed in thousands of Canadian Dollars, unless otherwise stated,
except per share or option) |
2. |
SIGNIFICANT ACCOUNTING POLICIES |
|
|
|
|
(a) |
Statement of Compliance |
|
|
|
|
|
These Financial Statements have been prepared in
accordance with IAS 34, Interim Financial Reporting, as issued by
the International Accounting Standards Board ("IASB") and interpretations
issued by the IFRS Interpretations Committee ("IFRIC"s). They do not
include all of the information required by International Financial
Reporting Standards ("IFRS") for complete annual financial statements, and
should be read in conjunction with the Groups consolidated financial
statements as at and for the year ended December 31, 2014, which were
filed. Accounting policies applied herein are the same as those applied in
the Groups annual financial statements. These Financial Statements were
authorized for issue by the Audit and Risk Committee of the Board of
Directors on November 13, 2015. |
|
|
|
|
(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 for financial instruments classified as
available-for-sale, which are stated at their fair value. |
|
|
|
|
|
Comparative information in the statement of loss and
comprehensive loss has been reclassified to separately reflect legal,
accounting and audit expenditures as a separate line item, which line item
is predominantly comprised of legal costs incurred by the Group in
response to the EPAs activities surrounding the Pebble Project. These
expenditures were previously included under general and administrative
expenditures. There is no impact of the expense reclassification on loss
and comprehensive loss for the period or basic and diluted loss per share.
Statements of financial position, cash flows and changes in equity are not
affected. |
Page 7
Northern Dynasty Minerals Ltd.
|
Notes to the Condensed Consolidated
Interim Financial Statements |
For the three and nine months ended September 30, 2015 and
2014 |
(Unaudited
Expressed in thousands of Canadian Dollars, unless otherwise stated,
except per share or option) |
(c) |
Basis of Consolidation |
|
|
|
These Financial Statements incorporate the financial
statements of the Company, the Companys subsidiaries and entities
controlled by the Company and its subsidiaries listed
below: |
|
|
Place of |
|
|
|
Name of
Subsidiary |
Incorporation |
Principal Activity |
Ownership |
|
0796412 BC Ltd. |
British Columbia,
Canada |
Not active. Wholly-owned
subsidiary of the Company. |
100% |
|
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% of the Pebble Limited Partnership
("PLP") and 100% of Pebble Mines Corp. |
100% (indirect) |
|
Pebble Limited Partnership |
Alaska, USA |
Holding Company and Exploration
of the Pebble Project. |
100%
(indirect) |
|
Pebble Mines Corp. |
Delaware, USA |
General Partner. Holds 0.1% of PLP. |
100% (indirect) |
|
Pebble West Claims Corporation 2
|
Alaska, USA |
Holding Company. Wholly-owned
subsidiary of PLP. |
100%
(indirect) |
|
Pebble East Claims Corporation 3 |
Alaska, USA |
Holding Company. Wholly-owned subsidiary of
PLP. |
100% (indirect) |
|
U5 Resources Inc.4 |
Nevada, USA |
Holding Company. Wholly-owned
subsidiary of the Company. |
100%
|
Notes to the table above:
|
1. |
Holds 20% interest in the Northern Dynasty Partnership.
The Company holds the remaining 80% interest. |
|
2. |
Holds certain of the Pebble Project claims. |
|
3. |
Holds certain of the Pebble Project claims and claims
located south and west of the Pebble Project claims. In January 2015, two
of the Companys wholly-owned subsidiaries, Kaskanak Inc. and its wholly-
owned parent, Kaskanak Copper LLC, were merged with Pebble East Claims
Corporation, with the latter surviving the merger. |
|
4. |
Holds certain mineral claims located north of the Pebble
Project claims. |
(d) |
Significant Accounting Estimates and
Judgments |
|
|
|
There was no change in the use of estimates and judgments
during the current period as compared to those described in Note 2 in the
Groups Consolidated Financial Statements for the year ended December 31,
2014. |
|
|
(e) |
Amendments, Interpretations, Revised and New Standards
Adopted by the Group |
|
|
|
As of January 1, 2015 the Group has not adopted any new
amendments, interpretations, revised and new
standards. |
Page 8
Northern Dynasty Minerals Ltd.
|
Notes to the Condensed Consolidated
Interim Financial Statements |
For the three and nine months ended September 30, 2015 and
2014 |
(Unaudited
Expressed in thousands of Canadian Dollars, unless otherwise stated,
except per share or option) |
(f) |
Accounting Standards, Amendments and Revised Standards
Not Yet Effective Effective for annual periods commencing on or
after January 1, 2018 |
|
|
IFRS 9, Financial Instruments
("IFRS 9"), replaces IAS 39, Financial Instruments: Recognition
and Measurement, in its entirety. The standard incorporates a
number of improvements: a) includes a logical model for classification and
measurement (IFRS 9 provides for principle-based approach to
classification which is driven by cash flow characteristics and the
business model in which an asset is held); b) includes a single,
forward-looking "expected loss" impairment model (IFRS 9 will require
entities to account for expected credit losses from when financial
instruments are first recognized and to recognize full lifetime expected
losses on a timely basis); and c) includes a substantially-reformed model
for hedge accounting with enhanced disclosures about risk management
activity (IFRS 9s new model aligns the accounting treatment with risk
management activities). IFRS 9 is effective for annual periods beginning
on or after 1 January 2018 with early adoption permitted.
|
The Group anticipates that the adoption
of IFRS 9 will have no material impact on its financial statements given the
extent of its current use of financial instruments in the ordinary course of
business.
|
|
IFRS 15, Revenue from Contracts with
Customers ("IFRS 15"), which was issued by the IASB in May 2014,
supersedes IAS 11, Construction Contracts, IAS 18, Revenue,
IFRIC 13, Customer Loyalty Programs, IFRIC 15, Agreements for
the Construction of Real Estate, IFRIC 18, Transfers of Assets from
Customers, and SIC 31, Revenue Barter Transactions
involving Advertising Services. IFRS 15 establishes a single five-step
model framework for determining the nature, amount, timing and certainty
of revenue and cash flows arising from a contract with a customer. IFRS 15
is effective for annual periods beginning on or after January 1, 2018,
with early adoption permitted. |
The Group anticipates that the adoption
of IFRS 15 is unlikely to have a material impact on its financial statements
given the Company does not currently have contracts with customers in the
ordinary course of business.
Page 9
Northern Dynasty Minerals Ltd.
|
Notes to the Condensed Consolidated
Interim Financial Statements |
For the three and nine months ended September 30, 2015 and
2014 |
(Unaudited
Expressed in thousands of Canadian Dollars, unless otherwise stated,
except per share or option) |
3. |
MINERAL PROPERTY, PLANT AND
EQUIPMENT |
The Groups exploration and evaluation
assets are comprised of the following:
|
Nine months ended September 30, 2015 |
|
Mineral
property |
|
|
Plant and
|
|
|
Total |
|
|
|
|
interest |
|
|
equipment |
|
|
|
|
|
Cost |
|
|
|
|
|
|
|
|
|
|
Beginning balance |
$ |
112,541
|
|
$ |
1,155 |
|
$ |
113,696
|
|
|
Additions |
|
|
|
|
28 |
|
|
28 |
|
|
Disposals |
|
|
|
|
(151 |
) |
|
(151 |
) |
|
Ending balance |
$ |
112,541
|
|
$ |
1,032 |
|
$ |
113,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
$ |
|
|
$ |
(278 |
) |
$ |
(278 |
) |
|
Charge for the period |
|
|
|
|
(210 |
) |
|
(210 |
) |
|
Reversal of accumulated depreciation on disposal |
|
|
|
|
76 |
|
|
76 |
|
|
Ending balance |
$ |
|
|
$ |
(412 |
) |
$ |
(412 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
difference |
|
28,515 |
|
|
224 |
|
|
28,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying value Ending balance |
$ |
141,056 |
|
$ |
844 |
|
$ |
141,900 |
|
Depreciation charged for the period is
included in exploration and evaluation expenses in the statement of
comprehensive loss.
|
Year ended December 31, 2014
|
|
Mineral property |
|
|
Plant and |
|
|
Total |
|
|
|
|
interest |
|
|
equipment |
|
|
|
|
|
Cost |
|
|
|
|
|
|
|
|
|
|
Beginning balance |
$ |
106,697 |
|
$ |
1,222 |
|
$ |
107,919 |
|
|
Additions (1) |
|
5,844 |
|
|
|
|
|
5,844 |
|
|
Disposals |
|
|
|
|
(67 |
) |
|
(67 |
) |
|
Ending balance |
$ |
112,541 |
|
$ |
1,155 |
|
$ |
113,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
$ |
|
|
$ |
|
|
$ |
|
|
|
Charge for the year |
|
|
|
|
(282 |
) |
|
(282 |
) |
|
Eliminated on disposal |
|
|
|
|
4 |
|
|
4 |
|
|
Ending balance |
$ |
|
|
$ |
(278 |
) |
$ |
(278 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation difference |
$ |
10,095 |
|
$ |
95 |
|
$ |
10,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying value Ending balance |
$ |
122,636 |
|
$ |
972 |
|
$ |
123,608 |
|
|
(1) |
Represents the transfer to the Group of a 100% interest
in certain mineral claims located north and northwest of the Pebble
Project in settlement of a loan to a third party. |
The Groups mineral property represents
the Pebble Project and adjacent mineral claims, located in southwest Alaska, 19
miles (30 kilometers) from the villages of Iliamna and Newhalen, and
approximately 200 miles (320 kilometers) southwest of the city of Anchorage.
Mineral rights relating to the Pebble Project were acquired by the Group in
2001. In July 2007, the Group established the Pebble Limited Partnership (the
"Pebble Partnership") to advance the Pebble Project toward the feasibility
stage. The Groups contribution to the Pebble Partnership was the Pebble Project. Until December 2013, the
Pebble Partnership was under joint control and funded by the Group`s partner who
provided approximately $595 million (US$573 million) in funding. The Group
reacquired a 100% interest in the Pebble Partnership and control of the Pebble
Project in December 2013.
Page 10
Northern Dynasty Minerals Ltd.
|
Notes to the Condensed Consolidated
Interim Financial Statements |
For the three and nine months ended September 30, 2015 and
2014 |
(Unaudited
Expressed in thousands of Canadian Dollars, unless otherwise stated,
except per share or option) |
4. |
AVAILABLE-FOR-SALE FINANCIAL
ASSETS |
|
|
|
The Groups available-for-sale financial asset is
comprised of investments in marketable securities of Canadian publicly
listed companies. During the period, the Group sold certain of its
marketable securities to a related party (note 9(b)) for $280, which
approximates the original cost to the Group. |
|
|
5. |
AMOUNTS RECEIVABLE AND PREPAID
EXPENSES |
|
|
|
September 30 |
|
|
December 31 |
|
|
|
|
2015 |
|
|
2014 |
|
|
Sales tax receivable |
$ |
79 |
|
$ |
70 |
|
|
Amounts receivable |
|
391 |
|
|
143 |
|
|
Prepaid expenses |
|
472 |
|
|
749 |
|
|
Total |
$ |
942 |
|
$ |
962 |
|
6. |
CASH AND CASH EQUIVALENTS AND RESTRICTED
CASH |
|
|
(a) |
Cash and Cash
Equivalents |
|
|
|
September 30 |
|
|
December 31 |
|
|
|
|
2015 |
|
|
2014 |
|
|
Business and savings accounts |
$ |
12,606 |
|
$ |
9,130 |
|
|
Guaranteed investment certificates |
|
|
|
|
317 |
|
|
Total |
$ |
12,606 |
|
$ |
9,447 |
|
(b) |
Restricted Cash
|
|
|
|
At September 30, 2015, restricted cash in the
amount of $1,165 (December 31, 2014 $1,206) was held by the Pebble
Partnership for certain equipment demobilization expenses relating to its
activities undertaken when it was subject to joint control. This cash is
not available for general use by the Group. The Group has a current
obligation (note 10) to refund to the Groups former limited partner any
unutilized balance upon the earlier of (i) 60 days from the date of
completion of demobilization and (ii) December 31, 2015. |
|
|
|
|
7. |
CAPITAL AND RESERVES
|
|
|
(a) |
Authorized Share
Capital |
|
|
|
At September 30, 2015, the Companys authorized
share capital is comprised of an unlimited (2014 unlimited) number of
common shares with no par value. All issued shares are fully paid.
|
Page 11
Northern Dynasty Minerals Ltd.
|
Notes to the Condensed Consolidated
Interim Financial Statements |
For the three and nine months ended September 30, 2015 and
2014 |
(Unaudited
Expressed in thousands of Canadian Dollars, unless otherwise stated,
except per share or option) |
Each of the Companys share purchase
warrants ("Special Warrant") is convertible, without payment of any additional
consideration by the holder, into one common share of the Company, either at the
option of the holder or automatically within a maximum of a two year period from
the issuance date.
The Special Warrants do not confer on
their holders any right as a shareholder of the Company, including but not
limited to any right to vote at any meeting of shareholders or any other
proceedings of the Company, other than meetings by holders of Special Warrants,
or any right to receive any dividend or other distribution.
|
|
|
Number of |
|
|
Proceeds, net of |
|
|
Continuity of Special Warrants |
|
Special Warrants |
|
|
transaction cost |
|
|
Balance at January 1, 2015
|
|
27,622,642 |
|
$ |
11,552 |
|
|
Issued at $0.431 per Special Warrant |
|
8,340,093 |
|
|
3,375 |
|
|
Issued at $0.399 per Special
Warrant |
|
37,600,000 |
|
|
14,351 |
|
|
Conversion on a oneforone basis into common shares |
|
(35,962,735 |
) |
|
(14,927 |
) |
|
Balance at September 30, 2015 |
|
37,600,000 |
|
$ |
14,351 |
|
During the nine months ended on
September 30, 2015, the Group incurred a total of $1,225 in advisory, finders,
regulatory, and legal fees on the financing, of which $651 was incurred during
the three months ended September 30, 2015.
Subsequent to the reporting period, on
November 13, all the Special Warrants automatically exercised.
(c) |
Share Purchase Option Compensation
Plan |
The following reconciles share purchase
options ("Options") outstanding for the nine months ended September 30, 2015 and
2014:
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
average |
|
|
|
|
|
average |
|
|
|
|
|
|
|
exercise |
|
|
|
|
|
exercise |
|
|
|
|
Number of |
|
|
price |
|
|
Number of |
|
|
price |
|
|
Continuity of Options |
|
Options |
|
|
($/Option) |
|
|
Options |
|
|
($/Option) |
|
|
Balance at beginning of
period |
|
7,687,000 |
|
|
1.95 |
|
|
3,735,700 |
|
|
4.13 |
|
|
Granted |
|
|
|
|
|
|
|
5,875,100 |
|
|
1.56 |
|
|
Expired |
|
(1,241,800 |
)
|
|
3.00 |
|
|
(1,852,800 |
)
|
|
5.10 |
|
|
Forfeited |
|
(278,100 |
) |
|
2.35 |
|
|
(7,400 |
) |
|
1.77 |
|
|
Balance at end of period |
|
6,167,100 |
|
|
1.72 |
|
|
7,750,600 |
|
|
1.95 |
|
For the Options granted during the nine
month period ended on September 30, 2014, the weighted average fair value was
estimated at $0.75 per option and was based on the Black-Scholes option pricing
model using the following weighted average assumptions:
Page 12
Northern Dynasty Minerals Ltd.
|
Notes to the Condensed Consolidated
Interim Financial Statements |
For the three and nine months ended September 30, 2015 and
2014 |
(Unaudited
Expressed in thousands of Canadian Dollars, unless otherwise stated,
except per share or option) |
Assumptions |
|
|
|
Risk-free interest rate |
|
1.53% |
|
Expected life |
|
4.56 years |
|
Expected volatility |
|
67.7% |
|
Grant date share price |
$ |
1.44 |
|
Expected dividend yield |
|
Nil |
|
The following table summarizes information about Options
outstanding at September 30, 2015:
|
|
|
Options outstanding |
|
|
|
|
|
Options exercisable |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Weighted |
|
|
average |
|
|
|
|
|
Weighted |
|
|
average |
|
|
|
|
|
|
|
average |
|
|
remaining |
|
|
|
|
|
average |
|
|
remaining |
|
|
Exercise |
|
Number of |
|
|
exercise |
|
|
contractual |
|
|
Number of |
|
|
exercise |
|
|
contractual |
|
|
prices |
|
Options |
|
|
price |
|
|
life |
|
|
Options |
|
|
price |
|
|
life |
|
|
($) |
|
outstanding |
|
|
($/Option) |
|
|
(years) |
|
|
exercisable |
|
|
($/Option) |
|
|
(years) |
|
|
0.72 |
|
200,000 |
|
|
0.72 |
|
|
3.96 |
|
|
133,334 |
|
|
0.72 |
|
|
3.96 |
|
|
0.89 |
|
1,180,500 |
|
|
0.89 |
|
|
3.45 |
|
|
745,166 |
|
|
0.89 |
|
|
3.47 |
|
|
1.77 |
|
4,284,600 |
|
|
1.77 |
|
|
2.93 |
|
|
4,284,600 |
|
|
1.77 |
|
|
2.93 |
|
|
3.00 |
|
475,000 |
|
|
3.00 |
|
|
1.75 |
|
|
475,000 |
|
|
3.00 |
|
|
1.75 |
|
|
15.44 |
|
27,000 |
|
|
15.44 |
|
|
0.46 |
|
|
27,000 |
|
|
15.44 |
|
|
0.46 |
|
|
|
|
6,167,100 |
|
|
1.72 |
|
|
2.96 |
|
|
5,665,100 |
|
|
1.80 |
|
|
2.92 |
|
(d) |
Foreign Currency Translation
Reserve |
The foreign currency translation
reserve represents accumulated exchange differences arising on the translation
of the results and net assets of two of the Companys subsidiaries the Pebble
Partnership and U5 Resources Inc. from their functional currency (US dollar);
to the Groups reporting currency (Canadian dollar).
On August 31, 2015, the Company and
Cannon Point Resources Ltd. (Cannon Point), a TSX-Venture Exchange listed
company with approximately $4.7 in cash and cash equivalents, and with no other
significant asset or active operations, entered into an arrangement agreement
(the Arrangement) whereby the Company is to acquire 100% of the issued and
outstanding equity securities of Cannon Point.
Subsequent to the reporting period, on
October 29, 2015, the Arrangement was completed. Pursuant to the Arrangement,
the Company acquired all issued and outstanding common shares of Cannon Point
and issued 12,881,344 of its common shares to the former shareholders of Cannon
Point, at an exchange ratio of 0.376 of a Northern Dynasty common share for each
issued and outstanding common share of Cannon Point. Additionally, 8,375,000
share purchase warrants of Cannon Point were exchanged for 3,149,000 Northern
Dynasty share purchase warrants, exercisable at a price of $2.13 per share on or
before December 17, 2015, and 3,312,500 Cannon Point share options were
exchanged for 1,245,500 Northern Dynasty share options with exercise prices
ranging from $0.29 to $0.43 per share and weighted average remaining life of
2.56 years as of the date of closing of the Arrangement.
Pursuant to the Arrangement, Cannon
Point provided the Group with a credit facility of $4,250 (the "Credit
Facility") which was repayable on August 31, 2016, provided that if the
Arrangement was terminated due to a breach by the Company, the Credit Facility
would be repayable within 30 days from the date of termination along with accrued interest at a rate of 15% per annum. The
Credit Facility was secured by a general security agreement and was fully drawn
down on September 1, 2015. As of September 30, 2015, the Group had accrued
interest of $53 on the Credit Facility.
Page 13
Northern Dynasty Minerals Ltd.
|
Notes to the Condensed Consolidated
Interim Financial Statements |
For the three and nine months ended September 30, 2015 and
2014 |
(Unaudited
Expressed in thousands of Canadian Dollars, unless otherwise stated,
except per share or option) |
The acquisition of Cannon Point by the
Company constitutes an asset acquisition for accounting purposes, as Cannon
Point did not meet the definition of a business under IFRS 3, Business
Combinations. After the reporting period, as Cannon Point has become a
wholly-owned subsidiary of the Company, the Credit Facility and interest thereon
will be eliminated upon consolidation as inter-company items and consolidated
equity will increase as a result of the issuance of the Companys common shares,
warrants and share options as discussed above.
9. |
RELATED PARTY BALANCES AND
TRANSACTIONS |
Balances and transactions between the
Company and its subsidiaries, which are related parties of the Company, have
been eliminated on consolidation (note 2(c)). Details of balances and
transactions with other related parties are disclosed below:
|
|
|
September 30 |
|
|
December 31 |
|
|
Balances payable to related parties |
|
2015 |
|
|
2014 |
|
|
Key Management Personnel (note 9(a)) |
$ |
736 |
|
$ |
- |
|
|
Entity with significant influence (note 9(b)) |
|
898 |
|
|
383 |
|
|
Total |
$ |
1,634 |
|
$ |
383 |
|
(a) |
Transactions and Balances with Key Management
Personnel |
The aggregate value of transactions
with key management personnel, being directors and senior management including
the Senior Vice President, Corporate Development, Vice President ("VP")
Corporate Communications, VP, Engineering, VP, Public Affairs, Pebble
Partnership Chief Executive Officer and VP, Public Affairs and Pebble Mines
Corp. Chairman, for the three and nine months ended September 30, 2015 and 2014
was as follows:
|
|
|
Three monthsended |
|
|
Nine monthsended |
|
|
|
|
September 30, |
|
|
September 30, |
|
|
Compensation |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
|
Short-term employee benefits (i)(ii)
|
$ |
2,371 |
|
$ |
934 |
|
$ |
4,317 |
|
$ |
2,938 |
|
|
Share-based compensation |
|
40 |
|
|
422 |
|
|
339 |
|
|
2,421 |
|
|
Total |
$ |
1,829 |
|
$ |
1,356 |
|
$ |
4,074 |
|
$ |
5,359 |
|
|
(i) |
Short-term employee benefits include salaries, any
bonuses and directors fees paid and payable and amounts paid and payable
to HDSI (note 9(b)) for services provided to the Group by certain HDSI
personnel who serve as executive directors and officers for the
Group. |
|
|
|
|
(ii) |
Of total short-term employee benefits to key management
personnel of the Company, $736 was unpaid at September 30, 2015 (December
31, 2014: $nil). |
Page 14
Northern Dynasty Minerals Ltd.
|
Notes to the Condensed Consolidated
Interim Financial Statements |
For the three and nine months ended September 30, 2015 and
2014 |
(Unaudited
Expressed in thousands of Canadian Dollars, unless otherwise stated,
except per share or option) |
(b) |
Transactions with other Related
Parties |
Hunter Dickinson Services Inc.
("HDSI"), a private company, provides geological, corporate development,
administrative and management services to the Group and its subsidiaries at
annually set rates pursuant to a management services agreement. HDSI also incurs
third party costs on behalf of the Group which are reimbursed by the Group at
cost. The Group may make pre-payments for services under terms of the services
agreement. Several directors and other key management personnel of HDSI, who are
close business associates, are also key management personnel of the Group.
The aggregate value of transactions
with other related parties for the three and nine months ended September 30,
2015 and 2014 were as follows:
|
|
|
Three months |
|
|
Nine months |
|
|
Transactions |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
|
Entity with significant influence |
|
|
|
|
|
|
|
|
|
|
|
|
|
Services rendered to the Group |
$ |
1,768 |
|
$ |
1,107 |
|
$ |
3,878 |
|
$ |
3,803 |
|
|
Reimbursement of third party expenses
incurred on behalf of the Group |
|
63 |
|
|
162 |
|
|
201 |
|
|
622 |
|
|
Sale
of available-for-sale financial assets (note 4) |
|
(280 |
) |
|
|
|
|
(280 |
) |
|
|
|
|
Total |
$ |
1,551 |
|
$ |
1,269 |
|
$ |
3,799 |
|
$ |
4,425 |
|
10. |
TRADE AND OTHER
PAYABLES |
|
|
|
September 30 |
|
|
December 31 |
|
|
Falling due within the year |
|
2015 |
|
|
2014 |
|
|
Trade |
$ |
6,831 |
|
$ |
4,444 |
|
|
Other (note 6(b)) |
|
1,165 |
|
|
1,206 |
|
|
Total |
$ |
7,996 |
|
$ |
5,650 |
|
11. |
BASIC AND DILUTED LOSS PER
SHARE |
The calculation of basic and diluted
loss per share was based on the following for the three and nine months ended
September 30, 2015 and 2014:
|
|
|
Three months |
|
|
Nine months |
|
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
|
Loss attributable to common shareholders |
$ |
9,397 $ |
|
|
6,088 |
|
$ |
21,421 $ |
|
|
21,422 |
|
|
Weighted average number of common shares
outstanding and common share equivalents (000s) |
|
137,173 |
|
|
95,010 |
|
|
134,835 |
|
|
95,010 |
|
Due to their mandatory conversion
requirements with no additional payments, Special Warrants (note 7(b)) are
included in the calculation of basic loss per share. Diluted loss per share does
not include the effect of the 6,167,100 share purchase options outstanding (note
7(c)) as they are anti-dilutive.
Page 15
Northern Dynasty Minerals Ltd.
|
Notes to the Condensed Consolidated
Interim Financial Statements |
For the three and nine months ended September 30, 2015 and
2014 |
(Unaudited
Expressed in thousands of Canadian Dollars, unless otherwise stated,
except per share or option) |
The amount of salaries and benefits included in expenses for
the three and nine months ended September 30, 2015 and 2014 are as follows:
|
|
|
Three months |
|
|
Nine months |
|
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
|
Exploration and evaluation expenses |
$ |
865 |
|
$ |
1,297 |
|
$ |
2,273 |
|
$ |
2,775 |
|
|
General and administration expenses |
|
2,372 |
|
|
1,272 |
|
|
4,996 |
|
|
2,688 |
|
|
Share-based compensation |
|
33 |
|
|
699 |
|
|
434 |
|
|
2,798 |
|
|
Total |
$ |
3,270 |
|
$ |
3,268 |
|
$ |
7,703 |
|
$ |
8,261 |
|
13. |
COMMITMENTS AND
CONTINGENCIES |
|
|
(a) |
Leases
|
The Group has the following commitments as of September 30,
2015:
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
(AfterSeptember 30) |
|
|
2016 |
|
|
Total |
|
|
|
(000s) |
|
|
(000s |
) |
|
(000s |
) |
|
Anchorage office lease
(i) |
US$ |
121 |
|
US$ |
407 |
|
US$ |
528 |
|
|
Pebble Project site lease (ii) |
|
24 |
|
|
32 |
|
|
56 |
|
|
Total |
US$ |
145 |
|
US$ |
439 |
|
US$ |
584 |
|
|
Total in Canadian dollars (iii) |
$ |
194 |
|
$ |
586 |
|
$ |
780 |
|
|
(i) |
Original term of 5 years expires on October 31,
2016. |
|
(ii) |
Lease for hanger at site, expires on May 1,
2016. |
|
(iii) |
Converted at closing rate of $1.3345/US$ on September 30,
2015, as per Bank of Canada. |
The Group has a sub-lease agreement in
respect of a portion of the Anchorage office space subject to the operating
lease for an average annual rent of approximately US$218,000 ($291). The term of
the sub-lease expires on October 31, 2016.
As a result of a recent ruling from the
Alaska Supreme Court ("Court"), in which the Court in the appeal case reversed a
decision of a lower court and remanded the case back to the lower court, the
Group, through the Pebble Partnership, has a contingent liability for its share
of the award of attorneys' fees and other amounts that the lower court may
impose. The Group is unable to estimate reliably the total amount of these costs
as no claim has been lodged with the lower court.
The Group, through the Pebble
Partnership, is advancing its multi-dimensional strategy to address the EPAs
preemptive regulatory process under Section 404(c) of the Clean Water Act,
through litigation against the EPA contesting the EPAs statutory authority to
act pre-emptively under the Clean Water Act, and alleging violation of FACA and
the unlawful withholding of documentation under the Freedom of Information Act.
The Group has a contingent liability for additional legal fees and costs that
may be due to the Groups counsel should the Group be successful in its
litigation against the EPA. However, the Group is unable to estimate reliably
the total amount of such costs, due to the timing or the length of time that
each of the legal initiatives mentioned above will take to advance to specific
milestone events or final conclusion.
Page 16
Northern Dynasty Minerals Ltd.
|
Notes to the Condensed Consolidated
Interim Financial Statements |
For the three and nine months ended September 30, 2015 and
2014 |
(Unaudited
Expressed in thousands of Canadian Dollars, unless otherwise stated,
except per share or option) |
(c) |
Property Rentals |
|
|
|
State rentals for the Pebble Project and adjacent claims
in the amount of US$990,390 ($1,322) are payable in November
2015. |
|
|
(d) |
Financial Advisory and Consulting
Services |
|
|
|
The Group entered into an agreement for the provision of
financial advisory and consulting services to be provided to the Group for
a twelve month period ending October 31, 2016 at a monthly fee of $8,500
per month. |
|
|
14. |
EVENTS AFTER THE REPORTING PERIOD |
|
|
|
After the reporting period and these Financial Statements
were approved for issue, the following material events had
occurred: |
|
|
(a) |
Acquisition of Cannon Point |
|
|
|
On October 29, 2015, the Group completed the acquisition
of Cannon Point (note 8). |
|
|
(b) |
Agreement to Acquire Mission Gold
Ltd. |
|
|
|
On November 2, 2015, the Company announced that it had
signed a definitive agreement with TSX Venture Exchange-listed Mission
Gold Ltd. ("Mission Gold") (the "Arrangement Agreement") whereby by way of
a statutory plan of arrangement, the Company is to acquire 100% of the
approximately 50.5 million issued and outstanding common shares of Mission
Gold whose primary assets are comprised of approximately $9 million in
cash and a 100% interest in the Alto Parana titanium project (which has to
be sold to a third party on terms acceptable to the Company prior to, and
as a condition of, closing of the acquisition). |
|
|
|
Each common share of Mission Gold will be exchanged for
0.55 of a common share of the Company, subject to adjustment in the event
that Mission Golds working capital is less than an agreed minimum amount.
Each of the approximately 16.7 million outstanding Mission Gold warrants
will be exchanged pursuant to the plan of arrangement for a warrant to
acquire one common share of the Company at an exercise price increased to
110% of the applicable existing Mission Gold warrant exercise price and
having the same expiry date as the original warrant term. One nominee of
Mission Gold will be appointed to the board of directors of the Company at
closing. As part of the transaction, Mission Gold has made available to
the Group, a secured credit facility of up to $8.4 million. The facility
has a term of six months, provided that if the Arrangement Agreement is
terminated due to a breach by the Group, the facility will be repayable 30
days from the date of termination along with accrued interest at a rate of
15% per annum. On November 4, 2015, the Company drew down an initial
advance of $2,000,000 under the facility. |
|
|
(c) |
Grant of share options |
|
|
|
On October 20, 2015, the Company granted 3,657,500
Options at an exercise price of $0.50 per Option with 3 and 5 year terms.
The Options vest 1/3 on grant date, 1/3, 12 months from grant date and
1/3, 2 years from grant date. |
Page 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
Table of Contents
This Managements Discussion and Analysis ("MD&A") should
be read in conjunction with the unaudited interim financial statements ("Interim
Financial Statements") for the three and nine months ended September 30, 2015
and the audited consolidated financial statements and MD&A of Northern
Dynasty Minerals Ltd. ("Northern Dynasty" or the "Company") for the year ended
December 31, 2014 as publicly filed under the Companys profile on SEDAR at
www.sedar.com.
The Company reports in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board
("IASB") and interpretations of the IFRS Interpretations Committee (together,
"IFRS"). The following disclosure and associated Financial Statements are
presented in accordance with IFRS. This MD&A is prepared as of November 13,
2015. All dollar amounts herein are expressed in Canadian dollars, unless
otherwise specified.
Page 2
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
This discussion includes certain statements that may
be deemed "forward-looking statements" or "forward looking information"
within the meaning of Canadian and United States securities law. Words
such as plans, "expects", or "does not expect", "budget", "scheduled",
"estimates", "forecasts", "anticipate" or "does not anticipate",
"believe", "intend" and similar expressions or statements that certain
actions, events or results " may", "could", "would", "might" or "will" be
taken, occur or be achieved, have been used to identify forward-looking
information. |
|
|
Forward-looking information may include, but is not
limited to, |
|
our
expectations regarding permitting of a mine at the Pebble Project; |
|
our
expected financial performance in future periods; |
|
our
plan of operations, including our plans to carry out exploration and
development activities; |
|
our
ability to raise capital for exploration and development activities;
|
|
our
expectations regarding the exploration and development potential of the
Pebble Project; and |
|
factors
relating to our investment decisions. |
|
|
Forward-looking information is based on the
reasonable assumptions, estimates, analysis and opinions of management
made in light of its experience and its perception of trends, current
conditions and expected developments, as well as other factors that
management believes to be relevant and reasonable in the circumstances at
the date that such statements are made, but which may prove to be
incorrect. We believe that the assumptions and expectations reflected in
such forward-looking information are reasonable. |
|
|
Key assumptions upon which the Companys
forward-looking information are based include: |
|
that
the Company will ultimately be able to demonstrate that a mine at the
Pebble Project can be developed and operated in an environmentally sound
and socially responsible manner, meeting all relevant federal, state and
local regulatory requirements; |
|
that we
will be ultimately able to obtain permitting for a mine at the Pebble
Project; |
|
that
the market prices of copper and gold will not decline significantly for a
lengthy period of time; |
|
that we
will be able to secure sufficient working capital necessary for the
continued environmental assessment and permitting activities and
engineering work which is a precondition to any potential development of
the Pebble Project, which would then require engineering and financing for
ultimate construction; |
|
the
cost of carrying out exploration and development activities on the Pebble
Project; |
|
that
key personnel will continue their employment with us; |
|
our
ability to obtain the necessary expertise in order to carry out our
exploration and development activities within the planned time periods;
and |
|
our
ability to obtain adequate financing on acceptable terms. |
|
|
Readers are cautioned that the foregoing list is not
exhaustive of all factors and assumptions which may have been used. |
|
|
Some of the risks and uncertainties that could cause
actual results to differ materially from those expressed in the
forward-looking statements include: |
|
ability
to obtain permitting for a mine at the Pebble Project; |
|
ability
to continue to fund the exploration and development activities; |
|
the
speculative nature of the mineral resource exploration business; |
|
the
exploration stage of the Pebble Project; |
|
the
lack of known reserves on the Pebble Project; |
|
inability to establish that the Pebble Project contains
commercially viable deposits of ore; |
|
ability
to recover the financial statement carrying values of the Pebble Project
if the Company ceases to continue on a going concern basis; |
|
loss of
the services of any of the Companys executive officers; |
|
a
history of financial losses; |
|
ability
to continue on a going concern basis; |
|
the volatility of gold, copper and molybdenum
prices; |
Page 3
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and nine months ended September 30, 2015
|
|
the inherent risk involved in the exploration,
development and production of minerals; |
|
changes
in, or the introduction of new, government regulations relating to mining,
including laws and regulations relating to the protection of the
environment; |
|
the
presence of unknown environmental hazards at the Pebble Project; |
|
potential claims by third parties against the Pebble Project; |
|
inability to insure our operations against all risks; |
|
the
highly competitive nature of the mining business; |
|
litigation risks and the inherent uncertainty of litigation; |
|
the
historical volatility in the Companys share price; |
|
potential conflicts of interest relating to the Companys
directors and officers; |
|
the
potential dilution to current shareholders due to any future equity
financings; |
|
the
loss of services of independent contractors; and |
|
the
potential dilution to current shareholders from the exercise of share
purchase options to purchase the Companys shares. |
|
This list is not exhaustive for the factors that may
affect any of the Companys forward-looking statements or information.
Forward-looking statements or information are statements about the future
and are inherently uncertain, and actual achievements of the Company or
other future events or conditions may differ materially from those
reflected in the forward-looking statements or information due to a
variety of risks, uncertainties and other factors, including, without
limitation, the risks and uncertainties described above. |
|
Our forward-looking statements are based on the
reasonable beliefs, expectations and opinions of management on the date of
this MD&A. Although we have attempted to identify important factors
that could cause actual results to differ materially from those contained
in forward-looking information, there may be other factors that cause
results not to be as anticipated, estimated or intended. There is no
assurance that such information will prove to be accurate, as actual
results and future events could differ materially from those anticipated
in such information. Accordingly, readers should not place undue reliance
on forward-looking information. |
|
Since Northern Dynasty acquired the Pebble Project in
2001, the Company and subsequently the Pebble Limited Partnership
completed significant exploration programs, resource estimates,
environmental data collection and technical studies, and engineering of
various possible mine development models and related infrastructure, power
and transportation systems. As a consequence of several factors, including
the US Environmental Protection Agency Clean Water Act Section
404(c) regulatory action with respect to the Pebble Project, the
withdrawal of Anglo American plc from the project and the passage of time,
previous technical and engineering studies related to mine-site and
infrastructure development are considered to have very uncertain and
perhaps little value at this time. Environmental baseline studies and data
collection remain a significant legacy asset of the Company from this
period.
For more information on the Company, investors should review the
Companys annual information form and home jurisdiction filings that are
available on SEDAR at www.sedar.com and the Companys annual report
on Form 20-F filed with the United States Securities Exchange Commission
(the "SEC") at www.sec.gov.
|
|
The Company reviews its forward looking statements on
an ongoing basis and updates this information when circumstances require
it. |
Cautionary Note to Investors
Concerning Estimates of Measured and Indicated Resources
The following section uses the terms "measured resources"
and "indicated resources". The Company advises investors that although
those terms are recognized and required by Canadian regulations, the SEC
does not recognize them. Investors are cautioned not to assume that all
or any part of mineral deposits in these categories will ever be
converted into reserves. |
Page 4
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and nine months ended September 30, 2015
|
Cautionary Note to Investors Concerning
Estimates of Inferred Resources
The following section uses the term "inferred resources". The Company
advises investors that although this term is recognized and required by
Canadian regulations, the SEC does not recognize it. "Inferred resources"
have a great amount of uncertainty as to their existence, and as to their
economic and legal feasibility. It cannot be assumed that all or any part
of a mineral resource will ever be upgraded to a higher category. Under
Canadian rules, estimates of inferred mineral resources may not form the
basis of economic studies, except in rare cases. Investors are
cautioned |
Northern Dynasty is a mineral exploration company which, via
its subsidiaries, holds a 100% interest in mining claims on State of Alaska land
in southwest Alaska, USA ("US") that are part of or in the vicinity of the
Pebble Copper-Gold-Molybdenum Project (the "Pebble Project" or Pebble).
The Pebble Project is an initiative to develop one of the
worlds most important mineral resources when measured by aggregate contained
metals. Current mineral resources in the Pebble deposit at a 0.30% copper
equivalent (CuEQ)1 cut-off grade comprise:
|
6.44 billion tonnes of Measured and Indicated Mineral
Resources grading 0.40% copper, 0.34 g/t gold, 240 ppm molybdenum and 1.66
g/t silver, containing 57 billion pounds of copper, 70 million ounces of
gold, 3.4 billion pounds of molybdenum and 344 million ounces of silver;
and |
|
|
|
4.46 billion tonnes of Inferred Mineral Resources grading
0.25% copper, 0.26 g/t gold, 222 ppm molybdenum and 1.19 g/t silver,
containing 24.5 billion pounds of copper, 37 million ounces of gold, 2.2
billion pounds of molybdenum and 170 million ounces of silver. |
Mineralization indicating the presence of the Pebble deposit
was discovered by a prior operator in 1987, and by 1997 an initial outline of
the copper, gold and molybdenum deposit had been identified. Northern Dynasty
acquired the right to earn an interest in the Pebble property in 2001.
Exploration since that time has led to significant expansion of the Pebble
deposit, including the discovery of a substantial volume of higher grade
mineralization in the eastern part of the deposit. Comprehensive deposit
delineation, environmental, socioeconomic and engineering studies of the Pebble
deposit began in 2004.
A number of other occurrences of copper, gold and molybdenum
have been identified along the extensive northeast-trending mineralized system
that underlies the property. The potential of these earlier stage prospects has
not yet been fully explored.
Some $802 million has been invested to advance the Pebble
Project since 2001, of which approximately $595 million (US$573 million) was
provided by a wholly-owned subsidiary of Anglo American plc that participated in
the Pebble Limited Partnership (the "Pebble Partnership") from 2007 to
20132, and the remainder was financed by Northern Dynasty.
_______________________________________
1 For additional details, see section 1.2.1 below.
2 During
the period 2007 to 2013, the Pebble Partnership expended several hundred million
dollars on the Pebble Project, a major portion of which was spent on exploration
programs, resource estimates, environmental data collection and technical
studies, with a significant portion spent on engineering of various possible
mine development models, as well as related infrastructure, power and
transportation systems. As a consequence of several factors, including the EPAs
CWA 404(c) regulatory action with respect to the Pebble Project, the withdrawal
of Anglo American plc from the project and the passage of time, technical and
engineering studies related to mine-site and infrastructure development are
considered to have very uncertain and perhaps little value at this time. Environmental
baseline studies and data collection remains a significant legacy asset of the
Company from this period.
Page 5
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
In February 2014, the US Environmental Protection Agency (the
"EPA") announced the initiation of a regulatory action under the Clean Water Act
to consider restriction or a prohibition on mining activities associated with
the Pebble deposit. The Companys efforts since that time have been focused
around providing information and responses to this action through the Pebble
Partnership.
In 2015, the Company is:
|
engaging in a multi-dimensional strategy,
further described in section 1.2.1.2 below, to address the EPAs
pre-emptive regulatory action under Section 404(c) of the Clean Water Act
and otherwise prepare documentation to position the Pebble Project for
initiation of federal and state permitting under National Environmental
Policy Act ("NEPA"); |
|
|
|
continuing to maintain an active corporate
presence in Alaska in order to advance relationships with political and
regulatory offices of government, Alaska Native partners and other
stakeholder groups; and |
|
|
|
working to secure a transaction with a
potential partner(s) to further advance the project. |
The Cohen Group Report
One of the initiatives in the Companys multi-prong strategy
has involved the commissioning of an independent third party review of the EPAs
action by The Cohen Group. Subsequent to the end of the quarter on October 6,
2015, The Cohen Group released the report of its findings entitled, Report
of an Independent Review of the United States Environmental Protection Agencys
Actions in Connection With Its Evaluation of Potential Mining In Alaskas
Bristol Bay Watershed, prepared by a team of independent investigators
employed by The Cohen Group and law firm DLA Piper over a period of
approximately one year.
Cohen states: "The decision about whether to build a mine in
this area, as well as the process used to make such a decision, is very
important to Alaskas environment, economy, people, fish and wildlife. It
requires regulatory authority to be exercised in the fairest way possible. After
a very thorough review, I do not believe EPA used the fairest and most
appropriate process."
Cohen concludes by encouraging US lawmakers to consider taking
action to ensure that all major development projects in the US, including
Pebble, are evaluated through NEPA permitting process. This process, which
entails compliance with NEPA and other regulatory requirements, an environmental
impact statement, and input from EPA, other relevant agencies, and the State of
Alaska, will supply the gaps in information which the Bristol Bay Watershed
Assessment left outstanding. This decision is too important to be made with
anything less than the best and most comprehensive information available.
Financing
In August 2015, Northern Dynasty announced that it would seek
to raise up to $20 million through a combination of an equity financing through
the issuance of share purchase warrants ("Special Warrants") and the purchase of
the TSX Venture listed entity, Cannon Point Resources Ltd. ("Cannon Point"),
whose primary asset is cash of $4.7 million. By September 10, 2015, the Company
had closed the Special Warrant portion of the financing, raising over $15
million.
The acquisition of Cannon Point closed on October 29, 2015. In
conjunction with the transaction with Cannon Point, Mr. Gordon Keep has been
appointed to Northern Dynastys board of directors.
Page 6
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
Also subsequent to the end of the quarter on October 8, 2015,
Northern Dynasty announced that it intends to acquire TSX Venture listed
company, Mission Gold Ltd., whose primary assets are approximately $9 million in
cash and a 100% interest in a titanium project (which has to be sold to a third
party on terms acceptable to the Company prior to, and as a condition of,
closing of the acquisition).
Further details of the recent financings are provided in
1.2.2.
Corporate
At September 30, 2015, Northern Dynasty had $12.6 million in
cash and cash equivalents available for its operating requirements. The Company
has prioritized the allocation of the available financial resources in order to
meet key corporate and Pebble Project expenditure requirements in the near term.
The Company continues to seek additional financing in order to progress any
material programs. Additional financing may include any of or a combination of,
debt, equity and/or contributions from possible new Pebble Project participants
as well as the acquisition of entities whose primary asset is cash (refer to the
recent financings in 1.2.2).
There can be no assurances that the Company will be successful
in obtaining additional financing. If the Company is unable to raise the
necessary capital resources to meet obligations as they come due, the Company
will at some point have to reduce or curtail its operations.
The Pebble property ("Pebble") is located in southwest Alaska,
approximately 17 miles (27 kilometers) from the villages of Iliamna and
Newhalen, and approximately 200 miles (320 kilometers) southwest of the city of
Anchorage. The property consists of 2,402 mineral claims. Situated approximately
1,000 feet above sea-level and 65 miles from tidewater on Cook Inlet, the site
conditions are favorable for sound mine site and infrastructure development.
1.2.1.1 |
Technical
Information |
In early 2015, a Technical Report, written in accordance with
National Instrument ("NI") 43-101 (the "2014 Technical Report") was completed to
document information on the current mineral resources and metallurgy for the
project. The technical report, entitled "2014 Technical Report on the Pebble
Project, Southwest Alaska, USA," effective date December 31, 2014 and authored
by J. David Gaunt, P.Geo., James Lang, P.Geo., Eric Titley, P.Geo., and Ting Lu,
P.Eng., is filed under the Companys profile at www.sedar.com.
Mineral Resources
The current estimate of the mineral resources in the Pebble
deposit incorporated in the 2014 Technical Report is based on drilling to the
end of 2013, and includes approximately 59,000 assays obtained from 699 drill
holes. The resource was estimated using ordinary kriging by David Gaunt, P.Geo.,
a qualified person who is not independent of Northern Dynasty.
The mineral resource tabulation, as shown below, uses copper
equivalency that incorporates the contribution of copper, gold and molybdenum.
Although the estimate includes silver, it was not used as part of the copper
equivalency calculation in order to facilitate comparison with previous
estimates which did not consider the silver content or its potential economic
contribution. A base case cut-off of 0.3% CuEq is highlighted.
Page 7
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
Pebble Project Mineral Resources
Cut-off
CuEq (%) |
CuEq (%) |
Tonnes |
Cu (%) |
Au (g/t) |
Mo (ppm) |
Ag (g/t) |
Cu Blbs |
Au Moz |
Mo Blbs |
Ag Moz |
Measured |
0.3 |
0.65 |
527,000,000 |
0.33 |
0.35 |
178 |
1.66 |
3.83 |
5.93 |
0.21 |
28.13 |
0.4 |
0.66 |
508,000,000 |
0.34 |
0.36 |
180 |
1.68 |
3.80 |
5.88 |
0.20 |
27.42 |
0.6 |
0.77 |
279,000,000 |
0.40 |
0.42 |
203 |
1.84 |
2.46 |
3.77 |
0.12 |
16.51 |
1.0 |
1.16 |
28,000,000 |
0.62 |
0.62 |
302 |
2.27 |
0.38 |
0.56 |
0.02 |
2.04 |
Indicated |
0.3 |
0.77 |
5,912,000,000 |
0.41 |
0.34 |
245 |
1.66 |
53.42 |
64.62 |
3.20 |
315.50 |
0.4 |
0.82 |
5,173,000,000 |
0.45 |
0.35 |
260 |
1.75 |
51.31 |
58.21 |
2.97 |
291.05 |
0.6 |
0.99 |
3,450,000,000 |
0.55 |
0.41 |
299 |
1.99 |
41.82 |
45.47 |
2.27 |
220.71 |
1.0 |
1.29 |
1,411,000,000 |
0.77 |
0.51 |
343 |
2.42 |
23.95 |
23.14 |
1.07 |
109.79 |
Measured + Indicated |
0.3 |
0.76 |
6,439,000,000 |
0.40 |
0.34 |
240 |
1.66 |
56.76 |
70.38 |
3.40 |
343.63 |
0.4 |
0.81 |
5,681,000,000 |
0.44 |
0.35 |
253 |
1.75 |
55.09 |
63.92 |
3.17 |
319.62 |
0.6 |
0.97 |
3,729,000,000 |
0.54 |
0.41 |
291 |
1.98 |
44.38 |
49.15 |
2.39 |
237.37 |
1.0 |
1.29 |
1,439,000,000 |
0.76 |
0.51 |
342 |
2.42 |
24.11 |
23.60 |
1.08 |
111.97 |
Inferred |
0.3 |
0.54 |
4,460,000,000 |
0.25 |
0.26 |
222 |
1.19 |
24.55 |
37.25 |
2.18 |
170.49 |
0.4 |
0.68 |
2,630,000,000 |
0.33 |
0.30 |
266 |
1.39 |
19.14 |
25.38 |
1.55 |
117.58 |
0.6 |
0.89 |
1,290,000,000 |
0.48 |
0.37 |
291 |
1.79 |
13.66 |
15.35 |
0.83 |
74.28 |
1.0 |
1.20 |
360,000,000 |
0.69 |
0.45 |
377 |
2.27 |
5.41 |
5.14 |
0.30 |
25.94 |
Notes to above table:
These resource estimates have been prepared in accordance with
NI 43-101 and the CIM Definition Standards. Inferred Mineral Resources are
considered to be too speculative to allow the application of technical and
economic parameters to support mine planning and evaluation of the economic
viability of the project. Under Canadian rules, estimates of Inferred Mineral
Resources may not form the basis of feasibility or pre-feasibility studies, or
economic studies, except for Preliminary Economic Assessments as defined under
43-101. It cannot be assumed that all or any part of the Inferred Resources will
ever be upgraded to a higher category.
Copper equivalent calculations used metal prices of $1.85/lb
for copper, $902/oz for gold and $12.50/lb for molybdenum, and recoveries of 85%
for copper 69.6% for gold, and 77.8% for molybdenum in the Pebble West zone and
89.3% for copper, 76.8% for gold, 83.7% for molybdenum in the Pebble East zone.
Contained metal calculations are based on 100% recoveries.
A 0.30% CuEQ cut-off is considered to be appropriate for
porphyry deposit open pit mining operations in the Americas.
All mineral resource estimates, cut-offs and metallurgical
recoveries are subject to change as a consequence of more detailed economic
analyses that would be required in pre-feasibility and feasibility studies.
Page 8
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
The resource estimate is constrained by a conceptual pit that
was developed using a Lerchs-Grossman algorithm and is based on the parameters
set out below:
Parameter |
Units |
Cost ($) |
Value |
Metal Price
|
Gold |
$/oz |
- |
1540.00 |
Copper |
$/lb |
- |
3.63 |
Molybdenum |
$/lb |
- |
12.36 |
Metal Recovery
|
Copper |
% |
- |
89 |
Gold |
% |
- |
72 |
Molybdenum |
% |
- |
82 |
Operating Cost
|
Mining (mineralized material or waste) |
$/ton mined |
1.01 |
- |
Added haul lift from depth |
$/ton/bench |
0.03 |
- |
Process |
Process cost adjusted by total crushing
energy |
$/ton milled |
4.40 |
- |
Transportation |
$/ton milled |
0.46 |
- |
Environmental |
$/ton milled |
0.70 |
- |
G&A |
$/ton milled |
1.18 |
- |
Block Model |
Current block model |
ft |
- |
75 x 75 x 50 |
Density |
Mineralized material and waste rock |
- |
- |
Block model |
Pit Slope Angles |
|
degrees |
- |
42 |
Environmental and Socioeconomic
Environmental Baseline Studies
Extensive environmental baseline data collection was initiated
in 2004, with close and ongoing attention given to designing and planning a
project that protects clean water, healthy fish and wildlife populations and
other natural resources in the region.
In January 2012, the Pebble Partnership publicly released the
27,000-page Environmental Baseline Document ("EBD") for the Pebble Project,
characterizing a broad range of environmental and social conditions in southwest
Alaska including climate, water quality, wetlands, fish and aquatic habitat,
wildlife, land and water use, socioeconomics and subsistence activities. The
purpose of the EBD is to provide the public, regulatory agencies and the Pebble
Partnership with a detailed compendium of pre-development environmental and
socioeconomic conditions in the project area. Research for the Pebble EBD was
conducted by more than 40 respected independent research firms, utilizing over
100 scientific experts and engineering groups, laboratories and support
services. Researchers were selected for their specific areas of expertise and
Alaskan experience, with cooperating government agencies participating in
several studies. Information for the EBD was gathered through field studies,
laboratory tests, review of government records and other third-party sources,
and interviews with Alaska residents. The EBD study is available at
www.pebbleresearch.com.
The Pebble Partnership facilitated a four-day workshop with
federal and state regulatory agencies in January 2012 to present the EBD
findings. The workshop was broadcast publicly via the Internet. A series of
public presentations was also coordinated in more than 20 communities throughout
southwest Alaska and elsewhere around the State to present the EBD findings. Public
and expert review of the EBD was facilitated under the Keystone
initiative3.
Page 9
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
Environmental baseline data reports through 2014 are being
integrated with the database from the EBD so that this information can be shared
with state/federal agencies and the public as part of the future permitting
process under NEPA. Environmental monitoring at reduced levels continues in
2015.
Community Engagement
An active program of stakeholder outreach has also been
undertaken at Pebble, and has included community meetings, stakeholder visits,
presentations and event appearances, as well as stakeholder tours to the Pebble
Project site and to operating mines in the United States and Canada. The focus
of these outreach activities is to update stakeholders on the Pebble Project, to
receive feedback on stakeholder priorities and concerns and to advise
participants about modern mining practices.
Stakeholder outreach and community engagement is ongoing,
although at a reduced scale commensurate with other project activities. As the
Pebble Project advances toward the completion of a Project Description and
preparation for project permitting under NEPA, it is expected that the Pebble
Partnership will initiate further stakeholder engagement programs to involve
stakeholders in the planning process.
Environmental Protection Agency and
Bristol Bay Watershed Assessment
In February 2011, the EPA announced it would undertake a
Bristol Bay Watershed Assessment study focusing on the potential effects of
large-scale mine development in Bristol Bay and, specifically the Nushagak and
Kvichak area drainages. This process was ostensibly initiated in response to
calls from persons and groups opposing the Pebble Project for the EPA to
pre-emptively use its asserted authority under Section 404(c) of the U.S.
Clean Water Act (the "Clean Water Act") to prohibit discharges of dredged
or fill material in waters of the US within these drainages; however, evidence
exists that the EPA may have been considering a Section 404(c) veto of the
Pebble Project at least as far back as 2008 two years before it received a
petition from several Alaska Native tribes.
The EPAs first draft Bristol Bay Watershed Assessment ("BBWA")
report was released on May 18, 2012. In the Companys opinion after review with
its consultants, the draft report is a fundamentally flawed document. By the
EPAs own admission, it evaluated the effects of a "hypothetical project" that
has neither been defined nor proposed by the Pebble Partnership, and for which
key environmental mitigation strategies have not yet been developed and, hence
would not yet be known. It is believed by the Company that the assessment was
rushed because it was based on studies conducted over only one year in an area
of 20,000 square miles. In comparison, the Pebble Project has studied the
ecological and social environment surrounding Pebble for nearly a decade. The
EPA also failed to adequately consider the comprehensive and detailed data that
the Pebble Partnership provided as part of its 27,000-page Environmental
Baseline Document (further described under Environmental Baseline Studies
above).
The EPA called for public comment on the quality and
sufficiency of scientific information presented in the draft BBWA report. In
response, the Pebble Partnership and Northern Dynasty made submissions on the
draft report. Northern Dynasty made a presentation highlighting these
shortcomings at public hearings held in Seattle, Washington, on May 31, 2012 and in Anchorage,
Alaska, on August 7, 2012. In July 2012, the Company also submitted a 635-page
critique of the draft report in response to the EPAs call for public comment,
and has called upon the EPA to cease such unwarranted actions until such time as
a definitive proposal for the development of the Pebble deposit is submitted
into the rigorous NEPA permitting process.
________________________________
3 An independent
stakeholder dialogue process concerning the Pebble Project initiated in late
2010 by the Keystone Center a non-profit organization specializing in
facilitating stakeholder-driven consultation processes concerning contentious,
science-based issues.
Page 10
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
Concerns about the reasonableness of the basis of risk
assessment in the draft EPA report were stated by many of the independent
experts on the peer review panel assembled to review the BBWA, as summarized, in
a report entitled "External Peer Review of EPA's Draft Document: An
Assessment of Potential Mining Impacts on Salmon Ecosystems of Bristol Bay,
Alaska" released in November 2012. In a wide-ranging critique of the
draft report's methodology and findings, many peer review panellists called the
EPA's effort to evaluate the effects of a "hypothetical mining scenario" on the
water, fish, wildlife and cultural resources of Southwest Alaska "inadequate",
"premature", "unreasonable", suspect" and "misleading". A list of these peer
review documents can be found on the Companys website.
On April 26, 2013, the EPA released a revised draft of the BBWA
report and announced another public comment and Peer Review period. The Pebble
Partnership and Northern Dynasty made submissions on the revised draft. In late
May 2013, Northern Dynasty filed a 205-page submission which describes the same
major shortcomings as the original report published in May 2012.
In mid-January 2014, the EPA released the final version of its
BBWA. The report still reflects many of the same fundamental shortcomings as
previous drafts.
On February 28, 2014, the EPA announced the initiation of a
regulatory action under Section 404(c) of the Clean Water Act to consider
restriction or a prohibition on mining activities associated with the Pebble
deposit in order to protect aquatic resources in southwest Alaska. In late April
2014, the Pebble Partnership submitted a comprehensive response to the EPAs
February 28, 2014 notification letter.
In late May 2014, the Pebble Partnership filed suit in the U.S.
District Court for Alaska and sought an injunction to halt the regulatory action
initiated by the EPA under the Clean Water Act, asserting that, in the absence
of a permit application, the action exceeds the federal agencys statutory
authority and violates the Alaska Statehood Act among other federal laws. The
State of Alaska and Alaska Peninsula Corporation, an Alaska Native village
corporation with extensive land holdings in the Pebble Project area, later
joined in the Pebble Partnerships lawsuit against the EPA as co-plaintiffs. On
September 26, 2014, U.S. federal court in Alaska granted the EPAs motion to
dismiss the case. This ruling did not judge the merits of the statutory
authority case, it only deferred that hearing and judgment until after a final
Section 404(c) determination has been made by the EPA. If or when the EPA action
is deemed "final", the Pebble Partnership will pursue the underlying case. The
Company also appealed the decision to grant the motion to dismiss to the 9th
Circuit Court of Appeals. This appeal was denied in May 2015. The Pebble
Partnership still holds the option to pursue its statutory authority case in the
instance that EPA finalizes a pre-emptive regulatory action under the Clean
Water Act 404(c).
On July 18, 2014, EPA Region 10 announced a "Proposed
Determination" to restrict the discharge of dredged or fill material associated
with mining the Pebble deposit in a 268 square mile area should that disposal
result in any of the following: loss of five or more miles of streams with
documented salmon occurrence; loss of 19 or more miles of streams where salmon
are not documented but that are tributaries of streams with documented salmon
occurrence; the loss of 1,100 or more acres of wetlands, lakes, and ponds that
connect with streams with documented salmon occurrence or tributaries of those
streams; and stream flow alterations greater than 20 percent of daily flow in
nine or more linear miles of streams with documented salmon occurrence. Northern
Dynasty management does not accept that the EPA has the statutory authority to
impose conditions on development at Pebble, or any development project anywhere
in Alaska or the US, prior to the formal submission of a development plan and
its thorough review by federal and state agencies including development of an
Environmental Impact Statement ("EIS") and review under NEPA.
Page 11
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
On September 19, 2014, the Pebble Partnership submitted a
comprehensive legal and technical response to EPA Region 10s Proposed
Determination. Northern Dynasty and the Pebble Partnership believe the Proposed
Determination is unsupported by the administrative record as established by the
Bristol Bay Watershed Assessment, and is therefore arbitrary and capricious.
On September 3, 2014, the Pebble Partnership initiated a second
action against EPA in federal district court in Alaska charging that EPA
violated the Federal Advisory Committee Act ("FACA") due to its close
interactions with, and the undue influence of Environmental Non-Governmental
Organizations and anti-mining activists in developing the Bristol Bay Watershed
Assessment, and with respect to its unprecedented pre-emptive 404c regulatory
action under the Clean Water Act. On September 24, 2014, the U.S. federal
court judge in Alaska released an order recognizing that the EPA agreed not to
take the next step to advance its 404c regulatory action with respect to
southwest Alaskas Pebble Project until at least January 2, 2015.
On November 24, 2014, a U.S. federal court judge in Alaska
granted the Pebble Partnerships request for a preliminary injunction in
relation to the FACA case. While the preliminary injunction does not resolve the
Pebble Partnerships claims that the EPA actions with respect to the Bristol Bay
Watershed Assessment and subsequent 404c regulatory action violated FACA, the
decision permits the further discovery process of the underlying facts to enable
the court to issue a final decision on the merits of the FACA case. On June 4,
2015, the federal court in Alaska issued an order denying the EPAs motion to
dismiss this case.
Discovery has now commenced in the FACA case. The Pebble
Partnership has filed requests for production of documents and notices of
dispositions for EPA employees and relevant third parties. Should the Pebble
Partnership prevail in its FACA litigation against the EPA, the federal agency
may be unable to rely upon the Bristol Bay Watershed Assessment as part of the
administrative record for any regulatory action at the Pebble Project.
On October 14, 2014, the Pebble Partnership filed suit in
federal district court in Alaska charging that EPA has violated the Freedom of
Information Act by improperly withholding documents related to the Pebble
Project, the Bristol Bay Watershed Assessment and consideration of a pre-emptive
404(c) veto under the Clean Water Act. The EPA moved for summary judgment
claiming that its search for and disclosure of document was adequate. The Pebble
Partnership opposed the governments motion, pointing out several deficiencies
in the EPAs search parameters and the agencys overly broad assertion of the
deliberative process privilege to withhold documents. On August 24, 2015, the
U.S. federal court judge granted in part and deferred in part the EPAs motion
for summary judgement on the Freedom of Information Act ("FOIA")
litigation. The court accepted the EPAs position that it had made an adequate
search for documents but left the matter open should the EPA not meet its
obligations in the FACA litigation or if additional documents surface.
Additionally, the judge ordered the EPA to produce a sample of 183 partially or
fully withheld documents so that it could conduct an in camera review of the
sample and test the merits of the EPAs withholdings under the deliberative
process privilege. Before producing this sample to the Court, the EPA chose to
voluntarily release 115 documents (or 63% of the sample ordered by the Court),
relinquishing its claim of privilege as to these documents. The parties are
currently briefing the application of the deliberative process privilege with
respect to the sample of documents.
Counsel for Northern Dynasty and the Pebble Partnership has
submitted numerous letters to the independent Office of the EPA Inspector
General ("IG") since January 2014 raising concerns of apprehension of bias,
process irregularities and undue influence by environmental organizations in the
EPA's preparation of the Bristol Bay Watershed Assessment. In response to
Congressional and other requests, on May 2, 2014, the IGs office announced that
it would investigate the EPAs conduct in preparing An Assessment of
Potential Mining Impacts on Salmon Ecosystems of Bristol Bay, Alaska. A
team of IG investigators was assigned "to determine whether the EPA adhered to
laws, regulations, policies and procedures in developing its assessment of
potential mining impacts in Bristol Bay, Alaska."
On March 24, 2015, it was announced that former United States
Defense Secretary William S. Cohen and his firm, The Cohen Group, assisted by
the law firm DLA Piper, had been retained by the Pebble Partnership to conduct an independent review of whether the EPA acted fairly
in connection with its evaluation of potential mining in the Bristol Bay
watershed. Secretary Cohen was requested to evaluate the fairness of EPA's
actions and decisions in this matter based upon a thorough assessment of the
facts and relying on his experience as a senior government official as well as
his 24 years as a member of the U.S. Senate and House of Representatives.
Page 12
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
A team of independent investigators employed by The Cohen Group
and DLA Piper reviewed thousands of documents secured through FOIA requests and
interviewed approximately 60 individuals involved with the EPA or its review of
the Pebble Project. On October 6, 2015, Mr. Cohen released his report entitled
"Report of an Independent Review of the United States Environmental
Protection Agencys Actions in Connection with its Evaluation of Potential
Mining in Alaskas Bristol Bay Watershed." The report stated the conclusion
of Mr. Cohen that he did not believe the EPA used the "fairest and most
appropriate process" in its proposed preemptive regulatory action under the
Clean Water Act 404(c).
Mr. Cohen urged policymakers to require that the permitting
process under NEPA and the regulations developed by the Council on Environmental
Quality (the "Permit/NEPA Process") be followed. The Permit/NEPA Process, which
entails compliance with NEPA and other regulatory requirements, an environmental
impact assessment and input from the EPA, other relevant agencies and the State
of Alaska, and will supply the gaps in information which the BBWA left
outstanding. Mr. Cohen commented that the Permit/NEPA Process is more
comprehensive than the pre-emptive Section 404(c) action employed by the EPA and
he could find no valid reason why that process was not used.
The Cohen report raised a number of concerns about the EPAs
Bristol Bay Watershed Assessment study and the Clean Water Act 404(c) regulatory
action, including possible prejudice regarding the outcome of the action by the
EPA, inappropriately close relationships between certain EPA officials and
anti-mine advocates, EPAs candor with respect to certain actions it took, lack
of consistency between the BBWA and the proposed determination, and lack of
cooperation by EPA personnel with respect to Congressional queries and FOIA
requests.
Northern Dynasty does not consider the Cohen report to
constitute an "experts" report but rather considers it to constitute an
informed view of the Companys treatment by the EPA expressed by a person
familiar with governmental due process goals. Mr. Cohen has appeared before a
Congressional committee (House Committee on Science, Space and Technology) with
respect to the findings in his report and if given the opportunity may appear
before other committees in the months ahead.
In summary, the Pebble Partnership is advancing a
multi-dimensional strategy to address the EPAs preemptive regulatory action
under Section 404(c) of the Clean Water Act, and is working to position
the Pebble Project to initiate federal and state permitting under NEPA
unencumbered by any extraordinary development restrictions imposed by the
federal agency. This strategy includes three discrete pieces of litigation
against the EPA, including:
|
challenging the EPAs statutory authority to
pre-emptively impose development restrictions at the Pebble Project under
Section 404(c) of the Clean Water Act prior to the Pebble Partnership
submitting a proposed development plan for the project or the development
of an EIS under NEPA; |
|
|
|
alleging that the EPA violated FACA in the
course of undertaking the Bristol Bay Watershed Assessment and subsequent
Section 404(c) of the Clean Water Act regulatory action; and |
|
|
|
alleging that the EPA is unlawfully withholding
relevant documentation and other information sought by the Pebble
Partnership under FOIA. |
While the litigation process is inherently uncertain, and it is
difficult to predict with confidence the length of time that each of the legal
initiatives described above will take to advance to specific milestone events or
final conclusion, Northern Dynasty expects:
Page 13
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
|
a final decision by a federal court judge in
Alaska on the Pebble Partnerships FACA case sometime in the next 18
months; and |
|
|
|
the independent Office of the EPA Inspector
General to complete its investigation and publish a final report on EPA
actions with respect to the Bristol Bay Watershed Assessment and the EPAs
subsequent regulatory action under Section 404(c) of the Clean Water Act
in the first quarter of 2016. |
Northern Dynasty cannot predict the outcome of its various
challenges to what it sees as improper pre-emptory attempts by the EPA to
prevent or unduly restrict mineral development at Pebble. If these challenges
all fail and EPA continues to oppose the Pebble Project by all legal means, it
will almost certainly have a material adverse effect on the Company.
Nunamta Aulukestai
In October 2011, a lawsuit filed in July 2009 by the Trustees
for Alaska (an environmental law firm) on behalf of Nunamta Aulukestai an
organization established and funded to oppose development of the Pebble Project
- was rejected by the Anchorage Superior Court. The lawsuit alleged that the
Alaska Department of Natural Resources had violated the state constitution by
granting exploration and temporary water use permits to the Pebble Partnership,
and exploration activities had caused harm to vegetation, water, fish and
wildlife. The Pebble Partnership actively participated in the trial proceedings
after being granted intervener status. Superior Court Judge Aarseth denied each
of the allegations made by Nunamta Aulukestai, and ruled that no evidence of
environmental harm was presented. The plaintiffs filed an appeal and a ruling
was made on May 29, 2015. The Alaska Supreme Court agreed that there was no
evidence of environmental damage but ruled that the land use permits conveyed an
interest in land and, as such should have been preceded by public notice. The
decision does not change the status of current permits held by the Pebble
Partnership, although drilling permits applied for in future may necessitate
additional public notice and comment requirements. In August 2015, the Supreme
Court ruled in the appeal case that the Alaska Department of Natural Resources
and the Pebble Partnership were jointly and severally liable for plaintiffs
attorney fees in the amount of US$57,082. The case has been remanded back to the
trial court, where there will be further litigation about the potential award of
the plaintiffs attorneys fees for the trial court portion of the litigation.
December 2014 Special Warrants - $15.5
Million Financing
On December 29, 2014, the Company announced the terms of an
offering of its Special Warrants and subsequently, on January 13, 2015, it
closed the offering, raising a total of approximately $15.5 million from the
sale of 35,962,735 Special Warrants. All special warrants have been exercised
and a total of 35,962,735 of the Companys common shares (Common Shares) have
been issued. The issuance of the Common Shares was qualified by the Companys
short-form prospectus dated February 24, 2015.
August 2015 Financing
In August 2015, Northern Dynasty announced that it intends to
raise up to $20 million through a combination of an issuance of $10-$15 million
worth of Special Warrants, exercisable into Common Shares on a one for one
basis, at a price of $0.399 per special warrant (the "August 2015 Special
Warrants"), together with the acquisition of 100% of Cannon Point Resources Ltd.
("Cannon Point"), a TSX Venture listed entity, whose primary asset is cash of
$4.7 million.
Page 14
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
August 2015 Special Warrants $15
Million Financing
On August 10, 2015, the Company announced the terms of the
Offering and on August 31, 2015 and September 10, 2015 that it had closed the
Offering, raising a total of approximately $15 million from the sale of
37,600,000 Special Warrants.
Under the terms of issuance of the August 2015 Special
Warrants, the Company filed a short-form prospectus in certain Canadian
provinces to qualify the conversion of the August 2015 Special Warrants and a
registration statement in the United States to qualify the resale of Common
Shares by U.S. investors. The Company received a final receipt for the
short-form prospectus from the relevant Canadian securities regulators and all
the August 2015 Special Warrants automatically exercised on November 13, 2015
into Common Shares on a one-for-one basis without payment of any additional
consideration.
Acquisition of dormant listed issuer
(Cannon Point) with $4.7 million in cash
On August 31, 2015, the Company entered into an arrangement
agreement (the Arrangement) with Cannon Point whereby the Company would
acquire 100% of the issued and outstanding Cannon Point shares. Cannon Point, a
TSX-Venture listed company, had approximately $4.7 million in cash and had no
other significant asset and/or active operations as of the date of the
Arrangement.
The transaction closed on October 29, 2015. Pursuant to the
Arrangement, Northern Dynasty issued an aggregate of 12,881,344 Common Shares to
the former shareholders of Cannon Point (0.376 of a Northern Dynasty common
share for each issued Cannon Point common share). In addition, 8,375,000 share
purchase warrants of Cannon Point were exchanged for 3,149,000 share purchase
warrants of Northern Dynasty exercisable at a price of $2.13 per share on or
before December 17, 2015, and 3,312,500 stock options of Cannon Point were
exchanged for 1,245,500 stock options of Northern Dynasty with exercise prices
ranging from $0.29 to $0.43 per share. All such options will expire on January
29, 2016, with the exception of an aggregate of 676,800 options which will
retain their original expiry date. The weighted average expected life of the
options is 2.56 years.
Planned acquisition of listed issuer
(Mission Gold Ltd.) with approximately $9 million in cash
Subsequent to the end of the third quarter, on October 8, 2015,
the Company announced that it intends to acquire 100% of approximately 50.5
million issued and outstanding common shares of the TSX Venture Exchange-listed
Mission Gold Ltd. ("Mission Gold"), whose primary assets are approximately $9
million in cash and a 100% interest in the Alto Parana titanium project (which
has to be sold to a third party on terms acceptable to the Company prior to, and
as a condition of, closing of the acquisition).
On November 2, 2015, the Company announced that it had signed a
definitive agreement with Mission Gold (the "Arrangement Agreement"). The
transaction will be implemented by way of a statutory plan of arrangement. Each
common share of Mission Gold will be exchanged for 0.55 of a Northern Dynasty
common share, subject to adjustment in the event that Mission Golds working
capital is less than an agreed minimum amount. Each of approximately 16.7
million outstanding Mission Gold warrants will be exchanged pursuant to the plan
of arrangement for a warrant to acquire one Northern Dynasty common share at an
exercise price increased to 110% of the applicable existing Mission Gold warrant
exercise price and having the same expiry date as the original warrant term. One
nominee of Mission Gold will be appointed to the board of directors of Northern
Dynasty at closing.
As part of the transaction, Mission Gold has made a secured
loan facility of up to $8.4 million available to Northern Dynasty. The facility
has a term of six months, provided that if the Arrangement Agreement is
terminated due to a breach by Northern Dynasty, the facility will be repayable
30 days from the date of termination along with accrued interest at a rate of
15% per annum. On November 4, 2015, the Company drew down an initial advance of
$2,000,000 under the facility.
Page 15
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
Northern Dynasty has also entered into standard lock-up
agreements with certain security holders of Mission Gold, including with holders
of approximately 49% of the outstanding Common Shares of Mission Gold to vote in
favour of the Transaction.
The Arrangement Agreement provides for, among other things, a
non-solicitation covenant on the part of Mission Gold, subject to customary
"fiduciary out" provisions that entitle Mission Gold to consider and accept a
superior proposal, a right in favour of Northern Dynasty to match any superior
proposal and, in certain circumstances, the payment of a termination fee.
The Transaction is subject to the approval of the TSX Venture
Exchange on the part of Mission Gold and the TSX and NYSE MKT on the part of
Northern Dynasty, required approvals of the court and the Mission Gold security
holders, the execution of a binding agreement for the sale of Mission Golds
Alto Parana titanium project prior to closing of the Transaction, and other
customary closing conditions.
The Transaction is not subject to Northern Dynasty shareholder
approval. It is expected to close within 120 days of the October 8, 2015,
announcement; however, given that a number of the conditions are beyond the
Companys control, there can be no certainty of completion at this time.
Copper prices increased from early 2009 until late 2011. From
that time, prices have been variable and weakened overall. The recent closing
price is US$2.19/lb.
The average annual gold price steadily increased from 2008 to
2012. Gold prices trended lower in 2013, and have been variable but weakening
overall in 2014 and 2015. The recent closing price is US$1,082/oz.
Molybdenum prices were variable, but improving in 2010 and
2011, variable in 2013, and then began an uptrend that extended through the end
of June 2014. Prices have, largely, been on a downtrend since that time with a
recent closing price of US$4.99/lb.
An upward trend in silver prices began in 2010, and continued
to late September 2011; prices reached as high as $43/oz in 2011, resulting in
the highest average annual price since 2008. Prices ranged between $26/oz and
$35/oz between October 2011 and December 2012, and trended downward in 2013.
Silver prices have been variable in 2014 and 2015, with an overall decrease in
the average price. The recent closing price is US$14.39/oz.
Average annual prices since 2010 as well as the average prices
of copper, gold, molybdenum and silver so far in 2015 are shown in the table
below:
Year |
Average metal price |
Copper
US$/lb |
Gold
US$/oz |
Molybdenum
US$/lb |
Silver
US$/oz |
2010 |
3.42 |
1,228 |
15.87 |
20.24 |
2011 |
4.00 |
1,572 |
15.41 |
35.25 |
2012 |
3.61 |
1,669 |
12.81 |
31.16 |
2013 |
3.32 |
1,410 |
10.40 |
23.80 |
2014 |
3.14 |
1,276 |
11.91 |
19.08 |
2015 (to the date of the MD&A) |
2.55 |
1,173 |
6.96 |
15.91 |
Source: LME Official Cash Price as provided at
www.metalprices.com
Page 16
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
1.3 |
Selected Annual
Information |
Not required for interim MD&A.
1.4 |
Summary and Discussion of Quarterly
Results |
All monetary amounts are expressed in thousands of dollars
except per share amounts and where otherwise indicated. Minor differences are
due to rounding.
Excerpts from Statements |
|
Sep 30 |
|
|
Jun 30 |
|
|
Mar 31 |
|
|
Dec 31 |
|
|
Sep 30 |
|
|
Jun 30 |
|
|
Mar 31 |
|
|
Dec 31 |
|
of Comprehensive Loss |
|
2015 |
|
|
2015 |
|
|
2015 |
|
|
2014 |
|
|
2014 |
|
|
2014 |
|
|
2014 |
|
|
2013 |
|
(Income) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration and evaluation |
$ |
1,786 |
|
$ |
1,484 |
|
$ |
2,074 |
|
$ |
3,461 |
|
$ |
2,436 |
|
$ |
2,952 |
|
$ |
4,028 |
|
$ |
1,076 |
|
General and administrative(i) |
|
3,076 |
|
|
1,567 |
|
|
1,816 |
|
|
2,118 |
|
|
2,120 |
|
|
2,150 |
|
|
2,670 |
|
|
1,596 |
|
Legal, accounting and audit(i) |
|
4,452 |
|
|
2,922 |
|
|
3,248 |
|
|
4,933 |
|
|
1,957 |
|
|
1,281 |
|
|
155 |
|
|
214 |
|
Share-based compensation |
|
33 |
|
|
41 |
|
|
360 |
|
|
522 |
|
|
557 |
|
|
699 |
|
|
2,099 |
|
|
|
|
Other items (ii) |
|
50 |
|
|
(236 |
) |
|
(1,252 |
) |
|
(1,109 |
) |
|
(982 |
) |
|
(211 |
) |
|
(489 |
) |
|
(412 |
) |
Equity accounting adjustment (iii)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,062 |
) |
Loss (income) for the quarter |
$ |
9,397 |
|
$ |
5,778 |
|
$ |
6,246 |
|
$ |
9,925 |
|
$ |
6,088 |
|
$ |
6,871 |
|
$ |
8,463 |
|
$ |
(2,588 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss
(income) per common share |
$ |
0.07 |
|
$ |
0.04 |
|
$ |
0.05 |
|
$ |
0.10 |
|
$ |
0.06 |
|
$ |
0.07 |
|
$ |
0.09 |
|
$ |
(0.03 |
) |
(i) |
From Q1-2015 onward, in presenting the statement of loss
and comprehensive loss, the Company has separately reflected legal,
accounting and audit expenditures, which line item is predominantly
comprised of legal costs incurred by the Group in response to the EPAs
activities surrounding the Pebble Project. These expenditures were
previously included under general and administrative expenditures.
Quarterly results for all previous quarters presented in the above table
have been adjusted to conform with the classification of expenditures
adopted in the current years fiscal quarters. |
|
|
(ii) |
Other items include interest income, interest payable,
exchange gains or losses, and deferred income tax expense and
recovery. |
|
|
(iii) |
Represents a gain recorded upon discontinuance of equity
method for accounting for the investment in the Pebble Limited Partnership
when the Company reacquired control in Q4 of 2013. |
Discussion of Quarterly Trends
Since late Q3 of 2013, the Company has funded 100% of
evaluation work on the Pebble Project following the withdrawal of the project
partner. Exploration and evaluation expenses ("E&E") included costs for
Native community engagement, select environmental monitoring programs, annual
fees for claims (in Q4 of 2014), site leases for accommodation, land access
agreements and technical studies, some of which were incurred at the beginning
of the respective year.
General and administrative expenses ("G&A"), which exclude
legal, accounting and audit expenses as per the revised presentation of the
statement of loss and comprehensive loss adopted by the Company in fiscal year
2015, have fluctuated based on the level of corporate activities undertaken. As
a result of the added costs associated with the management and administration of
the Pebble Partnership, G&A trended higher initially in 2014 then declined
to a quarterly average of approximately $1.7 million in Q1 and Q2 of 2015. In Q3
2015, the G&A increased mainly due to the recognition of arrear directors
fees and a bonus commitment.
Legal, accounting and audit expenses are comprised primarily of
legal costs incurred by the Group in response to the EPAs activities
surrounding the Pebble Project and have fluctuated in line with ongoing
activities to advance the Companys multi-dimensional strategy to address the
EPAs pre-emptive regulatory process as discussed in Section 1.2.1.2
Legal Matters.
Page 17
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
Share-based compensation expense ("SBC") has fluctuated due to
the timing of share purchase option grants and the vesting periods associated
with these grants. In 2014, the Company issued share purchase options and
accordingly recognized SBC on grant date and over the vesting periods for share
purchase options. There were no grants of options in the first three quarters in
2015.
1.5 |
Results of
Operations |
The following financial data has been prepared in accordance
with IFRS effective for the period ended September 30, 2015.
The Companys operations and business are not driven by
seasonal trends, but rather are driven towards the achievement of project
milestones relating to the Pebble Project such as the achievement of various
technical, environmental, socio-economic and legal objectives, including
obtaining the necessary permits, the completion of pre-feasibility and final
feasibility studies, preparation of engineering designs, as well as receipt of
financings to fund these objectives along with mine construction.
1.5.1 |
Results of Operations for the Three Months Ended
September 30, 2015 vs. 2014 |
The Company recorded an increase in loss of $3.3 million to
$9.4 million from a loss of $6.1 million in 2014.
E&E decreased by $0.7 million as the Company prioritized
the allocation of available financial resources in order to meet key corporate
and Pebble Project expenditure requirements relating to ongoing activities
around the EPAs initiatives as discussed in Section 1.2.1.2 Legal
Matters. E&E activities during the quarter included Native community
engagement, environmental monitoring and site leases for accommodation.
The following table provides a breakdown of E&E incurred
during the period:
E&E
(expressed in thousands of dollars) |
|
Three months ended
September 30 |
|
|
|
2015 |
|
|
2014 |
|
Engineering |
$ |
60 |
|
$ |
7 |
|
Environmental |
|
162 |
|
|
720 |
|
Site activities |
|
558 |
|
|
38 |
|
Socio-economic |
|
960 |
|
|
751 |
|
Other activities and travel |
|
46 |
|
|
920 |
|
Total |
$ |
1,786 |
|
$ |
2,436 |
|
G&A excluding legal, accounting and audit slightly
increased $1.0 million to $3.1 million due primarily to the recognition of
arrear directors fees for period and a 2014 bonus commitment. Legal, accounting
and audit costs increased by $2.5 million due primarily to increased legal costs
incurred as the Company, through the Pebble Partnership, advances key legal
objectives to address the EPAs pre-emptive regulatory process (see Section
1.2.1.2 Legal Matters).
Page 18
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
The following table provides a breakdown of G&A incurred
during the period:
G&A
(expressed in thousands of dollars) |
|
Three months ended
September 30 |
|
|
|
2015 |
|
|
2014 |
|
Conference and travel |
$ |
112 |
|
$ |
76 |
|
Consulting |
|
(63 |
) |
|
358 |
|
Insurance |
|
103 |
|
|
101 |
|
Office costs |
|
319 |
|
|
295 |
|
Management and administration |
|
2,368 |
|
|
1,093 |
|
Shareholder communication |
|
222 |
|
|
178 |
|
Trust and filing |
|
15 |
|
|
19 |
|
General and administrative |
|
3,076 |
|
|
2,120 |
|
Legal, accounting and audit |
|
4,452 |
|
|
1,957 |
|
Total |
$ |
7,528 |
|
$ |
4,077 |
|
SBC decreased to $ 33,000 from $0.5 million in 2014 as the
Company did not grant any options in the current period (2014 0.2 million
options were granted).
1.5.2 |
Results of Operations for the Nine Months Ended
September 30, 2015 vs. 2014 |
The Company recorded a loss of $21.4 million, the same as it
recorded for 2014.
E&E decreased by $4.1 million as the Company prioritized
the allocation of available financial resources in order to meet key corporate
and Pebble Project expenditure requirements relating to ongoing activities
around the EPAs initiatives as discussed in Section 1.2.1.2 Legal
Matters. E&E activities as such for the period included Native
community engagement, environmental monitoring and site leases for
accommodation.
The following table provides a breakdown of E&E incurred
during the period:
E&E (expressed in thousands
of dollars) |
|
Nine months ended September 30 |
|
|
|
2015 |
|
|
2014 |
|
Engineering |
$ |
197 |
|
$ |
1,303 |
|
Environmental |
|
651 |
|
|
1,968 |
|
Site activities |
|
1,450 |
|
|
2,649 |
|
Socio-economic |
|
2,885 |
|
|
3,255 |
|
Other activities and travel |
|
161 |
|
|
243 |
|
Total |
$ |
5,344 |
|
$ |
9,418 |
|
G&A, excluding legal, accounting and audit, decreased by
$0.4 million due to the Company reducing office costs and consulting. Legal,
accounting and audit increased by $7.3 million due primarily to increased legal
costs incurred as the Company, through the Pebble Partnership, advances key
legal objectives to address the EPAs pre-emptive regulatory process (see
Section 1.2.1.2 Legal Matters).
Page 19
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
The following table provides a breakdown of G&A incurred
during the period:
G&A
(expressed in thousands of dollars) |
|
Nine months ended
September 30 |
|
|
|
2015 |
|
|
2014 |
|
Conference and travel |
$ |
292 |
|
$ |
252 |
|
Consulting |
|
171 |
|
|
524 |
|
Insurance |
|
293 |
|
|
320 |
|
Office costs |
|
981 |
|
|
1,425 |
|
Management and administration |
|
3,882 |
|
|
3,588 |
|
Shareholder communication |
|
575 |
|
|
616 |
|
Trust and filing |
|
265 |
|
|
216 |
|
General and administrative |
|
6,459 |
|
|
6,941 |
|
Legal, accounting and audit |
|
10,622 |
|
|
3,393 |
|
Total |
$ |
17,081 |
|
$ |
10,334 |
|
SBC decreased by $2.9 million as the Company did not grant any
options in the current period (2014 5.9 million options were granted).
The Company's major sources of funding has been the issuance of
equity securities for cash, primarily through private placements to
sophisticated investors and institutions and the issue of common shares pursuant
to the exercise of share purchase options. The Company's access to financing is
always uncertain. There can be no assurance of continued access to significant
equity funding.
As at September 30, 2015, the Companys cash and cash
equivalents were $12.6 million as compared to $9.5 million at December 31, 2014.
The Company used $18.8 million of its cash in its operating activities (see
Section 1.5.1) and raised $17.7 million from the special warrant financings that
closed in January, August and September 2015 (see Section 1.2.2
Financings). The Company received a loan advance of $4.25
million from Canon Point in terms of the credit facility provided by Cannon
Point (see Section 1.2.2 Financings). The Company has
prioritized the allocation of these funds to meet key corporate and Pebble
Project expenditure requirements to January 2016. Additional financing will be
required in order to progress any material expenditures at the Pebble Project in
2016. The Company has signed a definitive agreement with Mission Gold whereby
the Company is to acquire Mission Gold, which has approximately $9 million in
cash (see Section 1.2.2 Financings). There can be no
assurances that the Company will be successful in obtaining additional
financing. If the Company is unable to raise the necessary capital resources to
meet obligations as they come due, the Company will at some point have to reduce
or curtail its operations.
The Company has no "Purchase Obligations", defined as any
agreement to purchase goods or services that is enforceable and legally binding
on the Company that specifies all significant terms, including: fixed or minimum
quantities to be purchased; fixed, minimum or variable price provisions; and the
approximate timing of the transaction. The Company is responsible for
maintenance payments on the Pebble Project claims which includes rental fees of
approximately US$1.0 million due in November 2015 for existing claims and
routine office and site leases (refer to Note 13 in the notes to Interim
Financial Statements which accompany this MD&A).
The Companys capital resources consist of its cash reserves.
As of September 30, 2015, the Company had no long term debt or commitments for
material capital expenditures other than what has been disclosed in the
Financial Statements.
Page 20
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
The Company has no lines of credit or other sources of
financing.
1.8 |
Off-Balance Sheet
Arrangements |
There are none.
1.9 |
Transactions with Related
Parties |
Transactions with Hunter Dickinson
Services Inc. ("HDSI")
Hunter Dickinson Inc. ("HDI") and its wholly owned subsidiary,
HDSI are private companies established by a group of mining professionals
engaged in advancing and developing mineral properties for a number of private
and publicly-listed exploration companies, one of which is the Company.
Many of the current directors of the Company namely, Scott
Cousens, Robert Dickinson, Russell Hallbauer, Marchand Snyman and Ronald
Thiessen are active members of the HDI Board of Directors. Other key
management personnel of the Company Doug Allen, Stephen Hodgson, Bruce
Jenkins, Sean Magee and Trevor Thomas are members of HDIs senior management
team.
The business purpose of the related
party relationship
HDSI provides technical, geological, corporate communications,
regulatory compliance, administrative and management services to the Company, on
an as-needed and as-requested basis from the Company. HDSI also incurs third
party costs on behalf of the Company. Such third party costs include, for
example, directors and officers insurance, travel, conferences, and technology
services.
As a result of this relationship with HDSI, the Company has
ready access to a range of diverse and specialized expertise on a regular basis,
without having to engage or hire full-time experts. The Company benefits from
the economies of scale created by HDSI.
The measurement basis used
The Company procures services from HDSI pursuant to an
agreement (the "Services Agreement") dated July 2, 2010 whereby HDSI agreed to
provide technical, geological, corporate communications, administrative and
management services to the Company. A copy of the Services Agreement is publicly
available under the Companys profile at www.sedar.com.
Services from HDSI are provided on a non-exclusive basis as
required and as requested by the Company. The Company is not obligated to
acquire any minimum amount of services from HDSI. The fees for services is
determined based on an agreed upon charge-out rate for each employee performing
the service and the time spent by the employee. The charge-out rate also
includes overhead costs such as office rent, information technology services and
administrative support. Such charge-out rates are agreed and set annually in
advance.
Third party expenses are billed at cost, without any markup.
Ongoing contractual or other commitments
resulting from the related party relationship
There are no ongoing contractual or other commitments resulting
from the Companys transactions with HDSI, other than the payment for services
already rendered and billed. The agreement may be terminated upon 60 days
notice from either the Company or HDSI.
Page 21
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
The following summarizes the transactions with HDSI for the
three and nine months ended September 30:
|
|
Three months |
|
|
Nine months |
|
Transactions |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
Services rendered by HDSI |
$ |
1,768 |
|
$ |
1,374 |
|
$ |
3,878 |
|
$ |
2,941 |
|
Technical |
|
136 |
|
|
440 |
|
|
792 |
|
|
1,005 |
|
Engineering |
|
(36 |
) |
|
147 |
|
|
119 |
|
|
355 |
|
Environmental |
|
116 |
|
|
157 |
|
|
467 |
|
|
341 |
|
Socioeconomic |
|
(1 |
) |
|
84 |
|
|
- |
|
|
195 |
|
Other technical services |
|
57 |
|
|
52 |
|
|
206 |
|
|
114 |
|
General and administrative |
|
1,632 |
|
|
934 |
|
|
3,086 |
|
|
1,936 |
|
Management, financial &
administration |
|
1,405 |
|
|
637 |
|
|
2,283 |
|
|
1,343 |
|
Provision of IT services |
|
72 |
|
|
122 |
|
|
291 |
|
|
245 |
|
Shareholder communication |
|
155 |
|
|
175 |
|
|
512 |
|
|
348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reimbursement of third party expenses
|
|
63 |
|
|
40 |
|
|
201 |
|
|
215 |
|
Conference and travel |
|
18 |
|
|
39 |
|
|
89 |
|
|
134 |
|
Insurance |
|
12 |
|
|
|
|
|
63 |
|
|
63 |
|
Office supplies and other |
|
33 |
|
|
1 |
|
|
49 |
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of available-for-sale financial assets to HDSI
|
|
(280 |
) |
|
|
|
|
(280 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
1,551 |
|
$ |
1,414 |
|
$ |
3,799 |
|
$ |
3,156 |
|
Key Management Personnel
The required disclosure for the remuneration of the Companys
key management personnel is provided in Note 8(a) in the notes to the Interim
Financial Statements which accompany this MD&A and which are available under
the Companys profile at www.sedar.com.
Not applicable.
1.11 |
Proposed
Transactions |
The Company has signed a definitive agreement with Mission Gold
in which the Company is to acquire Mission Gold by way of a statutory plan of
arrangement, which details are discussed in 1.2.2. There are no other proposed
asset or business acquisitions or dispositions, other than those in the ordinary
course, before the Board of Directors for consideration.
1.12 |
Critical Accounting
Estimates |
There was no change in the use of estimates and judgments
during the current period from those described in Note 2 in the Groups
Consolidated Financial Statements for the year ended December 31, 2014 available
under the Companys profile at www.sedar.com.
Page 22
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
1.13 |
Changes in Accounting Policies including Initial
Adoption |
The Company has disclosed information and potential impact
thereof in Note 2 in the notes to the Financial Statements which accompany this
MD&A.
1.14 |
Financial Instruments and Other
Instruments |
The Company 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 provided as follows:
Credit Risk
Credit risk is the risk of potential loss to the Company if a
counterparty to a financial instrument fails to meet its contractual
obligations. The Companys credit risk is primarily attributable to its liquid
financial assets, including cash and cash equivalents, restricted cash and
amounts receivable. The Company 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, and in government treasury bills which are available on
demand by the Group as and when required. There has been no change in the
Companys objectives and policies for managing this risk except for changes in
the carrying amounts of financial assets exposed to credit risk, and there was
no significant change to the Companys exposure to credit risk during the year
ended December 31, 2014. Amounts receivable include receivable balances with
government agencies and refundable deposits. Management has also concluded that
there is no objective evidence of impairment to its amounts receivable.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to
meet its financial obligations when they become due. There has been no change in
the Companys objectives and policies for managing this risk. The Companys
liquidity position has been discussed in Section 1.6
Liquidity.
Foreign Exchange Risk
The Company is subject to both currency transaction risk and
currency translation risk: the Pebble Partnership and U5 Resources Inc. have the
US dollar as functional currency; and certain of the Companys corporate
expenses are incurred in US dollars. The fluctuation of the US dollar in
relation to the Canadian dollar has an impact upon the losses incurred by the
Company as well as the value of the Companys assets and total shareholders
equity as the Companys functional and presentation currency is the Canadian
dollar. The Company has not entered into any agreements or purchased any
instruments to hedge possible currency risks at this time.
There has been no change in the Companys objectives and
policies for managing this risk, except for the changes in the carrying amounts
of the financial assets exposed to foreign exchange risk, and there was no
significant change to the Companys exposure to foreign exchange risk during the
year ended December 31, 2014.
Interest rate risk
The Company is subject to interest rate risk with respect to
its investments in cash and cash equivalents. There has been no change in the
Companys objectives and policies for managing this risk and no significant
change to the Companys exposure to interest rate risk during the period ended
September 30, 2015.
Page 23
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
Commodity price risk
While the value of the Companys Pebble Project, held through
its interest in the Pebble Partnership, is related to the price of gold, copper
and molybdenum and the outlook for these minerals, the Company currently does
not have any operating mines and hence does not have any hedging or other
commodity based risks in respect of its operational activities.
Gold, copper, and molybdenum prices have fluctuated widely
historically and are affected by numerous factors outside of the Company's
control, including, but not limited to, industrial and retail demand, central
bank lending, forward sales by producers and speculators, levels of worldwide
production, short-term changes in supply and demand because of speculative
hedging activities, and certain other factors related specifically to gold.
Capital Management
The Company's policy is to maintain a strong capital base so as
to maintain investor and creditor confidence and to sustain future development
of the business. The capital structure of the Company consists of equity,
comprising share capital, reserves and special warrants, net of accumulated
deficit.
There were no changes in the Company's approach to capital
management during the period. The Company is not subject to any externally
imposed capital requirements.
1.15 |
Other MD&A
Requirements |
Additional information relating to the Company, including the
Company's 2014 Annual Information Form, is available under the Companys
profile on SEDAR at www.sedar.com.
1.15.1 |
Disclosure of Outstanding Share
Data |
The capital structure of the Company as of the date of this
MD&A is shown in the following table:
|
|
Total |
|
Common Shares issued and
outstanding |
|
181,453,943 |
|
Warrants |
|
|
|
Warrants issued pursuant to the acquisition of Cannon
Point (exercise price per warrant: $2.13) |
|
3,149,000 |
|
Share options |
|
|
|
Share options issued to
employees and consultants (weighted average exercise price per option:
$1.27) |
|
9,784,400 |
|
Share options issued pursuant to the acquisition of Cannon
Point (weighted average exercise price per option: $0.38) |
|
1,245,500 |
|
Total options outstanding |
|
11,029,900 |
|
1.15.2 |
Disclosure Controls and
Procedures |
The Company has disclosure controls and procedures in place to
provide reasonable assurance that any information required to be disclosed by
the Company under securities legislation is recorded, processed, summarized and
reported within the applicable time periods and that required information is
gathered and communicated to the Company's management so that decisions can
be made about timely disclosure of that information.
Page 24
Northern Dynasty Minerals Ltd.
|
Management's Discussion And
Analysis |
Three and
nine months ended September 30, 2015 |
1.15.3 |
Managements Report on Internal Control over Financial
Reporting |
The Company's management, including the CEO and the CFO, is
responsible for establishing and maintaining adequate internal control over
financial reporting. Internal control over financial reporting ("ICFR") is a
process designed by, or under the supervision of, the Company's principal
executive and principal financial officers and effected by the Company's Board
of Directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
consolidated financial statements for external purposes in accordance with IFRS.
The Company's ICFR includes those policies and procedures that:
|
|
pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company; |
|
|
|
|
|
provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with IFRS, and that receipts and expenditures of the Company
are being made only in accordance with authorizations of management and
directors of the company; and |
|
|
|
|
|
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 consolidated financial statements. |
1.15.4 |
Changes in Internal Control over Financial
Reporting |
There has been no change in the Companys ICFR that has
materially affected, or is reasonably likely to materially affect, the Companys
ICFR during the period covered by this MD&A.
1.15.5 |
Limitations of Controls and
Procedures |
The Companys management, including its CEO and CFO, believe
that any system of disclosure controls and procedures or ICFR, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Furthermore, the
design of a control system must reflect the fact that there are resource
constraints and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, they cannot
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been prevented or detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty and breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by unauthorized override of
controls. The design of any system of controls is also based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions. Accordingly, because of the inherent limitations in
a cost effective control system, misstatements due to error or fraud may occur
and not be detected.
Please refer to "Risk Factors" discussed in Item 5 in
the Companys 2014 annual information form for the year ended December
31, 2014 filed under the Companys profile on SEDAR at www.sedar.com.
Page 25
NORTHERN DYNASTY MINERALS LTD.
Form 52-109F2
Certification of Interim Filings - Full Certificate
I, Ronald W. Thiessen, President and Chief Executive Officer of
Northern Dynasty Minerals Ltd., certify the following:
1. |
Review: I have reviewed the interim financial
report and interim MD&A (together, the interim filings) of Northern
Dynasty Minerals Ltd. (the issuer) for the interim period ended
September 30, 2015. |
|
|
2. |
No misrepresentations: Based on my knowledge,
having exercised reasonable diligence, the interim filings do not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated or that is necessary to make a statement not
misleading in light of the circumstances under which it was made, with
respect to the period covered by the interim filings. |
|
|
3. |
Fair presentation: Based on my knowledge, having
exercised reasonable diligence, the interim financial report together with
the other financial information included in the interim filings fairly
present in all material respects the financial condition, financial
performance and cash flows of the issuer, as of the date of and for the
periods presented in the interim filings. |
|
|
4. |
Responsibility: The issuers other certifying
officer and I are responsible for establishing and maintaining disclosure
controls and procedures (DC&P) and internal control over financial
reporting (ICFR), as those terms are defined in National Instrument
52-109, Certification of Disclosure in Issuers Annual and Interim
Filings, for the issuer. |
|
|
5. |
Design: Subject to the limitations, if any,
described in paragraphs 5.2 and 5.3, the issuers other certifying officer
and I have, as at the end of the period covered by the interim
filings |
|
(a) |
designed DC&P, or caused it to be designed under our
supervision, to provide reasonable assurance
that |
|
(i) |
material information relating to the issuer is made known
to us by others, particularly during the period in which the interim
filings are being prepared; and |
|
|
|
|
(ii) |
information required to be disclosed by the issuer in its
annual filings, interim filings or other reports filed or submitted by it
under securities legislation recorded, processed, summarized and reported
within the time periods specified securities legislation;
and |
|
(b) |
designed ICFR, or caused it to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with the issuers
GAAP. |
5.1 |
Control framework: The control framework the
issuers other certifying officer and I used to design the issuers ICFR
is the Internal Control Integrated Framework 2013 published by The
Committee of Sponsoring Organizations of the Treadway
Commission. |
|
|
5.2 |
ICFR material weakness relating to design:
N/A |
|
|
5.3 |
Limitation on scope of design:
N/A |
6. |
Reporting changes in ICFR: The issuer has
disclosed in its interim MD&A any change in the issuers ICFR that
occurred during the period beginning on July 1, 2015 and ended on
September 30, 2015 that has materially affected, or is reasonably likely
to materially affect, the issuers ICFR. |
Date: November 16, 2015
/s/ R.W. Thiessen
_______________________
Ronald
W. Thiessen
President and Chief Executive Officer
2
NORTHERN DYNASTY MINERALS LTD.
Form 52-109F2
Certification of Interim Filings - Full Certificate
I, Marchand Snyman, Chief Financial Officer of Northern Dynasty
Minerals Ltd., certify the following:
1. |
Review: I have reviewed the interim financial
report and interim MD&A (together, the interim filings) of Northern
Dynasty Minerals Ltd. (the issuer) for the interim period ended
September 30, 2015. |
|
|
2. |
No misrepresentations: Based on my knowledge,
having exercised reasonable diligence, the interim filings do not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated or that is necessary to make a statement not
misleading in light of the circumstances under which it was made, with
respect to the period covered by the interim filings. |
|
|
3. |
Fair presentation: Based on my knowledge, having
exercised reasonable diligence, the interim financial report together with
the other financial information included in the interim filings fairly
present in all material respects the financial condition, financial
performance and cash flows of the issuer, as of the date of and for the
periods presented in the interim filings. |
|
|
4. |
Responsibility: The issuers other certifying
officer and I are responsible for establishing and maintaining disclosure
controls and procedures (DC&P) and internal control over financial
reporting (ICFR), as those terms are defined in National Instrument
52-109, Certification of Disclosure in Issuers Annual and Interim
Filings, for the issuer. |
|
|
5. |
Design: Subject to the limitations, if any,
described in paragraphs 5.2 and 5.3, the issuers other certifying officer
and I have, as at the end of the period covered by the interim
filings |
|
(a) |
designed DC&P, or caused it to be designed under our
supervision, to provide reasonable assurance
that |
|
(i) |
material information relating to the issuer is made known
to us by others, particularly during the period in which the interim
filings are being prepared; and |
|
|
|
|
(ii) |
information required to be disclosed by the issuer in its
annual filings, interim filings or other reports filed or submitted by it
under securities legislation is recorded, processed, summarized and
reported within the time periods specified in securities legislation;
and |
|
(b) |
designed ICFR, or caused it to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with the issuers
GAAP. |
5.1 |
Control framework: The control framework the
issuers other certifying officer and I used to design the issuers ICFR
is the Internal Control Integrated Framework 2013 published by The
Committee of Sponsoring Organizations of the Treadway
Commission. |
|
|
5.2 |
ICFR material weakness relating to design:
N/A |
|
|
5.3 |
Limitation on scope of design:
N/A |
6. |
Reporting changes in ICFR: The issuer has
disclosed in its interim MD&A any change in the issuers ICFR that
occurred during the period beginning on July 1, 2015 and ended on
September 30, 2015 that has materially affected, or is reasonably likely
to materially affect, the issuers ICFR. |
Date: November 16, 2015
/s/ M. Snyman
_______________________
Marchand
Snyman
Chief Financial Officer
2
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