Letter Agreement with Northern Dynasty Minerals Ltd. dated June 29, 2010

On the transaction completion date (the “Closing”) to be a date mutually agreed but on or before July 1, 2010 unless we otherwise agree, Northern Dynasty will advance for the benefit of Liberty Star, up to $4 million (the “Advanced Amount”) in order to discharge all of Liberty Star’s secured notes issued May 2007 through August 2009 (“Notes”) which are now in default. Northern Dynasty will make this cash advance in its discretion either directly to the lenders’ agent or to a licensed Alaska legal counsel who will act as escrow agent and will coordinate the repayment of the Notes with the lenders’ collateral agent and counsel. If the funds are paid to the escrow agent, the escrow agent will be irrevocably directed by Northern Dynasty to release the funds to or on behalf of the lenders subject only t o receiving cancelled Note certificates and a release of the lenders security against all of Liberty Star’s Alaskan mining claims (the “Claims”), the shares of Big Chunk Corp. and any other assets of Liberty Star or its subsidiaries.

$1 million of the Advanced Amount shall constitute the cash portion of the consideration for the sale to Northern Dynasty or its nominated subsidiary of the claims

listed and delineated in Schedule “A” sometimes referred to as the Southwest claims (herein the “Purchased Claims”) which will be conveyed by Liberty Star to Northern Dynasty’s nominated US-corporation affiliate concurrently with Northern Dynasty’s payment of the $4 million into escrow or to the lenders.  The remainder of the Advanced Amount (i.e. the Advanced Amount less $1 million) together with interest accrued thereon, shall be considered a loan (the “Loan”), and the advancement of the Loan on the terms described herein, shall constitute the remainder of the consideration for the sale to Northern Dynasty of the Purchased Claims.  The purchase of the Purchased Claims and the Loan are interdependent.

In respect of the Loan, the following are the applicable terms:

(a)  

The Loan will be a secured convertible loan, secured against Liberty Star’s assets including the claims listed and delineated in Schedule “C” (the “Joint Venture Claims”) with a customary UCC general security interest generally in the form attached as Schedule “B” (“General Security Agreement”).

(b)  

The Loan will bear interest at 10 % per year calculated monthly, until it is repaid or deemed repaid as herein provided.

(c)  

The Loan will be due for repayment 45 days after the earlier to occur of (i) Northern Dynasty’s completion of its earn-in to the Joint Venture Claims described below unless it has elected to deem the entire outstanding balance of the Loan (including interest thereon) to be part of the earn-in expenditure requirements and (ii) termination of Northern Dynasty’s earn-in right by voluntary abandonment provided that $1,000,000 expenditure under section 3(d) has been made; or (iii) termination of Northern Dynasty’s earn-in right on account of a superior third party joint venture offer as described in section 3(i) below.

(d)  

The Loan will be convertible until repaid or deemed repaid, into Liberty Star common shares at the 5 day volume weighted average trading price immediately prior to Northern Dynasty giving a notice of conversion less the maximum allowable discount applicable as if Liberty Star were listed on the TSX Venture Exchange..  Northern Dynasty acknowledges there are customary US securities laws resale restrictions in the event of conversion and it will observe such restrictions. The only condition to exercise of the convertibility right is that Northern Dynasty will have expended at least $1 million of the earn-in expenditures contemplated by paragraph (f). Northern Dynasty is an accredited investor.

(e)  

The Loan may be pre-paid by Liberty Star without penalty at any time on 10 days prior notice during which time Northern Dynasty’s conversion rights are unaffected.

(f)  

Northern Dynasty and Liberty Star will endeavour to negotiate an earn-in option and joint venture agreement under which Northern Dynasty or its assignee, Pebble Limited Partnership, can earn a 60% joint venture interest in the Joint Venture Claims by spending $10 million on exploration and claim maintenance costs and related expenses within 6 years from execution of the joint venture agreement.  Northern Dynasty can deem all or any portion of the Loan to constitute part of its exploration expenditure requirements of $10 million except the $1,000,000 expenditure under section 3(d) (meaning, for example, that $10 million less the principal amount of the Loan and accrued interest on the Loan would need to be spent by Northern Dynasty to achieve the $10 million aggregate requirement) at which time a 60/40 (NDM:Liberty Star) joint venture would b e formed.  Northern Dynasty’s minimum annual expenditures under the earn-in would be the minimum level necessary to keep the Joint Venture Claims in good standing. Northern Dynasty may elect to abandon the earn-in at any time on 30 days notice, so long as sufficient annual labor is performed, or a cash payment in lieu of labor is made, in order to fulfil the annual labor requirements for the Joint Venture Claims for a minimum of 12 months after termination of the earn-in.

(g)  

The form of joint venture would be based on a conventional Rocky Mountain Mineral Law Foundation precedent and the parties would, after Northern Dynasty’s earn-in requirements are met, be jointly responsible for funding ongoing exploration and development expenditures with customary dilution for non-participation and two elections not to participate will preclude the right of further participation. Northern Dynasty would be operator for a customary fee and a management committee would direct the joint venture based on a simple majority vote (by interest held) of the participating parties. Elections to participate in programs which are proposed by the operator and approved by the management committee would be required within 30 days for exploration and 90 days for production.

(h)  

Notwithstanding any other provision in this agreement, if Northern Dynasty and Liberty Star are unable to agree the form of joint venture after 60 days from Closing then the Loan may be called by Northern Dynasty at any time and shall be due 45 days after being called .

(i)  

If, prior to Northern Dynasty incurring expenditures above the minimum annual maintenance expenditures, Liberty Star receives a bona fide offer from a third party prepared to pay a larger amount per percentage to earn at least a 60% interest (the “Increased Interest”) in all of the Joint Venture Claims (larger than $166,667 per percentage), Northern Dynasty shall have a right to agree to increase the exploration expenditure requirements of $10 million hereunder, to such larger amount per percentage in consideration for an Increased Interest. In the event that Northern Dynasty fails to agree to such increase within 60 days of its receipt of notice from Liberty Star setting out full particulars of the third party offer, then at the time of execution of the third party earn-in and joint venture: (i)

(j)  

Northern Dynasty shall forfeit its interest in the Joint Venture Claims (except as security for the Loan); (ii) Northern Dynasty shall be immediately refunded all expenditures made pursuant to the earn-in; (iii) notwithstanding sections 3(d) and 3(e) above, the Loan shall not be convertible into Liberty Star shares; and (iv) the Loan shall be due 45 days thereafter.

Northern Dynasty’s obligation to pay the lenders directly or fund the escrow agent are subject to the following representations of Liberty Star being true at Closing:

(a)  

Liberty Star has all necessary corporate power and has taken all necessary proceedings to execute and deliver this agreement as a legal binding obligation.

(b)  

This agreement and the obligations assumed by Liberty Star herein do not conflict with any agreement, law or court or governmental order to which Liberty Star is subject, except terms of the Notes which are to be terminated. .

(c)  

All the Claims are described either on Schedule A or Schedule C and are duly located, validly recorded and registered in the name of Liberty Star and no third party other than the lenders has any interest in them whatsoever and there are no royalty or other interests reserved in them to Liberty Star or any other person;.

(d)  

there are no existing environmental remediation obligations relating to any of the Claims and no operations have taken place on them which were contrary to environmental laws;

(e)  

upon discharge of the Notes Liberty Star will hold good unencumbered title to the Claims and will convey good  and clear title to the Purchased Claims to Northern Dynasty’s US-corporation nominee on Closing against payment of the Advanced Amount;

(f)  

Liberty star has not committed an act of bankruptcy, upon discharge of the Notes it will not be insolvent and will be under no legal impediment from dealing with the Claims;

(g)  

there is no litigation involving Liberty Star or its assets and except for the Notes, no party has any basis to sue Liberty Star nor has any party threatened to do so;

(h)  

the public disclosure filings of Liberty Star at www.sec.gov are up to date and true in all material respects and do not omit to disclose any material information.

Liberty Star agrees from execution hereof that:

for purposes of the joint venture, Liberty Star shall make its books and records open to review by Northern Dynasty and Northern Dynasty may review such facts in connection with Liberty Star’s business, properties and legal and financial status as Northern Dynasty may reasonably request to ensure compliance with the representations of Liberty Star and terms hereof;

(a)  

Northern Dynasty, acting in its sole discretion, may assume responsibility for negotiations with the lenders and their counsel and may initiate legal proceedings in the name of Liberty Star to defend Liberty Star’s and Northern Dynasty’s interests in the Claims as represented by this agreement. Northern Dynasty shall have full control of the prosecution of such litigation and may settle, restructure, extend or otherwise compromise the lenders claims as long as the aggregate amount settled or compromised does not exceed the Advanced Amount. If the amount accepted by the Lenders is less than the Advanced Amount in full satisfaction then 50% of the compromised amount shall be deemed included in the Loan amount and the Loan shall be deemed increased by the other 50% notwithstanding the amount was not actually advanced by Northern Dynasty. In n o event will Northern Dynasty assume any liability to Liberty Star for any action taken by the lenders in connection with the amounts owing them;

(b)  

it shall duly observe the terms of this Agreement and those of the General Security Agreement and any other collateral agreement; and

(c)  

it shall cooperate with Northern Dynasty in any negotiations with the Lenders and shall keep such negotiations (including negotiations between Liberty Star and Northern Dynasty) confidential, but Liberty Star shall be permitted to disclose the terms hereof under applicable disclosure laws and, prior to such disclosure, Liberty Star will provide a draft news release to Northern Dynasty for its comment.

The conditions to which Northern Dynasty’s obligations hereunder are subject are as follows (each of which may be waived by Northern Dynasty in whole or in part):

(a)  

as of acceptance hereof by Liberty Star and as of Closing, all of the representations of Liberty Star will be true and all of its covenants shall have been fulfilled;

(b)  

the lenders will have not have refused to accept repayment or have claimed an amount in excess of $3.9 million or claimed any other relief or damages including a right to realize on or take an interest in the claims; and

(c)  

no litigation shall have been initiated or threatened by any person or governmental authority to enjoin or inhibit the transactions contemplated hereby.

This agreement will be deemed to have been made in British Columbia and will be enforceable in the Courts of British Columbia.

This agreement shall enure to the benefit of and shall be binding upon the parties hereto and their successors according to law.

Northern Dynasty may assign its rights under this agreement in whole or in part and from time to time provided that Northern Dynasty shall remain liable for its obligations hereunder.

Liberty Star Uranium & Metals Corp. and Big Chunk Corp. shall be jointly and severally liable for the obligations of Liberty Star hereunder.