NEOMETALS LTD — Annual Report 2003

Sep 24, 2003

Reed Resources Ltd ABN 89 099 116 631 Annual report - 30 June 2003

Contents

Page

Directors Report	2.
Corporate Governance Statement	8
Statement of Financial Performance	10
Statement of Financial Position	11
Statement of Cash flows	12
Notes to the Financial Statements	13
Directors Declaration	27
Independent Audit Report	28

Directors' report

Your directors present their report on the Company during and since the end of the financial year:

Directors

The following persons were directors of the Company since the start of the financial year up to the date of this report:

D J Reed	Executive Chairman
C J Reed	Director and Company Secretary
P L F Collins	Director

Principal activities

The consolidated entity's principal activities during the period consisted of the exploration for gold and other minerals, and the development of a gold producing operation.

There were no significant changes in the nature of the consolidated entity's principal activities during the financial year

Operating Results

The consolidated loss of the consolidated entity after providing for income tax was \$557,102 (2002: \$240,560).

Dividends

No dividends have been paid in the period and none are proposed.

Review of Operations

Since it was listed on the ASX in July 2002, the consolidated entity has added substantially to the value of its gold resource inventory through successful exploration programs at Comet Vale and has expanded its operational base through the acquisition of additional tenements.

The consolidated entity has three exploration projects within the Archaean Yilgarn Craton in Western Australia. These are located at:

• Comet Vale (100 %), an advanced exploration project that is well situated on the Goldfields Highway 100 km north of Kalgoorlie.
• Mt Finnerty (100 %), a 'brownfields' exploration project consisting of about 250 $km²$ of exploration tenements $\bullet$ located about 120 km west of Kalgoorlie.
• Barrambie (100 %), an advanced exploration project situated about 100 km southeast of Meekatharra.

Comet Vale Project

The Comet Vale project is the consolidated entity's key operational project. The principal exploration target continues to be repetitions of the high-grade Comet Vale lode which was mined in the old Sand Queen and Gladsome mines (181,885 oz of gold produced from $248,476$ tonnes of ore processed: average $22.8$ g/t Au).

During the year, the consolidated entity completed:

• De-watering of the old Sand Oueen mine to below the No.4 Level (154 metres below surface) and refurbishment of the Main Shaft to the No.4 Level. The pumps and ancillary equipment were removed from the Sand Queen Main Shaft following completion of underground geological mapping and sampling.
• Four programs of systematic reverse circulation percussion (RC) drilling and diamond core drilling of the Comet Vale lode position at the Sand Oueen mine, infull and deep drilling of the Sand George deposit, and shallow inful drilling between Sand Queen and Sand George prospect. This included 10,055 metres in 99 RC holes, some of which were drilled as pre-collars for diamond drill holes, and 3,568 m of diamond core drilling completed in 17 DD holes.
• Establishment of a fully verified and validated data base.
• Re-evaluation of the mineral resources at Sand George, including density measurements of drill core, and resource estimation at the Sand Oueen South Extension and a new lode at Sand Prince West.
• A scoping study for mining of the Sand George lodes.

Directors' report

These activities have resulted in:

• Revision of the geological interpretation of the structural setting of the Comet Vale lodes and enclosing host rocks, based on surface and underground geological mapping combined with detailed logging of drill core and re-logging of RC chips samples. The improved geological model of the Sand Queen-Sand George area has necessitated redefinition and re-labelling of lodes at Sand George (now referred to as the SG1, SG2 and SG3 Lodes and newly identified SG4 and SG5 Lodes).
• Confirmation of continuity of the narrow vein, high-grade mineralisation in the main lodes at the Sand George prospect with the SG 1 Lode continuous over a strike length of approximately 225m and the SG 2 Lode, structurally below the SG 1 Lode, over a strike length of approximately 150m.
• A total Indicated Mineral Resource of 138,000 tonnes at 14.4 g/t Au (2 g/t Au cut-off) for 63,900 ounces of contained gold in the SG 1 and SG 2 Lodes at Sand George (Table 1).
• Intersection of two new lode positions at depth (SG 4 and SG 5 Lodes) with high-grade intersections, including 0.6m @ 104.9 g/t Au in SG 4 Lode and 1.0m @ 40.8 g/t Au in SG 5 Lode. The SG 4 and SG 5 Lode intersections demonstrate that high-grade mineralisation continues at depth and to the south.
• A remnant Indicated Mineral Resource of 6,500 tonnes at 19.8 g/t Au (2 g/t Au lower cut-off) for 4,100 ounces of contained gold in a South Extension of the Sand Queen Main Lode, in a zone of high-grade mineralisation between Nos.1 and 3 Levels at the Sand Queen mine.
• Intersection of a new high grade lode (1m $\hat{\omega}$ ) 15 g/t Au), and indications of a second parallel new lode, approximately 45m below the southern end of the No.6 Level of the Sand Oueen mine. The two new lode intersections are in the same stratigraphic and structural positions as the SG 1 and SG 2 Lodes at the Sand George prospect.
• A new Inferred Mineral Resource of 77,600 tonnes at 3.9 g/t Au $(1 \t{g/t}$ Au lower cut-off) for 9,700 ounces of contained gold in an extensive flat-lying to gently northwest dipping thrust zone at the Sand Prince West prospect (Table 1). Mineralisation outlined to date has been drilled to a maximum depth of about 35 m below surface over a strike length of about 200 metres and is open to the north and west.

The total of 197,800 tonnes at 12.0 $g/t$ Au in Indicated and Inferred Mineral Resources (at 2 $g/t$ lower cut) for 76,000 ounces of gold at the Sand George, Sand Queen South Extension and Sand Prince West prospects (Table 1) is a substantial increase in total ounces of gold despite the application a higher grade for the lower cut-off for the Sand George lodes, but aided by a more precise and consistent geological model.

The revised geological model of the Comet Vale lodes and their host rocks has enhanced the potential for the discovery of additional resources, in particular below the southern end of the Sand Queen mine (below No.6 Level), north of the Sand Queen-Gladsome mine, south of the Sand George SG1 and SG2 Lodes for extensions of both lodes, and within the Sand Prince West thrust zone.

Although the Company's exploration activities have focussed on the high-grade lode gold deposits at Comet Vale, these tenements are also prospective for lateritic nickel-cobalt and nickel-sulphide mineralisation.

During the year, agreement was reached with all Native Title claimants and Mining Leases M29/197, M29/198, M29/199, M29/200, M29/201, M29/232, M29/233 and M29/235 were granted, providing access to an additional 1.760 hectares of contiguous tenements that were pending at the time of issue of the Company's Prospectus. The Company also negotiated the acquisition of some 4.075 hectares of additional tenements adjoining the Comet Vale project from Auriongold Ltd.

Mount Finnerty Project

The Mount Finnerty project covers about 48 km of strike length of the Watt Hills greenstone belt which the consolidated entity considers to be highly prospective for high-grade lode gold deposits; BIF-hosted iron ore deposits similar to the hematite-enriched iron ore deposits being mined at Koolyanobbing about 80 km to the west; and lateritic nickel-cobalt and nickel-sulphide mineralization.

Operations during the year have involved collation of existing geological, geochemical, geophysical and GIS data; and completion of a low level airborne geophysical survey during March 2003. A total of 8.248 line kilometres was flown by UTS Geophysics at a line spacing of 100 metres and a nominal sensor height of 30 metres, over the entire Mount Finnerty project. The airborne geophysical survey included total magnetic intensity, radiometrics (total counts, potassium, uranium and thorium) and digital elevation data.

Directors' report

Consultants have been engaged to undertake an interpretation of the airborne geophysical survey data and to provide an assessment of potential exploration targets, including:

• Major structures within the Watt Hills greenstone belt that may host or have controlled lode gold mineralisation.
• Zones of potential hematite enrichment in thicker units of banded iron formation (BIF) within the greenstone belt.
• $\bullet$ Ultramafic rocks that may be potential hosts for nickel sulphides or a source for lateritic nickel.

During the year, Exploration Licences E15/674, E16/272, E15/744, E15/745 and E15/746 were granted. This completes the tenure of all exploration tenements that were outstanding at the time of issue of the Company's Prospectus. The Company also exercised an option to acquire about 31.976 hectares of additional tenements adjoining the Mount Finnerty Project from Kalgoorlie Metals Pty Ltd (a subsidiary of Anaconda Nickel Ltd).

Barrambie Project

In April 2003, the Company acquired Mining Lease M57/173 (100%) from Precious Metals Australia Ltd and Magnum Properties Pty Ltd for a consideration of \$110,000 cash and 750,000 Ordinary Shares in Reed Resources. The Mining Lease (684 hectares) covers about 11 km of strike length of the 22 km long Barrambie Complex and includes the Barrambie titanium-vanadium-iron (Ti-V-Fe) deposit.

The Barrambie Complex has potential to host one of Australia's largest titanium deposits and the consolidated entity's focus will be on evaluating the potential for a large, high grade (in excess of 20 % Ti0.) hard rock titanium resource within M57/173.

Previous exploration and evaluation programs at Barrambie have been biased toward the deposit's vanadium potential. In excess of \$3.5 million has been expended on several drilling programs (11,583 metres in 263 RAB, RC, and cored drill holes) and feasibility studies during the period 1968-2000, mostly on a 2 km section of the Complex referred to as the Bay-Cove Zone. This work identified a vanadium resource of some 130,000-190,000 tonnes of $V_2O_5$ (vanadium pentoxide) in the Bay-Cove Zone, with titanium and iron as accessory products, but the Complex's potential to contain substantial accumulations of titanium mineralisation (as ilmenite and leucoxene) has not been fully tested.

Consultants have been engaged to compile and validate all previous exploration data on the Ti-V-Fe oxide deposit at Barrambie. The validated data will be used to plan an exploration program to test the extent and continuity of an Eastern Band which is the principal target for high-grade titanium mineralisation. Reported drill hole intersections of the Eastern Band have assays in the range 18.0-31.5 % $TiO₂$ over inferred true widths of 15-39 metres.

The Barrambie project also has potential for shear zone-hosted gold and for platinum group metals (PGMs) either within the titanomagnetite bands or as separate layers with nickel-copper sulphides.

Developments subsequent to the end of the financial year

Since June 30, 2003 the consolidated entity has received a report on a mineralogical examination of samples of concentrate which contain numerous grains of liberated gold with a low silver content. Metallurgical test work indicates that the proportion of free gold is greater than 70 % and that a very high overall gold recovery can be expected.

The Board has been actively engaged in discussions with several organisations to facilitate an early decision to mine the Sand George SG1 and SG 2 Lodes, including discussions with a major underground mining contractor and RSG Global has been commissioned to undertake a Pre-Feasibility Study.

		Table 1 Comet Vale project, cross-sectional Mineral Resource estimates*, calculated using different lower cut-off grades.

Deposit/Lode	Lower cut-off grade	Resource $Cateqory*$	mass (tonnes)	urage $(g/t \text{ Au})$	Contained gold (ounces)
Sand George prospect
$SG1$ Lode (1)	$2 \frac{g}{t}$ Au	INDICATED	78,100	15.13	37,990
$SG2$ Lode (2)	2 g/t A u	INDICATED	59,900	13.42	25,840
Total (at $2 \frac{g}{t}$ lower cut)	$2 g/t$ Au	INDICATED	138,000	14.38	63,840
$SG1$ Lode (1)	$5 g/t$ Au	INDICATED	68,100	16.82	36,830

Directors' report

$SG2$ Lode (2)	5 g/t Au	INDICATED	53,700	14.44	24,930
Total (at 5 g/t lower cut)	5 g/t Au	INDICATED	121,800	15.77	61,760
Sand Queen mine
South Extension (3)	$2 g/t$ Au	INDICATED	6,500	19.76	4,120
South Extension (3)	5 g/t Au	INDICATED	6,100	20.98	4,110
TOTAL INDICATED (at 2 $\mu$ /t lower cut)	$2 g/t \text{Au}$		144,500	14.6	67,970
TOTAL INDICATED (at 5 $g/t$ lower cut)	5 g/t Au		127,900	16.0	65,800
Sand Prince West $(4)$	1 g/t Au	INFERRED	77,600	3.90	9,730
	$2 \frac{g}{t}$ Au	INFERRED	53,300	4.70	8,050
TOTAL RESOURCE	2 g/t Au		197,800	12.0	76,020

Indicated and Inferred Mineral Resources detailed in this statement are in accordance with the JORC Australasian Code for Reporting of Mineral Resources and Ore Reserves (1999 Edition) and have been compiled under the supervision of Mr Geoff Davis, Consulting Geologist, who has relevant experience to qualify as a Competent Person under the Code and has authorised their release to the ASX.

Tonnes and Ounces are rounded, rounding errors may occur.

Notes:

• 1. Top-cut grade of 52.7 g/t Au applied; density of 2.67 (measured)
• 1. Top-cut grade of 31.6 g/t Au applied: density of 2.70 for blocks grading 2-5 g/t Au, 2.71 for blocks grading >5 g/t Au (measured)
• 1. Top-cut grade of 43.3 g/t Au applied; density of 2.67 (estimated)
• 1. Top-cut grade of 10.6 g/t Au applied; density of 2.65 (estimated)

Significant changes in the state of affairs

The following significant changes in the state of affairs of the consolidated entity occurred during the current financial year:

• On 9 July 2002 the company issued 30,000,000 shares at 20 cents, having raised \$6,000,000 and listed on the $(i)$ Australian Stock Exchange.
• $(ii)$ On 1 April 2003 the company issued 750,000 ordinary shares at 20c each, pursuant to the agreement with Precious Metals Australia Limited for the purchase of the Barrambie tenement.

Matters subsequent to the end of the financial year

There has not been any matter or circumstance, other than that referred to in the financial statements or notes thereto, that has arisen since the end of the financial year, that has significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

Future Developments

Disclosure of information regarding the likely developments in the operations of the consolidated entity in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the consolidated entity. Accordingly, this information has not been disclosed in this report.

Environmental Issues

The Company is aware of its environmental obligations with regards to its exploration and development activities and ensures that it complies with all regulations when carrying out such work.

Directors' report

Information on directors

Director	Experience	Special responsibilities	Reed Resources Ltd Ordinary shares	Options held
David John Reed OAM FCPA	Mr David Reed, age 57, is a Fellow Member of CPA Australia, and graduated in accountancy in 1965. He has 40 years experience in stockbroking including 22 years based in Kalgoorlie. In 1985 became chairman of stock-broking firm Eyres Reed Ltd in Perth until its sale to CIBC World Markets in 1997. He has extensive public company experience having sat as chairman of several listed exploration companies. He has a long history in the gold mining industry, including Chairman of Fund Raising for the Australian Prospectors and Miners Hall of Fame. A Founder and Chairman of the Diggers and Dealers Forum in Kalgoorlie, and a past Secretary of the Amalgamated Prospectors and leascholders Association. He was appointed a director and executive chairman of Reed Resources Ltd on 20 December 2001.	Chairman	17,362,115
Christopher John Reed B Comm ASA	Mr Chris Reed, age 30, has a Bachelor of Commerce degree from the University of Notre Dame and is an Associate Member of CPA Australia. He has eleven years experience in the mineral exploration and mining industry. He has also spent 2 years with the UBS group as Company Secretary and a divisional Chief Financial Officer. He was appointed a director of Reed Resources Ltd on 20 December 2001.	Director	2,822,180
Peter Lionel Fleury Collins BSc, PhD, MAIG	Dr Peter Collins graduated as a Bachelor of Science with honours from the University of Tasmania, where he also gained his Doctor of Philosophy. He has 25 years experience as a geologist in Tasmania and Western Australia. He has been an economic geologist and tin-tungsten commodity specialist with the Tasmanian Geological Survey. He has lectured in geology at Curtin University of Technology since 1987 and has been widely active in the investigation of mineral deposits in WA. Dr Collins was responsible for the planning and management of the exploration programme that discovered the Sand George deposit at Comet Vale. He was appointed a director of Reed Resources Ltd on 20 December 2001.	Director	285,705

Meetings of Directors

The number of meetings of the consolidated entity's board of directors held during the financial year ended 30 June 2003 total nine. The number of meeting attended by each director and their eligibility to attend were:

	Number eligible to attend	Number attended
D J Reed	0	a
C J Reed	Q	a
P L F Collins	о	Q

Directors' report

Directors' emoluments

The board reviews the remuneration packages of all directors and executive officers on an annual basis. Remuneration packages are reviewed with due regard to performance and other relevant factors. There are no executive officers of the parent and economic entity other than these directors. The emoluments of each director of the parent entity are as follows.

Name	Salary /	Directors	Superannuation	Other	Total S
	Consulting Fees	Fees	Contributions
D J Reed	100,000	-	9.000	$\overline{\phantom{a}}$	109.000
C J Reed	78.842	-	7.095	8.779	94.716
P L F Collins	21.465	30.000	2.700	٠	54,165

Except as detailed in Note 23 to the financial report, no director has received or become entitled to receive, during or since the financial year, a benefit because of a contract made by the Company or a related body corporate with a director, a firm of which the director is a member or an entity in which a director has a substantial financial interest.

Insurance of officers

During the financial year, the company paid a premium in respect of a contract insuring the directors of the company (as named above), the company secretary and all executive officers of the company and of any related body corporate against a liability incurred as a director, secretary or executive officer to the extent permitted by Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

This report is made in accordance with a resolution of the directors, pursuant to s 298(2) of the Corporations Act 2001.

GReed

Director

Perth

24 September 2003

Corporate Governance Statement

The Company's main corporate governance policies and practices are outlined below.

The Board of Directors

The Company's Board of Directors is responsible for corporate governance of the Company. The Board will guide management in the development of strategies for the Company, set and review the Company's strategic objectives and monitor the performance of the Company against those objectives. The overall goals of the corporate governance process are to:

• deliver corporate and operational performance against objectives set: $\bullet$
• drive shareholder value: $\bullet$
• assure a prudential and ethical base to the Company's conduct and activities; and $\bullet$
• ensure compliance with the Company's legal and regulatory obligations. Consistent with these goals, the Board ٠ assumes the following responsibilities:
• developing initiatives for profit and asset growth; $\bullet$
• reviewing the corporate, commercial and financial performance of the Company on a regular basis; $\bullet$
• $\bullet$ acting on behalf of, and being accountable to, the Company's shareholders:
• identifying business risks and implementing actions to manage those risks; and ٠
• developing and effecting management and corporate systems to assure quality sound corporate performance.

The Company is committed to the circulation of relevant materials to Directors in a timely manner to facilitate Directors' participation in Board discussions on a fully informed basis.

Composition of the Board

Election of Board members is substantially the province of the Company's shareholders in general meeting. However, subject thereto, the Company commits to the following principles:

• A Board comprising Directors with a blend of skills, experience and attributes appropriate for the Company and its business:
• The principal criterion for the appointment of new Directors being their ability to add value to the Company and its $\bullet$ business.

Formal nomination committee or procedures have been adopted for the identification, appointment and review of Board membership, but an informal assessment process, facilitated by the Executive Chairman, has been committed by the Board.

Independent Professional Advice

Subject to the Chairman's prior approval (not to be unreasonably withheld) Directors, at the Company's expense, may obtain independent professional advice on issues arising in the course of their duties.

Remuneration Arrangements

The remuneration of an executive director will be decided by the Board, without the affected executive director participating in that decision making process.

The maximum remuneration of non-executive Directors is the subject of shareholder resolution in accordance with the Company's Constitution, the Corporations Act and the ASX Listing Rules, as applicable. The apportionment of non executive.

Director remuneration within that maximum will be made by the Board having regard to the inputs and value to the Company of the respective contributions of each non-executive Director. The Board may award additional remuneration to non-executive Directors called upon to perform extra services or make special exertions on behalf of the Company.

Corporate Governance Statement

The Board as a whole will investigate and recommend candidates for appointment as external auditors of the Company and from time to time will review the scope, performance and fees of its external auditors.

Audit Committee

The Company presently does not have a separately constituted audit committee as it is not presently of a size, or its affairs of such complexity, to warrant such a committee. All matters capable of delegation to such a committee are presently dealt with by the full Board.

Identification and Management of Risk

The Board's collective experience will enable accurate identification of the principal risks which may affect the Company's business. Management of these risks will be discussed by the Board at periodic strategic planning meetings. In addition, key operational risks and their management, will be recurring items for deliberation at Board meetings.

Ethical Standards

The Board is committed to the establishment and maintenance of appropriate ethical standards to underpin the Company's operations and corporate practices.

Management Structure

The Company is committed to evolving management structures and reporting procedures that are commensurate with its business objectives. The Company's organisational structuring is to be based on the principle of minimising hierarchical layers of management, encouraging effective communication and the assumption of a personal involvement in the success of the business by personnel at all levels.

Statement of financial performance

	Notes	Consolidated 12 months 2003 \$	Consolidated 9 months 2002 \$	Parent Entity 12 months 2003 \$	Parent Entity 9 months 2002 \$
Revenues from ordinary activities	$\mathfrak{D}$	213,796	919	213,796	919
Direct exploration expenses not capitalised		(105)	(17, 552)	(105)	(17, 552)
Employee benefits expense		(231, 025)	(69,046)	(231, 025)	(69,046)
Legal and professional expenses		(101, 867)	(67,998)	(101, 867)	(67,998)
Occupancy costs		(28, 131)	(19,515)	(28, 131)	(19,515)
Communications and advertising		(42, 405)	(18,998)	(42, 405)	(18,998)
Office equipment hire and office supplies		(63,902)	(10, 967)	(63,902)	(10, 967)
Travel		(42, 244)	(12, 502)	(42, 244)	(12, 502)
Depreciation & amortisation expense		(34, 159)	(4.055)	(34,159)	(4,055)
Borrowing costs		(3,556)	(2, 732)	(3,556)	(2,732)
Accounting and professional services		(97,787)	(9,736)	(97, 787)	(9,736)
Insurance expenditure		(27,319)	(2,914)	(27,319)	(2,914)
Other expenses from ordinary activities Loss from ordinary activities before income tax expense	3	(98, 398) (557, 102)	(5,464) (240, 560)	(98, 398) (557, 102)	(5, 464) (240, 560)
Income tax expense relating to ordinary activities Net (loss) from ordinary activities after income tax expense	4	(557, 102)	(240, 560)	(557, 102)	(240, 560)
Net Profit		(557, 102)	(240, 560)	(557, 102)	(240, 560)
Total changes in equity other than those relating from transactions with owners as owners	13	(557, 102)	(240, 560)	(557, 102)	(240, 560)
Basic earnings per share (cents per share)	14	(1.2)	(7.1)
Diluted earnings per share (cents per share)	14	(1.2)	(7.1)

The above statement of financial performance should be read in conjunction with the accompanying notes.

Statement of financial position

	Notes	Consolidated 2003 \$	Consolidated 2002 S	Parent Entity 2003 S	Parent Entity 2002 T
Current assets
Cash assets	22	1,294,971	3,002	1,294,971	3,002
Receivables	5	129,182	38,287	283,260	42,555
Other	6		607,323		607,323
Total current assets		1,424,153	648,612	1,578,231	652,880
Non-current assets
Financial assets	7			625,317	625,317
Mining tenements	8	6,593,000	3,305,550	5,817,343	2,654,753
Property, plant & equipment	9	325,643	92,161	325,643	92,161
Total non-current assets		6,918,643	3,397,711	6,768,303	3,372,231
Total assets		8,342,796	4,046,323	8,346,534	4,025,111
Current liabilities
Payables	10	164,664	592,234	168,402	571,022
Interest-bearing liabilities	11	19,403	261,531	19,403	261,531
Total current liabilities		184,067	853,765	187,805	832,553
Non-current liabilities
Interest-bearing liabilities	11	13,712	33,116	13,712	33,116
Total current liabilities		13,712	33,116	13,712	33,116
Total liabilities		197,779	886,881	201,517	865,669
Net assets		8,145,017	3,159,442	8,145,017	3,159,442
Equity
Contributed equity	12	8,942,679	3,400,002	8,942,679	3,400,002
Accumulated losses	13	(797, 662)	(240, 560)	(797, 662)	(240, 560)
Total equity		8,145,017	3,159,442	8,145,017	3,159,442

The above statement of financial position should be read in conjunction with the accompanying notes

Statement of Cashflows

	Notes	Consolidated 12 months 2003 S	Consolidated 9 months 2002 s.	Parent Entity 12 months 2003 Ŝ	Parent Entity 9 months 2002 S
Cash flows from operating activities
Receipts from customers		54,795	23,414	54,795	23,414
Payments to suppliers and employees		(876, 525)	(53,021)	(852,360)	(53,021)
Interest and other costs of finance		(3,556)	(2, 732)	(3,556)	(2,732)
Interest received		163,215	919	163,215	919.
Cash flows used in operating activities	22	(662, 071)	(31, 420)	(637,906)	(31, 420)
Cash flows from investing activities
Payments for property plant and equipment		(267, 641)	(36, 734)	(267, 641)	(36, 734)
Purchase of investments (mining tenements)		(474, 464)	(6,024)	(351, 442)	(6,024)
Payments for capitalised mining expenditure		(2,811,148)	(65, 626)	(2,811,148)	(65, 626)
Amounts advanced to related parties				(149, 811)
Cash flow used for investing activities		(3,553,253)	(108, 384)	(3,580,042)	(108, 384)
Cash flows from financing activities
Proceeds from issues of equity securities		6,150,000	76,931	6,150,000	76,931
Payments for share issue costs		(378, 551)	(228, 772)	(378, 551)	(228, 772)
Proceeds from hire purchase borrowings			51,207		51,207
Repayment of borrowings		(20, 716)		(18,092)
Repayment of deposits & advances
Cash flows used in financing activities		5,750,733	(100, 634)	5,753,357	(100, 634)
Net increase in cash held		1,535,409	(240, 438)	1,535,409	(240, 438)
Cash at the beginning of the financial period		(240, 438)	$\theta$	(240, 438)	0
Cash at the end of the financial period	22	1,294,971	(240, 438)	1,294,971	(240, 438)

The above statement of cash flows should be read in conjunction with the accompanying notes.

for the period ended 30/06/03

Note 1. Summary of significant accounting policies

This general purpose financial report has been prepared in accordance with Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board. Urgent Issues Group Consensus Views and the Corporations Act 2001.

The financial report has been prepared on an accruals basis and is based on historical costs and does not take into account changing money values or, except where stated, current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets.

The following is a summary of the material accounting policies adopted by the economic entity in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

(a) Comparative figures

The Company was incorporated on 20 December 2001. Accordingly comparative figures are for the period from incorporation to 30 June 2002.

(b) Principles of Consolidation

The consolidated financial statements are prepared by combining the financial statements of all the entities that comprise the consolidated entity, being the company (the parent entity) and its controlled entities as defined in Accounting Standard AASB 1024 "Consolidated Accounts". A list of controlled entities is contained in Note 15 to the financial statements.

All inter-company balances and transactions between entities in the economic entity, including any unrealised profits or losses, have been eliminated on consolidation.

(c) Income Tax

The economic entity adopts the liability method of tax-effect accounting whereby the income tax expense is based on the profit from ordinary activities adjusted for any permanent differences.

Timing differences which arise due to the different accounting periods in which items of revenue and expense are included in the determination of accounting profit and taxable income are brought to account as either a provision for deferred income tax or as a future income tax benefit at the rate of income tax applicable to the period in which the benefit will be received or the liability will become payable.

Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt. Future income tax benefits in relation to tax losses are not brought to account unless there is virtual certainty of realisation of the benefit.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

(d) Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation.

Plant and Equipment

Plant and equipment are measured on the cost basis.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets employment and subsequent disposal. The expected net cash flows have not been discounted to their present values in determining recoverable amounts.

The cost of fixed assets constructed within the economic entity includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads.

for the period ended $30/06/03$

Depreciation

The depreciable amount of all fixed assets is depreciated on a straight line basis over their useful lives to the economic entity commencing from the time the asset is held ready for use.

The depreciation rates used for each class of depreciable assets are:

Plant and equipment	-5-50%
Leased plant and equipment	22%

(e) Leased Assets

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to entities in the economic entity are classified as finance leases. Finance leases are capitalised, recording an asset and a liability equal to the present value of the minimum lease payments, including any guaranteed residual values. Leased assets are depreciated on a straight line basis over their estimated useful lives where it is likely that the economic entity will obtain ownership of the asset or over the term of the lease. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

(f) Investments

Non-current investments are measured on the cost basis. The carrying amount of non-current investments is reviewed annually by directors to ensure it is not in excess of the recoverable amount of these investments. The recoverable amount is assessed from the quoted market value for listed investments or the underlying net assets for other nonlisted investments

The expected net cash flows from investments have not been discounted to their present value in determining the recoverable amounts.

(g) Exploration and Development Expenditure

Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves.

Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made.

When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis.

Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.

(h) Employee Benefits

Provision is made for the company's liability for employee entitlements arising from services rendered by employees to balance date. Employee benefits expected to be settled within one year together with benefits arising from wages and salaries, annual leave and sick leave which will be settled after one year, have been measured at the rate expected to apply at the date of settlement amount. Other employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

Contributions are made by economic entity to employee superannuation funds and are charged as expenses when incurred.

for the period ended 30/06/03

$(i)$ Cash

For the purpose of the statement of cash flows, cash includes:

• Cash on hand at call deposits with banks or financial institutions, net of bank overdrafts; and
• Investments in money market instruments with less than 14 days to maturity.

$(i)$ Revenue

Revenue from the sale of goods is recognised upon the delivery of goods to customers.

Interest revenue is recognised on an accrual basis taking into account the interest rates applicable to the financial assets.

Dividend revenue is recognised when the right to receive a dividend has been established.

Revenue from the rendering of a service is recognised upon the delivery of the service to the customers.

All revenue is stated net of the amount of goods and services tax (GST).

(k) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST.

Cash flows are included in the statement of cash flows on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating outflows

(I) Accounts payable

Trade payables and other accounts payable are recognised when the consolidated entity becomes obliged to make future payments resulting from the purchase of goods and services.

(m) Receivables

Trade receivables and other receivables are recorded at amounts due less any allowance for doubtful debts.

(n) Interest-bearing liabilities

Bank loans and other loans are recorded at an amount equal to the net proceeds received. Interest expense is recognised on an accrual basis.

(o) Financial Instruments Issued by the Company

Debt and Equity Instruments

Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement.

Transaction Costs on the Issue of Equity Instruments

Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate.

for the period ended 30/06/03

		Consolidated 2003 \$	Consolidated 2002 S	Parent Entity 2003 S	Parent Entity 2002 \$
Note 2.	Revenue
	Revenue from operating activities		$\blacksquare$		۰
	Revenue from outside the operating activities:
Interest revenue		163,215	919	163,215	919
Fuel Rebate		49,449		49,449
Other income		1,132		1,132
		213,796	919	213,796	919

Note 3. Loss from ordinary activities

Loss from ordinary activities before income tax expense has been determined after:

Expenses

Depreciation Office, Plant & Equipment	34,159	4.055	34.159	4.055
Rental expense relating to operating leases Minimum lease payments	27.732	19.962	27.732	19.962

Note 4. Income tax

	Consolidated 2003 S	Consolidated 2002 \$	Parent Entity 2003 \$	Parent Entity 2002 \$
The income tax expense for the financial year differs from the amount calculated on the profit. The differences are reconciled as follows:
Profit/(Loss) from ordinary activities before income tax expense	(557, 102)	(240, 560)	(557, 102)	(240, 560)
Income tax calculated $\omega$ 30%	(167, 131)	(72.168)	(167, 131)	(72,168)
(Increase)/Decrease in income tax benefit due to: Non-deductible expenditure	13,855	270	13,855	270
Tax benefits not recognised	153,276	71,898	153,276	71,898
Income tax expense	$\blacksquare$

As of 30 June 2003, the parent entity and its controlled entities have future income tax benefits not brought to account as assets in relation to tax losses and timing differences of parent entity \$560,211 (2002: \$158,073), consolidated entity \$597,115 (2002: \$157,159), available to offset against future year's taxable income. The benefit will only be obtained if:

for the period ended 30/06/03

• the Company derives future assessable income of a nature and of an amount $(i)$ sufficient to enable the benefit from the deductions for the losses to be realised, or
• (ii) the Company continues to comply with the conditions for deductibility imposed by tax legislation, and
• (iii) no changes in tax legislation adversely affect the Company in realising the benefit from the deductions for the losses.

Legislation to allow groups, comprising a parent entity and its Australian resident wholly owned entities, to elect to consoldation and be treated as a single entity for income tax purposes was substantively enacted on 21 October 2002. This legislation, which includes both mandatory and elective elements, is applicable to the company.

At the date of this report the Directors have not assessed the financial effect, if any, the legislation may have on the company and the consolidated entity and, accordingly, the Directors have not made a decision whether or not to elect to be taxed as a single entity. The financial effect of the implementation of the tax consolidation system on the consolidated entity has not been recognised in the financial statements.

		Consolidated 2003 S	Consolidated 2002 S	Parent Entity 2003 S	Parent Entity 2002 \$
Note 5.	Current assets - Receivables
GST receivable Other debtors Amounts receivable from wholly owned subsidiary		121,930 7,252	38,087 200	121,929 7,252 154,079	38,087 200 4,268
		129,182	38,287	283,260	42,555
Note 6.	Current assets - Other
2002.	Prepayments - prospectus costs relating to shares issued July		607,323		607,323
			607,323	$\blacksquare$	607,323

Note 7. Non-current assets - Financial Assets

Non Current

Unlisted investments, at cost
Shares in controlled entities

See note 15 for details of controlled entities

Note 8. Non-current assets - Exploration and development expenditure

	Consolidated 2003 S	Consolidated 2002 S	Parent Entity 2003 S	Parent Entity 2002 S
Mining tenements at beginning of period	3.305,550	۰	2,654,753
Mining tenements additions in period at cost	476,303	3,135,332	351.442	2,488,803
Exploration expenditure incurred during the period	2,811,147	158,949	2,811.147	154.681
Option to acquire tenements, at cost		11.269		11.269
	6.593,000	3,305,550	5,817.342	2,654.753

The Directors' assessment of recoverable amount was after: consideration of prevailing market conditions; previous expenditure carried out on the tenements: and the potential for mineralisation based on both the entity's and independent geological reports.

The ultimate value of these assets is dependent upon recoupment by commercial development or the sale of the whole, or part, of the economic entity's interests in those areas for an amount at least equal to the carrying value. There may exist, on the economic entity's exploration properties, areas subject to claim under native title or containing sacred sites or sites or significance to Aboriginal people. As a result, exploration properties or areas within the tenements may be subject to exploration and mining restrictions.

Note 9. Non-current assets - Property, plant and equipment

		Consolidated 2003
	Furniture & Fittings at cost	Plant $\&$ Equipment at cost	TOTAL
	Ŝ	S	\$
Gross Carrying Value
Balance at 30 June 2002		96,216	96,216
Additions	7,896	259,745	267,641
Disposals
Balance at 30 June 2003	7,896	355,961	363,857
Accumulated Depreciation/Amortisation
Balance at 30 June 2002		4,055	4,055
Disposals
Depreciation expense	2,421	31,738	34,159
Balance at 30 June 2003	2,421	35,793	38,214
Net book value
As at 30 June 2002		92,161	92,161
As at 30 June 2003	5,475	320,168	325,643

Aggregate depreciation allocated during the year is recognised as an expense and disclosed in note 3 to the financial statements.

for the period ended 30/06/03

		Parent 2003
	Furniture & Fittings at cost		Plant & Equipment at cost	TOTAL
	S		S	\$
Gross Carrying Value Balance at 30 June 2002 Additions		7,896	96,216 259,745	96,216 267,641
Disposals Balance at 30 June 2003		7,896	355,961	363,857
Accumulated Depreciation/Amortisation Balance at 30 June 2002 Disposals			4,055	4,055
Depreciation expense		2,421	31,738	34,159
Balance at 30 June 2003		2,421	35,793	38,214
Net book value
As at 30 June 2002 As at 30 June 2003		5,475	92,161 320,168	92,161 325,643
Note 10. Current liabilities - Payables	Consolidated 2003 S	Consolidated 2002 \$	Parent Entity 2003 S	Parent Entity 2002 $\mathbf S$
Trade creditors and accruals	164,664	592,234	168,428	571,022
Note 11. Interest Bearing Liabilities
Current - Secured Bank overdraft		243,440
Hire purchase loan	19,403	18,091	19,403	243,440 18,091
	19,403	261,531	19,403	261,531
Non-current – secured
Hire purchase loan	13,712	33,116	13,712	33,116
Total current and non-current secured liabilities Bank overdraft (a)		243,440		243,440
Hire purchase loan (b)	33,115	51,207	33,115	51,207
	33,115	294,647	33,115	294,647

In 2002 the bank overdraft was secured against the assets of the company and by personal guarantees provided $(a)$ by Mr D. Reed and Mr C.Reed.

Secured by the asset under Hire Purchase, the current market value of which exceeds the value of the Hire $(b)$ Purchase liability.

Note 12. Contributed equity

(a) Share capital

$49,750,000$ fully paid ordinary shares $(2002)$ :	8.942.679	3.400.002	8.942.679	3.400.002
$(19,000,000)$ (b), (c)

for the period ended 30/06/03

	2003		2002
	No.		No.
Movements in ordinary share capital: (b)	$^4000$	\$'000	4000	\$'000
Balance at the beginning of financial year	19,000.000	3,400,002
Share issue for cash	30,000,000	6,000,000
Share issue costs	۰	(607, 323)
Share issue for working capital (i)		$\overline{\phantom{a}}$	769.290	76,929
Share issue reimbursement of expenses (i)		$\overline{\phantom{a}}$	3.230,710	323,071
Share issue in exchange for tenements (ii)	750.000	150,000	11,892,113	2,378,423
Share issue in exchange for company (ii)			3,107,885	621,577
	49,750,000	8.942,679	19,000,000	3,400,002

$(i)$ These shares were issued at 10 cents per share on the basis that it represented seed capital provided at risk to enable the establishment of the company.

$(ii)$ These shares were issued at the same price as that set for the public share issue.

(c) Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of shares held.

On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

(d) Options

There are no options on issue.

		Consolidated 2003 S	Consolidated 2002 S	Parent Entity 2003 \$	Parent Entity 2002 \$
Note 13.	Reserves and accumulated losses
Net loss	Accumulated losses at the beginning of the financial period	(240.560) (557, 102)	(240, 560)	(240, 560) (557.102)	(240, 560)
	Accumulated losses at the end of the financial period	(797,662)	(240, 560)	(797.662)	(240, 560)

Note 14. Earnings per share

	Consolidated
	2003	2002
	Cents per Share	Cents per Share
Basic earnings per share	(1.2)	(7.1)
Diluted earnings per share	(1.2)	(7.1)

Basic Earnings per Share

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

	2003	2002
	S	S
Earnings (a)	(557, 102)	(240, 560)
	.

Reed Resources Ltd Notes to the financial statements for the period ended 30/06/03

	2003	2002
	No.	No.
Weighted average number of ordinary shares	48.113.014	3.377,946

(a) Earnings used in the calculation of basic earnings per share reconciles to net profit in the statement of financial performance as follows:

	2003	2002
Net profit/ $(\text{loss})$	(557,102)	(240, 560)
Earnings used in the calculation of basic EPS	(557, 102)	(240.560)

Diluted Earnings per Share

The earnings and weighted average number of ordinary and potential ordinary shares used in the calculation of diluted earnings per share are as follows:

	2003	2002
	S	S
Earnings (a)	(557, 102)	(240, 560)
	2003 No.	2002 No.
Weighted average number of ordinary shares and potential ordinary shares (b)	48,113,014	3,377,946

(a) Earnings used in the calculation of diluted earnings per share reconciles to net profit in the statement of financial performance as follows:

	2003	2002
		Т
Net profit/ $(\text{loss})$	(557, 102)	(240.560)
Earnings used in the calculation of diluted EPS	(557.102)	(240.560)

(b) Weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted earnings per share reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows:

	2003 No.	2002 No.
Weighted average number of ordinary shares used in the calculation of basic EPS	48.113,014	3.377,946
Weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted EPS	48,113,014	3.377,946

for the period ended 30/06/03

Note 15. Controlled Entity

The parent entity is Reed Resources Ltd, a company incorporated in Australia.

Mount Finnerty Pty Ltd is a 100% subsidiary of Reed Resources Ltd. Mount Finnerty Pty Ltd is incorporated in Australia and was acquired on 13 May 2002 for a purchase consideration of \$621,577. Reed Resources Ltd is entitled to all profits earned by Mount Finnerty Pty Ltd from 13 May 2002.

Note 16. Financial instruments

(a) Credit risk exposures

The credit risk on financial assets which have been recognised on the statement of financial position is generally the carrying amount, net of any provisions for doubtful debts.

(b) Interest rate risk exposures

The consolidated entity's exposure to interest rate risk and the effective weighted average interest rate by maturity periods is set out in the following table. For interest rates applicable to each class of asset or liability refer to individual notes to the financial statements.

Exposures arise predominantly from assets and liabilities bearing variable interest rates as the company intends to hold fixed rate assets and liabilities to maturity.

				Fixed interest maturing
		in:
2003	Notes	Floating interest rate S	l year or less S	Over 1 to 5 years S	Non- interest bearing S	Total S
Financial assets
Cash	22	3.7%	1,294,968		3	1.294,971
Receivables	5				129,182	129,182
			$\blacksquare$	٠	129,185	1,424,153
Financial liabilities
Trade and other creditors	10	12.6%			164,664	164,664
Finance lease liability	11	6.9%	19,403	13,712		33,115
			19,403	13,712	164,664	197,779
Net financial assets (liabilities)			1,275,565	(13,712)	(35, 479)	1,226,374

for the period ended 30/06/03

			Fixed interest maturing in:
2002		Floating interest rate	1 year or less	Over 1 to 5 years	Non- interest bearing	Total
Financial assets	Notes	S	S	S	S	S
Cash	22	$3.7\%$	$\blacksquare$		3,002	3,002
Receivables	5				38,287	38,287
				۰	41,289	41,289
Financial liabilities
Overdraft	22	12.6%	243,440			243,440
Trade and other creditors	10				592,234	592,234
Finance lease liability	11	$6.9\%$	18,091	33,116		51,207
			261,531	33,116	592,234	886,881
Net financial assets (liabilities)			(261, 531)	(33, 116)	(550, 945)	(845, 592)

(c) Net fair value of financial assets and liabilities

The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets and financial liabilities approximates their carrying amounts.

Note 17. Remuneration of directors	Consolidated 2003	Consolidated 2002 S	Parent Entity 2003	Parent Entity 2002 \$
Income paid or payable, or otherwise made available, to directors by the company and related parties in connection with the management of affairs of the company	257.881	74.070	257.881	74,070

The numbers of directors whose total income from the company or related parties was within the specified bands are as follows:

\$		m Φ
0	$\tilde{\phantom{a}}$	9,999
20,000		29,999
40,000	٠	49,999
50,000	$\blacksquare$	59,999
90,000	$\overline{\phantom{m}}$	99,999
100,000	$\overline{\phantom{000000000000000000000000000000000000$	109,999

Note 18. Remuneration of executives

There were no executives who received remuneration of \$100,000 or more.

for the period ended 30/06/03

Note 19. Remuneration of auditors	Consolidated 2003 \$	Consolidated 2002 S	Parent Entity 2003 \$	Parent Entity 2002 S
During the period the auditor earned the following remuneration:
Audit or review of financial reports of the entity or any entity of the consolidated entity	19,000	5.000	19,000	5,000
Other assurance services in prospectus		86.556	٠	86,556
Other advisory	$\overline{\phantom{0}}$	7.000	$\overline{\phantom{0}}$	7,000
Total remuneration	19.000	98,556	19,000	98,556

Note 20. Related Parties

Directors:

The names of persons who were directors of the Company during the period are as follows:

	2003 Number 2002 Number
	Fully Paid Ordinary Shares	Fully Paid Ordinary Shares
D J Reed	17,362,115	15,892,115
C J Reed	2,822.180	2,822,180
P L Collins.	285,705	285.705
D.J Reed acquired 1,470,000 shares on 20/1/03. There were no other shares issued/purchased by Directors and their Director
related entities during the year.

Remuneration and retirement benefits

Information on remuneration of directors is disclosed in note 17.

Transactions of directors and director-related entities concerning shares

The Company has entered into arrangements with Trucking Nominees Pty Ltd, a Company associated with Mr D Reed, for the provision of offices and office equipment to the Company in West Perth and Kalgoorlie at cost plus 5% the total amount for the year was \$139.835. The amount is not included in the director's remuneration.

Mr P Collins provides geological consulting services to the Company, the total amount for the year was \$21,465. The amount is included in director's remuneration.

The above amounts were made for services rendered in the ordinary course of business and on normal commercial terms and conditions.

Note 21. Commitments

(a)	Finance Lease Commitments	Consolidated 2003 S	Consolidated 2002 S	Parent Entity 2003 S	Parent Entity 2002 S
Payable
	Not later than 1 year	21,114	21,114	21.114	21.114
	Later than 1 year but not later than 5 years	14 075	35,190	14.075	35,190
	Later than 5 years	٠
	Minimum lease payments	35,189	56,304	35.189	56,304
	Less future finance charges	(2.074)	(5,097)	(2,074)	(5,097)
	Total lease liability	33,115	51,207	33,115	51,207

(b) Operating Lease Commitments

There are no non-cancellable operating lease commitments.

Notes To The Statement of Cash Flows Note 22.

	Consolidated 2003 \$	Consolidated 2002 S	Parent Entity 2003 S	Parent Entity 2002 S
Cash at bank and on hand	1,294,971	3,002	1,294,971	3,002
Reconciliation of Cash $\left( a\right)$ Cash at the end of the financial year as shown in the statement of cash flows is reconciled to items in the statement of financial position as follows:
Cash at bank	1,294,968		1,294,968
Cash on hand	3	3,002	3	3,002
Bank overdrafts		(243, 440)		(243, 440)
	1,294,971	(240, 438)	1,294,971	(240, 438)
Non-Cash Financing and Investing Activities (b)
Purchase of subsidiary company - Mount Finnerty Pty Ltd.
In May 2002 the parent company acquired 100% of the shares in Mount Finnerty Pty Ltd for shares issued at 20 cents per share
Fair value of assets acquired - Mining tenements		621,578		621,578
Consideration - ordinary shares		621,578		621,578
Purchase of mining tenements - Barrambie.
In April 2003 the parent company acquired mining tenements at Barrambie (2002 – Comet Vale) for shares issued at 20 cents per share
Fair value of assets acquired - Mining tenements	150,000	2,378,423	150,000	2,378,423
Consideration - ordinary shares	150,000	2,378,423	150,000	2,378,423
Financing of initial working capital. In April 2002 the parent company reimbursed Mr D J Reed
\$400,000 in initial working capital for the Company by the issue of shares at 10 cents per share for shares issued at 20 cents per share
Reimbursement of expenses paid on behalf of Company		323,071		323,071
Total lease liability	$\blacksquare$	323,071	۰	323,071

for the period ended 30/06/03

(c) Cash Balances Not Available for Use

Cash restrictions exist on \$28,500 of the cash balance as at 30 June 2003. The cash restriction relates unconditional performance bonds issued by National Australia Bank in favour of the Minister for State Development. A Term deposit of \$28,500 has been restricted to ensure it serves as a guarantee.

(d) Reconciliation of Profit From Ordinary Activities After Related Income Tax to Net Cash Flows From Operating Activities

	Consolidated 12 months 2003 S	Consolidated 9 months 2002 S	Parent Entity 12 months 2003 Т	Parent Entity 9 months 2003 S
Profit (Loss) from ordinary activities after tax	(557, 102)	(240.560)	(557, 102)	(240, 560)
Depreciation and amortisation	34,159	4.055	34.159	4.055
Expenses paid on behalf of the company by a related entity		184,032		184,032
(Increase) / decrease in assets:
Current receivables	(90, 894)	(38.287)	(90.894)	(42, 555)
Increase / (decrease) in liabilities:
Current payables	(48, 234)	59.340	(24.069)	59,340
Net cash outflow from operating activities	(662,071)	(31, 420)	(637,906)	(31, 420)

Note 23. Financing facilities.

Secured bank overdraft facility, reviewed annually and payable at call. Amount used Amount unused

Note 24. Segment Reporting

The economic entity is engaged in mineral resource exploration and development, carried out in the Kalgoorlie region of Western Australia.

Note 25. Contingent Liabilities

There are no known contingent liabilities at the date of this report.

Note 26. Events Subsequent to Reporting Date

There are has not been any matter of circumstance, other than that referred to in the financial statements or notes thereto, that has arise since the end of the financial year, that has significantly affected, or may significantly affect, the operations of the consolidated entity in future financial years.

Note 27. Additional Company Information

Reed Resources Ltd is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

Reed Resources Ltd 706 Murray Street WEST PERTH WA 6005

Note 28. Employee Numbers

Number of employees at end of financial period

$\overline{2}$ $\overline{2}$ $\overline{2}$ $\overline{2}$

243,440

250,000

$\overline{a}$

6,560

243,440

250.000

$\mathbf{r}$

6,560

Directors Declaration

The directors declare that:

• $(a)$ the attached financial statements and notes thereto comply with Accounting Standards;
• $(b)$ the attached financial statements and notes thereto give a true and fair view of the financial position and performance of the company and the consolidated entity;
• in the directors; opinion, the attached financial statements and notes thereto are in accordance with the Corporations $(c)$ Act 2001; and
• $(d)$ in the directors' opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the directors, made pursuant to s 295(5) of the Corporations Act 2001.

On behalf of the Directors

Gheed

$C$ J Reed

Perth 24 September 2003 Deloitte Touche Tohmatsu A.B.N. 74 490 121 060 Central Park Level 16 152-158 St Georges Terrace Perth WA 6000 Australia

DX 10307SSE Telephone (08) 9365 7000 Facsimile (08) 9365 7001 www.deloitte.com.au

Deloitte
Touche Tohmaten

INDEPENDENT AUDIT REPORT TO THE MEMBERS

OF REED RESOURCES LIMITED

Scope

The financial report and directors' responsibility

The financial report comprises the statement of financial position, statement of financial performance. statement of cashflows, accompanying notes to the financial statements, and the directors' declaration for both Reed Resources Limited (the company) and the consolidated entity, for the financial year ended 30 June 2003 as set out on pages 10 to 27. The consolidated entity comprises the company and the entities it controlled at the year's end or from time to time during the financial year.

The directors of the company are responsible for the preparation and true and fair presentation of the financial report in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report.

Audit approach

We have conducted an independent audit of the financial report in order to express an opinion on it to the members of the company. Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the financial report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgement, selective testing, the inherent limitations of internal controls, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected.

We performed procedures to form an opinion whether, in all material respects, the financial report is presented fairly in accordance with the Corporations Act 2001 and Accounting Standards and other mandatory professional reporting requirements in Australia so as to present a view which is consistent with our understanding of the company's and the consolidated entity's financial position, and performance as represented by the results of their operations and their cash flows.

Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting estimates made by the directors.

While we considered the effectiveness of management's internal controls over financial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls.

The audit opinion expressed in this report has been formed on the above basis.

Independence

In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001.

Deloitte
Touche
Tohmatsu

Audit Opinion

In our opinion, the financial report of Reed Resources Limited is in accordance with:

$(a)$ the Corporations Act 2001, including:

• giving a true and fair view of the company's and consolidated entity's financial position as at $(i)$ 30 June 2003 and of their performance for the year ended on that date; and
• complying with Accounting Standards in Australia and the Corporations Regulations 2001; $(ii)$ and
• $(b)$ other mandatory professional reporting requirements in Australia.

Deloite Targue Talmatsu

DELOITTE TOUCHE TOHMATSU

l avantiles.

Leanne Karamfiles Partner Chartered Accountants

Perth, WA, 24 September 2003

The shareholder information set out below was applicable as at 30 August 2003.

Distribution of equity securities

Analysis of number of equity security holders by size of holding:

	Ordinary Shares
$1 - 1000$
$1,001 - 5,000$	21
$5,001 - 10,000$	79
$10,001 - 100,000$	301
100,001 and over	48
	451

Equity security holders

The names of the twenty largest holders of quoted equity securities are listed below:

		Ordinary Shares
Name	Number	Percentage of issued
	Held	shares
D J Reed	11,892,115	23.90
Trucking Nominees Pty Ltd	4,000,000	8.04
C J Reed	2,822,180	5.67
N B Little & Sons Pty Ltd (NB Little Super Fund)	2,000,000	4.02
Teran Nominees Pty Ltd	1,800,000	3.62
Trucking Nominees Pty Ltd (DJ Reed Super Fund A/C)	1,470,000	2.95
Weighbridge Trust Limited	1,100,056	2.23
Robmob Pty Ltd (Robinson Super Fund Account)	830,000	1.67
Precious Metals Australia Limited	750,000	1.51
J Kailis	600,000	1.21
Beck Corporation	500,000	1.01
D Loughnan	390,000	0.78
T C Reed	355,000	0.71
T B Ardagh	350,000	0.70
Durkin Enterprises Pty Ltd (No2 Super Fund Account)	350,000	0.70
SL J Raynand	350,000	0.70
Rock Securities Ltd	350,000	0.70
R N Andrews	327,000	0.66
Beck Corporation Pty Ltd	300,000	0.60
P Loughnan	300,000	0.60
	30,846,351	61.98

Substantial holders

Substantial holders in the company are set out below:

Ordinary Shares	Number	Percentage
D J Reed	17.362.115	34.89%
C J Reed	2,822.180	5.67%

Voting Rights

The voting rights attaching to ordinary shares are set out below:

On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

Other

The name of the company secretary is Mr Christopher Reed.

The address of the principal registered office in Australia is: 706 Murray Street, West Perth, Western Australia 6005. Telephone: (08) 9322 1182. $(08)$ 9321 0556. Facsimile Website www.reedresources.com

Registers of securities are held at the following addresses 706 Murray Street, West Perth, Western Australia 6005

Quotation has been granted for all ordinary shares of the company on all Member Exchanges of the Australian Stock Exchange Limited.

Schedule of Mineral Tenements as at 30 June 2003

Project	Tenement	Interest
Comet Vale	M29/35	100%
Comet Vale	M29/52	100%
Comet Vale	M29/85	100%
Comet Vale	M29/185	100%
Comet Vale	M29/197	100%
Comet Vale	M29/198	100%
Comet Vale	M29/199	100%
Comet Vale	M29/200	100%
Comet Vale	M29/201	100%
Comet Vale	M29/232	100%
Comet Vale	M29/233	100%
Comet Vale	M29/235	100%
Comet Vale	M29/321	100%
Comet Vale	MLA29/186	100%
Comet Vale	MLA29/269	100%
Comet Vale	MLA29/270	100%
Comet Vale	1.29/70	100%
Comet Vale	P29/1643	100%
Comet Vale	P29/1644	100%
Comet Vale	PLA29/1764	100%
Comet Vale	ELA29/423	100%
Comet Vale	ELA29/466	100%
Comet Vale	ELA29/502	100%

Project	Tenement	Interest
Mt Finnerty	E15/621	100%
Mt Finnerty	E15/744	100%
Mt Finnerty	E15/745	100%
Mt Finnerty	E15/746	100%
Mt Finnerty	E16/262	100%
Mt Finnerty	E16/272	100%
Mt Finnerty	E16/674	100%
Mt Finnerty	E30/266	100%
Mt Finnerty	ELA15/713	100%
Mt Finnerty	ELA16/260	100%
Mt Finnerty	ELA16/261	100%
Mt Finnerty	P15/4496	100%
Mt Finnerty	P15/4499	100%
Mt Finnerty	P16/2163	100%
Mt Finnerty	P30/969	100%
Mt Finnerty	P30/970	100%
Mt Finnerty	PLA15/4445	100%
Mt Finnerty	PLA15/4446	100%
Mt Finnerty	PLA16/2111	100%
Mt Finnerty	PLA16/2112	100%
Mt Finnerty	PLA16/2113	100%
Mt Finnerty	PLA16/2114	100%
Rarrambie	M57/173.	100%