NEOMETALS LTD — Annual Report 2004

Sep 23, 2004

Reed Resources Ltd

ACN 89 099 116 631

Financial Report for the Financial Year Ended 30 June 2004

Annual Financial Report
For The Financial Year Ended 30^th June 2004

	Page Number
Corporate governance statement	$\boldsymbol{z}$
Directors' report	$\overline{S}$
Independent audit report	19
Directors' declaration	21
Statement of Financial Performance	22
Statement of Financial Position	23
Statement of Cash Flows	24
Notes to the financial statements	25
Additional stock exchange information	46

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;
• 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 $\bullet$ Board 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; $\bullet$
• acting on behalf of, and being accountable to, the Company's shareholders; $\bullet$
• identifying business risks and implementing actions to manage those risks; and $\bullet$
• 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 $\bullet$ Company and its business;
• The principal criterion for the appointment of new Directors being their ability to add value to the Company and its 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

Audit Committee

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.

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.

Principles of Best Practice Recommendations

In accordance with ASX Listing Rule 4.10, Reed is required to disclose the extent to which it has followed the Principles of Best Practice Recommendations during the financial year.

Reed has not fully complied with the best practice recommendations throughout the reporting period, as the implementation of the recommendations still need to be addressed and approved by the directors.

Where Reed has not followed a recommendation, this has been identified and an explanation for the departure has been given. Notwithstanding that the recommendations were not followed, the Board expects to comply with most of the recommendations over future reporting periods:

Principle 1: Lay solid foundations for management and oversight

This principle has been partly addressed under the heading "The Board of Directors" above, and will be fully addressed once the Board has approved the implementation of the best practice recommendations.

Principle 2: Structure the Board to add value

This principle has been partly addressed under the heading "Composition of the Board" above, and will be fully addressed once the Board has approved the implementation of the best practice recommendations.

Principle 3: Promote ethical and responsible decision-making

This principle has been partly addressed under the heading "Ethical Standards" above, and will be fully addressed once the Board has approved the implementation of the best practice recommendations.

Corporate Governance Statement

Principle 4: Safeguard integrity in financial reporting

This principle has not been specifically addressed above, and will be fully addressed once the Board has approved the implementation of the best practice recommendations.

Principle 5: Make timely and balanced disclosure

This principle has not been specifically addressed above, and will be fully addressed once the Board has approved the implementation of the best practice recommendations.

Principle 6: Respect the rights of shareholders

This principle has not been specifically addressed above, and will be fully addressed once the Board has approved the implementation of the best practice recommendations.

Principle 7: Recognise and manage risk

This principle has been partly addressed under the heading "Identification and Management of Risk" above, and will be fully addressed once the Board has approved the implementation of the best practice recommendations.

Principle 8: Encourage enhanced performance

This principle has not been specifically addressed above, and will be fully addressed once the Board has approved the implementation of the best practice recommendations.

Principle 9: Remunerate fairly and responsibly

This principle has been partly addressed under the heading "Remuneration Arrangements" above, and will be fully addressed once the Board has approved the implementation of the best practice recommendations.

Principle 10: Recognise the legitimate interests of stakeholders

This principle has not been specifically addressed above, and will be fully addressed once the Board has approved the implementation of the best practice recommendations.

Your directors present their report on the Company during or 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
I C Junk-	Director (appointed 1 December 2003)

Principal activities

The consolidated entity's principal activities during the period consisted of 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 vear

Operating Results

The consolidated loss of the consolidated entity after providing for income tax was \$766,984 (2003 \$557,102).

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.

• Comet Vale (100%) Gold, Nickel An advanced exploration project that is well situated on the Goldfields Highway about 100 km north of Kalgoorlie.
• Mt Finnerty (100 %) Iron Ore, Gold Nickel A brownfields exploration project consisting of about 250 km² of exploration tenements located about 120 km west of Kalgoorlie.
• Barrambie (100%) Titanium An advanced exploration project situated about 100 km southeast of Meekatharra.

Figure 1. Location of Reed Resources projects

COMET VALE PROJECT (Reed Resources Ltd 100%)

The Company's principal operations during year continued to be at the Comet Vale Project with the focus on evaluation of mining the SG1 and SG2 lodes at the Sand George prospect. The Comet Vale project is the consolidated entity's key operational project. The principal exploration target continues to be repetitions of the highgrade 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).

Figure 2. Location of the Sand George prospect among the Comet Vale line gold lodes along the boundary between basaltic rocks (green) and ultramafic rocks (purple), which also has nickel potential.

During the year, the consolidated entity completed:

• Two programs of systematic infill and extension drilling of the Sand George deposit, including infill drilling between the Sand Queen mine and the Sand George prospect. This included 819 metres in six reverse circulation percussion (RC) drill holes, 4,310 metres in 31 RC holes which were drilled as precollars for diamond drill holes, and 2,508 m of diamond core drilling completed in 33 DD holes.
• Continued maintenance of a fully verified and validated data base.

• Re-evaluation of the Mineral Resources at the Sand George deposit by RSG Global.

• An increase in the Mineral Resource at the Sand George deposit to a combined Indicated and Inferred Mineral Resource of 155,000 tonnes at a grade of 11.6 $g/t$ Au (for 57,800 ounces of gold) in the SG1 and SG2 lodes, including 112,000 tonnes assigned to the Indicated Category (as at March 2004).

• Well constrained geological modelling of the Sand George lodes for use in mine design and planning.

Figure 3. Comet Vale surface geology and projected surface position of the Sand Queen-Gladsome and Sand George lodes (left) and an interpreted cross-section at 13175N through the Sand George lodes (right).

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 (Figure 3, 4).

There has been no change to the Mineral Resource estimates for the Sand Queen South Extension (6,500 tonnes at 19.7 g/t Au; 4,120 ounces gold) and the Sand Prince West lode (53,300 tonnes at 4.7 g/t Au; 8,050 ounces gold), both determined for a 2 $g/t$ Au cut-off.

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

Pre Feasibility Study

RSG Global was commissioned to undertake a Pre-feasibility Study on the SG1 and SG2 lodes and Barminco, an underground mining contractor, completed an evaluation of a possible joint venture arrangement. The Pre-feasibility Study was temporarily suspended in October 2003 whilst the Company completed an infill drilling program in November-December 2003 to increase confidence in the resource estimate. This drilling program confirmed geological continuity of the SG1 and SG2 lode structures, with several intersections assaying in excess of 20 $g/t$ Au.

Reed Resources Ltd

Directors' report

RSG Global recommenced the Pre-Feasibility Study in January 2004, including a re-calculation of the Mineral Resource in the SG1 & SG2 lodes at the Sand George prospect (combined total of 155,000 tonnes at 11.6 $g/t$ Au). The Pre-feasibility Study was again temporarily suspended in March 2004 whilst the Company completed a step-out drilling program in May-June 2004 to enable mineralised intersections not included in the resource estimate to be incorporated in the mine design to capitalise on projected mine operating costs of A\$380/oz.

Figure 4. Comet Vale long-section (looking west) showing an outline of the Sand George lodes, Sand Queen South Extension and possible lode extensions below the Sand Queen mine.

Metallurgical testwork indicates that the Sand George ore is amenable to processing through a standard CIP plant with in excess of 95% gold recovery. Recovery from simple gravity separation is greater than 80% and the Company is reviewing several proposals from toll-millers with gravity gold facilities.

A geotechnical study, hydrogeological study, advanced metallurgical testing and an environmental assessment have been completed to enable a decision to mine to be made once the company has received the Pre-Feasibility Study expected by the end of September 2004.

MOUNT FINNERTY PROJECT (Reed Resources Ltd 100%)

The Mount Finnerty project covers about 48 km of strike length of the Watt Hills Greenstone Belt (Figure 5) which the Company 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 for nickel-sulphide mineralization and lateritic nickel-cobalt enrichments over weathered ultramafic rocks.

A geological interpretation of the Mt. Finnerty tenements by Southern Geoscience Consultants (based on a detailed airborne geophysical survey flown in 2003) identified two thick bands of ultramafic rocks flanking a thick sequence of mafic (basaltic) volcanics, volcanogenic sediments, BIFs, all between marginal granitoids. A number of crosscutting structures and alteration zones are key targets for lode gold deposits, additional to the prospects already identified from previous exploration.

Reed Resources Ltd

Directors' report

Geological mapping of the central part of the greenstone belt (at $1:25,000$ scale) along the central spine of BIF ridges has confirmed much of the interpreted distribution of the main rock units, including the two bands of ultramafic rocks on either side of the greenstone belt. This mapping has also contributed to a revision of the structural interpretation and refinement of gold targets.

Figure 5. Mt Finnerty project tenement location (left) and interpreted surface geology (right).

Nickel sulphide exploration

There has been limited previous exploration of the Mt Finnerty tenements for nickel sulphide mineralization. Most previous work was undertaken by Western Mining Corporation (WMC) in the early 1970s, including a limited program of soil geochemistry, ground geophysics and percussion drilling. Although there were anomalous results (e.g., 1.2% nickel in gossanous material from the western side of the greenstone belt; Figure 5) and favourable rock types for nickel sulphides were intersected in the drill holes, there has been limited follow-up of the nickel-sulphide potential of the area as gold became the main focus of subsequent exploration.

During the year, sampling of the sporadically outcropping ultramatic rocks on the western side of the greenstone belt has shown them to be magnesium-rich, komatiitic rocks containing 20-30 % MgO (olivinite and talc carbonate rocks) that are the favoured host rocks for nickel sulphides. Assays of samples collected from outcropping ultramatics indicates that these rocks are enriched in nickel (1940-6110 ppm Ni) and chromium (2660-5085 ppm $Cr$ ).

Disseminated nickel sulphides have been reported from ultramafic rocks in the greenstone belt (but outside Reed's tenements). Arimco Mining P/L reported 1.19% nickel in a gossanous sample from the western side of the greenstone belt in 1993 and a single follow-up percussion drill hole returned 15m $(a)$ 0.35% Ni from 21m, and 8m containing very fine sulphides from 87m (Figure 5). Electron microprobe analysis of the sulphides identified pentlandite in serpentinised dunite, but no assay has been reported.

Reed Resources has an opportunity to explore a substantial length of the Watt Hills Greenstone Belt that is highly prospective for nickel sulphides and the Company plans to implement a vigorous exploration program for nickel sulphides in conjunction its gold exploration.

Iron ore exploration

Geological mapping (at 1:25,000) was undertaken during the year as the first stage of the Company's assessment of the iron-ore potential of the Mt. Finnerty tenements. The mapping has confirmed continuity of the BIF units throughout the full length of the Mt. Finnerty project. Most of the ridges are of BIF, including small zones of high grade iron oxides with specular hematite (57-66% Fe), but areas of low relief have vet to be effectively tested.

The BIF units in the Mt. Finnerty tenements are contiguous with those hosting the iron ore deposits at Mt. Walton (2.5 Mt $\hat{\omega}$ 60.5% Fe) immediately to the north and at Bungalbin (65.7 Mt $\hat{\omega}$ 57.9% Fe) located 20 km northwest of the Mt. Finnerty tenements.

The BIF units are also key targets for BIF-hosted replacement style gold mineralization alongside the many crosscutting structures identified from interpretation of the airborne geophysical survey.

BARRAMBIE PROJECT (Reed Resources Ltd 100%)

The Barrambie project consists of 684 hectares in a single mining lease (M57/173) which covers about 11 km of strike length of the 22 km long Barrambie Layered Complex that includes the Barrambie titanium-vanadium-iron (Ti-V-Fe) deposit (Figure 6). The layered complex has potential to host Australia's largest high-grade primary titanium deposit with grades in the order of 22-25 % TiO₂.

Figure 6. Outline of Mining Lease M57/173 over the southern segment of the sill-like Barrambie Layered Complex which makes up the Barrambie Project.

Previous exploration and evaluation programs at Barrambie have been biased toward the deposit's vanadium potential with in excess of \$3.5 million expended on several drilling programs and feasibility studies during the period 1968-2000, mostly on a 2 km section of the layered complex referred to as the Bay-Cove Zone.

The Company's principal focus is on the titanium potential of the Fe-Ti-V rich bands but the Barrambie Complex also has potential for shear zone-hosted gold and for platinum group metals (PGMs) either within the ilmenitehematite bands or as separate layers with nickel-copper sulphides in the basal section of the layered complex.

Work carried out during the year has included:

• Collation of previous geological data, analytical data (6.450 assays) and survey data from about 294 RC and DD drill holes $(8, 170$ metres total) that have been drilled in 15 drilling campaigns during the period 1968-1999.
• Evaluation of the resource in the Eastern Band in Bay-Cove area where there are sufficient drill hole intersections of the 20-30 metre thick basal band (Figure 7).
• Metallurgical testing of about one tonne of drill core from five DD holes drilled in 1999, which intersected the Eastern Band.

These activities have resulted in:

• A complete data base of all available drilling data.
• The first JORC compliant Mineral Resource estimate for the Eastern Band which contains a combined Indicated and Inferred Mineral Resource of 23.7 Mt at a grade of 22.4 % TiO₂ (details below).
• Metallurgical testwork indicating a concentrate containing in excess of 52 % TiO₂ can be produced from the ilmenite-hematite ore, which can be further upgraded by leaching (details below)

Figure 7. Block Model of the Barrambie Layered Complex showing titaniferous-vanadiferous bands (red) and the position of the high-grade ilmenite-hematite Eastern Band at the base(?) of the complex.

Mineral Resource Estimate

The combined Mineral Resource of 23.7 Mt @ 22.4% TiO₂ (Table 1) has been estimated for the high-grade Eastern Band of ilmenite-hematite where it has been drilled along strike from the airstrip at the southern end of the Barrambie tenement through the Cove Area and north to the Bay Area, from 7845N to 12030N for a strike length of 4.18 km. The mineralised Eastern Band has good continuity and the average width of the high-grade titaniferous band is 23 metres. The remaining 5-6 km of layered complex along strike and within the tenements has not been tested.

Table 1. Mineral Resource estimate of the Eastern Band, Barrambie Complex.

Resource Category	Tonnes	Grade
Indicated Resource	7,160,000	22.9 % Ti02
Inferred Resource	16,600,000	22.3 % Ti02
TOTAL	23,760,000	22.4 % Ti02

Indicated and Inferred Mineral Resources detailed above are in accordance with the JORC Code for Reporting of Mineral Resources and Ore Reserves and have been compiled by Dr.Bryan Smith (Bryan Smith Geosciences) who has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person under the Code. Dr Smith consents to the inclusion in the report of the matters in the form and context in which it appears.

The Mineral Resource has been estimated by cross-sectional polygonal methods projecting the mineralization half the distance to the adjacent section or to a maximum of 60 metres north and south of the line of section. The resource estimate has been calculated to a depth of 60 metres below surface, which, as a first approximation, is considered to be the limit for open pit mining based on a strip ratio of 2:1 where the average wall batter angle is $52^{\circ}$ and the average mining width is 23 metres.

Metallurgical Testwork

The first two stages of physical and metallurgical testwork on about one tonne of drill core from the Bay-Cove area of the deposit are most encouraging. The testwork is being performed by SGS Lakefield Oretest under the supervision of Mineral Engineering Technical Services Pty Ltd (METS).

Stage 1 involved an atmospheric acid leach on a combined oxide/primary magnetic concentrate contained 52 % TiO₂ to produce a feedstock suitable for the production of titanium slag, pig iron and vanadium pentoxide. Results of the physical testwork indicate that all work indices are low and that the ore is non-abrasive.

The second stage of metallurgical test work has confirmed that a feedstock suitable for the production of titanium slag, pig iron and vanadium pentoxide can be produced via conventional technology. An atmospheric chloride leach on the gravity concentrate can be upgraded to a primary concentrate containing about 55 % $Ti\theta_2$ , which may suitable for further upgrading to either titanium slag or synthetic rutile.

Liberation analysis has revealed that the dominant mineral in the Eastern band of the deposit is ilmenite which can be readily separated from the titaniferous hematite, after titaniferous magnetite (Figure 8).

Figure 8. False-colour AutoGeoSEM image showing ilmenite (green) liberated as individual grains, and separate from 'impure' titano-hematite (purple) and composite grains (multi-coloured).

NEW DIRECTOR

On 1 December 2003 the Company appointed Mr Ian Courtney Junk as a Non-Executive Director. Mr Junk is a highly-respected mining engineer and currently Managing Director of Kambalda-based mining company Donegal Resources

Mr Junk and Donegal Resources were instrumental in the purchase and management of the Miitel and Wannaway sale blocks from WMC Resources for the Miitel Joint Venture, involving Mincor Resources and Clough Mining.

Mr Junk brings with him considerable experience in narrow vein underground mining and project development. Mr Junk and his brother Leigh, a co-director of Donegal Resources were chosen as national finalists and State winner of the Ernst & Young - Young Entrepreneur of the Year for the successful implementation of innovative mining methods at the Miltel Nickel Mine.

STRATEGIC ALLIANCE

On 19 December 2003 the Company announced that it had entered into a memorandum of understanding establishing a strategic alliance with Consolidated Minerals Limited ("Consolidated"). Consolidated has been granted an option, exercisable before 31 December 2004, to form a joint venture with the Company for the exploration, development and mining of Iron Ore on the Company's Mt Finnerty leases situated 80km north east of Southern Cross and for Titanium at Barrambie situated some 85km north west of Sandstone and including any tenements acquired by the Company during the option period which are contiguous to these current tenements.

The full terms of the joint venture, including the acquisition price payable by Consolidated for its participating interest are to be negotiated in good faith between the Company and Consolidated during the option period. The consideration for the option opportunity is Consolidated's agreement to promptly subscribe for 7.45 million Reed ordinary shares at an issue price of 25c per share, raising \$1,862 million.

In addition, and timed with the Company's satisfaction of its regulatory clearance to mine its Sand George gold mine deposit, Consolidated has also agreed to underwrite a convertible note with a principal amount of \$4million to enable the Company to finance the development of its Sand George gold deposit which is anticipated to come into production in 2004.

An alliance with such a successful and progressive company as Consolidated, particularly with its experience in the mining and haulage of bulk minerals, would underwrite the potential for the mining and development of the iron ore and titanium ore bodies on the Company's tenement holdings. It also confirms that the properties the Company holds are in favourable geological settings for minerals other than gold.

Developments subsequent to the end of the financial year

Since June 30, 2004, RSG Global recommenced the Pre-Feasibility Study in July 2004, including a re-calculation of the Mineral Resource in the SG1 & SG2 lodes to incorporate the results of the step-out drilling undertaken during May-June 2004.

The consolidated entity has received a new Mineral Resource estimate from RSG Global, with a substantial increase in the total Mineral Resource to 368,000 tonnes at 7.8 $g/t$ Au for 92,000 ounces of gold, including 167,000 tonnes at

Reed Resources Ltd

Directors' report

8.1 g/t Au (70,000 ounces) in the Indicated Mineral Resource category (Table 2). The Indicated Mineral Resource is for the lodes below 360 m RL and for that part of the SG1 lode that is above 180 m RL and SG2 lode that above 160 $m$ RL.

Table 2.	Comet Vale project, Sand George prospect cross-sectional Mineral Resource estimates at 2 $g/t$
	Au cut-off, calculated using ordinary Kriging over the full width of the lode intersections. Tonnes and
	ounces are rounded, hence rounding errors may occur

Deposit/Lode	Cut-off Grade	Resource Category	Mass (tonnes)	Grade $(g/t \text{ Au})$	Contained gold (ounces)
SG1 Lode	$2 g/t$ Au	INDICATED	136,000	9.6	42,000
SG2 Lode	$2 g/t$ Au	INDICATED	131,000	6.5	27,000
SUB-TOTAL	$2$ g/t Au	INDICATED	167,000	8.1	70,000
SG1 Lode	$2 g/t$ Au	INFERRED	41,000	6.8	9,000
SG2 Lode	$2 g/t$ Au	INFERRED	59,000	7.1	13,000
SUB-TOTAL	$2$ g/t Au	INFERRED	101,000	7.0	22,000
TOTAL RESOURCE	2 g/t Au	INDICATED & INFERRED	368,000	7.8	92,000

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 by James Ridley (Senior Consultant-Resources, RSG Global) who has sufficient experience relevant to the style of mineralization and type of deposit under consideration and to the activity which which he is undertaking to qualify as a Competent Persons under the Code. James Ridley consents to the inclusion in the report of the matters in the form and context in which it appears.

The revised Mineral Resource estimate does not include intersections of the SG3, SG4 and SG5 lodes in the deeper parts of the Sand George deposit and a new lode, SG6, which has been interpreted from the latest drilling at the northern end of Sand George.

The total gold inventory in at Comet Vale, including the Indicated and Inferred Mineral Resources in the SG1 and SG2 lodes at the Sand George prospect, the Inferred Mineral Resource in the Sand Prince West prospect and the Indicated Mineral Resource in the Sand Queen South Extension, now stands at 427,800 tonnes containing 104,100 ounces of gold.

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 19 December 2003 the company entered into a Memorandum of Understanding ("MOU") with $(i)$ Consolidated Minerals Limited ("Consolidated"), pursuant to the agreement Consolidated subscribed for 2,000,000 ordinary shares at 25c each.
• On 19 March 2004 pursuant to the MOU agreement, Consolidated subscribed for 5,450,000 ordinary $(ii)$ shares at 25c each.
• $(iii)$ On 17 June 2004 Consolidated subscribed for an additional 4,800,000 ordinary shares at 25c each.

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.

Reed Resources Ltd
Directors' report

Information on directors

			Reed Resources Ltd
Director	Experience	Special responsibilities	Ordinary shares	Options held
David John Reed OAM FCPA	Mr David Reed, age 58, 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 Session Chairman of the Diggers and Dealers Forum in Kalgoorlie, and a past Secretary of the Amalgamated Prospectors and leaseholders He was appointed a director and Association. executive chairman of Reed Resources Ltd on 20 December 2001.	Chairman	19,004,115
Christopher John Reed B Comm GradCert MinEcon ASA	Mr Chris Reed, age 31, graduated as a Bachelor of Commerce from the University of Notre Dame, he holds a Graduate Certificate in Mineral Economics from the WA School of Mines and is an Associate Member of CPA Australia. He has fourteen years experience in the mineral exploration and mining industry. He was appointed a director of Reed Resources Ltd on 20 December 2001.	Director	2,243,180	1,000,000
Peter Lionel Fleury Collins BSc(Hons), PhD, MAIG	Dr Peter Collins, age 55, graduated as a Bachelor of Science with honours from the University of Tasmania, where he also gained his Doctor of He has 25 years experience as a Philosophy. 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	500,000
lan Courtney Junk BEng(Hons) MAusIMM	Mr Ian Junk, age 36, graduated as a Bachelor of Engineering with honours from the WA School of Mines and holds a First Class Mine Managers Certificate. Ian is a highly respected mining engineer with considerable experience in narrow vein underground mining and project development. Ian and his brother Leigh were chosen as national	Director		500,000

finalists in the 2003 Ernst $&$ Young - Young Entrepreneur of the Year for their successful implementation of innovative mining methods at the Miitel nickel mine. Ian is a member of the Australian Institute of Mining and Metallurgy. He was appointed a director of Reed Resources Ltd on 20 December 2001

Meetings of Directors

The number of meetings of the consolidated entity's board of directors held during the financial year ended 30 June 2004 total eleven. The number of meeting attended by each director and their eligibility to attend were:

	Number eligible to attend	Number attended
D J Reed		11
C J Reed		11
P L F Collins	11
I C Junk (appointed 1 December 2003)

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 Fees	Superannuation Contributions	Vehicle - Benefit	Total S
D J Reed	100,000		9.000		109,000
C J Reed	89,230	-	8,030	13,230	110,490
PLF Collins	48,941	30,000	2,700	$\blacksquare$	81,641
I C Junk	$\overline{\phantom{0}}$	17,500	1,350	-	18,850

Reed Resources Ltd has entered into arrangements with Trucking Nominees Pty Ltd, a company associated with Mr D J Reed, for the provision of offices and office equipment in West Perth and Kalgoorlie at cost plus 5%. The total amount of \$91,336 was paid for the year by way of service fees. This amount is not included in the directors' emoluments.

Directors' Share and Option Holdings

The following table sets out each relevant past and present Director's relevant interest in shares and options of the Company as at the date of this report.. There were no specified executives.

Directors and Executives	Number of Shares Held	Number of Options Granted 1	Exercise Price	Expiry Date	Option Valuation S
D J Reed	17,362,115		N/A	N/A	N/A
C J Reed	2,243,180	1,000,000 $^{\circ}$	\$0.35	31/12/08	77,630
PLF Collins	285,705	500,000	\$0.35	31/12/08	38,815
I C Junk		500,000	\$0.35	31/12/08	38,815

Insurance of officers and auditors

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.

The company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the company or of any related body corporate against a liability incurred as such an officer or auditor.

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, 20 September 2004

Deloitte

Deloitte Touche Tohmatsu A.B.N. 74 490 121 060

Central Park Level 16 152-158 St. Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia

DX 206 Tel: +61 (0) 8 9365 7000 Fax: +61 (0) 8 9365 7001 www.deloitte.com.au

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 2004 as set out on pages 21 to 45. 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.

Member of Deloitte Touche Tohmatsu

he liability of Deloitte Touche Tohmatsu is limited by, and to the extent of, the ccountants' Scheme under the Professional Standards Act 1994 (NSW).

19

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 30 June $(i)$ 2004 and of their performance for the year ended on that date; and
• $(ii)$ complying with Accounting Standards in Australia and the Corporations Regulations 2001; and

other mandatory professional reporting requirements in Australia. $(b)$

Deloit Touch Tolman

۰,, Grafiam McHarrie Partner Chartered Accountants

Perth, 22 September 2004

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;
• c) in the directors' opinion, the attached financial statements and notes thereto are in accordance with the Corporations 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.

Signed 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 Director Perth, 20 September 2004

Reed Resources Ltd

Statement of Financial Performance for the financial year ended 30 June 2004

		Consolidated		Company
		2004	2003	2004	2003
	Note	\$	\$	\$	S
Revenue from the sales of goods
Cost of sales
Gross profit
Other revenue from ordinary activities		53,088	213,796	53,088	213,796
Direct exploration expenses not capitalised		(2,639)	(105)	(2,639)	(105)
Employee benefit expenses		(271, 582)	(231, 025)	(271, 582)	(231, 025)
Legal and professional expenses		(67,388)	(101, 867)	(67,388)	(101, 867)
Occupancy costs		(23,190)	(28, 131)	(23,190)	(28, 131)
Communications and advertising		(49, 523)	(42, 405)	(49, 523)	(42, 405)
Office equipment hire and office supplies		(69,920)	(63,902)	(69, 920)	(63,902)
Travel		(26, 872)	(42, 244)	(26, 872)	(42, 244)
Depreciation and amortisation expenses		(52, 129)	(34, 159)	(52, 129)	(34, 159)
Borrowing costs		(2, 283)	(3, 556)	(2,283)	(3,556)
Accounting and professional services		(96,095)	(97, 787)	(96,095)	(97, 787)
Consulting and service fees		(57, 273)	(93, 807)	(57,273)	(93, 807)
Insurance expenditure		(24, 644)	(27,319)	(24, 644)	(27,319)
Other expenses from ordinary activities		(76, 534)	(4,591)	(53, 041)	(4,591)
Loss from ordinary activities before income tax	2	(766, 984)	(557,102)	(743, 491)	(557,102)
Income tax expense relating to ordinary activities	3
Loss from ordinary activities after related income tax		(766,984)	(557,102)	(743, 491)	(557,102)
Total changes in equity other than those resulting from transactions with owners as owners		(766,984)	(557, 102)	(743, 491)	(557,102)
Earnings/(loss) per share:
Basic (cents per share)	17	(1.5)	(1.2)
Diluted (cents per share)	17	(1.5)	(1.2)

Notes to the financial statements are included on pages 26 to 48

Reed Resources Ltd Statement of Financial Position

as at 30 June 2004

		Consolidated		Company
		2004	2003	2004	2003
	Note	S	$\mathbb{S}$	\$	\$
Current assets
Cash assets		2,003,686	1,294,971	2,003,686	1,294,971
Receivables	7	77,833	129,182	341,200	283,260
Total current assets		2,081,519	1,424,153	2,344,886	1,578,231
Non-current assets
Other financial assets	8			625,317	625,317
Property, plant and equipment	9	301,778	325,643	301,778	325,643
Mining tenements	10	8,070,950	6,593,000	7,197,489	5,817,343
Total non-current assets		8,372,728	6,918,643	8,124,584	6,768,303
Total assets		10,454,247	8,342,796	10,469,470	8,346,534
Current liabilities
Payables	11		164,664	3,348	168,402
Interest-bearing liabilities	12	13,713	19,403	13,713	19,403
Total current liabilities		13,713	184,067	17,061	187,805
Non-current liabilities
Interest-bearing liabilities	13		13,712		13,712
Total non-current liabilities		$\blacksquare$	13,712		13,712
Total liabilities		13,713	197,779	17,061	201,517
Net assets		10,440,534	8,145,017	10,452,409	8,145,017
Equity
Contributed equity	15	12,005,179	8,942,679	12,005,179	8,942,679
Accumulated losses	16	(1, 564, 645)	(797, 662)	(1,552,770)	(797, 662)
Total equity		10,440,534	8,145,017	10,452,409	8,145,017

Notes to the financial statements are included on pages 26 to 48

Reed Resources Ltd

Statement of Cash Flows for the financial year ended 30 June 2004

		Consolidated		Company
		2004	2003	2004	2003
Cash flows from operating activities	Note	$\mathbb{S}$	\$	\$	\$
Receipts from customers			54,795		54,795
Payments to suppliers and employees		(782, 735)	(876, 525)	(770, 725)	(852,360)
Interest and bill discounts received		47,475	163,215	47,475	163,215
Interest and other costs of finance paid		(1,905)	(3,556)	(1,905)	(3,556)
Net cash used in operating activities	23	(737, 165)	(662, 071)	(725, 155)	(637,906)
Cash flows from investing activities
Payments for capitalised mining expenditure		(1, 534, 735)	(2,811,148)	(1, 534, 735)	(2,811,148)
Proceeds from repayment of related party receivables				97,670
Amounts advanced to related parties				(109,680)	(149, 811)
Payment for property, plant and equipment		(29,066)	(267, 641)	(29,066)	(267, 641)
Payments for investments (mining tenements)		(33, 417)	(474, 464)	(33, 417)	(351, 442)
Net cash used in investing activities		(1, 597, 218)	(3,553,253)	(1,609,228)	(3,580,042)
Cash flows from financing activities
Proceeds from issues of equity securities		3,062,500	6,150,000	3,062,500	6,150,000
Payment for share issue costs			(378, 551)		(378, 551)
Repayment of borrowings		(19, 402)	(20,716)	(19, 402)	(18,092)
Net cash provided by financing activities		3,043,098	5,750,733	3,043,098	5,753,357
Net increase in cash held		708,715	1,535,409	708,715	1,535,409
Cash at the beginning of the financial year		1,294,971	(240, 438)	1,294,971	(240, 438)
Cash at the end of the financial year	23	2,003,686	1,294,971	2,003,686	1,294,971

Notes to the financial statements are included on pages 26 to 48

Note	Contents	Note	Contents
	Summary of accounting policies	14	Employee benefits
2	Loss from ordinary activities	15	Contributed equity
3	Income tax	16	Accumulated losses
4	Directors' and executives' remuneration	17	Earnings per share
5	Executive and employee share option plan	18	Commitments for expenditure
6	Remuneration of auditors	19.	Controlled entities
7	Current receivables	20	Segment information
8	Other non-current financial assets	21	Related party and specified executive disclosures (disclosing entities)
9	Property, plant and equipment	22	Subsequent events
10	Non-current assets	23	Notes to the Statement of cash flows
11	Current payables	24	Financial instruments
12	Current interest-bearing liabilities	25	Impact of adoption of Australian equivalents to International Financial Reporting Standards
13	Non-current interest-bearing liabilities	26	Additional company information

1. Summary of accounting policies

Financial reporting framework

The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Urgent Issues Group Consensus Views, and complies with other requirements of the law.

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

Significant accounting policies

Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.

The following significant accounting policies have been adopted in the preparation and presentation of the financial report:

$(a)$ 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.

$(b)$ Acquisition of assets

Assets acquired are recorded at the cost of acquisition, being the purchase consideration determined as at the date of acquisition plus costs incidental to the acquisition.

In the event that settlement of all or part of the cash consideration given in the acquisition of an asset is deferred, the fair value of the purchase consideration is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.

Depreciation $\left( c\right)$

Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land and investment properties. Depreciation is calculated on a straight line basis so as to write off the net cost or other re-valued amount of each asset over its expected useful life. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight line method. The following estimated useful lives are used in the calculation of depreciation:

$\bullet$ Buildings	$25 - 100$ years
$\bullet$ Furniture & fittings	$5 - 20$ years
• Plant and equipment	$2 - 20$ years

Employee benefits $(d)$

Provision is made for benefits accruing to employees in respect of wages and salaries and annual leave when it is probable that settlement will be required and they are capable of being measured reliably.

Provisions made in respect of wages and salaries and annual leave expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Provisions made in respect of other employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the consolidated entity in respect of services provided by employees up to reporting date.

1. Summary of accounting policies (cont'd)

Financial instruments issued by the company $(e)$

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. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.

Interest and dividends

Interest and dividends are classified as expenses or as distributions of profit consistent with the statement of financial position classification of the related debt or equity instruments or component parts of compound instruments.

$(f)$ Goods and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:

• where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as í. part of the cost of acquisition of an asset or as part of an item of expense; or
• ii. for receivables and payables which are recognised inclusive of GST.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.

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 cash flows.

$(q)$ Income tax

Tax-effect accounting principles are adopted whereby income tax expense is calculated on pre-tax accounting profits after adjustment for permanent differences. The tax-effect of timing differences, which occur when items are included or allowed for income tax purposes in a period different to that for accounting, is shown at current taxation rates in the deferred tax assets and deferred tax liabilities, as applicable.

During the financial year, the directors elected that the company and all its wholly-owned Australian resident entities would join a tax-consolidated group. As a result, all income tax expenses, revenues, assets and liabilities of the members of the tax-consolidated group are recognised in the financial statements of the parent entity.

No tax sharing agreement between the entities in the tax-consolidated group exists and the income tax expense/revenue of the parent entity therefore includes no tax contribution amounts paid or payable between the parent entity and subsidiary entities.

1. Summary of accounting policies (cont'd)

$(h)$ Leased assets

Leased assets classified as finance leases are recognised as assets. The amount initially brought to account is the present value of minimum lease payments.

A finance lease is one which effectively transfers from the lessor to the lessee substantially all the risks and benefits incidental to ownership of the leased property.

Finance leased assets are amortised on a straight line basis over the estimated useful life of the asset.

Finance lease payments are allocated between interest expense and reduction of lease liability over the term of the lease. The interest expense is determined by applying the interest rate implicit in the lease to the outstanding lease liability at the beginning of each lease payment period.

Operating lease payments are recognised as an expense on a basis which reflects the pattern in which economic benefits from the leased asset are consumed.

$(i)$ 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 appears in note 19 to the financial statements. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements.

The consolidated financial statements include the information and results of each controlled entity from the date on which the company obtains control and until such time as the company ceases to control such entity.

In preparing the consolidated financial statements, all intercompany balances and transactions, and unrealised profits arising within the consolidated entity are eliminated in full.

$(i)$ Receivables

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

$(k)$ Revenue recognition

Interest Revenue

Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset.

Sale of goods and disposal of assets

Revenue from the sale of goods and disposal of other assets is recognised when the consolidated entity has passed control of the goods or other assets to the buyer.

$(1)$ 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 non-listed investments.

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

1. Summary of accounting policies (cont'd)

$(m)$ 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.

$(n)$ Comparative amounts

Comparative figures are, where appropriate, reclassified so as to be comparable with the figures presented for the current financial year. This reclassification has not resulted in any adjustments to the financial performance during or the financial position at the end of the financial year.

			Consolidated		Company
			2004	2003	2004	2003
			$\mathbb S$	\$	${\mathbb S}$	\$
2.		Loss from ordinary activities
		Loss from ordinary activities before income tax includes the following items of revenue and expense:
	(a)	Non-operating revenue
		Interest revenue:
		Other entities	53,088	163,215	53,088	163,215
		Fuel Rebate		49,449		49,449
		Other income	$\overline{\phantom{a}}$	1,132	$\overline{\phantom{0}}$	1,132
			53,088	213,796	53,088	213,796
	(b)	Expenses
		Depreciation of non-current assets
		Property, plant and equipment	52,129	34,159	52,129	34,159
		Borrowing costs	2,283	3,556	2,283	3,556
		Rental expenses relating to operating leases
		Minimum lease payments		27,732		27,732
	(c)	Sale of assets
		Net Loss
		Property, plant and equipment	(818)		(818)
			(818)		(818)

		Consolidated		Company
		2004 S	2003 S	2004 \$	2003 \$
3.	Income tax
	The prima facie income tax expense on pre-tax accounting profit reconciles to the a) income tax expense in the financial statements as follows:
	Profit/(loss) from ordinary activities	(766, 984)	(557,102)	(743, 491)	(557,102)
	Income tax expense calculated at 30%	(230,095)	(167, 131)	(223, 047)	(167, 131)
	Permanent differences:
	Non-deductible expenses	259	13,855	259	13,855
	Timing differences and tax losses not brought to account as future income tax benefits	229,836	153,276	222,788	153,276
	Impact of the tax consolidation system: Initial recognition of future tax loss balances of
	subsidiaries on implementation of the tax consolidation system Recognition of future tax loss balances of	1,838		1,838
	subsidiaries that have joined the tax consolidated group during the financial year Current and deferred taxes relating to	12,010		12,010
	transactions, events and balances of wholly- owned subsidiaries in the tax consolidated group	(13, 848)		(13, 848)
	Income tax expense relating to ordinary activities
	Future income tax benefits not brought to account as assets:
	Tax losses - capitalised development costs	4,528,848	3,084,448	4,528,848	3,084,448
	Tax losses - revenue	1,945,379	1,057,789	1,945,379	1,057,789
		6,474,227	4,142,237	6,474,227	4,142,237

The taxation benefits of tax losses and timing differences not brought to account will only be obtained if:

• a) assessable income is derived of a nature and of amount sufficient to enable the benefit from the deductions to be realised;
• b) conditions for deductibility imposed by the law are complied with; and
• no changes in tax legislation adversely affect the realisation of the benefit from the deductions. c).

Tax consolidation system

Legislation to allow groups, comprising a parent entity and its Australian resident wholly-owned entities, to elect to consolidate and be treated as a single entity for income tax purposes was substantively enacted on 21 October 2002.

The company and its wholly-owned Australian resident entities are eligible to consolidate for tax purposes under this legislation and have elected to be taxed as a single entity from 1 July 2003. The implementation of the tax consolidation system has not yet been formally notified to the Australian Taxation Office. The head entity within the tax-consolidated group for the purposes of the tax consolidation system is Reed Resources Consolidated Ltd.

$\overline{4}$ . Directors' and executives' remuneration

The specified directors of Reed Resources Ltd during the year were:

D J Reed C J Reed P L Collins I C Junk

There were no specified executives during or at the end of the financial year.

Specified directors' remuneration

The board of directors reviews the remuneration packages of all specified directors on an annual basis and makes recommendations to the board. Remuneration packages are reviewed and determined with due regard to current market rates and are benchmarked against comparable industry salaries, adjusted by a performance factor to reflect changes in the performance of the company.

	Salaries	Superannuation	Vehicle Benefit	Options	Total
	\$	\$	\$	\$	\$
Specified directors
D J Reed	100,000	9,000		$\overline{\phantom{a}}$	109,000
C J Reed	89,230	8,030	13,230	۰	110,490
P L Collins	78,941	2,700		-	81,641
I C Junk	17,500	1,350			18,850
	285,671	21,080	13,230		319,981

5. Executive share option plan

There were no share options granted, exercised, nor lapsed during the financial year.

		Consolidated		Company
		2004	2003	2004	2003
		\$	S.	S	S
6.	Remuneration of auditors
	Auditor of the parent entity
	Auditing the financial report	24,100	19,000	24.100	19,000
		24,100	19,000	24,100	19,000
7.	Current receivables
	Other debtors	12,142	7,252	11,750	7,252
	Goods and services tax (GST) recoverable	65,691	121,930	65,691	121,929
	Amounts receivable from wholly owned subsidiary			263,759	154,079
		77,833	129,182	341,200	283,260

Reed Resources Ltd

Notes to the financial statements for the financial year ended 30 June 2004

			Consolidated	Company
		2004	2003	2004	2003
8.	Other non-current financial assets
	Shares in controlled entities		$\overline{\phantom{0}}$	625.317	625,317

$\overline{\mathbf{9}}$ Property, plant and equipment

	Consolidated
	Leasehold improvements at cost	Furniture & Fittings at cost	Plant and equipment at cost	Leased motor vehicles at cost	TOTAL
	\$	\$	\$	S	\$
Gross carrying amount
Balance at 30 June 2003		7,896	302,507	53,454	363,857
Additions	27,900	1,166			29,066
Disposals		(1,405)			(1, 405)
Balance at 30 June 2004	27,900	7,657	302,507	53,454	391,518
Accumulated depreciation/ amortisation
Balance at 30 June 2003		2,421	21,340	14,453	38,214
Depreciation expense	142	2,317	40,895	8,775	52,129
Disposals		(603)			(603)
Balance at 30 June 2004	142	4,135	62,235	23,228	89,740
Net book value
As at 30 June 2003		5,475	320,168	39,001	325,643
As at 30 June 2004	27,758	3,522	270,498	30,226	301,778

	Company
	Leasehold improvements at cost	Furniture & Fittings at cost	Plant and equipment at cost	Leased motor vehicles at cost	TOTAL
	\$	\$	\$	S	\$
Gross carrying amount
Balance at 30 June 2003		7.896	302,507	53,454	363,857
Additions	27,900	1,166			29,066
Disposals		(1.405)			(1, 405)
Balance at 30 June 2004	27,900	7,657	302,507	53,454	391,518
Accumulated depreciation/ amortisation
Balance at 30 June 2003		2,421	21,340	14,453	38,214
Depreciation expense	142	2,317	40,895	8,775	52,129
Disposals		(603)			(603)
Balance at 30 June 2004	142	4,135	62,235	23,228	89,740
Net book value
As at 30 June 2003		5,475	320,168	39,001	325,643
As at 30 June 2004	27,758	3,522	270,498	30,226	301,778

Property, plant and equipment (cont'd) 9.

		Consolidated		Company
		2004	2003	2004	2003
		T	S	S	S
	Aggregate depreciation allocated, whether recognised as an expense or capitalised as part of the carrying amount of other assets during the year:
	Buildings	142		142
	Furniture & fittings	2,317	2,421	2,317	2,421
	Plant and equipment	40,895	22,963	40,895	22,963
	Leased motor vehicles	8,775	8,775	8,775	8,775
		52,129	34,159	52,129	34,159
10.	Non-Current Assets
	Exploration and development expenditure: Mining tenements at beginning of period	6,593,000	3,305,550	5,817,343	2,654,753
	Mining tenements additions in period at cost Exploration expenditure incurred during the	33,416	476,303	33,416	351,442
	period	1,444,534	2,811,147	1,346,730	2,811,148
		8,070,950	6,593,000	7,197,489	5,817,343
11.	Current payables
	Trade payables and accruals		164,664	3,348	168,402
			164,664	3,348	168,402
12.	Current interest-bearing liabilities
	Secured:
	Finance lease (i)	13,713	19,403	13,713	19,403
		13,713	19,403	13,713	19,403

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

Reed Resources Ltd

Notes to the financial statements for the financial year ended 30 June 2004

		Consolidated		Company
		2004	2003	2004	2003
		2	\$	\$	S
13.	Non-current interest-bearing liabilities
	Secured:
	Finance lease		13,712		13,712
			13,712		13,712
14.	Employee benefits
	Number of employees at end of financial year	4	$\overline{2}$	4	$\overline{2}$
15.	Contributed equity
	62,000,000 fully ordinary shares paid
	(2003: 49, 750, 000)	12,005,179	8,942,679	12,005,179	8,942,679
		12,005,179	8,942,679	12,005,179	8,942,679
		2004		2003
		No.	$\mathbf S$	No.	\$
	Fully paid ordinary shares
	Balance at beginning of financial year	49,750,000	8,942,679	19,000,000	3,400,002
	Share issue for eash	12,250,000	3,062,500	30,000,000	6,000,000
	Share issue costs				(607,323)
	Share issue in exchange for tenements			750,000	150,000
	Balance at end of financial year	62,000,000	12,005,179	49,750,000	8,942,679

16. Accumulated losses

Balance at beginning of financial year Net loss attributable to members of the parent		$(797,661)$ $(240,560)$	(797.661)	(240.560)
entity	(766.984)	(557.102)	(755, 109)	(557, 102)
Balance at end of financial year	(1, 564, 645)	(797,662)	(1,552,770)	(797,662)

17. Earnings per share

	Consolidated
	2004 Cents per share	2003 Cents per share
Basic earnings per share	(1.5)	(1.2)
Diluted earnings per share	$1.5^{\circ}$

Basic earnings per share

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

	2004 S	2003 S
Loss(a)	(766.984)	(557,102)
	2004 No.	2003 No.
Weighted average number of ordinary shares (b)	52,214,110	48,113,014

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

	2004	2003
Net loss	(766,984)	(557.102)
Loss used in the calculation of basic EPS	(766.984)	(557.102)

Diluted earnings per share

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

	2004	2003
Loss(a)	(766, 984)	(557,102)
	2004	2003
	No.	No.
Weighted average number of ordinary shares and
potential ordinary shares	52,214,110	48,113,014

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

	2004	2003
Net loss	(766.984)	(557,102)
Loss used in the calculation of diluted EPS	(766.984)	(557.102)

17. Earnings per share (cont'd)

(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:

		2004 No.	2003 No.
	Weighted average number of ordinary shares used in the calculation of basic EPS Weighted average number of ordinary shares	52,214,110	48,113,014
	and potential ordinary shares used in the calculation of diluted EPS	52,214,110	48,113,014
			Consolidated	Company
		2004	2003	2004	2003
	Commitments for expenditure
(a)	Finance lease commitments
	Payable
	Not longer than 1 year	14,076	21,114	14,076	21,114
	Longer than 1 year and not longer than
	5 years		14,075		14,075
	Longer than 5 years
	Minimum lease payments	14,076	35,189	14,076	35,189
	Less future finance charges	(363)	(2,074)	(363)	(2,074)
	Total lease liability	13,713	33,115	13,713	33,115

$(b)$ Lease commitments

There are no non-cancellable operating lease commitments.

Controlled entities 19.

18.

Name of entity	Country of incorporation	2004 $\frac{6}{9}$	2003 $\%$
Parent entity
Reed Resources Ltd	Australia
Controlled entities
Mount Finnerty Pty Ltd	Australia	100	100

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.

20. Segment information

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

21. Related party and specified executive disclosures

Equity interests in related parties $(a)$

Equity interests in controlled entities Reed Resources Ltd holds 100% of the ordinary shares of Mount Finnerty Pty Ltd.

$(b)$ Specified directors' and specified executives' remuneration

Details of specified directors' and specified executives' remuneration are disclosed in note 4 to the financial statements.

Specified directors' and specified executives' equity holdings $\left( c\right)$

Fully paid ordinary shares of Reed Resources Ltd

	Balance @ 1/7/03	Net other change	Balance@ 30/6/04
	No.	No.	No.
Specified directors
D J Reed	15,720,115	1,642,000	17,362,115
C J Reed	2,822,180	(579,000)	2,243,180
P L F Collins	285,705		285,705
1 Junk
	18,828,000	1,063,000	19,891,000

$(d)$ Transactions within the wholly-owned group

During the financial year, the directors elected for wholly-owned Australian entities within the group to be taxed as a single entity from 1 July 2004. Reed Resources Ltd has recognised all tax balances and expenses in relation to those entities, and a corresponding payable has been recognised in those entities to compensate Reed Resources Ltd for tax paid on their behalf.

There were no other transactions that occurred during the financial year between entities in the whollyowned group.

21. Related party and specified executive disclosures (cont'd)

Transactions with other related parties (e)

Reed Resources Ltd has entered into arrangements with Trucking Nominees Pty Ltd, a company associated with Mr D Reed, for the provision of offices and office equipment in West Perth and KalgoorlieThe total amount for the year was \$91,336, and is not included in the directors' remuneration. The fee is based on the cost to Trucking Nominees, plus 5%.

Mr P Collins provides geological consulting services to the Company. The total amount for the year was \$48,941. The amount is included in directors' remuneration, and is based on the number of hours' services provided, at an agreed rate per hour.

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

$(f)$ Controlling entities

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

22. Subsequent events

Employee Share Plan

The company directors agreed to adopt and approve the Employee Share Option Plan (ESOP) on 4 August 2004 which sets out the terms, conditions and rules governing the issue of options to company employees.

On the 4 August 2004 the company allotted 2,400,000 options with an exercisable price of \$0.35 and an expiry date of 31 December 2008. These options vest immediately upon issue.

At the date of issue the options were valued at \$0.077 each, giving the total parcel issued a value of \$186,312.

			Consolidated		Company
			2004	2003	2004	2003
			S	S	S	S
23.		Notes to the statement of cash flows
	(a)	Reconciliation of cash
		For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows:
		Cash at bank	2,003,683	1,294,968	2,003,683	1,294,968
		Cash on hand	3	3	3	3
			2,003,686	1,294,971	2,003,686	1,294,971
	(b)	Non-cash financing and investing activities
		Non-current assets:
		Mining tenements - Barrambie		150,000		150,000
				150,000		150,000

Cash balances not available for use $(c)$

Cash restrictions exist on \$28,500 (2003: \$28,500) of the cash balance as at 30 June 2004. The cash restriction relates to 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 in its use to ensure it serves as a guarantee.

Reconciliation of loss from ordinary activities after related income tax to net $(d)$ cash flows from operating activities

Loss from ordinary activities after related
income tax	(766,984)	(557,102)	(743.491)	(557, 102)
Loss on sale of non-current assets	(818)		(818)
Depreciation and amortisation of non-current assets	52,129	34.159	52.129	34,159
(Increase)/decrease in assets:
Current receivables	51,741	(90, 894)	51.741	(90, 894)
Increase/(decrease) in liabilities:
Current payables	(73, 233)	(48.234)	(84,716)	(24,069)
Net cash used in operating activities	(737, 165)	(662,071)	(725, 155)	(637,906)

24. Financial instruments

Significant accounting policies $(a)$

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which revenues and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 1 to the financial statements.

$(b)$ 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.

Interest rate risk $(c)$

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

The following table details the consolidated entity's exposure to interest rate risk as at the 30 June 2004:

			Fixed interest rate maturity
2004	Variable interest rate %	Less than 1 year \$	1 to 5 vears \$	More than 5 vears S	Non- interest bearing Ж	Total S
Financial assets
Cash	$3.7\%$	2,003,683		۰	3	2,003,686
Receivables			$\overline{\phantom{a}}$	۰	77,833	77,833
		2,003,683	$\overline{\phantom{a}}$	۰	77,833	2,081,519
Financial Liabilities Trade Payables Finance lease liabilities	6.9%	(13,713) (13,713)	۰	۰ ۰		(13,713) (13,713)
Net financial assets		1,989,970	-		77,836	2,067,806

24. Financial instruments (cont'd)

The following table details the consolidated entity's exposure to interest rate risk as at the 30 June 2003:

	Fixed interest rate maturity
2003	Variable interest rate %	Less than 1 year S	$1$ to 5 years S	More than 5 vears S	Non- interest bearing S	Total \$
Financial assets
Cash	3.7%	.294,968			٦	1,294.971
Receivables					129,182	129,182
		1,294,968			129,185	1,424,153
Financial Liabilities Trade Payables Finance lease liabilities	6.9%	(19, 403) (19, 403)	(13, 712) (13, 712)		(164, 664) (164, 664)	(164, 664) (33,115) (197, 779)
Net financial assets/(liabilities)		,275,565	(13, 712)		(35, 479)	1,226,374

Net fair value of financial assets and liabilities $(d)$

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

25. Impact of adoption of Australian equivalents to International Financial Reporting Standards

Management of the transition to A-IFRS

In accordance with the Financial Reporting Council's strategic directive, Reed Resources Ltd ("Reed") will be required to prepare financial statements that comply with Australian equivalents to International Financial Reporting Standards ("A-IFRS") for annual reporting periods beginning on or after 1 January 2005. Accordingly, Reed's first half-year report prepared under A-IFRS will be for the half-year reporting period ended 31 December 2005, and its first annual financial report prepared under A-IFRS will be for the year ended 30 June 2006.

In 2004 Reed proposes to manage the transition to A-IFRS. The financial controller, Mr Chris Reed, will carry out the transition work, and will report to the board of directors. The consolidated entity plans to manage the transition to A-IFRS in 3 phases, namely:

• Phase $1 -$ scoping and impact analysis
• Phase $2$ evaluation and design ٠
• Phase $3$ implementation and review ٠

Risk management and change management will be managed throughout the life of the project.

Reed is currently conducting a high-level scoping exercise as part of its awareness training to obtain an idea of the effect and effort involved in adopting A-IFRS on the consolidated entity. Part of the scoping exercise will involve identifying key areas of impact that will arise on adoption of A-IFRS including financial impact, effort required, and options available to the consolidated entity on first-time adoption of A-IFRS. When the consolidated entity has this information, it intends to conduct a business impact study to determine the approximate impact and best options for the consolidated entity for future reporting periods, and to begin a process to redesign and build systems and processes in order to capture information necessary to allow the preparation of financial statements which are fully compliant with A-IFRS.

The directors believe Reed will be able to achieve its plan for A-IFRS implementation such that financial statements which are fully compliant with A-IFRS will be able to be prepared.

Reed has identified the following as being the significant areas of differences affecting the consolidated entity on adoption of A-IFRS. This does not represent an exhaustive list of the differences that will arise, and further analysis may change the consolidated entity's assessment of the importance or otherwise of the various differences.

First-time adoption of A-IFRS

On first-time adoption of A-IFRS, the consolidated entity will be required to restate its comparative balance sheet such that the comparative balances presented comply with the requirements specified in the A-IFRS. That is, the balances that will be presented in the financial report for the year ended 30 June 2005 may not be the balances that will be presented as comparative numbers in the financial report for the following year, as a result of the requirement to retrospectively apply the A-IFRS. In addition, certain assets and liabilities may not qualify for recognition under A-IFRS, and will need to be derecognised. As any adjustments on first-time adoption are to be made against opening retained earnings, the amount of retained earnings at 30 June 2004 presented in the 2005 financial report and the 2006 financial report available to be paid out as dividends may differ significantly.

Various voluntary and mandatory exemptions are available to the consolidated entity on first-time adoption, which will not be available on an ongoing basis. The exemptions provide relief from retrospectively accounting for certain balances, instruments and transactions in accordance with A-IFRS, and includes relief from having to restate past business combinations, expense share-based payments granted before 7 November 2002, and the identification of a 'deemed cost' for property, plant and equipment.

The impact on Reed Resources Ltd of the changes in accounting policies on first-time adoption of A-IFRS will be affected by the choices made. The consolidated entity is evaluating the effect of the options available on first-time adoption in order to determine the best possible outcome for the consolidated entity.

Share-based payment

Share-based compensation forms part of the remuneration of employees of the consolidated entity (including executives) as disclosed in the notes to the financial statements. The consolidated entity does not recognise an expense for any share-based compensation granted. Under A-IFRS, the consolidated entity will be required to recognise an expense for such share-based compensation. Share-based compensation is measured at the fair value of the share options determined at grant date and recognised over the expected vesting period of the options. A reversal of the expense will be permitted to the extent non-market based vesting conditions (e.g. service conditions) are not met. The entity will not retrospectively recognise share-based payments vested before 1 January 2005 as permitted under A-IFRS first time adoption.

The recognition of the expense will decrease the consolidated entity's opening retained earnings on initial adoption of A-IFRS and increase share capital by the same amount for share-based payments issued after 7 November 2002 but not vested before 1 January 2005. Similar impacts will also occur in future periods, however, quantification of the impact on equity and in the income statement of the existing share options granted as remuneration has not been completed at the reporting date.

Income tax

The consolidated entity currently recognises deferred taxes by accounting for the differences between accounting profits and taxable income, which give rise to 'permanent' and 'timing' differences. Under A-IFRS, deferred taxes are measured by reference to the 'temporary differences' determined as the difference between the carrying amount and the tax base of assets and liabilities recognised in the balance sheet.

Because A-IFRS has a wider scope than the entity's current accounting policies, it is likely that the amount of deferred taxes recognised in the balance sheet will increase. In particular, significant increases in deferred tax liabilities are anticipated in relation to deferred taxes associated with fair value adjustments and intangibles arising in relation to pre-transition business combinations, revaluations of land and buildings and investments in associates.

The consolidated entity also has carried forward tax losses which have not been recognised as deferred tax assets as they do not satisfy the 'virtually certain' criteria under current Australian GAAP (refer note 5(b)). Under A-IFRS, it may be easier to recognise these tax losses as deferred tax assets as they are recognised based on a 'probable' recognition criteria. The impact of this difference may be to increase deferred tax assets and opening retained earnings, and result in a higher level of recognised deferred tax assets on a go-forward basis.

Adjustments to the recognised amounts of deferred taxes will also result as a consequence of adjustments to the carrying amounts of assets and liabilities resulting from the adoption of other A-IFRS. The likely impact of these changes on deferred tax balances has not currently been determined.

Extractive industries

An A-IFRS on extractive industries has not yet been issued. Consequently, the consolidated entity is unable to determine the change in policies and related impacts, if any, that may arise on adoption of A-IFRS on its extractive-related operations and balances at reporting date.

Additional company information 26.

Reed Resources Ltd is a listed public company, incorporated and operating in Australia.

Registered office Principal place of business Reed Resources Ltd Reed Resources Ltd 706 Murray Street 706 Murray Street WEST PERTH WA 6005 WEST PERTH WA 6005

Additional stock exchange information as at 14 August 2004

The shareholder information set out below was applicable as at 14 August 2004.

Distribution of equity securities

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

	Ordinary Shares
$1 - 1000$
$1,001 - 5,000$	80
$5,001 - 10,000$	178
$10,001 - 100,000$	361
100,001 and over	48
	674

Equity security holders

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

		Ordinary Shares
Name	Number Held	Percentage of issued shares
Consolidated Minerals Limited	12,250,000	19.76
D J Reed	11,892,115	19.18
Trucking Nominees Pty Ltd (DJ Reed Super Fund A/C)	5,112,000	8.25
C J Reed	2,243,180	3.62
Trucking Nominees Pty Ltd	2,000,000	3.23
Teran Nominees Pty Ltd	1,800,000	2.90
Robmob Pty Ltd (Robinson Super Fund Account)	1,060,945	1.71
J Kailis	600,000	0.97
A N T & A Little (A&A Little Super Fund)	579,648	0.93
Beck Corporation Pty Ltd	500,000	0.81
S L J Raynaud	500,000	0.81
D Loughnan	450,000	0.73
R N Andrews	400,000	0.65
T C Reed	400,000	0.65
T B Ardagh	350,000	0.56
Durkin Enterprises Pty Ltd (No2 Super Fund Account)	350,000	0.56
Harry Morgan Pty Ltd	350,000	0.56
M A Ardagh	300,000	0.48
P L F Collins	285,705	0.46
Rock Securities Ltd	300,000	0.44
	41,723,593	67.26

Additional stock exchange information as at 14 August 2004

Substantial holders

Substantial holders in the company are set out below:

Ordinary Shares	Number	Percentage
D J Reed	19.004.115	30.65%
Consolidated Minerals Ltd	12.250,000	19.76%

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,

Facsimile (08) 9321 0556, 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.

Additional stock exchange information as at 14 August 2004

Schedule of Mineral Tenements as at 30 June 2004

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	E29/423	100%
Comet Vale	E29/466	100%
Comet Vale	E29/502	100%
Comet Vale	L29/67	100%
Comet Vale	MLA29/186	100%
Comet Vale	MLA29/269	100%
Comet Vale	MLA29/270	100%
Comet Vale	PLA29/1643	100%
Comet Vale	PLA29/1644	100%
Comet Vale	PLA29/1764	100%
Mt.Finnerty	E15/621	100%
Mt.Finnerty	E15/674	100%
Mt.Finnerty	E15/713	100%
Mt.Finnerty	E15/744	100%
Mt.Finnertv	E15/745	100%
Mt.Finnerty	E15/746	100%
Mt.Finnerty	E16/272	100%
Mt.Finnerty	P15/4496	100%
Mt.Finnerty	P15/4499	100%
Mt.Finnerty	P16/2163	100%
Mt.Finnerty	ELA15/836	100%
Mt.Finnerty	ELA16/260	100%
Mt.Finnerty	ELA16/261	100%
Mt.Finnerty	ELA16/308	100%
Mt.Finnerty	ELA16/312	100%

Project	Tenement	Interest
Mt.Finnerty	PLA15/4445	100%
Mt.Finnerty	PLA15/4446	100%
Mt.Finnerty	PLA15/4649	100%
Mt.Finnerty	PLA15/4650	100%
Mt.Finnerty	PLA15/4657	100%
Mt.Finnerty	PLA16/2111	100%
Mt.Finnerty	PLA16/2112	100%
Mt.Finnerty	PLA16/2113	100%
Mt.Finnerty	PLA16/2114	100%
Mt.Finnerty	PLA16/2209	100%
Mt.Finnerty	PLA16/2210	100%
Mertondale	PLA37/6599	50%
Mertondale	PLA37/6600	50%
Mertondale	PLA37/6601	50%
Mertondale	PLA37/6602	50%
Mertondale	PLA37/6603	50%
Mertondale	PLA37/6604	50%
Mertondale	PLA37/6605	50%
Mertondale	PLA37/6606	50%
Mertondale	PLA37/6607	50%
Mertondale	PLA37/6608	50%
Mertondale	PLA37/6609	50%
Mertondale	PLA37/6610	50%
Mertondale	PLA37/6611	50%
Mertondale	PLA37/6612	50%
Mertondale	PLA37/6613	50%
Mertondale	PLA37/6614	50%
Mertondale	PLA37/6615	50%
Mertondale	PLA37/6654	50%
Mertondale	PLA37/6655	50%
Mertondale	PLA37/6656	50%
Mertondale	PLA37/6657	50%
Mertondale	PLA37/6658	50%
Mertondale	PLA37/6659	50%
Mertondale	PLA37/6660	50%
Mertondale	PLA37/6661	50%
Mertondale	PLA37/6662	50%
Barrambie	M57/173	100%