NEOMETALS LTD - Capital/Financing Update 2005

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REED AND PORTMAN EXECUTE HOA TO JOINT VENTURE MOUNT FINNERTY IRON ORE PROJECT

The Board of Reed Resources Ltd ("Reed") announces that it has executed a Heads of Agreement with Portman Limited (ASX:PMM) ("Portman") to enter into a joint venture to explore and develop iron ore at the Mt. Finnerty Project (Reed 100%), 65 km west of Koolyanobbing (Figure 1).

BACKGROUND

Geological mapping and surface sampling by Reed of banded iron formations (BIF) south of Mt. Finnerty identified two zones of iron-enriched BIF approximately 10 km apart (Figure 2). The northern zone was sampled over a strike length of at least 4 km with assays of 58.5 to 65 % Fe in surface rock chip samples.

The surface sampling indicated that the iron-enriched BIF between Mt Finnerty and the Railway has low levels of aluminium, silicon and manganese and very low phosphorous levels (most samples less than 0.08 % P).

Further surface sampling of iron-enriched BIF by Portman confirmed the high iron grades and and low levels of phosphorous, aluminium, silicon and manganese over the 4 km of strike previously sampled by Reed (Table 1, Figure 2).

It is the Board's view that a joint venture with such a successful and progressive company as Portman, particularly with its nearby Koolyanobbing operation and its experience in the mining and haulage of iron ore, would underwrite the potential for the mining and development of the iron ore bodies on the Reed tenement holdings.

TERMS

The key terms of the Heads of Agreement are:

Portman will be operator of the joint venture, and can earn 80% of the iron ore rights by solely incurring expenditure totalling \$300,000 within three years.
Minimum expenditure of \$100,000 must be incurred by Portman on the Project Area within 12 months prior to withdrawal.
If Portman withdraws from the Agreement prior to expending \$300,000 Portman will retain no interest in the Project (i.e. iron rights).
Following notification from Portman of achieving minimum expenditure (\$300,000) Reed Resources ("RDR") shall either:
o Elect to contribute to its share of expenditure thereby maintaining its twenty percent (20%) participating interest in the Project or.
$\circ$ Elect to retain a ten percent (10%) participating interest and be free carried until completion of a feasibility study and a decision has been made in favour of project development and commencement of mining (Decision to Mine ("DTM")).
At the DTM, Reed shall elect to either contribute to Joint Venture $\bullet$ Expenditure according to its equity, or convert all of its Participating Interest to a Production Royalty.
REED retains ownership of all non Iron Ore minerals.

A comprehensive joint venture agreement is to be executed within 60 days of the execution of the Heads of Agreement. The joint venture is planned to commence on 1 March 2005.

By order of the Board,

David Reed EXECUTIVE CHAIRMAN

Geological aspects of this report have been compiled by Dr P Collins (BSc(Hons), PhD, MAIG), an employee of Curtin Consultancy Services Ltd. Dr Collins has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which is being reported on to qualify as a Competent Person as defined in the Code for Reporting of Mineral Resources and Ore Reserves. Dr Collins consents to the inclusion in the report of the matters in the form and context in which it appears.

Sample ID	Easting	Northing	$Fe\%$	P%	Lithology
A43824	225641	6601443	52.97	0.019	Laterite
A43825	225688	6601001	59.93	0.109	Laterite
A43826	226417	6600653	58.52	0.116	Laterite
A43827	226468	6600604	62.81	0.032	MGH-well bedded
A43828	226538	6600530	58.51	0.029	Canga
A43829	226538	6600530	62.07	0.053	MGH-well bedded
A43830	226619	6600364	65.73	0.056	MGH-well bedded
A43831	227201	6599455	59.45	0.052	GO-poorly bedded
A43832	228190	6597855	56.75	0.019	MGH-well bedded, shaly
A43833	228097	6597982	57.50	0.014	MGH-well bedded
A43834	227735	6598462	59.41	0.062	MGH-weakly bedded
A43835	227484	6598640	60.74	0.035	MGH-well bedded
A43836	227339	6598828	61.14	0.043	MGH-well bedded
A43837	227354	6599196	61.88	0.049	Canga
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