NEOMETALS LTD — Capital/Financing Update 2011

Sep 8, 2011

Level 1, 672 Murray St West Perth WA 6005

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ABN 89 099 116 631
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Locked Bag 8 West Perth WA 6872 Tel: +61 8 9322 1182 Fax: +61 8 9321 0556

ASX RELEASE

9th September 2011

MEEKATHARRA GOLD – UNDERGOUND ORE RESERVE

HIGHLIGHTS

• Total underground Probable Reserves of 1.96Mt @ 3.6g/t for 225,000oz.

• Underground mining plan completed accessing five ore bodies from existing single decline;

Australian diversified resources company Reed Resources Ltd ( ASX: RDR ) (“Reed Resources”) is pleased to announce the finalisation of its underground Reserve at the Paddys Flat Gold Field for its core asset, the Meekatharra Gold Project in Western Australia.

The Paddys Flat mining area has been a significant source of both high grade underground gold production and low grade open pit gold production since 1910, and still hosts a deep rooted mineralised system beneath all the existing workings as illustrated in Figure 1. Drill intercepts into these systems at depth (>100m) is largely sparse. The areas more densely drilled focus around existing workings and the area that Reed Resources intend to exploit in its maiden underground venture at Meekatharra.

It is the intention of Reed Resources to undertake an intense drill program into the surrounding resources to expand this initial reserve.

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Figure 1. Paddys Flat Underground Reserve Location

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Managing Director Christopher Reed said, “We have proved up an initial 3 year underground mine that exploits a mix of bulk lower grade material in Prohibition and Fatts orebodies, with higher grade material in the Vivian-Consols-Mudlode systems. The combined open-pit and underground mine production is planned to exceed 1.8Mtpa. This is a sensational milestone to achieve in less than 8 months of planning and evaluation.

“We have not yet drilled any holes to expand the existing resource or reserve for the Paddys Flat underground operation, so we are pleased that our initial due-diligence on the project has been proven accurate. This has presented us with an initial mining plan that we are confident will grow and evolve as we commence resource and reserve expansion drilling.

“Whilst the total reserve ounces have decreased from the previous estimate (Table 1), we are very comfortable that the high level of conservatism built into this model by way of geology, estimates and costs, will ensure that on commencement this underground mine will be a profitable entity and will withstand fluctuating economic conditions and gold prices. The reserves reported in this announcement have also been scheduled and fully costed, with operating costs at $728/oz and capital costs being an additional $220/oz.

“Reed Resources are anticipating commencing the underground mining activities at the same time as the open pit mining. GR Engineering is evaluating the crushing options to enable these production levels.”

The Mineral Reserve estimates are compared in Table 1. The new estimate uses the new resource estimate undertaken by Snowden in May 2011 for Reed Resources, and excludes the reported reserves contained within the planned Prohibition pit cutback.

Table 1. Summary and comparison of the underground Reserve estimates at a gold price of A$1300/oz and using costs provided by a leading underground mining contracting company.

~~Gold Grade~~ Reed Resources Mineral Reserve Estimate September 2011	~~Gold Grade~~ Reed Resources Mineral Reserve Estimate September 2011	~~Gold Grade~~ Reed Resources Mineral Reserve Estimate September 2011	~~Gold Grade~~ Reed Resources Mineral Reserve Estimate September 2011		~~Gold Grade~~ ~~Total~~ Historical Mineral Reserve Estimate	~~Gold Grade~~ ~~Total~~ Historical Mineral Reserve Estimate	~~Gold Grade~~ ~~Total~~ Historical Mineral Reserve Estimate	~~Gold Grade~~ ~~Total~~ Historical Mineral Reserve Estimate
~~Project~~ Prohbition	~~Tonnes~~ 1,325,260	~~(g/t)~~ 2.4	~~Total Ounces~~ 104,100		~~Project~~ Prohbition	~~Tonnes~~ 1,372,000	~~(g/t)~~ 4.1	~~Ounces~~ 179,000
Vivian/Consols	256,500	7.7	63,600		Vivian/Consols	256,000	10.4	83,000
Fatts/Mudlode	380,000	4.7	57,200		Fatts/Mudlode	362,000	4.0	46,000
Total	1,961,760	3.6	224,900		Total	1,990,000	4.9	308,000

PROJECT UPDATE

The Project Schedule is progressing ahead of the planned timeline (Figure 2). A holistic mining plan and financial model can now be finalised to incorporate both the open pit and the underground production sources.

It is anticipated that subject to Board approval, refurbishment work on the processing plant and the accommodation village will commence in late October-November with a view to having the existing village refurbished ready for full-time occupancy in February. This will provide accommodation facilities for the main upgrade and construction works at the accommodation village and processing facility.

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Figure 2. Progress of Meekatharra Gold Project timeline to commencement of production.

Chris Reed Tony Dawe Reed Resources Ltd Professional Public Relations T: +61 89322 1182 T: +61 89388 0944/ +61 405 989 743 E: chris@reedresources.com E: tony.dawe@ppr.com.au

COMPETENT PERSONS STATEMENT

Geological and mining aspects of this report have been compiled by Mr Craig Fawcett (MAIMM), a full time employee of Reed Resources Ltd. Mr Fawcett 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 (2004). Mr Fawcett consents to the inclusion in this report of the matters in the form and context in which it appears.

Notes to accompany Mineral Reserve estimate:

The reserve estimate has been compiled internally by Reed Resources, in accordance with The 2004 Australasian Code for Reporting of Mineral Resources and Ore Reserves (JORC Code).

The ore reserve is that part of the Mineral Resource which can be economically mined by underground mining methods. Dilution of the Mineral Resource and an allowance for ore loss was included in the Ore Reserve estimate. All the Indicated Ore Resource was classified as Probable Reserves after consideration of all mining, metallurgical, social, environmental and financial aspects of the Paddys Flat and Yaloginda project.

A review of geotechnical stability and ground support requirements was undertaken and recommendations for support regimes and dilution incorporated into the generation of the reserve statement. The costing is considerate of the need for loose rock backfill to be placed within stoping voids to maintain overall stability.

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A summary of the costs applied to the Mineral Reserve include: (Australian Dollars)

• Processing costs $27/t

• Toll Haulage of $1.5/t

• A gold price of AUS$1,300

• Royalties of:

Stategovernment	2.50%
Royal Gold Inc	1.50%
Native title	0.75%
Barrick	$10/oz

• Metallurgical recoveries of:

Orebody	Mill recovery
Vivians	95%
Prohibition	92%
Consols	95%
Fats	98%
Mudlode	98%

• Total cost of $948/oz ($728/oz operating costs and $220/oz capital costs)

Metallurgical recovery was based on metallurgical work undertaken by St Barbara Mines and Mercator Gold at various recognised laboratories, and has been reviewed and confirmed as accurate by independent metallurgical consultants engaged by Reed Resources since assuming ownership.

About Reed Resources

Reed Resources Ltd (ASX: RDR, OTC: RDRUY) is an emerging Western Australian gold producer focused on bringing its flagship Meekatharra Gold Project into production in the second half of 2012.

Reed Resources’ wholly owned Meekatharra Gold Project is located in the prolific Murchison region of Western Australia and has a current JORC resource of 2.7 Moz and existing infrastructure including a 3 Mtpa processing plant.

Reed Resources’ other projects include:

• Mount Marion Lithium – High-grade lithium project located 40km south of Kalgoorlie in JV with Mineral Resources Limited (ASX: MIN) and set to be the World’s second biggest lithium concentrate operation. Currently under construction with commissioning planned for first half 2012.

• Barrambie Vanadium – Definitive Feasibility Study completed on the production 6300t of vanadium per annum. Currently in approvals process and MOU for fixed price EPC and financing assistance with China Nonferrous Metals.

• Comet Vale Gold – Evaluating recommencement of high-grade underground gold production, currently on care & maintenance. JORC resource of 186,000 oz at 10.8 g/t.

• Mount Finnerty Iron Ore – Iron ore JV with Cliffs Natural Resources and nickel farm-in with Barranco Resources NL.

Reed’s American Depositary Receipts (ADR’s) trade under the code RDRUY (CUSIP Number: 758254106). Each Reed Resources ADR is equivalent to 10 ordinary shares of Reed Resources as traded on the ASX. The Bank of New York Mellon is the depository bank.

Website: www.reedresources.com

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APPENDIX 1 RESERVE TECHNICAL INFORMATION

The Mineral Reserve Estimate was undertaken within Reed Resources technical team by Elizabeth Jones under the direction of Craig Fawcett. Elizabeth Jones has almost 20 years experience in mining, having previously held positions in mine production, mine planning and mine management. Elizabeth also holds a WA First Class Mine Managers Certificate.

Costs applied to the schedule derived from a highly regarded underground mining contracting company, and rates applied to the model are indicative. The reserve was undertaken using A$1,300/oz gold price and the cut-off grades applied were calculated based on the economic parameters appropriate to the mining method associated with each orebody.

Prohibition

The Prohibition ore body has previously been mined via an open pit. There is a significant cut back planned for this pit which has reduced the previous underground reserve by 96,000oz. The Prohibition Reserve has therefore globally increased by 30,000oz to 200,000oz (Table 3) when the open pit and the underground reserves for Prohibition are combined. This is best illustrated in Figure 3 where the planned open pit cutback can be seen to remove a large portion of the previous underground reserve.

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Figure 3. Long section of the Reserve and Resource outlines of the Prohibition Lode and mine design, looking West.

An optimised decline design sharing capital infrastructure between Prohibition and Vivian’s has reduced the cut-off grade to 2g/t. This area will provide large stopes and bulk tonnage to supplement the high grade material sourced from the remaining ore bodies. The area to the South and below the reserve will be the focus for exploration drilling as the underground operation progresses and drill sites become accessible.

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Vivian/ Consols

To the south of the current reserve the Vivian-Consols ore body was successfully mined from 1910 to 1930’s and the area between the current reserve and old workings will be an early target for drilling to extend the Probable Reserve (Figure 4).

The Vivian-Consols ore bodies were remodeled to reflect the complex interactions of the main shear and intersecting splay shears. A minimum mining width of 2m and sublevel interval spacing of 15m has been used to accommodate the complex ore structures. The reduction in gold ounces is due to the lower grade when compared to previous models in combination with the application of conservative mining parameters.

The previous resource interpretation did not distinguish between the high grade “Spur Lodes” and the main structure. This resulted in the previous model estimate artificially smearing very high gold grades. The Spur Lodes were more accurately modeled, using historical mapping and mining, and as such the contained metal in the resource and ultimately the reserve has been reduced. It is known that from the existing drilling and the orientation of the Spur Lodes that the new model has the opportunity to grow as these lodes are captured from additional drilling. As part of the reserve expansion program, Reed Resources will be undertaking an intense exploration program to better delineate these lodes as the contained metal in the exceptionally high grade pods is significant. The drilling density within the main lode system also requires closer spaced intersections to convert Inferred material to Indicated resources.

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Figure 4. Long section of the Reserve and Resource outlines of the Vivian-Consols Lodes and mine design, looking West.

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Mud Lode/ Fatts

The Mudlode ore body was mined successfully to the north and above the current reserve in the 1980’s. The current reserve extents incorporate remnant mining around the historical mining areas in addition to extensions at depth. Mudlode stopes are narrow, and this is reflected in the minimum 2m mining width and continuation of the 15m sublevel intervals used at Vivians and Consols.

The Fatts ore body has not been previously mined and represents a bulk tonnage source at an intermediate grade to supplement the narrow high grade mining areas (Figure 5).

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Figure 5. Long section of the Reserve and Resource outlines of the Mudlode & Fatts Lodes and mine design, looking West.

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Table 2.

Summary of current Mineral Resources

	~~Resource~~		~~Gold Grade~~	~~Total~~
~~Project~~ Meekatharra North	~~Classification~~ Indicated	~~Tonnes~~ 706,000	~~(g/t)~~ 1.3	~~Ounces~~ 29,000
	Inferred	174,000	1.2	6,000
	Sub-Total	880,000	1.3	35,000
Paddy's Flat	Indicated	19,116,000	1.7	1,047,900
	Inferred	9,456,800	1.6	500,600
	Sub-Total	28,572,800	1.7	1,548,500
Yaloginda	Indicated	9,961,000	1.7	536,300
	Inferred	4,328,000	1.7	240,400
	Sub-Total	14,289,000	1.7	776,700
Reedys TOTAL	Indicated	1,794,000	2.7	153,400
	Inferred	3,095,000	2.4	241,200
	Sub-Total ~~Indicated~~ ~~Ifd~~	4,889,000 ~~31,577,000~~ ~~17053800~~	2.5 ~~1.7~~ ~~17~~	394,600 ~~1,766,600~~ ~~988200~~

Table 3 . Summary of current Mineral Reserves

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