NEOMETALS LTD — Interim / Quarterly Report 2004

Apr 19, 2004

706 Murray Street West Perth WA 6005 Tel: +61 8 9322 1182 Fax: + 61 8 9321 0556

QUARTERLY REPORT FOR THE PERIOD ENDING 31 MARCH 2004

COMET VALE PROJECT

During the quarter, the Company focused on advancing the Pre-Feasibility study for the development of the Sand George resource as a high-grade underground gold mine. The Pre-Feasibility Study is scheduled to be completed by the end of April 2004.

Sand George

RSG Global were instructed in January to recommence the Pre-Feasibility Study, including a re-calculation of the Mineral Resource at the Sand George prospect.

Geological modeling by RSG Global has confirmed a combined Mineral Resource of 155,000 tonnes at 11.6 g/t Au in the SG1 & SG2 lodes, including 112,000 tonnes assigned to the Indicated Category.

The proportion of each lode defined as an Indicated Resource has been substantially increased, with 90% of the SG1 lode in the Indicated Category.

The updated Mineral Resource estimates for the Sand George 1 & 2 lodes are:

Vein	Category	Tonnes	Grade (g/t Au)	Ounces
SG 1	Indicated	77,238	12.6	31,344
SG 1	Inferred	8,095	12.6	3,278
SG 2	Indicated	34,944	10.2	11,413
SG 2	Inferred	35,062	10.7	12,017
Sub-Total	Ind & Inf	155,339	11.6	58,053
Low Grade	Ind & Inf	51,920	5.7	9,547
TOTAL	Ind 8 Inf	207,259	10.1	67,600

The revised Mineral Resource estimate does not include results from the three deeper SG3, SG4 and SG5 lodes at Sand George, which remain open in all directions.

Mine Planning

Donegal Resources is finalising the re-engineered detailed mine design and scheduling for the first stage of mining the Sand George lodes to a depth of 200 metres vertical.

Results from the metallurgical testwork by METS Pty Ltd at the laboratories of SGS Lakefield Oretest, indicate the Sand George ore is amenable to processing through a standard CIP plant with gold recovery greater than 95%. Gravity gold recovery from simple gravity separation is greater than 70%, as such the company is reviewing several proposals from toll-millers with gravity gold facilities.

All other work packages (geotechnical, hydrogeological and environmental investigations) are materially complete and a Notice of Intent ("NOI") is being finalised for commencement of decline development in the Sept 2004 quarter.

BARRAMBIE PROJECT

During the quarter, the Company focused on better definition of the resource at the main Eastern Zone of the deposit and on metallurgical testing of the high-grade titaniferous mineralisation.

Resource Estimate

Compilation of existing drilling data for the high grade Eastern Zone indicates a total estimated resource of 23.7 Mt @ 22.4% TiO₂ in the titaniferous magnetite over a strike distance of 4.18 km between the airstrip and the Bay area (some 40% of total strike length), from 7845N to 12030N, as outlined below:

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

The mineralised Eastern Zone has good continuity and the average width of the high-grade titaniferous band is 23.1 metres. The resource estimate has been calculated to a depth of 60 metres below surface, which is considered to be a first approximation of the limit for open pit mining based on a strip ratio of 2:1, an average wall batter angle of 52° and an average mining width of 23 metres for the high grade band. The eastern band remains open at depth having been intersected at a downhole depth of 243m.

The Barrambie tenement (M57/173), covers a strike length of the titaniferous magnetite of 11 km, although the differentiated gabbroic sill which hosts the magnetite bands extends for a total strike length of 22 km.

Metallurgical Testwork

Mineral Engineering Technical Services Pty Ltd (METS) was commissioned to supervise an initial program of physical and metallurgical test work. SGS Lakefield Oretest is performing the testwork program on about one tonne of core from the oxide and primary zones at the Bay-Cove area of the deposit.

Results of the physical test work to date have indicated that all work indices are low and that the ore is non-abrasive.

Results of the first stage of metallurgical testwork are very encouraging. This stage involved an atmospheric chloride leach of a combined oxide/primary magnetic concentrate to produce a feedstock suitable for the production of Titanium Slag, Pig Iron and Vanadium. The resulting concentrate contained 52% Ti02. A clearly defined process flowsheet is currently being optimised with the assistance of Consolidated Minerals' consultants. TZML

Following receipt of an optimised flowsheet, the Company and its strategic alliance partner Consolidated Minerals Limited will proceed to conduct preliminary engineering studies for the production of both chloride and sulphate-grade Titanium Slag, Pig Iron and Vanadium.

The results of this stage are expected by the end of April at which time financial modelling of both processes will be undertaken.

The resource which remains open at depth and along strike will provide sufficient ore for a 20 year mine life producing 210,000 tonnes of Titanium Slag (80% Chloride/20% Sulphate); 90,000 tonnes of Pig Iron and 3,000 tonnes of Vanadium Pentoxide per annum.

MT FINNERTY PROJECT

During the quarter, the Company focused on advancing the prospectivity of the Mt Finnerty project for iron ore, gold and nickel.

False colour infrared aerial photography at a scale of 1:25,000 was flown over all of the Mt. Finnerty tenements. This photography has been used for geological mapping of BIF units and for a photogeological interpretation of the regolith.

Iron ore

The Mt. Finnerty Project is prospective for BIF-hosted iron ore deposits, similar to those that are currently being mined by Portman Mining at Koolyanobbing and Windarling Peak as well as other iron ore deposits in the district that are yet to be mined such as at Bungalbin (65.7 million tonnes at 57.9% Fe) and Mt. Walton (2.5 million tonnes at a similar grade).

Reconnaissance geological mapping and sampling was completed along the BIF units that outcrop on the eastern side of the tenements, and potential joint venture partners, including companies currently producing iron and manganese ores in Western Australia, were conducted through the property.

During the quarter, Consolidated Minerals commenced a geological assessment of the iron ore potential of the Mt. Finnerty tenements as part of their strategic alliance with Reed Resources.

Gold

Assessment of previous soil geochemical surveys carried out by Arimco Mining and joint venture partners during 1993 to 1996 have commenced using the new regolith distribution map prepared from the photogeological land-form interpretation. New gold targets are being delineated, from an integration of the soil geochemical data with the new regolith and structural interpretations, for follow up RAB drilling.

Nickel

A review of the nickel sulphide potential of the Mt. Finnerty tenements, based on an interpretation by Southern Geoscience Consultants of the detailed airborne geophysical survey flown over the tenements in 2003 combined with reconnaissance geological mapping and sampling and assessment of earlier exploration data has been completed. Magnesian rich ultramafic rocks that include talc carbonates and olivinites have been identified on the western side of the tenements and programs to test these for nickel sulphides are being developed.

CORPORATE

As part of the strategic alliance with Consolidated Minerals Limited ("Consolidated"), Consolidated subscribed for 5.45 million Reed ordinary shares at an issue price of 25c per share, raising \$1.36 million.

In addition, and timed with Reed's satisfaction of its regulatory clearance to mine its Sand George gold mine deposit, Consolidated has also agreed to subscribe for a convertible note with a principal amount of \$4 million to enable Reed to finance the development of its Sand George gold deposit. The company is awaiting receipt of the Pre-feasibility study before committing to the development of Sand George.

The company encourages shareholders and interested parties to visit our website (www.reedresources.com) to register to receive announcements electronically.

Chred

C J Reed DIRECTOR

Technical aspects of this report have been compiled by Dr P Collins (BSc(Hons). PhD, MAIG), an employee of Curtin Consultancy Services Ltd, and Dr Bryan Smith (BAgSc, PhD, MAusIMM), Bryan Smith Geosciences Pty Ltd. Dr Collins and Dr Smith have sufficient experience relevant to the styles of mineralization and types of deposit under consideration and to the activity which is being reported on to qualify as a Competent Persons as defined in the Code for Reporting of Mineral Resources and Ore Reserves. Drs Collins and Smith consent to the inclusion in the report of the matters in the form and context in which it appears.

Indicated and Inferred Mineral Resources relating to the Sand George deposit as detailed in this statement are in accordance with the JORC Code for Reporting of Mineral Resources and Ore Reserves and have been compiled by Jan Pieter de Visser (RSG Global) who has sufficient experience which is 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. Jan Pieter de Visser consents to the inclusion in the report of the matters in the form and context in which it appears.

Indicated and Inferred Mineral Resources relating to the Barrambie deposit as detailed in this statement are in accordance with the JORC Code for Reporting of Mineral Resources and Ore Reserves and have been compiled by Dr Bryan Smith who has sufficient experience which is 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 Bryan Smith consents to the inclusion in the report of the matters in the form and context in which it appears.

Appendix 5B

Mining exploration entity quarterly report

Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001.

Name of entity

REED RESOURCES LTD

ABN

89 099 116 631

Quarter ended ("current quarter")

Year to date

$(9 \text{ months})$

31 MARCH 2004

Current quarter

\$Α

Consolidated statement of cash flows

Cash flows related to operating activities

			\$Α
$\mathbf{1}$ .	Receipts from product sales and related debtors	0	Ω
1.2	Payments for (a) exploration and evaluation (b) development (c) production	48,538) 32,291)	(666, 158) 98,250)
	(d) administration	(216, 532)	(561, 857)
1.3	Dividends received
1.4	Interest and other items of a similar nature received	7,683	31,358
1.5	Interest and other costs of finance paid	ť 956)	(1,636)
1.6	Income taxes paid
1.7	Other $-$
	Net Operating Cash Flows	(290,634)	(1, 296, 543)
1.8 1.9 1.10 1.11	Cash flows related to investing activities Payment for purchases of: (a)prospects (b)equity investments fixed (c) other assets Proceeds from sale of: (a)prospects (b)equity investments (c)other fixed assets Loans to other entities Loans repaid by other entities	6,286) 0) ł	33,413 438)
1.12	Other (Resettlement of prospect payment recouped $1st$ qtr)
	Net investing cash flows	6,286)	(33, 851)
1.13	Total operating and investing cash flows (carried forward)	(296, 920)	(1, 330, 394)

1.13	Total operating and investing cash flows (brought forward)	(296, 920)	(1, 330, 394)
	Cash flows related to financing activities
1.14	Proceeds from issues of shares, options, etc.	1,362,500	1,862,500
1.15	Proceeds from sale of forfeited shares
1.16	Proceeds from borrowings
1.17	Repayment of borrowings	(4,862)	(14, 394)
1.18	Dividends paid
1.19	Other - Prospectus Costs
	- Deposits
	Net financing cash flows	1,357,638	1,848,106
	Net increase (decrease) in cash held	1,060,718	(517, 712)
1.20	Cash at beginning of quarter/year to date	751,963	1,294,969
1.21	Exchange rate adjustments to item 1.20
1.22	Cash at end of quarter	1,812,681	1,812,681

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

		Current quarter AS
1.23	Aggregate amount of payments to the parties included in item 1.2	(94, 976)
1.24	Aggregate amount of loans to the parties included in item 1.10

$1.25$ Explanation necessary for an understanding of the transactions

Office rent and service fees paid to a company related to a director_	\$9,982
Salary and superannuation payable to directors	\$84,994

Non-cash financing and investing activities

• $2.1$ Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows
• $2.2\,$ Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest

Financing facilities available
Add notes as necessary for an understanding of the position.

		Amount available ŜΑ	Amount used ŜΑ
3.I	Loan facilities	Abs	MA
3.2	Credit standby arrangements	- 11	-

Estimated cash outflows for next quarter

4.1	Exploration and evaluation	SΑ 100,000
-4.2	Development	200,000
	Total	300,000

Reconciliation of cash

Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.	Current quarter ŜΑ	Previous quarter ŜΑ
Cash on hand and at bank 5.I	420,638	723,463
Deposits at call 5.2	1,362,500
53 Bank overdraft
Other (bonds) 5.4	29,543	28,500
Total: cash at end of quarter (item 1.22)	1,812,681	751,963

Changes in interests in mining tenements

		Tenement reference	Nature of interest (note(2))	Interest at beginning of quarter	Interest at end of quarter
-6.1	Interests in mining tenements relinquished, reduced or lapsed
6.2	Interests in mining tenements acquired or increased

Issued and quoted securities at end of current quarter
Description includes rate of interest and any redemption or conversion rights together with prices and dates.

		Total number	Number quoted	price Issue per security (see note $3)$ (cents)	Amount paid up per security (see note 3) (cents)
7.1	Preference
	*securities
	(description)
7.2	Changes during
	quarter
	(a) Increases
	through issues
	(b) Decreases
	through returns
	of capital, buy-
	backs, redemptions
7.3	+ Ordinary	57,200,000	40,200,000
	securities
7.4	Changes during
	quarter
	(a) Increases	5,450,000	5,450,000	\$0.25	\$0.25
	through issues
	(b) Decreases through returns
	of capital, buy-
	backs
7.5	+ Convertible
	debt securities
	(description)
7.6	Changes during
	quarter
	(a) Increases
	through issues (b) Decreases
	through
	securities
	matured,
	converted
7.7	Options			Exercise price	Expiry date
	(description and
	conversion factor)
7.8	Issued during
	quarter
$7.9\,$	Exercised during
	quarter
7.10	Expired during
	quarter
7.11	Debentures
7.12	(totals only) Unsecured
	notes (totals
	only)

Compliance statement

This statement has been prepared under accounting policies which comply with 1 accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 4).

$\overline{2}$ This statement does / does not* (delete one) give a true and fair view of the matters disclosed.

Sign here:

Gheed

(Director/Company secretary)

Date: 20 April 2004

Print name: CHRISTOPHER JOHN REED

Notes

The quarterly report provides a basis for informing the market how the entity's $\mathbf{1}$ activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

$\overline{2}$ The "Nature of interest" (items 6.1 and $6.2$ ) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.

3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities.

The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: Statement of Cash Flows apply to this report.

$\mathsf{S}$ Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

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