NEOMETALS LTD — Interim / Quarterly Report 2005

Apr 26, 2005

97 Outram Street West Perth WA 6005 Tel: + 61 8 9322 1182 Fax: + 61 8 9321 0556

QUARTERLY REPORT FOR THE PERIOD ENDING 31 MARCH 2005

COMET VALE PROJECT (100%)

Kingsrose earning 50% in M29/52, M29/321

During the quarter, the Company focused on development of the Sand George deposit and re-evaluation and infill drilling of the Sand Prince West lode.

Sand George mining start-up

The Company continued discussions with mining contractors to negotiate a contract to mine the Sand George deposit and, in January 2005, a Memorandum of Understanding (MOU) was signed with Kingsrose Pty Ltd (Kingsrose).

The MOU provides for Kingsrose to earn a 50% interest in Mining Leases M29/52 (Sand George) and M29/321 (Sand Queen) and Miscellaneous Licence L29/67 by incurring all mining and development costs to earn 50% of the gold recovered to a depth of 243 m below the collar of the Sand Queen Main Shaft and 60% of gold recovered below that level, excluding royalties. Mining operations, initially using the Sand Queen Main Shaft, are planned to commence on 1 May 2005 and the first gold production is planned for the December Quarter, 2005.

An application for land clearing for mining purposes has been lodged with the Department of Environment, and a Notice of Intent (NOI) and Project Management Plan (PMP) have been lodged with the Department of Industry and Resources.

Sand Prince West

An in-fill drilling program at the Sand Prince West prospect (M29/52) was completed during quarter with most of the 46 RC drill holes intersecting the gold-bearing lode. Drilled intersections range from 1 metre to 10.5 metres in length, with a best intersection of 7 metres at 31.42 g/t Au (drill hole SPWGC048).

This drilling has confirmed a shallow, north dipping lode structure that extends continuously from surface outcrops at 13000mN to a maximum depth of 25 metres at 13100mN. When combined with previous drilling data, drilling of the Sand Prince West lode has been undertaken on a 12.5 by 7.5 metre grid which is appropriate for resource evaluation and grade control for mining purposes. The viability of a shallow open pit mine on the Sand Prince West will be evaluated once resource estimation is completed during the current quarter.

Exploration for additional flat-Iving lode structures in close proximity to the Sand Prince West lode is also scheduled for the current quarter, to enhance the viability of open pit mining of this type of lode.

The Company has completed validation of previous drilling data on the nearby Coonega prospect (M29/35) in preparation for a re-assessment of the Coonega resource estimate and its potential for a small open pit mine.

Regional Exploration

UTS Geophysics has been commissioned to undertake a detailed, low-level airborne geophysical survey of the Comet Vale Project. The survey is currently scheduled for April 2005.

The Company commenced a compilation of all previous geological mapping and validation of all previous exploration data (soil and rock-chip geochemistry, RAB and RC drilling) acquired for tenements surrounding the Sand Queen-Sand George operation. This includes exploration for lateritic nickel over areas underlain by ultramafic rocks.

A soil geochemical survey has been planned over the entire project over and is scheduled for the current quarter, after completion of the geophysical survey.

MT FINNERTY PROJECT (100%) Portman Limited earning 80% Iron Ore Rights

Iron Ore

During the quarter, the company executed a Heads of Agreement with Portman Limited (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). It is the Board's view that the Joint Venture with Portman would underwrite the development of potential iron ore deposits on the Company's tenement holdings.

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 vears.
• 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:
• Elect to contribute to its share of expenditure thereby $\blacksquare$ maintaining its twenty percent (20%) participating interest in the Project or,
• 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 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.

The principal target, for iron ore, is an area between Mt Finnerty and the Transcontinental Railway, where previous work by Reed has demonstrated the potential for BIF-hosted iron ore similar to that at Portman's other operations. Geological mapping and surface sampling by Reed of banded iron formations (BIF) south of Mt. Finnerty identified two areas of iron-enriched BIF approximately 10 km apart (Figure 2).

The northern area, immediately to the south of Mt Finnerty, 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 also indicates that the iron-enriched BIF between Mt Finnerty and the railway, where sampled, has low levels of aluminium, silicon and manganese and very low phosphorous levels (most samples less than 0.08 % P).

Additional surface sampling of iron-enriched BIF by Portman has confirmed the high iron grades over the 4km of strike previously sampled by Reed in the northern area (Figure 2). Portman's sampling assayed 53 % to 63 % Fe and 0.014 to 0.116 % P, with most samples containing more than 59 % Fe and less then 0.08 % P.

Nickel

Geological mapping of the ultramafic sequence on the western flank of the Watt Hills greenstone belt has been completed and is currently being digitized for integration with other data sets, including an orthorectified photo-image, landform-regolith mapping and previous soil and rock-chip geochemical data.

Additional soil geochemical sampling scheduled for the current quarter will be combined with existing data sets to define targets for further ground-based exploration, including ground TEM surveys and RAB and RC drilling.

FIGURE 1. MT FINNERTY JOINT VENTURE AREA

FIGURE 2. LOCATION OF SAMPLES COLLECTED FROM THE TWO AREAS OF IRON ENRICHED BIF

BARRAMBIE PROJECT (100%)

During the quarter, Reed Resources commenced a Pre-feasibility Study ("PFS") for the development of a treatment plant to produce Vanadium Pentoxide ( $V_2O_5$ ) from its Barrambie Deposit. Current metallurgical test work by AMMTEC under the supervision of Mineral Engineering Technical Services (METS) will optimise the recovery of vanadium from conventional Salt Roast-Leaching of a gravity concentrate. This crucial process step has been successfully demonstrated by previous owners, results indicate sodium chloride is the preferred salt and satisfactory extraction of vanadium (>80%) was achieved without process optimisation.

This test work will enable an optimised flowsheet for the production of Vanadium Pentoxide to be finalised for the design, engineering and costing work packages to be performed by leading Australian engineers Sinclair Knight Merz. Ore reserves, mining method and mine design work packages are being prepared by BFP Consultants. The PFS is expected to be completed by July 2005.

Since Reed's acquisition of the deposit in April 2003, growing demand from steel producers has pushed the Vanadium Pentoxide price from US\$2.50/lb to US\$23/lb (Ryans Notes, 22 April 2005). In the findings of the Inquiry onto Vanadium Resources at Windimurra, the Economics and Industry Standing Committee of the Western Australian Legislative Council, the production cost per pound of Vanadium Pentoxide was reported by Xstrata at US\$1.60. Accordingly the evaluation of the deposit is now solely focused on the recovery of vanadium using the same process flowsheet of the Windimurra Vanadium Mine.

The Barrambie deposit contains in excess of 470,000 tonnes of $V₂O₅$ in Indicated and Inferred Resources of 124,000,000 tonnes at an average grade of $0.38\%$ V₂O₅. The deposit is divided into three segments (designated Bay, Cove and Gulf from north to south) and into two bands: an East Band along the eastern edge of the layered complex and a Central Band to the west of the East Band.

Bay-Cove East (Smith 2005)

Indicated 7 Mt @ 0.58% $V_2O_5$ , 22.9% TiO₂ Inferred 17 Mt @ 0.58% $V_2O_5$ , 22.3% TiO₂

Bay-Cove Central (BFP 2000)

Indicated 23 Mt @ 0.43% $V_2O_5$ Inferred 17 Mt @ 0.35% $V_2O_5$

Gulf Central (Snowden 1999) 60 Mt @ 0.30% $V_2O$ Inferred

FIGURE 3. LOCATION OF RESOURCES

An airborne geophysical survey over the Barrambie Mining Lease (M57/173) is scheduled for the June quarter and an in-fill drilling program will be undertaken in the September quarter to upgrade the Inferred and Indicated Resources in the Bay, Cove and Gulf segments.

CORPORATE

During the quarter, the Company issued 8,000,000 ordinary shares at 26 cents per share to clients of Intertsuisse.

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

D J Reed 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 types of deposit under consideration and to the activity which is being reported on to qualify as a Competent Person as defined in the JORC Code (2005). Dr Collins consents to the inclusion in the report of the matters in the form and context in which it appears.