NEOMETALS LTD — Interim / Quarterly Report 2006

Jan 30, 2006

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

QUARTERLY REPORT FOR THE PERIOD ENDING 31 DECEMBER 2005

COMET VALE PROJECT

Sand Queen Gold Mine Production Joint Venture (Kingsrose Mining Pty Ltd earning 50%)

During the quarter, Joint Venture Operator Kingsrose Mining Pty Ltd commenced underground operations in the Sand Queen Mine. All surface infrastructure is in operation, the Sand Queen mine was dewatered to below the 3 Level, and minor works completed on the Sand Queen Main Shaft. During January 2006, the 2 Level plat was enlarged and driving south towards the Sand George lodes commenced.

The 2 Level development drive initially headed toward the southeast, to bypass historical stoping and to intersect a reported lode to the east of the main Sand Queen lode, referred to as the East Lode. The East Lode was intersected approximately 5 metres from the shaft and development is currently driving to the south along this lode.

The Sand Queen South Deposit will be accessed from the existing 2 and 3 Levels in the Sand Queen mine. Development of the 2 and 3 Levels will be extended to the south to provide initial access into the Sand George lodes. Toll treatment of the ore is planned for early in the June 06 Quarter, with production ramping up to 3,000 tonnes per month as additional levels are opened up.

The current mine plan will produce 20,000 oz per annum, of which 10,000 ounces is attributable to Reed at a cash cost of A\$230/oz and generating in excess of A\$4.5 million per annum with an initial mine life of 31/2 years.

Headframe and winder facility (left) and miners preparing for the first underground shift (right) at the Sand Queen Mine Main Shaft, Comet Vale.

Resource Extension Drilling

Eight cored drill holes and two percussion drill holes are targeted to test the southern strike extension of the Sand George lodes, as shown on the accompanying long section. Previous RC drilling has indicated that the Comet Vale lode structure extends for at least 400 m to the south of the current Sand George resource limits. Successful completion of this drilling program will potentially double the strike extent of the resource and justify enlarging a planned ventilation shaft to a second production shaft by joint venture partner Kingsrose Mining Pty Ltd.

In addition, three RC drill holes are designed to infill the southern end of the SG1 lode, at shallow depths, and a diamond drill hole is targeted to infill between previously drilled intersections of the SG1 and SG2 lodes below the current mine design and above previous intercepts of the SG3, SG4 & SG5 lodes.

The drilling program commenced on 16 January 2006 and is due to be completed in mid-February.

Further drilling to test the depth potential of both the Sand Queen and Sand George lodes will be undertaken from the planned underground development.

Longitudinal section along the Comet Vale lode structure with planned drilling in relation to the Sand Queen-Gladsome Mine and the Sand George lodes.

Sand Prince West Deposit (100% RDR)

During the quarter, Hellman & Schofield Pty Ltd completed an estimation of Mineral Resources at the Sand Prince West deposit, which included the results of infill grade control drilling and resource extension drilling undertaken during the September quarter, 2005.

The combined Mineral Resource is now estimated to be 121,150 tonnes at a grade of 2.39 g/t Au, for 9,310 ounces of gold (at a 1 g/t Au cut-off). At a higher cut-off grade, the combined resource is estimated to contain 67.440 tonnes at a grade of 3.15 g/t Au, for an estimated 6,820 ounces of gold (at 2 g/t Au cut-off).

For each of the resource estimates about half of the contained gold is in the Measured Resource and further drilling will be required to upgrade the Indicated and Inferred Resources to Measured status.

The additional drilling program resulted in an increase of over 200 % in the combined resource tonnes and contained gold when compared with the previously reported resource estimate (34,602 tonnes containing 4,334 ounces of gold, announced in June Quarterly 2005).

Hellman & Schofield Pty Ltd also completed an initial study using Whittle Pit Optimisation software and a gold price of A\$550 per ounce. This resulted in an optimal shell resource of 28,396 tonnes at a grade of 3.28g/t (2,990 ounces) above a 2.0g/t cut off. This does not constitute a reserve as no formal pit design has been undertaken.

Mineral Resource Estimate for the Sand Prince West Lode
Cut Off Grade	Category	Tonnes	Grade $(g/\ell \, Au)$
$1.0$ g/t	Measured	53.061	2.72	4,640
	Indicated	46.097	2.15	3.186
	Inferred	21,993	2.11	1,492
	Total	121,150	2.39	9,318
$2.0$ g/t	Measured	33.024	3.47	3,684
	Indicated	23,125	2.88	2,141
	Inferred	11.293	2.74	995
	Total	67,441	3.15	6,820

Sand Prince West Mineral Resources listed above were estimated by Mr David Princep, an employee of Hellman & Schofield Pty Ltd, using data prepared by Reed Resources Ltd and geostatistical modelling by Hellman & Schofield. Reported tonnages and grade are in accordance with the JORC Code (December 2004). Mr Princep is a member of the AusIMM and has sufficient experience relevant to the style of mineralisation reported to qualify as a Competent Person as defined in the Code. Mr Princep consents to the inclusion in this report of the above Resource information in the form and context in which it appears.

Nickel Laterite Exploration (100% RDR)

A second phase of RC drilling was completed during the quarter to continue testing the weathered profile above the Walter Williams Formation for lateritic nickel mineralisation. The Walter Williams Formation is the same stratigraphic unit that hosts the Goongarrie, Cawse, and Siberia lateritic nickel deposits.

A total of 614m was drilled in 14 RC holes (NLC004 to NLC017) on an approximate 800m x 160m drill pattern. Drill access was hampered by terrain conditions, and some holes were drilled where access was available, rather than at planned positions on laterite ridges. No drilling has been done on an adjoining Mining Lease, M29/186, which is under joint venture with Heron Resources Limited, and no drilling was done on the southern 1km of strike of the Walter Williams Formation.

This drilling has confirmed the presence of two separate horizons of lateritic nickel mineralisation, with a near surface 'A zone' and a lower 'B zone'. Grades in both zones are similar. Analytical results, summarised in the table below, indicate substantial thicknesses of nickel enrichment in the weathered profile with best intersections of 12 metres at 0.76 % Ni (NLC007, open at depth), 26 metres at 0.62 % Ni (NLC009) and 35 metres at 0.53 % Ni (NLC017).

The exploration target at Comet Vale is a 20-30 Mt deposit with a grade of the order of 0.5-0.6 % Ni (unscreened) for a potential resource similar in style to that at Heron Resource's nearby Goongarrie and Highway deposits. Drilling to date indicates that the targeted grades are achievable, with possible higher grade zones, but additional closerspaced drilling is required for adequate testing of a potential resource.

Further infill drilling on a 400m x 80m grid pattern is needed to satisfy the JORC requirements for calculation of an Inferred Mineral Resource. Such drilling will focus initially on the area between 6684500N and 6685250N and then extend throughout the full 4.5 km strike length of the Walter Williams Formation within Reed's Comet Vale tenements.

Hole ID	Northing	Easting	From	Tо	Width	Nickel	Cobalt	Zone
	GDA94	GDA94	(m)	(m)	(m)	%	%
NLC004	6684057	320240	48	57	9	0.45%	0.01%	B
NLC007	6682609	320704	3	15#	12	0.76%	0.03%	в
NLC008	6682598	320528	8	20	12	$0.55\%$	0.04%	в
NLC009	6682608	320617	3	13	10	0.43%	0.02%	Α
			15	41	26.	0.62%	0.02%	в
NLC010	6682579	320388	27	43	16	0.43%	0.02%	в
NLC011	6682579	320388	27	43	16	0.43%	0.02%	Α
NLC012	6683163	320123	13	20	7	0.46%	0.02%	Α
			32	40	8	0.53%	0.00%	в
NLC014	6685609	319527	4	18	14	0.43%	0.07%	Α
			24	41	17	$0.37\%$	0.04%	в
NLC015	6685647	319370	8	22	14	$0.47\%$	0.06%	Α
			24	35	11	0.49%	0.06%	в
NLC017	6684975	319883	3	38	35	0.53%	0.03%	Α
			45	60	15	0.44%	0.02%	в

Significant Nickel Intersections, Phase 2 RC Drilling Program $(0.4 %$ Ni. no top cut)

Collar coordinates are for the Map Grid of Australia, 1994 - Zone 51

All depths in metres; $# = bottom of hole.$

Drill samples analysed by Kalgoorlie Assay Laboratory using X-Ray Fluorescence Spectrometry (XRF) for a standard 12-element suite, with the sample in the form of a pressed powder disc. No screen upgrade has been applied.

Nickel laterite exploration at Comet Vale, showing drill hole locations and significant intersections in relation to anomalous nickel-in-soil from previous sampling.

Regional Exploration

During the quarter, the Company continued its regional exploration program with 1:2,000 scale geological mapping of the well-exposed areas to the east of the Goldfields Highway. This program included collection of 163 grab samples for multi-element analysis.

Integration of the mapping and grab sampling with processed airborne geophysical survey data has resulted in a number of targets with potential for nickel-copper sulphide mineralisation and gold-copper mineralisation. Some of the key gold-copper targets coincide with major structures interpreted from the airborne geophysical data.

The regional work has confirmed that the Lake View line of workings (historically mined for gold and tungsten) is along a major shear zone, at least 4 km long, with a complex network of quartz reefs with varving Au-Cu-W-Ag mineralisation. Some of the better results of grab sampling of outcropping quartz reefs, include 9.6g/t Au; 36.4 g/t Au and 1.58 % Cu ; and 4.39 g/t Au and 0.7 % Cu.

Two north-south trending sub-parallel quartz reefs up to about 1.5 metres wide have been detected over about 2 km along strike with grab samples returning up to 6.83g/t Au and 10.1 % Cu; 27.1 a/t Au and 0.17 % Cu; 22.6 a/t Au and 0.2 % Cu; 0.59 a/t Au and 2.73 % Cu; 4.46 g/t Au and 5.0 % Cu; and 113 g/t Au.

In addition to sampling of the the above structures, grab samples from a 0.3 metre wide, northwest trending, gossanous shear zone in komatiitic rocks returned grades of up to 58.3 g/t Au and 6.25 % Cu; and a grab sample from a 0.5m wide shear zone in the only outcrop within a 1500 metre long gold-in-soil anomaly returned 46.6 g/t Au.

Further detailed mapping is planned to better identify these targets and to plan an RC drilling program to test the subsurface expression of these structures.

Gold exploration at Comet Vale, showing auger soil sampling anomalies and grab/rockchip sample locations and significant intersections in relation to previous drilling.

MT FINNERTY PROJECT

Iron Ore Joint Venture (Portman earning 80% Fe rights)

Reconnaissance mapping and sampling throughout the northern and central parts of the Mt Finnerty Project by Portman Limited has identified hematite/martite enriched lateritised BIF to goethitic cap rock and geothite-cemeted scree (canga) at a number of locations spread over a total strike length of about 16 km. This is additional to previously reported surface iron enrichments.

Grab sampling has returned grades of up to 64 % Fe (most samples in excess of 55 % Fe) over sample widths of up to 10 metres across strike. Analytical results for the grab samples are summarised in Appendix 1.

Portman's work has confirmed the presence of at least two parallel formations that show surface enrichment of the host BIF. In one of these formations, which passes to the east of Mt Finnerty, one stretch of samples collected over about 2 km strike length have returned an average of 58.3 % Fe (54.5 - 61.3 % Fe, 12 samples) and a second suite of samples collected over about 700m strike length have averaged 57.4 % Fe (55.4 - 60.2 % Fe, 5 samples). The two sets of samples are from the same formation but separated by about 1 km, along the strike of the formation.

Other zones identified by Portman with surface enrichment have been detected ~7 km south of Mt Walton (59.5-61.8 % Fe, 3 samples) and about 1 km to the north of Mt Finnerty (64.1-64.3 % Fe, 2 samples).

Mapping and sampling to the south of Mt Finnerty confirmed a previously identified zone of enrichment (first announced 25 November 2004) with samples returning 54.1 to 63.7 % Fe (11 samples) collected over about 4.5 km strike length, and commencing about 1.5 km south of Mt Finnerty. South of the sampled interval, the host formation is covered by alluvium and colluvium, but aeromagnetic survey data indicates that the host unit continues for about 10 km to another zone of iron-enriched outcrop adjacent to the Trans-Australian Railway line (at the discovery location in E15/621).

The latest sampling has confirmed that the surface-enriched BIF tends to have acceptable phosphorous levels with most samples containing less then 0.08 % P, and over half of the samples containing less than 0.05 % P.

Portman plan to test the more prospective zones of surface enrichment with an RC drilling program that is scheduled to commence when a drill rig becomes available.

Exploration Licences containing the northern and central zones of surface iron enrichment (E16/272, E16/308) have been endorsed for iron ore under section 111 of the Mining Act, and Mining Lease applications have been lodged over most of the enriched sections north of Mt Finnerty.

Portman Limited grab sample locations with iron content (% Fe) from the northern and central parts of the Joint Venture area within Exploration Licences E16/272 and E16/308 (results listed in Appendix 1).

Regional Exploration (RDR 100% all other minerals)

Reconnaissance type exploration for nickel sulphide mineralisation accompanying the ultramafic sequences within the Watt Hills Greenstone Belt continued during the quarter with the drilling of nine Reverse Circulation Percussion (RC) drill holes for a total of 1,536 metres. Depth of oxidation is highly variable (up to 70 m down hole) and one of the holes was abandoned due to clays and hole collapse.

The drilling program was designed to test EM targets that had been modelled by Southern Geoscience Consultants from a surface TEM survey conducted earlier in the year. The TEM survey was restricted to favourable ultramafic flow sequences that had been interpreted from previously acquired aeromagnetic survey data and confirmed, where possible, by geological mapping and rock chip sampling.

The RC drill holes are spread over the full length of the project and include one hole to test an EM anomaly coincident with an ultramafic unit mapped in the centre of the greenstone belt and two holes to test EM anomalies on the eastern flank, about 5 km north of Jaurdi Siding.

Initial results from the RC drilling program indicate that the ground geophysical survey was successful as trace to disseminated sulphides, although mostly barren pyrite, were intersected in most of the drill holes. The two holes to the north of Jaurdi Siding intersected approximately 5 % pyrite in two separate sections in each hole and the TEM anomalies are possibly due to these sulphides.

The drilling program was not intended to be a detailed survey of the basal contacts of MgO-enriched ultramafic flow sequences, which is the favoured position for the accumulation of nickel sulphides. High MgO ultramafic rocks that are favourable for nickel sulphides were intersected in several of the drill holes with thick sequences of these rocks being intersected in two of the drill holes. An interpreted basal contact of these ultramafics was tested in one of the drill holes but only barren disseminated sulphides were recorded.

The drilling has confirmed the presence of high MgO ultramafics, which are favourable hosts for nickel sulphides. It has also provided essential information on the facings of the ultramafic flow sequences, which will assist in defining the position of prospective basal contacts.

The exploration program will now be able to progress beyond the reconnaissance phase to more thoroughly test basal contacts of the ultramafic units for nickel sulphide mineralization. This will include a reinterpretation of the aeromagnetic and other geophysical data in the light of the recent RAB and RCP drilling data.

Location of key ground TEM targets that have been drill tested within the Mt Finnerty project.

BARRAMBIE PROJECT (100%)

PRE-FEASIBILITY STUDY

During the quarter, the Company progressed a Pre-Feasibility Study (PFS) to determine the viability of mining and constructing and operating a plant to produce vanadium pentoxide.

Open-pit optimisation, design and scheduling on the oxide resource were completed. Operating and capital costs based on a design by Sinclair Knight Merz have been received and incorporated into the financial modelling. All other work packages are complete and the final study document is due at the beginning of February, after which the results will be announced.

Key input factors for the Pre-Feasibility Study are:

Mill throughput Magnetite recovery Grade of magnetite concentrate $V_2O_5$ flake production

$2.0$ Mt $p.a.$ 36 %, equivalent to about 720,000 t p.a. $1.37\%$ V₂O₅ 20,000,000 lbs p.a.

Market Price

The mean price of vanadium pentoxide flake is US\$8.00/lb, as quoted by Ryans Notes as at 30 January 2006.

CORPORATE

Titan Resources Limited

The Company announced on 15 September 2005 that it had been granted a call option by Consolidated Nickel Pty Ltd to acquire 60 million shares in ASX listed Titan Resources Limited (Titan) and that the call option was exercisable in the event that Reed Resources makes an off-market bid to acquire all of the issued share capital of Titan.

The Company further announced on 11 October 2005 that a Confidentiality Agreement had been entered into between Reed Resources and Titan and that the Board of Titan had indicated that it would provide Reed Resources with access to information and relevant personnel so that Reed Resources could determine whether or not to make a bid for Titan.

The Board of Reed Resources resolved not to make a bid for Titan or exercise the call option and the call option expired.

Share Issue

The Board of directors of Reed Resources Ltd announced on 21 December 2005 that it issued 5,000,000 fully paid ordinary shares in the Company at \$0.20 each, to an associate of joint venture partner, Kingsrose Mining Pty Ltd (ACN 112 389 910). The issue was for cash consideration, which proceeds shall be applied toward working capital for the Company.

Annual General Meeting

The Company's Annual General Meeting of Shareholders was held at 3pm on Thursday 10 November 2005 at The Western Australia Club, 101 St George's Terrace, Perth, Western Australia. All resolutions were passed on a show of hands.

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 and information that relates to Exploration Results have been compiled by Peter Collins (BSc(Hons), PhD). Dr Collins is a member of the Australian Institute of Geoscientists and is a director of Reed Resources Ltd. Dr Collins has sufficient experience which is relevant to the styles of mineralization and types of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results Mineral Resources and Ore Reserves'. Dr Collins consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Reed is very encouraged by the Exploration Results included in this report, which will be used as a guide for planning future drill hole locations. Although Reed and Portman remain optimistic about the potential of the Mt.Finnerty tenements, any reference to the term "iron ore" in this report is conceptual in nature. Use of the term "grade(s)" is not intended to represent the grade of a resource; and an "average" Fe content is calculated as an arithmetic mean of the samples indicated.

APPENDIX A - MT FINNERTY PROJECT

		Samples with greater than 54 % Fe ingringmed
Sample	$GDA-E^{(2)}$	$GDA-N^{(2)}$	Fe %	$P\%$	$SiO2$ %	$Al_2O_3$ %	Mn %	LOI %
A 43845	226505	6603685	58.40	0.069	7.08	1.32	0.038	7.45
A43846	226387	6603909	55.47	0.099	11.53	1.53	0.041	7.04
A 43847	226223	6604099	60.29	0.043	5.45	2.16	0.025	5.18
A43848	226200	6604129	55.61	0.028	10.11	1.14	0.017	8.72
A43849	226122	6604152	57.35	0.059	6.38	1.66	0.028	9.45
A43850	224982	6605975	59.70	0.030	4.07	1.43	0.019	8.65
A 43851	225145	6605739	58.04	0.097	3.98	2.87	0.023	8.59
A 43852	225226	6605624	58.64	0.027	8.57	2.30	0.043	4.56
A43853	225301	6605438	58.12	0.180	5.22	1.79	0.016	9.07
A 43854	225346	6605342	56.00	0.025	6.31	2.94	0.029	9.55
A 43855	225458	6605211	60.11	0.017	4.04	0.87	0.042	8.66
A43856	227353	6602959	47.45	0.077	25.52	0.29	0.018	5.99
A43857	227496	6602741	31.41	0.054	52.13	0.21	0.014	2.41
A 43858	227217	6603007	36.81	0.115	38.16	1.95	0.015	6.72
A 43859	227181	6603020	44.48	0.119	29.26	0.80	0.005	5.79
A 43860	224858	6606296	57.60	0.050	5.53	2.76	0.016	8.55
A43861	224839	6606444	59.62	0.023	5.11	0.42	0.011	8.93
A 43862	224647	6606712	61.30	0.011	2.58	0.50	0.044	9.01
A43863	224589	6606827	58.86	0.019	8.53	0.06	0.064	6.23
A43864	224407	6606997	57.74	0.013	7.79	0.44	0.022	8.95
A 43865	224658	6606795	54.54	0.069	5.62	4.91	0.031	10.65
A43866	221791	6610768	44.33	0.143	28.85	0.58	0.017	6.57
A43867	225102	6604083	64.32	0.036	2.14	0.67	0.014	4.95
A43868	220921.8	6612648	60.45	0.096	2.63	2.36	0.116	7.93
A43869	220993.6	6612537	59.86	0.100	3.46	2.51	0.117	7.77
A43870	221058.7	6612390	61.80	0.088	2.03	0.80	0.013	8.32
A 43871	222627.9	6608746	58.82	0.038	3.63	1.63	0.091	10.14
A 43872	222755.4	6608450	55.95	0.127	9.36	0.97	0.081	9.08
A 43873	225189.1	6603900	64.06	0.075	2.60	0.97	0.016	4.47
A 43874	225478.3	6602991	60.70	0.056	6.25	0.64	0.043	5.91
A 43875	225484.2	6602944	48.49	0.020	21.44	0.28	0.043	8.70
A 43876	225686.4	6601390	54.15	0.021	8.30	6.85	0.009	6.78
A 43877	225910.2	6601008	58.40	0.046	5.62	5.09	0.023	5.14
A 43878	225842.4	6600822	57.65	0.112	7.03	2.79	0.031	7.02
A 43879	226308.5	6600759	56.54	0.054	8.10	3.81	0.016	6.33
A43880	226463.6	6600586	61.02	0.053	3.43	3.05	0.015	5.69
A 43881	226562.5	6600478	63.71	0.046	2.63	2.11	0.010	3.74
A 43882	227100.2	6599663	62.58	0.033	4.16	2.94	0.023	2.92
A43883	227448.6	6598683	57.85	0.041	6.29	3.04	0.014	6.85
A 43884	227560.8	6598576	60.69	0.041	4.91	2.35	0.010	5.29
A 43885	228105.3	6597954	59.90	0.243	2.58	1.46	0.019	9.45
A43886	228211.8	6597789	54.84	0.023	7.38	6.25	0.008	6.94
A 43887	229543.9	6593904	47.36	0.011	7.96	8.43	0.045	11.7

Analytical data⁽¹⁾ for Portman grab sample traverses (all samples)
Samples with greater than 54 % Ee highlighted

1. Fe, P, SiO₂, Al₂O₃, Mn have been determined by X-Ray flourescence spectrometry; LOI (loss on ignition) has been determined by thermo-gravimetric analysis.

2. Sample location coordinates are for the Map Grid of Australia, 1994 -Zone 51

Grab sample assay data tabulated above has been compiled by Dr Peter Collins from Portman Iron Ore Limited's "Mt Finnerty Joint Venture Report for December 2005". The results achieved in the sampling traverses may not necessarily represent what will be intersected at depth in a pending RC drill program, nor can they be considered an estimate of resources.