NEOMETALS LTD — Interim / Quarterly Report 2007

Apr 26, 2007

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 2007

COMET VALE PROJECT

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

On the 2 Level, shrinkage mining of stope SG2A was completed, with bogging of the broken ore stocks scheduled to commence in May. Development of the SG2B and C blocks are continuing with good results from bulk sampling. Level development southwards has now defined the Sand George lodes over 180 metres and remains open to the south.

Development on the 3 Level has continued as a matter of priority towards the Sand George resource. A rectifier/charger station was installed for operation of the 3 Level locomotive.

Summary of mining activity:

• 2 Level 85m of level development 2.811 ore tonnes
• 132m of level development 3 Level 1.491 waste tonnes

Long section of the Sand Queen Gold Mine (looking west), showing the Figure 1 position of current development of the Sand George lodes on the 2 and 3 Levels (white) and planned future development (yellow).

Milling

During the quarter a total of 4,161 tonnes of ore was milled at an average grade of 7.67g/t Au for 1,026 ounces gold (RDR share 493 ounces). The overall grade was 16 % above the predicted bulk grade of 6.64 g/t Au. The predicted tonnes were within 1 %. A total of 63 belt samples were collected during the milling campaign for grade reconciliation.

Reconciled tonnes and grades are:

High grade $-2,316$ t @ 8.5g/t Au (predicted 7.33g/t Au) SG2B/C development - 455 t @ 12.2g/t (10.8g/t) Low grade $-1,387t$ @ 4.79g/t (3.52g/t)

The cash cost per ounce was A\$456, and the average price received was A\$817. "Cash costs" include all expenditures by Reed, directly incurred on mining and milling, plus overheads and all royalties. The cash cost continues to decrease as the proportion of stoped ore to development ore increases as mining of the Sand George lodes reaches a more advanced stage.

Mining Forecast

The level of the underground work is steadily increasing as more headings are opened up on the 2 and 3 levels. Mining of the Sand George resource on 2 Level will commence in the partially developed 2B and 2C stopes, as will extraction of the 2A stope. Development in ore will continue southwards on 2 Level which should define additional stopes.

A total of 148 bulk and 113 face samples were collected for grade control. Bulk samples along 2 Level south ore drive within the porphyry reef (D3) have averaged 11.1 g/t Au at ~250% dilution. Face sampling and back calculations indicate the reef is in the order of an ounce/tonne over 0.3-0.8 m wide (Figure $2)$ .

Development will continue on the 3 Level to provide access to the Sand George lodes between the 2 and 3 Levels.

The next milling campaign is scheduled for June 2007, the size of each campaign is expected to increase as mining of the Sand George lodes increases to full production in the September quarter.

Figure 2 Interpreted plan of assay results of bulk samples from part of the 2 Level south ore drive.

Regional Exploration

During the quarter a total of 1,483 metres of RC drilling was completed in 23 holes at three prospects (Table 1).

Horle	No. of holes	Metres drilled	Composite samples	Single samples	Total samples
JVC012-023	12	519		208	208
WTC006-014		765		259	259
ETC001-002		199	51	66	117
Total		1483	51	533	584

Princess Grace Drilling:

During the quarter, 12 RC holes $(JVC012 - 023; 519 m)$ were drilled at the Princess Grace prospect to test for continuity and down dip extension of the lodes. The Princess Grace lode(s) has now been intersected over 250 m of strike and 50 m down dip. Gold mineralization is within quartz veins alongside porphyry intrusives (Figure 3).

Results from the latest drilling include 7m $@$ 3.22 g/t Au from 30 m down hole, 5 m @ 1.79 g/t Au from 18 m, 3 m @ 1.43 g/t Au from 53 m, and 1 m @ 1.42 g/t Au from 40 m (Table 2).

Resource modeling and extensional drilling is scheduled to start in late April 2007.

HolelD	eolar Nontain $c^{(0)}$	ealer Eastin $\frac{9}{(4)}$	interval Erom (GO)	Inferva 40.(M)	Intersecti សព Width (m)	Grade (ej(tAu)
JVC012	12835	7646	19	22	3	0.57
JVC013	12835	7655	19	22	3	0.41
JVC015	12887	7656	11	16	5	0.54
JVC017	12936	7645	18	23	5	1.79
JVC019	12936	7624	30	37	7	3.32
JVC020	12937	7609	41	41	1	1.42
JVC023	13074	7584	53	56	3	1.43

		Table 2: Princess Grace prospect significant intercepts.

1) Collar coordinates are for a local grid. All holes collared at 60° toward 089° on the local grid.

2) Samples of RC drill chips were analysed by Amdel Laboratory Services using a 50g Fire Assay charge

Interpreted cross sections of mineralized quartz lode adjacent to Figure 3 porphyry intrusives at the Princess Grace prospect.

Long Tunnel exploration drilling

Two RC holes (ETC001-002; 199 m) were drilled to test the down-dip extension of mineralized quartz reefs along the Long Tunnel/Lake View line of workings; testing for gold, tungsten and copper mineralisation. Assay results include 1m @ 23.3 g/t Au at 34-35 m down hole within an ultramafic actinolite schist (Table 3). Results of single metre splits of composite samples are pending, including 4m @ 1.22 g/t Au from 52 m in ETC001.

Follow-up RC drilling along strike is scheduled for late April early May 2007 and results will be combined with 3-D modeling of the extensive Long Tunnel workings.

Holeib	Gollar Coller Northing Easting		Interval From Im	Interval Her m	Intersection Width (m)	Grade (g/t Au)
ETC001	14000	9189	34	38		6.05
	including		34	35		23.3
ETC002	14049	9334	59	61		0.28

Table 3: Long Tunnel prospect significant intercepts.

1) Collar coordinates are for a local grid. ETC001 collared at -55° toward 000° and ETC 002 collared at -55° toward 180° on the local grid.

2) Samples are of RC drill chips analysed by Amdel Laboratory Services using a 400g 1hr Leachwell technique.

Lady Margaret Exploration Drilling:

During the quarter, 7 RC holes were drilled to test anomalous surface geochemistry and rock chip sampling (up to 19.2 g/t Au) and previous drilling which included 1m @ 6 g/t Au.

Although quartz reefs and intrusive porphyries similar to the Sand Queen lodes were intercepted, no significant results were obtained from this drilling.

Completion of detailed geological mapping (1:250) will aid a 3-D interpretation of the prospect.

Forward plan

Continuing regional exploration is planned to include extensional and down dip drilling at Princess Grace prospect followed by pit optimisation studies for the Sand Prince West and Princess Grace prospects. Detailed geological mapping of the Lake View - Long Tunnel workings and of the Lady Margaret area will aid compilation of a 3-D model for planning of follow-up RC drilling.

MT FINNERTY PROJECT

Key developments at the Mt Finnerty project have been the signing of a joint venture agreement with Western Areas to explore for nickel sulphides and completion of another phase of exploratory drilling for iron ore by Portman Limited.

The agreement with Western Areas, a successful and progressive nickel producer, particularly with its Flying Fox nickel mine, and its experience and success in nickel exploration in adjacent greenstone belts (Figure 4) confirms the Board's view that the Mt Finnerty project covers one of the most underexplored, fertile ultramafic sequences in the Eastern Goldfields.

Western Areas Nickel Joint Venture

The main terms of the agreement are:

• Western Areas can earn an initial 51% interest in the nickel rights to the tenements by \$1.5 million expenditure within a 3 year period.
• Western Areas can earn an additional 14% interest by further expenditure of \$1.5 million on the tenements
• Western Areas can withdraw from the agreement at any time after reaching a minimum expenditure of \$200,000 on the tenements.
• Western Areas and Reed will negotiate the terms of a formal joint venture agreement to exploit and nickel deposits discovered on the tenements

Nickel sulphide exploration

A review of Reed's geological mapping, initial drilling program and interpretation of aeromagnetic survey data, and of previous nickel sulphide exploration, confirmed the presence of a coherent sequence of spinifextextured komatiitic ultramafic flows along the western flank of the greenstone belt (Figure 5).

Exploration by Western Areas during the quarter has mostly involved compilation of aeromagnetic survey data (TMI) and of regolith maps covering the joint venture tenements for planning of future exploration. The regolith maps will be used as a base onto which basalt-ultramafic contacts, as inferred from the TMI, will be plotted to control a soil sampling program.

Three target areas have been identified, but initial work will focus on the two southern targets (Figure 4). At the southernmost target (Target Area 1) there is approximately 6 km of strike length of untested, intact basal contact of a high magnesian ultramafic formation (Western Ultramafic Unit - WUM) that can be effectively prospected by further soil sampling.

Exploration of Target Area 2, north of the railway line, is complicated by variable but extensive laterite cover. One such area over the Central Ultramafic Unit (CUM) will require bedrock drilling over at least 3km of strike to elucidate the ultramafic stratigraphy.

• Figure 4 Location of three nickel sulphide target areas within the Reed Resources/Western Areas joint venture project, in relation to nearby nickel mines and prospects
• Figure 5 Tenement plan of the Mt Finnerty Project showing the tenements subject to a joint venture with Western Areas NL and Interpreted bedrock geology of the Mt Finnerty Project (interpretation by Southern Geoscience Consultants) with the areas of key interest highlighted.

Iron Ore Joint Venture

(Portman Iron Ore Ltd earning 80% Fe rights)

Portman completed seven holes of RC drilling for 465 m at the FIN7 prospect. This target consists fo goethite-hematite enriched iron formation over a strike length of 700 metres and up to 30 metres wide. Previous surface sampling returned values up to 65 % Fe.

Drilling was undertaken along lines spaced 200 metres apart to test the lateral and depth extent of observed enrichment. The drill holes intersected variably lateritised and enriched banded iron formation and clays, which may represent deeply weathered mafic and ultramafic rocks.

Assaying of ironstone intercepts has confirmed continuity of mineralization at depth but not of sufficient grade to plan further work on the FIN7 target at this The best intercepts (58% Fe cut-off, no internal waste) in two of the stage. RC drill holes are summarized below:

Hole ID	$\mathbf{m}$	From To Intercept Fe SiO2 Al2O3 $ \ln \ln = \ln $	$\begin{bmatrix} 0 & 0 \ 0 & 0 \end{bmatrix}$	$\frac{1}{2}$ $\frac{9}{6}$ $\frac{9}{6}$		Ð	$\frac{9}{6}$	0) ( $\sim$ $\sigma_{f_0}$
MFRC033	1 Q	12			4.7	0.066	በ 11
MFRC034	26	14	h4.	8.5	5.2

Figure 6 Location of the FIN7 prospect and of the position of drill holes.

Figure 7 Interpreted sections of drill hole intercepts of Fe-enriched banded iron formation at the FIN7 prospect.

Forward plan

Nickel sulphide exploration is scheduled soil sampling is proposed south of the railway line, soon after Easter, as follow-up and extension to the work previously completed by Reed last year. Drill testing along the WUM will proceed when geochemical surveys have been generated.

Modeling and resource evaluation of some of the more advanced gold prospects at Mt Finnerty (eg. Flinders, Tasman propsects) is scheduled for the June quarter.

BARRAMBIE VANADIUM PROJECT (Reed 100%)

Feasibility Study

During the quarter, the Board appointed Mr Ken Hellsten of Hellsten Resource Management Services (HRMS) as project manager, and assist Reed to establish the study team and prepare a program and budget. A drilling program was subsequently initiated to provide infill and extension drilling of the Barrambie tenements to enable a revised resource estimate to be completed and samples collected for metallurgical testwork.

The study team comprises SKM (study management and controls, engineering and infrastructure), Snowden Group (resource and mining studies), METS (process design and review), Aquaterra (water and environmental studies and approvals) with geological and field support by Reed Resources.

An analysis of the pre-feasibility Study (PFS) and recent market information was conducted in early 2007 and an assessment of the key issues, risks and opportunities provided to Reed management. HRMS recommended the Feasibility Study (FS) proceed as a staged program with Phase 1 comprising resource drilling, assessment of ore types and feed options, metallurgical testwork (with a focus on optimising the beneficiation process), preliminary environmental assessment, infrastructure studies and process water appraisal. In this way the up-front expenditure is minimised during the early stages of the Feasibility Study (FS) until the process flowsheet is fixed and the project economics are considered sufficiently sound to warrant progressing to the more engineering intensive and costly Phase 2 program.

Phase 1 of the FS is gaining momentum with the resource drilling underway and making better than expected progress, planning of resource modelling, metallurgical testwork, water and environmental studies and infrastructure requirements on track and a strong project team established using recognised resource industry consultants.

Exploration results

A total of 142 RC drill holes were completed in the quarter for a total of 10,340 metres of drilling. In the Gulf, Cove and Bay sections of the deposit the drill lines are spaced at 200 and 400 metres apart. In the Bight and Strait sections at the northern end of the deposit, where there has been no previous drilling, drill lines are spaced at intervals of 800 metres (Figure 8).

Figure 8 Position of the local grid and subdivision of the Barrambie deposit into five segments. Distribution of vanadiferous magnetite mineralisation is based on interpretation of aeromagnetic survey data.

The drilling and assay results have confirmed the exceptional tenor and continuity of the massive and disseminated vanadiferous ilmenomagnetiteilmenite mineralisation that makes up the Barrambie deposit. The massive bands range from about 1 metre to in excess of 20 metres true thickness with disseminated mineralisation in the intervening material between massive bands. There is one thick massive band on the eastern edge of the deposit (Eastern Band) and, to the west, there is a series of narrower massive bands with intervening disseminated mineralisation that is referred to as the Central Bands (Figure 9).

Results for first 42 RC drill holes (BRC017-BRC058) were announced to the market on 2 March 2007. Drilling results for the next 50 drill holes (BRC059-084, BRC096-102, BRC104-121) were announced to the market on 4 April 2007. Results for the remainder of the drill holes, will be announced in the next week following receipt of all assay results.

Drill section 11000N in the Bay segment of the Barrambie deposit showing Figure 9 interpreted distribution of high-grade bands ( $>0.55$ % $V_2O_5$ ) including the massive Eastern Band and high-grade bands among disseminated mineralisation making up the Central Bands to the west (interpretation by Bryan Smith Geosciences). Much of the intervening material between the high-grade bands has grades in the range $0.4$ -0.55 % $V_2O_5$ .

In addition, 568 m of diamond core drilling in 8 holes was completed for geotechnical, geological and density data as well as provision of sample material for metallurgical testwork. This drilling will provide the data required for pit design, materials handling and comminution testwork.

Forward work plan

Drill results are currently being compiled and validated for inclusion in a comprehensive data base from which a geological model of the Barrambie deposit will be constructed in preparation for resource modelling by Snowden.

A further phase of infill drilling totalling 13,000 metres will be undertaken in selected areas later in Phase 1 (May - July) to ensure sufficient resources at an indicated status for at least 15 years of operation and definition of measured resources in selected areas for the initial 2-3 years of operations.

A large diameter (0.9m diameter) Calweld drilling rig has been secured to complete approximately 280 metres of drilling across the deposit to provide large scale samples for metallurgical testwork. This rig is capable of drilling to the base of complete oxidation $(40 - 50m)$ and will provide representative samples from a range of depths within both the Central and Eastern Zones. A total of approximately 500 tonnes of material will be collected with at least 40% expected to be $>0.5\%V_2O_5$ .

A Mineral Resource estimate is expected to be available early in the September Quarter.

OTHER PROJECTS

the quarter, the Company continued discussions with the Durina Ngaanyatiarra Land Council for an access agreement over an area along the northern contact (~35 km) of the Bell Rock Range intrusion (Figure 10), which is in the expedited procedure for grant in the September quarter.

Figure 10 Location of tenement in the Musgrave province.

Exploration of the Mertondale project (RDR 50%) (Figure 11), 45 km northeast of Leonora, included 1,854 metres of RC and aircore drilling at selected targets throughout the project area. Some 400 samples have been submitted for assay and results are expected early in the June Quarter. Further activity will depend on the results of the current drilling program.

FIGURE 11. Location of tenements making up the Mertondale Project and its position in relation to other gold deposits in the Leonora and Mertondale areas.

CORPORATE

Placement and Shareholder Purchase Plan

During the quarter placed 4.761.904 shares at \$0.42 (42 cents) per share to raise \$2.0 million before costs to RAB Special Situations (Master) Fund to subscribe for. The placement was arranged by Transocean Securities Pty Ltd.

The Board of Directors have also determined to make an offer to eligible shareholders, pursuant to a Share Purchase Plan (SPP), to subscribe for additional fully paid ordinary shares in the Company worth up to \$5,000 per eligible shareholder. The offer is limited in aggregate to \$5,000,000, being 11,904,762 shares at \$0.42 (42 cents) per share. The SPP will be fully underwritten by Transocean.

Applications for the shares under the SPP will be accepted by the Company until 5pm WST (or WSDST as applicable) on Monday 7 May 2007.

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

GReed

Chris Reed EXECUTIVE DIRECTOR

Geological aspects of this report that relate to Exploration Results have been compiled by Dr Peter Collins (MAIG), a Director of Reed Resources 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.

Although Reed Resources remain optimistic about the potential of its exploration projects, any reference to the terms "ore, "high-grade" and "low-grade" in this report is conceptual in nature. Use of the term "grade(s)" is not intended to represent the grade of a resource.