NEOMETALS LTD — Interim / Quarterly Report 2008

Mar 6, 2008

Reed Resources Ltd

ACN: 099 116 631 Half-year report for the half-year ended 31 December 2007

Reed Resources Ltd Directors’ Report

Directors’ r eport

The directors of Reed Resources Ltd submit herewith the financial report for the half-year ended 31 December 2007. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:

The names of the directors of the company during or since the end of the half-year are:

Name

Mr D. J. Reed Executive Chairman Mr C. J. Reed Managing Director and Company Secretary Dr P. L. F. Collins Non-Executive Director Mr I. C. Junk Non-Executive Director

Review of operations

Reed Resources’ exploration and development activities during the half year have continued to focus on advancing the Barrambie vanadium project and the Comet Vale gold operations. Portman Iron Ore Ltd and Western Areas NL are continuing with exploration of the Mt Finnerty project for iron ore and nickel sulphide mineralisation, respectively, under joint venture agreements. The Bell Rock Range project in Central Australia is progressing steadily.

BARRAMBIE PROJECT (100%)

Definitive Feasibility Study

During the period, the Definitive Feasibility Study (“DFS”) proceeded as scheduled with the Phase 1 program completed, comprising resource definition drilling, assessment of ore types and feed options, metallurgical test work focusing on optimising the beneficiation process, preliminary environmental assessment, infrastructure studies, and appraisal of process water. Phase 2 of the DFS, which was awarded to Sinclair Knight Merz (“SKM”) proceeded as scheduled with the study progressing in the areas of resource evaluation, mine planning, environmental approvals, metallurgical test work, process optimisation and plant design. Sinclair Knight Merz (“SKM”) was awarded the process evaluation and engineering design of Phase 2 of the study during the half year.

Metallurgical Test Work

Beneficiation Test Work: Beneficiation test work, supervised and directed by SKM, continued at AMDEL’s (IML) Perth laboratory and at the mineral processing facilities of Nagrom in Kelmscot, WA.

The test work was designed to test the variability of the ore in order to optimise the beneficiation, roasting and vanadium product flow sheets and enable selection of crushing, grinding, beneficiation, concentrating, roasting and vanadium production equipment. The test work used composite ore samples obtained by both a Caldwell auger rig and selected diamond drill core from the Eastern and Central Bands of the Barrambie deposit. Amdel commenced test work on five of about 25 samples during November. This testing is forecast to continue to February 2008.

Roasting Test Work: An initial baseline salt (sodium carbonate) roast test work program was performed at CSIRO’s Bentley laboratories. Results were encouraging with over 90 % extraction of V2O5 from the Central Bands composites. The test work provided supporting information to enable conditions for pilot plant test work to be performed in Germany to be specified.

Mineral Resource Estimate

Snowden Mining Industry consultants (Snowden) completed an initial Mineral Resource estimate for the Barrambie deposit (reported in August 2007). The total Indicated and Inferred Mineral Resource is estimated at 23.6 Mt at 0.83% V2O5, 17.9% TiO2 and 48.6% Fe2O3 at a block cut-off grade of 0.5% V2O5. This cut-off grade appears to best represent the higher-grade massive magnetite bands that will be the target for any selective mining of the deposit. It is also the highest grade of any of the major vanadiferous magnetite deposits in Western Australia.

The estimated resource grade is consistent with the company’s aim of achieving a head grade of about 0.8% V2O5 as feed for a processing plant.

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Reed Resources Ltd Directors’ R eport

Project Management

The Company appointed Bill Crossley as Project Manager for Phase 2 of the Definitive Feasibility Study. Bill has had previous experience in taking a number of projects from feasibility through to operations, including the Galtee More Gold Mine Mount Magnet, W.A. and Macraes Gold Mine in New Zealand.

Market Price

The current price of vanadium is quoted by the Ryans Notes at US$15/lb (15 February 2008). The primary use for vanadium is to harden steel.

COMET VALE PROJECT

Sand Queen Mine (Kingsrose Mining Ltd earning 50%)

During the half year, Kingsrose Mining Ltd (“Kingsrose”), operators of the Sand Queen mine, successfully listed on the Australian Stock Exchange on 7 December 2007. Following listing, Kingsrose’s management team has been working on the development of a detailed mine plan and budget for 2008, with the principal focus on realising the 50% Joint Venture obligations.

Kingsrose was extended first right of refusal to develop new underground gold deposits over all Comet Vale tenements in exchange Kingsrose has committed to extend development of Sand Queen Gold Mine to the 4 and 5 Levels and increase production to 5,500 tonnes per month (from current 3,000 tpm). The requirement to produce 25,000 oz of gold within three years from 1 March 2005 has been extended to 31 May 2009. If not met, Kingsrose shall not have earned any interest in the tenements and shall be deemed to have withdrawn from the agreement.

Mine Production: Although manpower constraints have affected production capacity during the period a substantial tonnage of ore was mined and hoisted for toll treatment.

In September, a parcel of 7,749 tonnes, comprising 5,226t of stoping ore grading 7.87 g/t Au and 2,522t of development ore grading 4.56 g/t Au was processed at Higginsville Mining’s Greenfields plant at Coolgardie,the bullion reconciled grade was 6.80 g/t Au. A total of 1,498 ounces of gold and 77 ounces of silver have been extracted of which 734 ounces of gold has been credited to Reed. The cash cost of production was A$498/oz generating a margin of A$323/oz at spot rate of A$830.20/oz.

A second parcel of 4,190 tonnes, comprising 3,712t of stoping ore grading 10.66 g/t Au and 478t of flushing material grading 2.45 g/t Au from the Sand George deposit was processed in January. A total of 1,235 ounces of gold and 101 ounces of silver have been extracted of which 608 ounces of gold was credited to Reed Resources. The cash cost of production was A$311/oz generating a margin of A$700/oz at spot rate of A$1011/oz.

Gold production is not hedged and therefore fully leveraged to further upward movements in the price of gold.

Kingsrose is progressing the mobilization of overseas workers, with the first group of underground miners due in early February and a second group expected to arrive at the end of March 2008.

MT FINNERTY PROJECT

Iron Ore Joint Venture

(Portman Iron Ore Limited 80% Fe rights)

Exploration by Portman Iron Ore Limited (“Portman”) during the December Quarter had two main components, the drill testing of selected Channel Iron Deposit (CID) targets and a gravity survey over a structurally complex and poorly exposed area of banded iron formation (BIF)

The mixed RAB and aircore (AC) drilling program was designed to test for iron enrichment within broad channels that had previously been interpreted from satellite imagery and aeromagnetic survey data. A total of 240 RAB/AC holes were drilled for a total of 4,619 metres of drilling.

Drilling results have confirmed iron enrichment in several of the interpreted channels, with palaeochannel profiles up to 30 metres thick with iron-enriched beds up to 13 metres thick separated by clays and sands. The palaeo-channels are extremely wide (up to 800 metres) and with iron-enriched beds at shallow depths below surface.

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Reed Resources Ltd Directors’ Report

A total of 1,084 samples were submitted for assay. Preliminary results indicate Fe grades for iron-rich beds range between 25 % Fe and 44% % Fe. A detailed gravity survey over a structurally complex area coincident with magnetic low was undertaken during the quarter with a total of 1,309 gravity stations read during the quarter. A number of residual gravity anomalies was identified and consideration is being given to RAB/RC drilling program.

Nickel Sulphide Joint Venture (Western Areas NL earning 65% Ni rights)

Western Areas has focused their initial nickel exploration over the Western Ultramafic sequence (WUM) where it is best exposed in the southern half of the project. Soil sampling has been completed over 10km of strike length using a Niton portable XRF instrument. Three moderately anomalous areas have been outlined south of the railway line all associated with the interpreted footwall contact of the ultramafic pile with underlying basalt. A fourth highly anomalous soil geochemical anomaly at Richies Reward, northwest of Jaurdi Homstead, has been drill tested by a RAB drilling program over 2.8km of strike. The bedrock RAB drilling (126 RAB holes for 3,956 metres) on 200 metre spaced lines was completed in November. Additional reconnaissance lines at 400 metre spacing have been drilled for a further 4km to north where conventional soil sampling becomes ineffective under more extensive regolith. This drilling has tested the position of the basal contact under the strong soil geochemical anomaly and possible northern extension. Preliminary results indicate extensive highmagnesian cumulate komatiite flows under variable supergene Ni blanket.

Reconnaissance mapping of other ultramafic units at Mt. Finnerty has identified the Marten Dam Ultramafic (MUM), which is located about 200m east of the WUM. The MUM has similar thicknesses and strike continuity and float samples have similar talc-carbonate high-magnesian chemistry to the WUM. Reed’s tenement holdings contain several kilometres of the MUM and are available for a continuation of the successful exploration approach so far utilised on the WUM.

BELL ROCK RANGE (100%)

During the period, Exploration Licence (E69/2293) was granted and is now awaiting completion of an access agreement. The project covers about 470 km[2] of the Bell Rock Range within the highly prospective Musgrave Province in central Australia.

Southern Geoscience Consultants compiled an information package of available geological and airborne geophysical data and completed an initial interpretation of the project.

CORPORATE

During the half year the Company issued 100,000 shares to an employee following the exercise of unlisted options previously issued under the Employee Share Option Plan. In addition, a further 2,500,000 unlisted options exercisable at 85 cents with expiry dates of 26 November 2012 and 31 December 2012 were granted to Directors, employees and key contractors of the company.

During the quarter the Company issued 25,000,000 ordinary shares at 65 cents each following approval at the Annual General Meeting. In connection with the above capital raising and following approval at the Annual General Meeting, an additional 2,500,000 unlisted options exercisable at 78 cents were issued to the company’s advisor with an expiry date of 31 December 2012.

Auditor’s independence declaration

The auditor’s independence declaration is included on page 4 of the half-year report.

Signed in accordance with a resolution of directors made pursuant to s.306(3) of the Corporations Act 2001.

On behalf of the Directors

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Christopher Reed Director Perth, 5 March 2008

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Reed Resources Ltd Auditor’s independence declaration

Deloitte Touche Tohmatsu ABN 74 490 121 060

Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia

The Board of Directors Reed Resources Ltd 97 Outram Street West Perth WA 6005

DX 206 Tel: +61 (0) 8 9365 7000 Fax: +61 (0) 8 9365 7001 www.deloitte.com.au

5 March 2008

Dear Board Members

Reed Resources Ltd

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Reed Resources Ltd.

As lead audit partner for the review of the financial statements of Reed Resources Ltd for the financial half-year ended 31 December 2007, I declare that to the best of my knowledge and belief, there have been no contraventions of:

• (i) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

• (ii) any applicable code of professional conduct in relation to the review.

Yours sincerely

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DELOITTE TOUCHE TOHMATSU

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Mark Gover Partner Chartered Accountants

Liability limited by a scheme approved under Professional Standards Legislation.

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Deloitte Touche Tohmatsu ABN 74 490 121 060

Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia

DX 206 Tel: +61 (0) 8 9365 7000 Fax: +61 (0) 8 9365 7001 www.deloitte.com.au

Independent Auditor’s Review Report to the Members of Reed Resources Ltd

We have reviewed the accompanying half-year financial report of Reed Resources Ltd, which comprises the balance sheet as at 31 December 2007, and the income statement, cash flow statement, statement of changes in equity for the half-year ended on that date, selected explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the end of the half-year or from time to time during the half-year as set out on pages 7 to 12.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the company are responsible for the preparation and fair presentation of the half-year financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the half-year financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2007 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Reed Resources Ltd, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Liability limited by a scheme approved under Professional Standards Legislation.

Auditor’s Independence Declaration

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Reed Resources Ltd is not in accordance with the Corporations Act 2001, including:

• (a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2007 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

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DELOITTE TOUCHE TOHMATSU

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Mark Gover Partner Chartered Accountants Perth, 5 March 2008

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Reed Resources Ltd Directors’ declaration

Directors’ declaration

The directors declare that:

• (a) in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and

• (b) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity.

Signed in accordance with a resolution of the directors made pursuant to s.303(5) of the Corporations Act 2001.

On behalf of the Directors

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Christopher Reed Director Perth, 5 March 2008

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Reed Resources Ltd Condensed consolidated income statement

Condensed consolidated income statement for the half-year ended 31 December 2007

Condensed consolidated income statement for the half-year ended 31 December 2007
Revenue from sale of goods Cost of sales Gross loss Other income Employment expenses Occupancy expenses Administration expenses Finance costs Impairment of non-current assets Loss before tax Income tax benefit Loss for the period Earnings per share Basic (cents per share) Diluted (cents per share)	Consolidated Half-year ended 31 Dec 2007 $ Half-year ended 31 Dec 2006 $ 624,605 - (624,846) -
	(241) - 138,178 30,096 (1,129,109) (874,860) (79,262) (37,802) (674,854) (395,004) (516) - (601,124) (76,915)
	(2,346,928) (1,354,485) 722,553 170,096
	(1,624,375) (1,184,389)
	(1.61) (1.48) (1.61) (1.48)

Notes to the financial statements are included on page 12.

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Reed Resources Ltd Condensed consolidated balance sheet

Condensed consolidated balance sheet as at 31 December 2007

Current assets Cash and cash equivalents Trade and other receivables Current tax assets Total current assets Non-current assets Exploration, Evaluation & development expenditure Property, plant and equipment Deferred tax assets Total non-current assets Total assets Current liabilities Trade and other payables Borrowings Total current liabilities Non-current liabilities Borrowings Total non-current liabilities Total liabilities Net assets Equity Issued capital Accumulated losses Reserves Total equity	Consolidated
	31 December 2007 $ 30 June 2007 $
	14,455,026 4,378,926 524,174 290,319 87,491 87,491
	15,066,691 4,756,736
	15,861,511 12,378,338 284,646 299,080 2,570,174 1,847,621
	18,716,331 14,525,039
	33,783,022 19,281,775
	1,133,477 815,134 16,291 15,625
	1,149,768 830,759
	17,667 25,985
	17,667 25,985
	1,167,435 856,744
	32,615,587 18,425,031
	37,130,666 22,728,236 (6,670,579) (5,046,205) 2,155,500 743,000
	32,615,587 18,425,031

Notes to the financial statements are included on page 12.

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Reed Resources Ltd

Condensed consolidated statement of changes in equity

Condensed consolidated statement of changes in equity for the half-year ended 31 December 2007

Balance at 1 Jul 2006 Loss for the period Total recognised income and expense Recognition of share-based payments Issue of shares under share option plan Balance at 31 Dec 2006 Balance at 1 Jul 2007 Loss for the period Total recognised income and expense Recognition of share-based payments Issue of share capital Issue of shares under share option plan Share issue costs Balance at 31 Dec 2007	Share capital Equity-settled employee benefits reserve Accumulated losses Total $ $ $ $
	16,203,679 98,147 (2,623,113) 13,678,713 - - (1,184,389) (1,184,389)
	- - (1,184,389) (1,184,389) - 513,000 - 513,000 87,500 - - 87,500
	16,291,179 611,147 (3,807,502) 13,094,824
	22,728,236 743,000 (5,046,205) 18,425,031 - - (1,624,375) (1,624,375)
	- - (1,624,375) (1,624,375) - 1,412,500 - 1,412,500 16,250,000 - - 16,250,000 35,000 - - 35,000 (1,882,570) - - (1,882,570)
	37,130,666 2,155,500 (6,670,579) 32,615,587

Notes to the financial statements are included on page 12.

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Reed Resources Ltd Condensed consolidated cash flow statement

Condensed consolidated cash flow statement for the half-year ended 31 December 2007

Cash flows from operating activities Receipts from customers Payments to suppliers and employees Net cash used in operating activities Cash flows from investing activities Interest received Payment for property, plant and equipment Exploration and development costs paid Net cash used in investing activities Cash flows from financing activities Proceeds from issues of equity securities Payment for share issue costs Repayment of borrowings Net cash provided by financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period	Consolidated
	Half-year ended 31 Dec 2007 $ Half-year ended 31 Dec 2006 $
	718,296 - (1,322,226) (659,993)
	(603,930) (659,993)
	139,847 32,004 (15,874) (10,632) (4,716,221) (490,951)
	(4,592,248) (469,579)
	16,285,000 87,500 (1,005,070) - (7,652) -
	15,272,278 87,500
	10,076,100 (1,042,072) 4,378,926 1,612,963
	14,455,026 570,891

Notes to the financial statements are included on page 12.

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Reed Resources Ltd Notes to the condensed consolidated financial statements

Notes to the condensed consolidated financial statements

1. Significant accounting policies

Statement of compliance

The half-year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and AASB 134 ‘Interim Financial Reporting’. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 ‘Interim Financial Reporting’. The half-year financial report does not include notes of the type normally included in an annual financial report and shall be read in conjunction with the most recent annual financial report.

Basis of preparation

The condensed financial statements have been prepared on the basis of historical cost. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the company’s 2007 annual financial report for the financial year ended 30 June 2007.

2. Segment information

The consolidated entity is engaged in mineral resource exploration, development and production carried out in Western Australia.

3. Dividends

No dividends were paid, proposed or declared during the half-year to 31 December 2007 or 31 December 2006.

4. Exploration and Evaluation

During the half-year reporting period the consolidated entity experienced a significant increase in exploration and evaluation expenditure. This increase primarily relates to the advancement of the DFS taking place on the company’s Barrambie project.

5. Issuances of equity securities

During the half-year reporting period, Reed Resources Ltd issued 25,000,000 ordinary shares for $16.25 million via a placement to institutional and sophisticated investors. The placement was arranged by Transocean Securities Pty Ltd (AFSL. No. 230 161). In addition, Reed Resources Ltd issued 100,000 ordinary shares for $35,000 on exercise of 100,000 share options issued under its executive share option plan.

Reed Resources Ltd issued 2,500,000 share options (2006: 2,700,000) over ordinary shares under its employee and executive share option plans during the half-year reporting period. These share options had a fair value at grant date of $0.22 per share option (2006: $0.19).

6. Subsequent events

On 10 January 2008 Barrambie Gas Pty Ltd, a wholly owned subsidiary of Reed Resources Ltd, was incorporated for the purpose of entering into a gas transmission agreement with DBNGP (WA) Transmission Pty Ltd for the Barrambie project. As part of the agreement Reed Resources Ltd was required to procure a bank guarantee in the amount of $8.7 million from its bankers. Accordingly, $8.7 million has been deposited in a restricted term deposit as security for this guarantee.

The fourth toll treatment campaign was completed on 21-25 January 2008 resulting in the recovery of 1,235 oz of gold, of which 608 oz of gold has been credited to Reed Resources Limited. The cash cost of trucking and toll treating the ore is estimated to be A$311/oz generating a margin of A$700/oz.

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