NEOMETALS LTD — Interim / Quarterly Report 2008

Jan 30, 2008

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

ABN 89 099 116 631

Reed Resources Ltd

QUARTERLY ACTIVITIES REPORT 31 JANUARY 2008

Highlights

• Barrambie (vanadium) – Phase 2 of DFS commences. Exceptional metallurgical recoveries from roast-leach test work results. New Project Manager appointed.

• Mt Finnerty (iron) – Initial drilling program (240 RAB/AC holes for 4,619 metres) has successfully tested interpreted palaeochannels with nearsurface iron enrichment in several of the drill-tested channels.

• Mt Finnerty (nickel) – Completion of intensive bedrock RAB drilling (126 holes for 3,956 metres) over 2.8 km strike at Richies Reward prospect, where there are highly anomalous soil geochemical anomalies coincident with the basal ultramafic/basalt contact. Ground EM/IP surveys over the most anomalous ground are being used to identify specific geophysical targets for follow-up RC drilling.

• Comet Vale (gold) – Ore production ramp up is continuing, including completion of 3 Level access through the Sand George lodes. Preliminary results from treatment of an ore parcel of some 4,000 tonnes indicates significantly higher grades than any of the previous ore parcels.

Reed Resources’ exploration and development activities during the quarter 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.

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Figure 1 Location of Reed Resources’ main projects in Western Australia.

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BARRAMBIE VANADIUM PROJECT (Reed 100%)

Definitive Feasibility Study

During the quarter, Phase 2 of the Barrambie Definitive Feasibility Study (DFS) 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 quarter.

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.

Roast Pilot Plant Test Work

During the course of the quarter 6 tonnes of concentrate was prepared by Nagrom and sent to Germany as kiln feed for salt roast pilot plant test work to be performed during late January - early February 2008. The bulk pilot plant roasting test program is scheduled to run for a week at Polysius’s German testing facilities and will result in the development of operating parameters that will enable a kiln to be sized to meet the required duty. The kiln test work will also produce a calcined product that can be leached and further processed to produce a flaked V2O5 product sample.

Plant Design

Design of a process plant based on an optimised flow sheet prepared from the results of the beneficiation and salt roast test work is a major component of the Phase 2 engineering works that was performed by SKM during the quarter.

To date, process flow sheets have been developed for the ROM and beneficiation circuit; kiln and leach circuit; and desilicification, AMV deammoniation and vanadium flaking circuit.

As advised last quarter, a substantial increase in the mass of concentrate recovered from bulk samples, once confirmed by variability test work, will greatly reduce the mill throughput rate needed to achieve the planned output of 9,000t of V2O5 per annum.

Gas Supply and Delivery

Reed Resources Limited have submitted offers to purchase gas from companies producing gas from the North West Shelf and discussions are continuing with various parties which are expected to be concluded during the first quarter of 2008.

Barrambie Gas Pty Ltd, a subsidiary of Reed Resources Limited, has executed a Standard Shipper Contract with the owners of the Dampier to Bunbury Natural Gas Pipeline (DBNGP) to secure future transport of gas through the DBNGP.

Environmental and Water Studies

An Environmental Referral and Scoping document was prepared during the quarter and lodged with the EPA in January 2008. Preliminary meetings were held with various stakeholders, including the Local Shires, local land holders, the EPA, Department of Water and Department of Industry and Resources.

A program of test and production bores was completed in the bore-field during the quarter and modelling of the water table indicated that sufficient water existed to provide water for the proposed operation for a period of nine years with minimal draw down.

Mineral Resource Estimate

As advised last quarter, 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.

As part of the on-going definitive feasibility study the Company completed a third phase of infill RC drilling during the quarter (154 holes, 10,863 metres). Results from the infill drilling continue to confirm the exceptional grades from both the Eastern and Central Bands at Barrambie.

The average grade of all high-grade intercepts received to date (1,624 assays greater than 0.6 % V2O5) is 0.9 % V2O5, 10.7 % TiO2 and 34 % Fe. This includes 521 assays greater than 1.0 % V2O5 with a maximum assay of 1.67 % V2O5.

Core from the diamond drilling program was examined progressively as it became available during the quarter and selected sections were sampled for metallurgical variability tests and for geotechnical and other physical property testing.

A representative area of the mineralisation was selected for close-spaced drilling to improve the understanding of short range continuity within both the Eastern Band and Central Bands, and to test the interpreted connectivity of high grade lodes of the Central Bands. This drilling was completed during the quarter and is currently being compiled for geological interpretation.

Any additional drilling will be targeted around cross-cutting structures to confirm the presence of the faults and improve confidence in the interpreted off-sets.

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.

Forward Work Program

Complete the beneficiation testing programme in particular the variability test work.

Complete the Pilot Scale Roasting test work, and produce a roasted concentrate product to enable leaching, desilicication, ammonium metavandate (AMV) production, fusion and flaking test work.

Complete another Mineral Resource Estimate, incorporating new drill results and bulk density measurements, which is expected to significantly increase the size and improve the classification of resources.

Market Price

The current price of vanadium is quoted by the Ryans Notes at US$8.30/lb (28 January 2008). The primary use for vanadium is to harden steel.

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:

• Drill testing of selected Channel Iron Deposit (CID) targets

• 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 (Figure 5). 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 palaeochannels are extremely wide (up to 800 metres) and with iron-enriched beds at shallow depths below surface, as illustrated in a typical section through the Jaurdi channel (Figure 2)

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Figure 2 Cross-section through the Jaurdi palaeochannel showing the shallow depth of iron enrichment over widths in excess of 800 metres. Section compiled from data provided by Portman Iron Ore Limited. 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. Geological data and assay results are currently being compiled.

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 were identified and consideration is being given to RAB/RC drilling program.

Exploration Forecast

Channel Iron Deposits are typically upgraded using physical separation methods and forward work this quarter will involve test work for production of suitable iron ore ‘fines’. Botanical surveys and permitting will commence for a major program of RAB/AC drilling of selected palaeochannels.

A RC drilling program was approved and permitted during the last quarter and will commence in February to test extensions to FIN9 and new targets FIN10 & FIN11 (Figs. 3, 4).

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Figure 3 Location of iron ore exploration targets at the Mount Finnerty Project, (left), and planned drilling in the vicinity of the FIN9 prospect (right).

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Figure 4 Plan’s of Rock Chip and Planned Drilling locations.

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Figure 5 Distribution of interpreted palaeochannels and detritals and location of RAB/AC drill holes completed during the intial stage of exploration. The Jaurdi palaeochannel shown in Figure 2 is north of and adjacent to the railway line at the south end of the project.

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 applied to unsieved, bottom of hole samples. Three moderately anomalous areas have been outlined south of the railway line (Figure 6); all associated with the interpreted footwall contact of the ultramafic pile with underlying basalt. Preliminary field inspection indicates subcropping moderate-MgO flows.

A fourth highly anomalous soil geochemical anomaly at Richies Reward, northwest of Jaurdi Homstead (Figure 6), 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 high-magnesian cumulate komatiite flows under variable supergene Ni blanket.

All RAB holes were drilled to ‘blade refusal’ at highly variable depths but averaging approximately 30m. All 1m drill spoils have been analysed using the Niton XRF instrument (3,956 analyses). The bottom two metres of all holes have also been sampled for assay at an analytical laboratory.

Geological logging has been finalised on 70 holes, with the following results:

• Regolith cover is generally thin over basalt but is highly variable over ultramafic rocks where drill penetration is controlled by alteration (e.g., serpentinite preserved to relatively depths whereas schistose talccarbonate units stay weathered to 70-80m depth). Isolated regolith remnants of plasmic clay (nontronite) hosted Ni-Co laterite enrichments have been noted.

• Ultramafic units exhibit variable textures, with 50-100m thick high-Mg orthocumulates present directly on the footwall contact.

• There are no unambiguous sedimentary units on the ultramafic contact, although laminated cherts have been mapped in the footwall basalt flows.

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.

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Figure 6 Location of nickel targets on the basal contact of the western ultramafic sequence

Exploration Forecast

Completion of the geological logging and interpretation of the RAB drilling program and its correlation with the Niton analyses will allow planned ground geophysical surveys to focus on the most prospective parts of the basal contact of the WUM. Infill RAB drilling planned for 2008 will be used to tighten the geological and geochemical information down to a 100m x 10m grid on the basal contact.

Geophysical surveys (E.M. and I.P. surveys) should identify any conductors that may be due to sulphides. The ground E.M. survey is due to be completed in January 2008. The I.P. program is dependant on the results of the E.M. survey. Subsequent 3-D modelling of geophysical anomalies will be used to position RC drill holes for testing of favourable geophysical targets.

COMET VALE PROJECT

Sand Queen Mine (Kingsrose Mining Ltd earning 50%)

During the quarter, 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 realizing the 50 % Joint Venture obligations.

Mine Production: Although manpower constraints have affected production capacity during the quarter, a substantial tonnage of ore was mined and hoisted ready for toll treatment. This ore parcel is mostly derived from new stoping above the 3 Level and remnant stoping above the 2 Level in the Sand George lodes, whereas previous ore parcels were mostly derived from level development.

Some 4,000 tonnes of ore was hauled to the Greenfields Plant in Coolgardie for treatment, which commenced on 21 January and concluded on 25 January. Although the final metal reconciliation is still being carried out, initial results indicate that the grade of this ore parcel is significantly higher than any of the previous ore parcels.

Mine development: During the quarter, 58 metres of new level development metres was completed on the 3 Level south drive (3LSD), taking the 3 level to the southern end of the Sand George lode, some 600 metres south of the Sand Queen shaft. A number of rises and sub-levels were also developed above the 3 Level.

Mine personnel: 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.

Safety: There was one underground lost time injury (4 days) and remedial improvements have been implemented.

Environmental matters: A saline water discharge event occurred when a surface transfer pump tripped at a shift change. Statutory authorities were notified immediately and site management, in consultation with the regulatory bodies, moved promptly to implement remedial and preventative measures. Kingsrose plan to upgrade the water discharge pipeline and attend to any outstanding compliance matters.

Application was made to the Department of Water to increase the volume of groundwater extracted for mine dewatering by an additional 250,000 Kl per annum.

Operations forecast

Kingsrose will commence extension of mine operations to the 4 Level at Sand Queen and expect to be hoisting ore from this level during the second half. Prior work will involve dewatering, shaft refurbishment and level development.

Regional Exploration

During the quarter, exploration focussed on the area to the east of the Goldfields Highway and on two targets in close proximity to the Sand Queen mine: a gold/arsenic soil anomaly southwest of the Princess Grace prospect and an unexplained “bullseye” magnetic anomaly. A total of 17 RC drill holes were completed for 1,399 metres of drilling and 607 samples submitted for gold assay. Samples from this drilling have also been submitted for multielement analysis and results are due in January 2008.

Eastern targets (M29/186): Eight RC drill holes (ETC004-011, for 728 m) were drilled to test the potential below selected gold workings where previous rock chip sampling had returned high gold grades. One hole (ETC012, 80 m) was drilled to test the contact between an orthocumulate and adcumulate ultramafic body that showed anomalous Au, Cu, and Ni levels from previous rock-chip sampling.

This drilling has confirmed the gold potential of the eastern area with a number of significant intercepts (Table 1), including 1m @ 8.59 g/t Au from 92m and 1m @ 27.2 g/t Au from 112 in ETC005; 4m @ 1.54 g/t Au from 30m in ETC007; and 4m @ 1.19 g/t Au from 44m in ETC012.

Further work, including detailed geological mapping and sampling and diamond tails on some of the RC holes in the vicinity of the Happy Days prospect is required to better determine structural controls on mineralisation. Additional RC/AC drilling is required to test the strike potential of known mineralised structures.

Table 1 Significant intercepts in RC drill holes in the Eastern area.

Table 1Significant intercepts in RC	drill holes in the Eastern area.
Hole Id Northing Easting Azim.	From (m) To (m) Length (m) Grade g/t Au Prospect
ETC004# 6683350 320790 225	76 77 1 0.16 Happy Days 86 88 2 0.24 HappyDays
ETC005# 6683390 320765 225	92 93 1 8.59 Happy Days 112 113 1 27.2 HappyDays
ETC006 6683425 320730 225	72 76 4 0.11 HappyDays
ETC007 6683760 320955 090	31 35 4 1.54 Ridge 48 52 4 0.15 Ridge 84 89 5 0.29 Ridge
ETC008 6684340 320700 090	36 37 1 0.14 Ten percent 42 44 2 0.12 Tenpercent
ETC012+ 6684065 321000 090	4 8 4 0.17 Corner
	44 48 4 1.19 Corner

Composite samples were assayed by Amdel Laboratories and using an aqua regia analysis technique. Single metre re-splits were assayed by Amdel Laboratories using a 50g Fire assay. All co-ordinates are in AMG84_51.

Hole abandoned due to very high water flow within shear structure. + Assay results for 4m composite samples only.

Gold/arsenic soil anomaly (M29/198): Six RC holes (WTC015-020, 353 metres) were drilled to test a 1.2 x 0.2 km gold and arsenic auger soil anomaly (20 ppb Au outline, maximum 35 ppb Au) located approximately 200 metres southwest of the Princess Grace deposit. This anomaly coincides with the position of the granite/greenstone contact but it is also adjacent to an interpreted shear structure about 150m to the west.

Drilling revealed that the residual and transported regolith profile is much deeper than predicted (in excess of 50 metres) with some holes failing to adequately test the bedrock. No significant results were received. It appears that the original auger drilling sampled indurated transported laterite and that the anomaly is likely to be offset from its source.

Magnetic anomaly (M29/233): Two RC holes (WTC021-022, 238 metres) were drilled to test a “bullseye” magnetic anomaly within a flexure between two interpreted NNW shear structures (centred at 6683350N, 319450E). Drill hole WTC022 intersected a highly recrystallised quartz vein on a sheared porphyry(?) contact that may be on one of the interpreted shear structures. Initial results show this vein to be anomalous in gold (0.07 g/t Au) and further work is required to fully test the potential of this structure.

Diamond Drilling: During the quarter results were received for five NQ2 diamond tails drilled on the end of previous RC drill holes: JVC040, 041 and 052 (within M29/52), JVCD050 (M29/233), and JVCD056 (M29/198).

Holes JVCD040 and 041 were drilled to test down dip positions within the Princess Grace structure. Both holes intersected narrow zones (up to 0.5 m wide) of intense shearing and quartz veining on the targeted upper porphyry contact. This shearing/veining is sub-parallel to the drilling. Analyses returned anomalous gold values up to 0.35g/t Au.

Holes JVCD050 and 052 tested the southern extension of the Comet Vale shear structure south of the Sand Prince lodes between intercepts from previous drilling. JVCD050 intersected a sequence of porphyry and ultramafics with minor quartz veining. JVCD052 intersected four distinct quartz lodes, two of which are considered to relate to known ore zones. No significant assay results were returned.

Hole JVCD056 was drilled to the north of the mine to test the northern extension of the Comet Vale shear structure below a 1 km long, 100 ppb Au anomaly. No significant quartz veins have been intersected.

The latest drilling along the Comet Vale shear zone have completed the nearmine testing of this structure at ‘shallow’ depths (i.e., to about 100 m below surface) and further exploration will target gold mineralisation at deeper levels of the shear zone.

Exploration Forecast:

SRK Consulting has been commissioned to undertake a thorough structural review and analysis of the Comet Vale project, utilising all available data from exploration and mining. The principal aims of the review are to provide an independent, updated assessment of geological structures controlling and hosting gold mineralisation and to identify specific controlled structures that may be targeted in future further drilling. The review is scheduled for completion at the end of March.

BELL RANGE ROCK PROJECT (Reed 100%)

During the quarter, 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 quarter the Company issued 25,100,000 ordinary shares at 65 cents each following approval at the Annual General Meeting.

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D J Reed

CHAIRMAN

Competent Persons

Information in this report that relates to Exploration Results is based on information compiled by Dr Peter Collins (BSc(Hons), PhD, MAIG). Dr Collins, a Director of Reed Resources Ltd, has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which is being undertaken 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 this report of the matters based on his information in the form and context in which it appears.