NEOMETALS LTD — Interim / Quarterly Report 2009

Jan 29, 2009

Reed Resources Ltd

ABN 89 099 116 631

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

QUARTERLY ACTIVITIES REPORT 31 DECEMBER 2008

Highlights

• Comet Vale (gold) – Record grade of milled ore with 4,262 t @ 14.7 g/t Au.

• Comet Vale (gold) – 34% increase in Mineral Resource estimate to 182,600 ounces of gold.

• Barrambie (vanadium) – Completion of northern extension and infill drilling adds an extra 6 km strike length of vanadiferous magnetite mineralisation.

• Barrambie (vanadium) – Definitive feasibility study (DFS) by SKM on schedule for completion end of March 2009.

• Mount Finnerty (iron) – JV Committee approves RC drill campaign on seven new BID targets.

Reed Resources’ exploration and development activities during the quarter continued to focus on the Comet Vale gold operations and advancing the Barrambie vanadium project. 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’ projects in Western Australia.

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COMET VALE PROJECT (gold, nickel)

Sand Queen Mine Operations (Reed Resources 100 %, Kingsrose Mining Limited earning 50 %)

Mining

Production of ore from the Sand Queen mine, Comet Vale for the December 2008 quarter was 5,784 tonnes of ore at an estimated grade of 14.1 g/t Au.

A concerted pumping campaign has lowered the water level in the old Sand Queen workings during January so that, at the time of writing, the 4 level was dewatered and work had commenced on establishing rail-mounted access. Shaft timbers are reported to be in good condition, with limited work required to extend skip guides down to the 4 level.

Milling

During December 2008 the highest grade ore parcel produced by the Comet Vale JV to date, consisting of 4,262 tonnes grading 14.7 g/t Au, was milled. The record grade agreed by minesite stockpile sampling and the toll treatment operator at 14.7 g/t Au is about 50% higher than the previous highest grade parcel.

Cash costs of production for the quarter were A$551/oz. The production cash flows in the quarterly report represent the September ore sale and includes a $500,000 one-off final payment to Kingsrose Mining relating to their share of the disputed July parcel.

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

The next parcel of ore for toll treatment has been generated from ore above the 3 Level and is expected to be milled in the latter half of February 2009.

Mineral Resource Extension

During the quarter, work focused on geological modelling and resource estimation following completion of a major drilling campaign that commenced on 15[th] August and concluded on 10[th] October 2008.

The infill and resource extension drilling program consisted of 4,456 metres of reverse circulation percussion (RC) drilling and 2,290.8 metres of diamond core drilling. The drilling programme has confirmed the narrow, high-grade ‘nuggety’ style of gold mineralisation over at least 600 m strike length of closely drilled Comet Vale shear zone (Figure 2).

The combined Mineral Resource for the Sand Queen mine is estimated at 661,000 tonnes at 8.6 g/t Au for 186,000 ounces gold (Table 1; ASX announcement 2[nd] December 2008). This includes an estimated 97,000 ounces of gold in the vicinity of the current and planned mine workings (Figure 2).

Regional exploration

No significant regional gold or nickel exploration was undertaken during the quarter.

Forward Work

Gold exploration planned for the March quarter will include re-evaluation of the open-pit potential of the Sand Prince West and Princess Grace deposits and completion of statutory reporting.

Table 1 . Mineral Resource estimates for the Sand Queen mine, Comet Vale project (at a cut-off grade of 5 g/t Au).

Resource classification	Volume (bcm)	Tonnes	Grade (Au g/t)	Au (Ounces)
Indicated	122,000	329,000	9.2	97,100
Inferred	123,000	332,000	8.0	85,500
Total	245,000	661,000	8.6	182,600

All tonnage, grade and ounce values have been rounded down to three significant figures. Slight errors may occur due to this rounding of values.

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Figure 2. Long section of the Sand Queen gold mine (looking west) with the outlines of the revised Indicated and Inferred Mineral Resources (at a cut-off grade of 5 g/t Au).

BARRAMBIE VANADIUM PROJECT (Reed 100%)

Resource extension drilling

With the completion of the 363 hole reverse circulation percussion (RCP) drilling program on the northern half of its wholly owned Mining Lease M57/173 during the quarter the company has now completely drilled out the full 11 kilometres of strike length of the Mining Lease. This additional drilling takes the total RCP holes drilled at Barrambie to 782 holes for a total 55,564 metres drilled over four separate drilling campaigns.

All assay results for the latest RCP program have been received and were announced on the 6[th] November and 8[th] December, 2008.

Resource estimation

Results from the latest drilling campaign have been compiled by the Company’s resource consultants to enable calculation of a final resource and reserve statement for the full 11 kilometres of strike length.

The existing Mineral Resource of 36.5 million tonnes at a grade of 0.82% V2O5, 17.7% TiO2 and 49.9% Fe2O3 at a block cut off grade of 0.5% V2O5 (ASX announcement 7[th] May 2008) is based on only 5 kilometres of strike length of southern mineralisation. This is expected to increase as the additional 6 kilometres of northern drill and assay data is processed and the additional northern resource is added to the southern resource.

An up dated resource statement is expected during Ferbruary 2009.

Definitive feasibility study (DFS)

Sinclair Knight Merz (SKM), the Company’s engineering consultants, completed the Definitive Feasibility Study in August 2008. This study indicated that, based on the existing mineralisation, the Barrambie vanadium processing plant and associated infrastructure will target a through-put of 3.2 million tonnes per annum of vanadium bearing magnetite mineralisation at a grade of 0.8% V2O5 and produce approximately 13,200 tonnes of vanadium pentoxide (V2O5) or 9,000 tonnes of Ferrovanadium per annum.

Mining studies indicated that the selective mining of the Central Zone on mineralisation will result in a feed to the plant in excess of 0.8% V2O5, which is the highest grade of any primary vanadium-bearing mineralisation in Australia.

Addendum to the DFS

On the basis of the increased grade of the Central Zone mineralisation and the increased tonnages expected from the recently drilled northern mineralisation the following additional studies are underway to further enhance the project:

• Investigate increasing the size and or length of the roasting kiln from 75 meters to 85 metres in order to accommodate the increased tonnage expected to be treated by the kiln.

• Continue to investigate salt addition to the roasting kiln and the temperature of operation with a view to minimising salt consumption and reduce the operating temperature and hence reducing operating costs. Early indications from the test work are that both the salt consumption and the roasting temperature are coming down.

The above initiatives are currently being finalised with a view to incorporating them into an Addendum to the DFS which is due for completion in the first quarter of 2009.

Environmental matters

An Environmental Scoping Document was lodged with the Environmental Protection Authority (EPA) during the quarter. The Company is currently awaiting feedback from the EPA on this document.

Forward work

The following activities are planned for the March quarter:

• The company’s resource consultants are to complete a revised Mineral Resource Estimate and Mining Reserve for the combined northern and southern areas.

• Modify the DFS process flow sheet and process design to produce 13,200 tonnes of Vanadium Pentoxide and 9,000 tonnes of Ferrovanadium.

• Finalise the Addendum to the DFS and include the additional northern and southern mineralisation into a final document and any improvements or modifications to the process flow sheet.

• Finalise the capital and operating cost estimate to develop the Barrambie Vanadium Mine.

Market price

The current price of vanadium is quoted by the Ryans Notes at US$5.50/lb for V2O5 and US$26/kg of V for Ferrovanadium (FeV80), as at 26 January 2009. The primary use for vanadium is to harden steel.

MOUNT FINNERTY PROJECT (iron, nickel, gold)

Iron Ore Exploration (Reed Resources 20 %, Portman 80 %)

Iron ore exploration is undertaken by Portman Iron Ore Ltd (Portman) in joint venture with Reed Resources Ltd. The principal aim of this exploration is to locate sufficient iron mineralisation within trucking distance of Portman’s Koolyanobbing Iron Ore operation, which is about 65km to the west. Previous exploration has identified two key exploration targets: banded iron formation (BIF) hosted iron enrichment (BID) deposits (e.g. FIN1 to FIN11 prospects) and channel iron deposits (CID) within broad palaeochannels that had been identified from geophysical interpretation of satellite imagery and aeromagnetic and ground magnetic survey data.

Exploration for BIF-hosted iron mineralisation has identified several new areas of outcropping iron mineralisation, sampling has generated drill targets FIN7 West, FIN10 North and FIN10 South, and FIN11 North and FIN11 South. New geophysical BID targets such as ‘Red Tulip’, a magnetic and gravity anomaly with discontinuous sub-cropping iron mineralisation, and ‘Blue Rose’, have also been approved by the joint venturers for drill testing in the first half of calendar 2009 (Figure 3).

During the quarter, Portman completed sampling of a systematic RAB drilling program to test the extent of iron-enriched detrital material in a number of palaeochannel deposits. The assays results are awaited.

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Figure 3 Plan of key BIF-hosted iron exploration targets in relation to outcropping and interpreted banded iron formations within the Mt Finnerty project.

Nickel Exploration (Western Areas NL earning 65 %)

Exploration by Western Areas continued during the quarter with the completion of logging and sampling of RAB drilling programs testing the prospective basal contact of the Western Ultramafic unit (WUM) and other potentially favourable lithologies (Figure 4). Logging and sampling were completed during the quarter, and selected chips were retained for lithological identification. Results of samples submitted for chemical assay are pending.

The RAB drilling program (WMFRB127-351 for 5,248 metres) at Johnnies Dam and Yalenberine Creek (Figure 4) defined moderately high Mg ultramafic rocks at Johnnies Dam. Uncalibrated Niton results show nickel values up to 1.4% Ni in WMFR294 in the Johnnies Dam area that are probably related to shallow saprolite concentration.

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Figure 4 Plan of RAB and RC drill holes along the targeted Western Ultramafic Unit in the vicinity of the Johnnie Dam-Yalenberine Creek area, Mt Finnerty project.

Gold and Other Minerals Exploration (Reed 100 %)

A botanical survey of the entire Mt Finnerty project commenced in mid-October and was completed during the quarter. The survey has been undertaken to update a previous biological assessment completed in 2005.

Forward Work

Planned iron exploration (PMM) includes:

• Evaluation of the results of the RAB drilling program that tested for iron enrichment within palaeochannel systems.

• Preparation for drill testing of the northern and southern extensions of the FIN10 and FIN11 prospects.

• Preparation for drill testing of the new targets at ‘Red Tulip’ and ‘Blue Rose’.

Planned nickel exploration (WSA) includes:

• Compilation of recent RAB and RC drilling data once assays are received and targets reviewed

• Rehabilitation of RAB and RC drilling sites and access.

• Gold and other minerals exploration is planned to include:

• Review gold and manganese targets, including resource models for Flinders and Tasman prospects.

• Maintain and update digital database.

BELL ROCK RANGE PROJECT (Reed 100%)

The Bell Rock Range project within the western part of the Proterozoic Musgrave Province in central Australia is highly prospective for several commodities, particularly Ni-Cu sulphide and PGE mineralisation in area that is underexplored.

During the quarter, the company has conducted anthropological research and continued discussions with local aboriginal communities to finalise agreements for access within the exploration licence.

CORPORATE

In December 2008, the joint venture partners announced an amendment of their Comet Vale Joint Venture for the Sand Queen Gold Mine in Western Australia. Under the modified terms KRM is entitled to 60% of the gold produced from below the 3 Level at Sand Queen, rather than the 50% previously stated. In addition the required 25,000 ounce production milestone has been extended to 31 May 2010.

Although Reed will earn a reduced proportion of the gold produced, this is expected to be offset by a projected increase in production. The Company is sympathetic to substantial increases in mining costs that are being incurred by Kingsrose and is of the view that this revision of the joint venture arrangement will facilitate the longer term viability of the Sand Queen gold mine.

In view of the current economic environment the Company has been minimising its expenditure, curtailing any non-essential exploration and evaluation activities and closing its Kalgoorlie exploration office.

During the quarter 2,200,000 options lapsed.

At the end of the quarter the Company had $11.48 million cash at bank.

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C J Reed MANAGING 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.