NEOMETALS LTD — Interim / Quarterly Report 2010

Jul 29, 2010

ABN 89 099 116 631

Reed Resources Ltd

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

QUARTERLY ACTIVITIES REPORT 30 June 2010

Highlights

Mount Marion

• Mount Marion Lithium Resource Estimate – 8.9Mt of 1.4% Li2O ‐ 220% Increase.

• Development Timetable on track for commercial production in Mar Q 2011 with Decision to Mine announced in July 2010.

• Lithium Carbonate Pre Feasibility Study indicates that a stand‐alone Lithium Carbonate Plant if located in China, has a Net Present value (NPV) of US$404m and a payback of around 2 years.

Barrambie

• Reed grants China Non‐Ferrous Metal Industry’s Foreign Engineering and Construction Co. Ltd (“NFC”) and Arccon (WA) Pty Ltd (Arccon) an exclusive right to provide EPCM and finance proposal by 31 August 2010.

• Barrambie Public Environmental Review Period Commenced 28 June 2010 and will close 26[th] July 2010.

Comet Vale

• New Resource Estimate ‐ 186,000oz @ 10.8g/t – Grade Increases 25%

• Production suspended 31 May 2010.

• Resumed 100% equity following buyout of JV partner interest.

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MT MARION LITHIUM PROJECT (Reed 100%)

(Production JV with Mineral Resources Limited)

Reed Resources Ltd ( ASX: RDR ) (“Reed” or “the Company”) received from its joint venture partner Mineral Resources Limited ( ASX: MIN ) (“Mineral Resources”) an Operations Commencement Notice for the Mt Marion Lithium Project near Kalgoorlie Western Australia on 16[th] July 2010.

The Joint Venture has been expanded to include mica, tantalum and potash feldspars; testwork has highlighted the potential to recover significant volumes of these by‐products.

The Company confirms that it has exercised its rights under the Option Agreement announced to the ASX on 13[th] August 2009 and acquired 100% of the granted mining leases. Minerals Resources funded both the exercise price and the decision to mine payment to the prospector at settlement.

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Figure 1 Project Location

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The Company has received notice that the clearing permit has been granted. Assessment of the Mining Proposal and Works Approval from the Departments of Minerals and Petroleum, and Environment and Conservation has commenced.

Commercial production is expected to commence in the March 2011 quarter at an initial rate of 200,000 tpa of spodumene concentrate grading 6.5% Li2O, containing some 13,000 tonnes of lithium oxide (Li2O). Total contained lithium oxide resources at present are 128,000 tonnes (Li2O).

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Figure 2. Development Timetable

MINERAL RESOURCE ESTIMATE

On the 14[th] April 2010 the Company announced the results of the resource definition drilling program and independent Mineral Resource Estimate. Mineral resource estimation was undertaken on four of the pegmatite deposits (No. 1, No. 2, No. 2W and No. 5 pegmatite; Figure 3) and (Table 1). This confirmed the Mt Marion Lithium Project as a world class high grade deposit with a total Resource of 8.9 Mt at 1.4 % Li2O, with the total contained lithium oxide resource increase by 220% to 128,000 tonnes of lithium oxide (Li2O).

Table 1. Mt Marion Mineral Resource estimate for the No. 1, No. 2, No. 2W and No. 5 pegmatite deposits, as at April 2010 using 0.3 % Li2O block cut off grade (ASX announcement 14 April 2010).

Deposit	Resource Classification	Tonnes	Grade (Li2O%)	Li2O (tonnes)
No 1	Indicated	2,364,000	1.42	33,569
No 1	Inferred	1,219,000	1.3	15,847
	Sub Total	3,583,000	1.4	53,745
No 2	Indicated	391,000	1.37	5,357
No 2	Inferred	595,000	1.4	8,330
	Sub Total	985,000	1.4	13,790
No 2W	Indicated	1,606,000	1.4	22,484
No 2W	Inferred	2,513,000	1.4	35,182
	Sub Total	4,119,000	1.4	57,666
No 5	Inferred	237,000	1.2	2,844
	Sub Total	237,000	1.2	2,844
	TOTAL	8,924,000	1.4	128,045

Figures may not sum due to rounding & notation of significant figures does not imply an added level of precision.

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Figure 3 Mount Marion pegmatite group within mining lease M15/1000.

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Figure 4. Mineral Resources within the Mount Marion pegmatite group within mining leases M15/999 and M15/1000.

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LITHIUM CARBONATE PRE FEASIBILITY STUDY

On the 15[th] June the Company announced the results of a Pre‐Feasibility Study (“PFS”) into the processing of lithium concentrates (spodumene) into battery‐grade lithium carbonate. The PFS undertaken by Hatch investigated the production of 17,000 tonnes per annum of lithium carbonate from 120,000 tonnes of chemical grade spodumene concentrate, of a quality equivalent to Reed’s planned share of output from its proposed Mt Marion Lithium project operation.

The study showed the significant benefits of producing lithium carbonate from lithium concentrates and highlighted the potential for Reed to become a major supplier of high‐ purity lithium chemicals to Asian lithium battery makers.

LITHIUM CARBONATE PRODUCTION

The process involves conventional sulphate roast‐water leaching of spodumene concentrate then precipitation and purification of lithium carbonate. Sodium sulphate is produced as a by product. Process test work was conducted on concentrates produced from the Company’s Mt Marion project.

For the purposes of the study, a kiln feed rate of 120,000 tpa @ 6.5% Li2O was assumed and the following key process steps applied:

• Decrepitating in a rotary kiln (conversion of alpha spodumene to beta spodumene).

• Sulphating roast and leaching.

• Precipitation and ion exchange

• Lithium carbonate crystallization

• Sodium Sulphate crystallization

• 17,000 tonnes per annum of lithium carbonate

• 20 year effective plant life.

PROJECT ECONOMICS

Operating cost estimates will not be released due to their sensitive commercial nature. The project, if located in China, has a Net Present Value (NPV) (un‐geared, pre tax, nominal discount rate of 12%) is estimated at US $404 million and a payback of around 2 years.

DOWNSTREAM PROCESSING OPPORTUNITIES

The Company is currently in discussions with local and international companies to downstream from spodumene concentrate to battery grade lithium carbonate via toll treatment or joint venture.

Although Reed believes that this opportunity can progress in a constructive and commercial manner, no party is under any obligation to proceed with any downstream processing proposal and regulatory requirements still need to be considered and addressed with no certainty that a transaction will eventuate. A decision on how the company intends to proceed is expected by October 2010.

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BARRAMBIE VANADIUM PROJECT (Reed 100%)

On the 17[th] May 2010 the Company advised that it had entered into discussions with China Non‐Ferrous Metal Industry’s Foreign Engineering and Construction Co. Ltd (“NFC”) which, if successfully concluded would allow for the development of the Company’s Barrambie Vanadium Project.

The approach to Reed Resources has been facilitated by Western Australian engineering and construction company Arccon (WA) Pty Ltd (Arccon), and discussions to date have centred on Arccon and NFC providing an engineering procurement and construction contract together with project financing to construct the Barrambie Vanadium Project.

Reed resources Ltd. has agreed to deal exclusively with NFC and Arccon until 31[st] August 2010.

Barrambie remains one of the world’s highest grade vanadium deposits with a Probable Ore Reserve of 39.7 Mt at 0.82% V2O5 (Table 2). This Ore Reserve is based on an Indicated Mineral Resource of 49.2 Mt which represents a Resource to Reserve conversion rate of 81 %.

Table 2. Probable Ore Reserve* estimate for the Barrambie vanadium deposit (ASX announcement 5 May 2009)

Diluted Ore Tonnes (Mt)	Diluted V2O5 (%)	Diluted TiO2 (%)	Diluted Fe2O3 (%)	Diluted Al2O3 (%)	Diluted SiO2 (%)
39.7	0.82	15.69	48.77	11.59	16.12

• Probable Ore Reserve by Snowden Mining Industry Consultants Pty Ltd for a diluted cut‐off grade of 0.6 % V2O5. All tonnes are estimated as dry tonnes.

A Public Environmental Review Document (PER) was approved for release for public review by the EPA on 17[th] June 2010. The public review period for the Barrambie Vanadium Project commenced on the 28[th] June 2010 and will end on the 26[th] July 2010, during that time submissions may be made to the Environmental Protection Authority regarding the Barrambie Vanadium Project.

The PER document is based on the Definitive Feasibility Study completed in April 2009 and indicates 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 0.82 % V2O5 to produce 7,700 tonnes of Ferro‐Vanadium (FeV80) per annum for a minimum 12 year period. The DFS estimated that the total cost from investment decision through the construction period to commissioning (including contingencies) is A$630m and indicative operating costs would be less than US $20/kg V. The price is currently US $32/kg (Ryan’s Notes, 26 July 2010).

The Mining Proposal and Works Approval documentation is being prepared and will be submitted in the Sep Q 2010.

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COMET VALE GOLD PROJECT (Reed 100%)

The Company resumed 100% ownership of the Sand Queen Gold Mine at the Comet Vale Gold Project in Western Australia from 1 June 2010, pursuant to an agreement with Production Joint Venture partner Kingsrose Mining Limited ( ASX: KRM ) (“Kingsrose”) terminating the existing joint venture arrangement. Under the agreement Reed will also assume ownership of all associated joint venture assets and infrastructure.

The agreement will enable Reed to further develop its strategy of increasing its level of gold production from the Sand Queen Gold Mine, 100kms north of Kalgoorlie (Figure 5).

Under the terms of the agreement, Reed has:

• Paid Kingsrose $1M cash on 31 October 2009;

• Issued Kingsrose $2M in Reed shares at the closing market price on 31 May 2010; and

• Purchase all mine assets and infrastructure for $1M cash on 31 May 2010.

Kingsrose completed mining at the Sand Queen Gold Mine on 31 May 2010 under the existing production joint venture arrangement.

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Figure 5 Location of the Comet Vale project (left) and plan of tenements surrounding the Sand Queen Mine.

On 6 May 2010 the Company advised of its decision to suspend underground operations at the Sand Queen Gold Mine from 1 June 2010 pending the resolution of a long term milling solution or the refurbishment and recommissioning of the Nimbus processing plant, 15 km southeast of Kalgoorlie that was purchased 1 September 2009.

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MINERAL RESOURCE ESTIMATE

A new Mineral Resource Estimate for the project was calculated by Cube Consulting during the previous quarter. The resulting new Resource estimate has a total 534,000 tonnes at an average grade of 10.8 g/t Au for 186,000 ounces of contained gold (ASX announcement 8 April 2010).

Table 3 . Mineral Resource estimates for the Sand Queen mine, Comet Vale project (above 5 g/t Au block cut‐off).

Resource classification	Volume (bcm)	Tonnes	Grade (Au g/t)	Au (Ounces)
Indicated	88,000	238,000	10.8	82,500
Inferred	110,000	296,000	10.9	103,500
Total	198,000	534,000	10.8	186,000

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 6 Vertical longitudinal projections of the Sand Queen Gold Mine, showing the resource outline in relation to current and planned development with selected drillhole intersections for Domain 1 (top) only. (Footwall and Hangingwall Domains can be found on ASX announcement 8 April 2010)

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GOLD PRODUCTION – SAND QUEEN GOLD MINE

During the quarter, Kingsrose hauled 5,011 tonnes of ore to the surface. Mining continued to finalise stopes on the 3 and 4 level, with a total of 3,307t broken. Mined tonnages were lower due to the large amount of finalising and cleaning out stopes that were the focus for the quarter. At the close of June, a total of 4,892t @ 9.89g/t (unfactored grade) and 2,650t @ 4.00g/t (unfactored grade) were the remaining broken stocks on surface. This parcel was sold to a third party for milling. Reed expects a cash margin of A$400‐450/oz for its share of production, which is 40% of recovered metal (about 596 ounces).

EXPLORATION FORECAST

A total of 10,000m RC exploration drilling is planned and has been submitted for POW approvals from the DMP. It is expected that a further 5,000m of diamond drilling and 5,000m of RC will be planned in a staged aggressive program to delineate further extensions to the current resource.

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NIMBUS PROCESSING PLANT (Reed 100%)

As previously advised the Nimbus precious metals processing plant and mining leases M26/490 and M26/598 were purchased in September 2009. The plant is capable of treating 250,000 tpa of oxide ore and is situated approx 15 km south‐southeast of Kalgoorlie (Figure 7).

During the quarter the Company continued to progress the Pre‐feasibility Study for the recommissioning of the Nimbus Treatment Plant. The study is investigated the following:

• Refurbish the existing plant as is, 250ktpa Merrill‐Crowe (hard rock only)

• Convert to CIP at 200ktpa, 500ktpa, 750ktpa and 1mtpa processing rates.

• Build a new 900ktpa plant

Replacing the existing Merrill Crowe circuit with a Carbon in Pulp circuit is seen as an essential step to minimise operational risk and improve plant recovery.

The 500ktpa circuit appears to the optimal case given existing and future ore plans delivering superior return on capital and utilising as much of the existing plant as possible. Due to the demand for toll‐milling services in the Eastern Goldfields, the Company has engaged Como Engineers to commence an engineering study on conversion to CIP, utilising the existing milling circuit (250ktpa) to reduce the construction time with the aim of recommissioning in the June Q 2011. A decision on how the company intends to proceed is expected by October 2010. Connection to the High Voltage power network is schedule to commence in the Dec Q 2011.

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Figure 7 Location of the Nimbus Project Mining Leases (M26/490, M26/598) and processing plant.

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MT FINNERTY PROJECT

The Mt Finnerty Project, located about 65 km east of Koolyanobbing, is currently being explored for iron ore in joint venture with Cliffs Natural Resources (“Cliffs”), nickel exploration in own right and in joint venture with Barranco Resources NL (“Barranco”).

IRON ORE (CLIFFS 80%)

During the quarter flora surveys have been completed over three initial targets planned for resource definition drilling, Mt Finnerty (FIN9North), Mt Watt and Maitland. These priority targets are the result of intense geological mapping and geophysical surveys and interpretations of both magnetic and gravity surveys.

The resource definition program is expected to commence in September and cost $400,000 of which Reed Resources Ltd will contribute approximately $150,000. Stage 1 of the program totals 25 RC holes, with Phase 2 being drilled shortly after (pending results on phase 1).

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Figure 8 Location of major iron mineralisation prospects, including FIN9, and iron exploration targets within the Mt Finerty project.

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NICKEL (BARRANCO 100%, REED EARNING 60%)

During the quarter exploration continued on the western flank of the Mt. Finnerty Greenstone Belt (in Exploration Licences E16/305, E16/330) following up the diffuse IP target from fixed loop TEM that was reported in the December quarter.

A second diamond hole (GDD003) was drilled into the area this quarter to follow up the anomaly. This was subsequently logged and further DHEM surveys were conducted on the hole. Two favourable targets were encountered that will be followed up with additional diamond drilling this coming quarter. The first target was a pyrrhotite rich sediment (Black shale intercalated with ultramafic bands) approximately 4m thick, and a strong conductive horizon logged as cumulate textured ultra‐mafics with disseminated pyrrhotite throughout a 15m wide zone. Interpretation on the DTHEM would indicate that this hole was drilled within 10m of a favourable anomaly. This was also complimented with low‐grade Nickel and copper assays in the anomalous geophysical zones.

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Figure 9 Cross section of diamond drill hole GDD003 : Grade and DHTEM anomalies.

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This part of the Mt Finnerty project remains prospective for massive nickel sulphide mineralisation. There are favourable high MgO ultramafic host rocks with intact basal contacts and highly anomalous geochemical results (high Cu and Ni) that have yet to be satisfactorily explained. The effectiveness of TEM as a search tool for massive sulphides in this area is compromised by the presence of conductive overburden. The search for nickel sulphides is still at an early stage and will now focus on shallow RAB drilling along favourable basal contacts to locate indicative geochemical anomalies.

NICKEL (REED 100%)

Since the lapse of the WSA agreement on 26[th] February, 2010 (ASX announcement 8 March 2010), this area has been reviewed by Reed Resources and ranked as having significant anomalism that will be followed up in due course.

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Figure 10 Plan of Nickel Targets over Interpreted Geological

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BELL ROCK RANGE PROJECT (Reed 100%, AAE earning 75%)

The Bell Rock Range Project (E69/2293) covers some 471 km[2] within the western part of the Proterozoic Musgrave Block in central Australia (Figure 5). It is highly prospective for several commodities, particularly Ni‐Cu sulphide and PGE mineralisation. Exploration is being conducted by Anglo American Exploration (Australia) Pty Ltd (“AAE”).

A regional airborne SPECTREM survey of the West Musgraves region was completed by AAE in mid‐March 2010, including approximately 2,610 line km flown in the Bell Rock Range tenement (E69/2293). Processing and interpretation of the Bell Rock Range data has included production of Conductivity Depth Images (CDI’s) for selected depth slices. A sampling program was carried out during the quarter. A total of 60 samples in 2 traverses were taken for whole rock geochemistry and thin section analysis. The results from this work will be available in September 2010.

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Figure 11 Project Location over Interpreted Geology

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CORPORATE

On 1 June 2010 the Company issued 4,011,431 fully paid ordinary shares to Kingsrose Mining Ltd (ACN 112 389 910) as part consideration pursuant to the agreement reached in October 2009 to terminate the existing joint venture arrangement (see ASX announcement dated 16 October 2009).

In addition, on 30 June 2010 the Company’s Managing Director exercised 1,000,000 unlisted options in the Company at an exercise price of $0.50.

At the end of the quarter the Company had $10 million in cash and term deposits, including $9 million in restricted‐use term deposits supporting performance bonds, in addition there was $340,000 in trade debtors relating to gold ore sales at 30 June 2010.

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CJ Reed

MANAGING DIRECTOR

Geological aspects of this report that relate to Exploration Results have been compiled by Mr Craig Fawcett (MAusIMM), a full‐time employee of Reed Resources Ltd. Mr Fawcett has sufficient experience relevant to the styles of mineralisation and types of deposit under consideration and to the activity being reported on to qualify as a Competent Person as defined in the Code for Reporting of Mineral Resources and Ore Reserves. Mr Fawcettconsents to the inclusion in the report of the matters in the form and context in which it appears.

About Reed Resources

Reed Resources Ltd is a diversified mining and exploration Company based in Western Australia. It has modest gold production and is diversifying and expanding its production base. Reed Resources has five main projects (all in Western Australia) including:

• Mount Marion – High‐grade Lithium project located about 40km south of Kalgoorlie in JV with Mineral Resources Limited. First production planned by March 2011.

• Barrambie – Definitive Feasibility Study completed on a Ferrovanadium operation to produce 6300t of vanadium per annum. Currently in approvals process. Exclusivity Agreement with China Nonferrous Metals for EPCM & Financing.

• Comet Vale – High‐grade underground gold mine.

• Mount Finnerty – Iron ore JV with Cliffs Natural Resources & Nickel Farm‐in with Barranco Resources NL.

• Bell Rock Range – Nickel‐Copper‐PGM Farm‐out to Anglo American Exploration.

• Website: www.reedresources.com ASX code: RDR

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