NEOMETALS LTD — Interim / Quarterly Report 2011

Apr 28, 2011

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

QUARTERLY ACTIVITIES REPORT

31 March 2011

Highlights:

Meekatharra Gold Project

• Acquired 2.5 Moz Meekatharra Gold Project for $26.7M and 2 million shares

• Reserves and Resources increased at Reedys and Bluebird

• Chunderloo copper-gold system targeted for exploration

• Preliminary and detailed engineering studies underway for recommissioning of processing plant

Mount Marion Lithium Project

• Final mining approvals granted, siteworks commence

• Mineral Resources Ltd becomes equity partner in the project

• Resource expansion drilling commenced

Corporate

• Raised $40 million involving a Placement and Underwritten Share Purchase Plan

MEEKATHARRA GOLD PROJECT

(Reed 100%)

On 12 January 2011 Reed Resources Ltd (ASX: RDR) (“the Company” or “Reed Resources”) announced the acquisition, via its wholly owned subsidiary GMK Exploration Pty Ltd, of 100% of the landholdings and assets of Mercator Gold Australia Pty Ltd (“Mercator”), which is currently in Administration (ASX release 12 January 2011).

The Meekatharra Gold Project, centred on the Bluebird processing plant, is located 640km northeast of Perth and 10 km south of Meekatharra, in the Murchison Region of Western Australia (Figure 1).

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Figure 1 Location of tenement holdings overlain on bedrock geology and historical gold production from key mining camps in the district.

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The project comprises more than 800 km[2] of tenure covering 100 km strike length of the Murchison Greenstone belt, and has produced in excess of 4.5 million ounces of gold. The Murchison Greenstone belt is a proven fertile greenstone belt, hosting multi-million ounce deposits at Mt Magnet, Tuckabianna, Reedy’s, Bluebird and Paddys Flat.

Mercator had delineated 2.5M ounces of gold in JORC Code compliant Resources, and Reserves in excess of 0.5M ounces prior to it commencing operations in early 2007. Mercator produced 44,000 ounces in the 18 months before suspension of operations in October 2008.

In addition, the Company will also acquire significant infrastructure, including a refurbished processing plant capable of up to 3Mtpa, a 180-man camp, offices, workshops and a 7MW diesel power plant (Figures 2,3). The replacement cost has been independently assessed at A$104 million. A number of key consulting parties have been engaged to assist with the Bankable Feasibility Study for recommencement of the Meekatharra operation, which is due for completion in February 2012.

Terms and Financing

Under the terms of the agreement Reed Resources has agreed to make the following payments to Mercator:

• A$2 million within 48 hours of execution of the agreement (since paid);

• A$15 million on 31 March 2011 (since paid); and

• A$8 million at Settlement on 30 June 2011 and replacement of bonds (A$2.8 million).

On the Settlement date, Reed will also issue Mercator with the greater of 2 million or A$1.3 million worth of Reed Resources shares based on the 5 day volume weighted average price (VWAP) prior to the Settlement date. The Company will also be responsible for the holding costs associated with the tenements for the period up until the Settlement date (estimated at A$1.7 million).

On 24 February 2011 the Company announced details of a $40 million capital raising involving a Share Placement and Underwritten Share Purchase Plan. Funds raised will be used to satisfy the purchase consideration for the Meekatharra Gold Project, for working capital, and the advancement of the Company’s other assets.

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Figure 2 Part of the processing facility at Bluebird, and the power generation plant in the foreground.

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Figure 3 Camp facility at Bluebird alongside the South Junction pit.

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Meekatharra Business Strategy

The Company has commenced a full geological and mining review of the entire tenement holding which is aimed at:

• Increasing reserves through re-estimation and re-optimisation of the legacy resource inventory to deliver a multiple source, sustainable 3-5 year mining plan with a view to recommencing operations by the end of 2012 (Table 1). The Company is confident that using current gold prices, as opposed to a historical average of less than US$800 per ounce for previous reserve calculations, will lead to a significant increase in reserves.

• Increasing the project’s JORC Code compliant resources through a resource expansion and targeted exploration drilling program. The density of drilling is sparse in relation to the size of the land holding, particularly beneath 100m below surface around historical mining centres. An initial review of some of the existing workings has already identified potential for immediate expansion, in addition to known resources.

The Company is currently building up a dedicated management team for its gold business. Reed Resources’ Chief Geologist, Mr Craig Fawcett, has assumed the role of General Manager – Gold. Craig is a qualified geologist and engineer who has previously held the positions of Chief Mine Geologist at Tanami Gold and Avoca Resources during both their start-up phase of operations. Craig has also held the position of Geology and Mining Manager at Apex’s Wiluna Gold Mine during their re-start of operations.

Table 1 Timeline to recommencement of operations at Meekatharra.

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Geology

A review of the geological models for the larger deposits in the resource inventory commenced during the quarter. A team of two resource and one senior exploration geologists were appointed during the quarter to accelerate the aggressive re-evaluation and re-modelling of legacy resources.

New resource estimates at Reedys for the Jack Ryan, Callisto and Rand deposits have delivered notable increases in gold grade and/or total ounces (ASX release 11 March 2011). The South Emu deposit is currently undergoing re-modelling and re-estimation.

Table 2. Jack Ryan Resource Estimate (2005)

Table 3. Jack Ryan Resource Estimate (2011)

~~Resource~~	~~Resource~~	~~Resource~~	~~Resource~~	~~Resource~~	~~Resource~~	~~Resource~~	~~Resource~~
~~Classification~~ ~~Tonnes~~ ~~Au (g/t)~~ ~~Ounces (oz)~~				~~Classification~~ ~~Tonnes~~ ~~Au (g/t)~~ ~~Ounces (oz)~~
Indicated	534,000	2.1	36,000	Indicated	341,000	2.9	32,000
Inferred	846,000	1.7	47,000	Inferred	655,000	2.3	47,600

Table 4. Rand Resource Estimate (2005)

Table 5. Rand Resource Estimate (2011)

~~Project~~ Rand	~~Classification~~ Indicated	~~Tonnes~~ 891,000	~~(g/t)~~ 1.9	~~Total Ounces~~ 55,000	~~Project~~ Rand	~~Classification~~ Indicated	~~Tonnes~~ 642,000	~~(g/t)~~ 2.4	~~Total Ounces~~ 49,400
	Inferred	1,458,000	2.7	125,000		Inferred	2,149,000	2.7	184,200
	Sub-Total	2,349,000	2.4	180,000		Sub-Total	2,791,000	2.6	233,600

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Figure 4. Longitudinal Projection of the Rand pit showing outlines of the Indicated and Inferred Resources.

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At Yaloginda, the Bluebird model passed evaluation and was forwarded to Minecomp for optimisation, results of which are in the Mining section below. The Surprise model was expanded to include Jess (previously under highway), Surprise South and Surprise West prospects, a new mineral resource estimate is expected in May.

At Paddys Flat, the Prohibition deposit was extensively remodelled to incorporate near surface mineralisation previously identified but never optimised for open pit cutback potential. A new mineral resource estimate is expected in May. The Vivians-Consols-FattsMudlode geological models are currently undergoing evaluation as a precursor to reevaluation as an underground mining operation.

During the quarter a review of some near mine targets uncovered the historical Chunderloo Mine, a major copper producer prior to the discovery of Golden Grove. Surface copper-gold geochemistry indicates a surface anomaly above 0.1% Cu over 3km along a granite-basalt contact. Historical mining covered only a 100m strike length portion of this anomaly. Previous sulphide intercepts include 15m@ 14.7g/t Au and 4.1% Cu (including 7m of 28.9 g/t Au and 8.3% Cu). Further drilling is planned to test the down-dip extension of this deposit and repeats along the structural corridor (ASX release 17 March 2011).

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Figure 5.

Long section of Chunderloo North deposit and grades of mineralised intercepts in RC drill holes.

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Mining

During the quarter the Bluebird Ore Reserve was re-estimated using current economic parameters to more accurately reflect increases in operating costs and gold prices. Although the Probable Ore Reserve is almost identical to the previous estimate there is still potential upside from the areas of inferred resources within the current pit shell. Bluebird represents potentially 12 months of base load, open pit feed for the recommencement of the operations.

A definitive pit design will be created from which an underground feasibility can commence. There is currently no underground mining plan into the Bluebird ore body (Figure 6). It is expected to commence this work in the next 3 months.

Table 6- Probable Ore Reserve estimate for the Bluebird Deposit

		Reserve Classification			Total Ounces
Type	Project		Tonnes	Gold Grade (g/t)
Open Pit	Bluebird	Probable	1,410,000	1.9	87,000
TOTAL			1,410,000	1.9	87,000

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Figure 6 Cross section through the Bluebird pit and underground potential below the pit

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At Paddys Flat, re-optimisation of the Prohibition deposit as an open pit and underground operation will commence in the June Quarter 2011 following receipt of the new resource estimate. A detailed evaluation of previous owners’ feasibility studies on the underground mining of the Prohibition-Vivians-Consols (“PVC”) commenced during the quarter and is progressing well. Subsequent owners Mercator had expanded the mineplan to recover newly discovered extensions to the PVC deposits, as well the newly discovered the Fatts and Mudlode deposits. The current probable reserves for the proposed operation are 1.99Mt at 4.8 g/t Au for 308,000 ozs. A new mine design is expected to be completed by the end of the June Quarter 2011.

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Figure 7 Schematic of planned underground workings at Paddys Flat

At Reedys, the new Jack Ryan, Callisto and Rand resources are being re-optimised and a new reserve estimate expected in May. The South Emu resource is being evaluated as a potential underground operation, a new mine design is expected to be completed by the end of the June Quarter 2011.

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MT MARION LITHIUM PROJECT

(Reed 70%, Mineral Resources Limited 30%)

During the December quarter 2010 the Company received works approval for plant construction from the Department of Environment and Conservation (DEC) to commence erection of the minerals processing plant at the Mt Marion Lithium Project, near Kalgoorlie, Western Australia. On 2 February 2011 the Company and its partner Mineral Resources Limited ( ASX: MIN ) (“Mineral Resources”) received approval from the Department of Mines and Petroleum for the final mining proposal at Mount Marion. Construction of the plant in modular form by Mineral Resources at its workshops in Kwinana is well advanced and site works have commenced.

On 16 February 2011 Reed Resources and Mineral Resources announced that they had agreed the principles to which the ownership structure of Mt Marion Lithium Project will be amended to achieve greater alignment of interests for the downstream processing of spodumene to battery grade lithium carbonate. Mineral Resources will convert a right to 40% of Mount Marion Project profits to 30% equity interest in Reed Industrial Minerals Pty Ltd which holds 100% of the Mount Marion Project.

The Mount Marion Project is on schedule for commissioning in the December quarter 2011 with initial capacity of 200,000 tpa of 6% Li2O chemical grade spodumene concentrate, 60,000 tpa of mica and 30 tpa tantalite concentrate. Total contained lithium oxide resources at present are 146,000 tonnes (Li2O).

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Primary Jaw Crusher

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Secondary Cone Crusher

Resource Expansion Drilling

A strategic resource expansion program commenced during the quarter with a view to extending the open pit mine life through depth and strike extensions of existing deposits (50 holes) and the definition of new resources from outcropping pegmatite prospects (52 holes) (Figure 8).

A total of 3,434 metres in 61 wide-spaced, vertical drill tested new prospects at Area 6 and the No 4 Deposit. Drilling to extend resources at three previously drilled deposits is in progress and is expected to be completed toward the end of April.

A row of 7 holes spaced along strike at 30 metre spacing on the western side of the No.1 Deposit was completed during the quarter. Pegmatite intersections are thicker than previous intersections with drilled intercepts sections and varying from 19.6 to 28 metres (average 24 metres) and mid points of the intersection depths varying from 80 to 90 metres. The consistency of the pegmatite on each section indicates that it will continue further to the west.

Following completion of the drilling expected early in the June quarter, Reed plans to update and report an upgraded mineral resource estimate in the September quarter.

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Figure 8 : Mount Marion existing pegmatite resources within the project

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Lithium Carbonate Development Strategy

During the quarter, the company sought and received expressions of interest from a number of Asian parties involved in, or seeking to become involved in, the downstream processing of lithium concentrate, with a view to leveraging the status of Mt Marion as one of the world’s largest potential sources of uncontracted spodumene. Reed mandated Gresham Advisory Partners to assist in this process.

Expressions of interest received incorporate a range of potential structures, including acquisition of an interest in the Mt Marion project, and a range of downstream processing joint ventures and investments.

The process has confirmed Reed’s expectation of a robust growth outlook for lithium chemicals as a result of the burgeoning market for a range of end-uses, particularly in the electric vehicle and energy storage industries. However, at this point, the company has not been presented with an opportunity to transact on terms that are considered to be value accretive to Reed shareholders.

Reed is continuing to engage in dialogue with a number of parties with a view to furthering its downstream ambitions and, in the meantime, remains focussed on advancing preparations for the commencement of operations at Mt Marion.

BARRAMBIE VANADIUM PROJECT (Reed 100%)

Construction and Financing Update

In November 2010 Reed signed a Memorandum of Understanding (MoU) with China Nonferrous Metal Industry’s Foreign Engineering and Construction Co Ltd (“NFC”) and West Australian based engineering and construction company Arccon (WA) Pty Ltd (“Arccon”) for the development of the Barrambie Vanadium Project situated in the Mid West Region of Western Australia.

The MoU represents the next step in the development of the Barrambie Vanadium Project, which is recognised as one of the world’s highest grade, primary vanadium deposits. The MoU formalises discussions that had taken place between Reed and NFC, relating to an engineering procurement and construction contract (“EPC”) and project financing.

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As well as NFC undertaking to provide a fixed price EPC contract for Barrambie in conjunction with Arccon the MoU envisages NFC will also assist Reed in securing debt and equity funding for the development of Barrambie.

During the quarter, NFC and Arccon investigated alternative process flow sheets and plant designs with the aim of reducing the capital and operating cost and improving the Barrambie project’s processing efficiency. NFC and Arccon have agreed that they will provide Reed with an updated fixed-price EPC estimate by the end of May 2011.

The EPC estimate from NFC is expected to specify the use of Chinese equipment and services for the Barrambie project and Reed expects the updated estimate will deliver significant savings compared to the original Definitive Feasibility Study capital cost estimate of A$628.9 million, subject to cost escalation and foreign exchange movements.

The Definitive Feasibility Study completed in April 2009 targeted treating 3.2 million tonnes per annum of vanadiferous magnetite mineralisation at a grade of 0.82% V2O5 to produce 11,200 tonnes of fused vanadium pentoxide flake per year for a minimum of 12 years. The DFS estimated that the total cost from the investment decision through construction and commissioning (including contingencies) is A$630M and indicative operating costs would be less than US $20/kg of V. The price is currently US $33/Kg (Ryans Notes 22[nd ] April 2011).

Reed believes it will benefit from the involvement of both NFC and Arccon in the consortium as it enables access to the cost benefits of a Chinese contractor, whilst retaining appropriate Australian expertise, to ensure Australian standards and work practices are adhered to and construction of the Project can be executed smoothly.

Public Environmental Review Document (PER)

The Public Environmental Review Document (PER) was released to the public on 17th June 2010 and closed on 26th July 2010. A number of submissions were received from interested parties, and the EPA is currently considering the Company’s response to the submissions before preparing its report and recommendations for the Minister.

5C Water Licence Application

Acting on the advice of the Department of Water (DoW) the Company has applied for 5C water licences for the extraction of water from the Barrambie bore field and the Barrambie Mine Site. Application for these licences will enable the company and its hydrologists to work closely with DoW in identifying the quantities of water available from the different sources and the appropriate management strategies to be adopted.

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Geotechnical Site Investigation

During the quarter Sinclair Knight Merz (SKM) carried out a geotechnical survey of the Barrambie project area. The aim of the survey was to identify the various soil and gravel materials that would be suitable for construction and rehabilitation purposes. A soil and gravel inventory was drawn up and materials were identified that would be suitable for road, civil and tailings dam construction and the rehabilitation of waste landforms.

Detailed area drainage plans were drawn up and a staged mine closure plan was prepared. These various investigations will assist the Company when it prepares its Mining Proposal for lodgement with the Department of Mines prior to commencing construction.

Barrambie Ore Reserve

The Barrambie vanadium deposit is one of the world’s highest grade vanadium deposits with a Probable Ore Reserve of 39.7 million tonnes at a grade of 0.82% V2O5. This ore reserve is based on an Indicated Mineral resource of 49.2 million tonnes.

COMET VALE GOLD PROJECT

(Reed 100%)

The Company resumed 100% ownership of the Sand Queen Gold Mine and all associated joint venture assets and infrastructure at the Comet Vale Gold Project in Western Australia from 1 June 2010. The mine remains on care and maintenance and there was no production from the Sand Queen during the March quarter.

NIMBUS PROCESSING PLANT

(Reed 100%)

The Nimbus precious metals processing plant and mining leases M26/490 and M26/598 were purchased from Polymetals Pty Ltd in September 2009. The plant was capable of treating 250,000 tonnes per annum of oxide ore and is situated approximately 15 kilometres east of Kalgoorlie.

Nimbus Plant Processing Capacity

The results of a Pre-Feasibility Study for recommissioning of the Nimbus Treatment Plant indicated that the most capital effective improvement would be to refurbish the existing plant “as is” with an immediate target of 250,000 tonnes per annum of hard rock ore but allowing space within the plant foot print to expand to 500,000 tonnes per annum.

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The current treatment plant has a Merrill Crowe circuit for the recovery of gold. This will be replaced by a carbon-in-pulp circuit, which is seen as an important step to reduce operational risk and improve plant efficiency and gold recovery.

Refurbishment of Nimbus Ball Mill

As a first step in the refurbishment, the existing ball mill was removed from its bearings and placed on supports to enable the ball charge to be removed and the inside of the mill to be pressure cleaned. The ball mill is in reasonable condition and has been removed from site for machining of the end plate and replacement of some of the rubber liners. A Works Approval for refurbishment of the plant will be lodged in the June Quarter.

Supply of Power to Nimbus Site

During the quarter Western Power completed work on the power line cross over on Bulong Road to enable power to be delivered to the Nimbus site via a power line easement that runs directly south from Bulong road into Nimbus mining lease M26/490 (Figure 9). High voltage closing switches together with the appropriate number of treated power poles have arrived on site. A contract for the installation of the power poles and the stringing of the high voltage aerials has been let. Subject to the appropriate approvals being granted this work is planned to commence in May 2011.

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Figure 9. Location of the Nimbus project mining leases (M26/490, M26/598) and processing plant, and power line easement from the Bulong Road.

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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”) and nickel mineralization, partly in joint venture with Barranco Resources NL (“Barranco”).

Iron Ore (Cliffs 80%, Reed 20%)

The first stage of resource definition drilling program was undertaken during the December 2010 quarter with a total of 25 RC holes completed. Drill assay results have been received confirming a low grade iron ore occurrence with potential for gold. A magnetite exploration review was completed during the quarter, and indicates the potential for substantial tonnages of magnetite

Nickel (Barranco 100%, Reed earning 60%)

No additional work has been conducted on the anomalous areas this quarter. This part of the Mt Finnerty project remains prospective for massive nickel sulphide mineralisation. A shallow RAB program to target the basal contacts has been designed and a POW will be lodged this quarter.

Gold (Reed 100%)

During the quarter no further work has been undertaken at the Mt Finnerty project in relation to the gold prospectivity. A decision is yet to be made as to when the drill program that has been designed will commence.

BELL ROCK RANGE PROJECT (Reed 100%)

The Bell Rock Range Project (E69/2293) covers some 471 km[2] within the western part of the Proterozoic Musgrave Block in central Australia. It is highly prospective for several commodities, particularly Ni-Cu sulphide and PGE mineralisation. No work has been conducted at Bell Rock Range during the quarter.

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CORPORATE

The following corporate events took place during the quarter;

• 14 January 2011 – The Company issued 1 million shares to a consultant to the company for a transaction related success fee.

• 21 February 2011 – A request was made for an immediate trading halt in relation to the Company’s ordinary shares pending an announcement regarding a capital raising.

• 24 February 2011 – The details of a $40 million capital raising involving a placement and share purchase plan was announced by the Company. Both raisings were conducted at an issue price of $0.58 cents per fully paid ordinary share.

• 2 and 4 March 2011 – The Company completed tranche 1 of the share placement issuing 27.5 million shares at an issue price of $0.58 cents per fully paid ordinary share.

• 4 March 2011 – The notice of Extraordinary General Meeting and Share Purchase Plan offer document were posted to shareholders.

• 10 March 2011 – The Company issued its statutory half year financial accounts.

• 28 March 2011 – The share purchase plan was closed and the results announced to the market.

• 31 March 2011 - The Company presented at the Paydirt Gold conference in Perth, Australia

At the end of the quarter the Company had $11.3 million in cash and term deposits, including $9 million in restricted-use term deposits supporting performance bonds.

CJ Reed

MANAGING DIRECTOR

COMPETENT PERSONS STATEMENT

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 Fawcett consents to the inclusion in the report of the matters in the form and context in which it appears.

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About Reed Resources

Reed Resources Ltd (ASX: RDR, OTC: RDRUY) is a diversified mining and exploration Company based in Western Australia. Reed’s American Depositary Receipts (ADR’s) trade under the code RDRUY (CUSIP Number: 758254106). Each Reed ADR is equivalent to 10 ordinary shares of Reed as traded on the ASX. The Bank of New York Mellon is the depository bank.

Reed Resources has five main projects (all in Western Australia):

• Mount Marion – High-grade Lithium project located about 40km south of Kalgoorlie in JV with Mineral Resources Limited. World’s second biggest lithium concentrate operation under construction. Commissioning to occur in December 2011.

• Meekatharra – Recently acquired 2.5M oz Gold project with 3Mtpa processing plant and associated infrastructure, conducting resource re-optimisation and feasibility study to recommence gold production in 2012.

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

• Comet Vale – Evaluating recommencement of high-grade underground gold production and refurbishment of processing plant, both currently on care & maintenance.

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

Website: www.reedresources.com

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