NEOMETALS LTD — Interim / Quarterly Report 2013

Jul 21, 2013

Level 1, 672 Murray St West Perth WA 6005

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ABN 89 099 116 631
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Locked Bag 8 West Perth WA 6872 Tel: +61 8 9322 1182 Fax: +61 8 9321 0556

ASX Release 22 July 2013

REED RESOURCES LTD QUARTERLY ACTIVITIES REPORT For the quarter ended 30 June 2013

Highlights:

Meekatharra Gold Operation

• Bluebird Gold Processing Plant averages 96.2% recovery

• Ounces sold improved by 84% to 13,474oz

• Ounces mined and processed adversely impacted by ounces that have been historically mined from the legacy Bluebird pits but not recorded, and a decline in the mine to mill ounces reconciliation in the geologically complex northern Bluebird ore zones

• 75% of Bluebird open pit volume removed

• 58,500oz remain to be mined from Bluebird at a total cash expenditure of ≈A$1,000/oz

• 85% of the remaining Bluebird ore is sources from the higher grade southern ore lodes

• Mt Marion Lithium Project

• “Proof of Technology” test work program continuing

Corporate

• $27 million cash realised on closure of hedge book

• Credit Suisse debt facility fully repaid and group security released, netting $7.7 million in cash

• Reed allows option to acquire Nannine Mining Centre to lapse

• The retirement of Environmental Performance Bonds releases $3 million in cash from restricted deposits

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CORPORATE

Gold Hedge

During the quarter, Western Australian gold producer, Reed Resources Ltd ( ASX: RDR ) ( “Reed” or “the Company” ), announced that it has closed its hedge book to realise its inherent financial value and strengthen the Company’s balance sheet during this period of gold price weakness.

The Company has repaid Credit Suisse all amounts owing under the $19 million debt facility established in November 2012 and Credit Suisse has released its security over the Reed group. The closure of the hedge book increased Reed’s working capital by approximately $7.7 million.

Environmental Performance Bonds

Subsequent to the end of the quarter, Reed announced that the Western Australian Department of Mines and Petroleum had retired all of the Company’s environmental performance bonds pertaining to the Meekatharra Gold Operation, following the Company opting in to the new Mining Rehabilitation Fund. The retirement of these bonds has released approximately $3 million previously held in restricted use term deposits as security for the bonds.

Lapse of Option to acquire Nannine Mining Centre

Subsequent to the end of the quarter, Reed announced that it had not exercised an option to acquire outright ownership of the Nannine Mining Centre (announced to ASX on 6 July 2011) and that the option has now lapsed. After critical evaluation and taking into account prevailing market conditions the Company has elected to preserve its financial position and avoid dilution.

Finances (unaudited)

Cash and term deposits on hand as of 30 June 2013 totalled $19.04 million, including $11.9 million in restricted use term deposits supporting performance bonds and other contractual obligations. As noted above, subsequent to the end of the quarter a further $3 million was released from restricted use term deposit.

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MEEKATHARRA GOLD OPERATION (Reed 100%)

The Meekatharra Gold Operation, 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.

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Figure 1: Location of tenement holdings overlain on bedrock geology of the Meekatharra – Mt Magnet region of the Murchison Province showing gold production from key Reed Resources mining districts and the location of other mining camps in the area.

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Meekatharra Gold Operation Strategy

Within the Meekatharra Gold Operation tenements Reed has a Resource inventory of 3.55Moz and a Reserve inventory of 730koz ounces (refer to Annexure A). Reed has a 3 staged strategy to exploit the Reserve, Resource and inventory base of the extensive Meekatharra Gold assets which includes producing up to 134,000 ounces from its Stage 1 open pit ore sources that are within 6.5km of Reed’s Bluebird processing facility. Stage 2 will exploit the remaining 596,000 ounces of Reserves predominantly from Paddys Flat, Yaloginda and Reedy project areas with production sourced from open pits and underground. Stage 3 of Reed’s strategy at Meekatharra will be executed concurrently with Stage’s 1 and 2 and utilise the latest targeting and exploration techniques to convert as many of the 2.8M Resource ounces to Reserves as possible whilst defining further Resources and Reserves with the ultimate aim of delivering a sustainable 10 year mine life from the Meekatharra Project area generating between 100,000 to 150,000 ounces per annum at a total cost below $1000/ounce.

Safety

No lost time injuries occurred at MGO during the quarter.

Operations

Mining

Bluebird

Total material movement from the Bluebird open pit was 1.38 million BCM for the quarter. Full year total material movement of 4.56 million BCM represents 75% of the total life of mine material to be mined from Bluebird. Given the current mine plan and cost assumptions the estimated total cash expenditure per ounce to complete the Bluebird pit is approximately A$1,000/oz. The total cash expenditure includes all mining (ore and waste), processing and mine administration costs.

Ore mined from the Bluebird open pit for the quarter was 317,781 tonnes at 1.17g/t for 12,004oz.

The Bluebird open pit was mined from the +420mRL to the 400mRL during the quarter.

As announced on 20 June approximately 20,500oz had been mined from Bluebird to the end of May compared with an estimated Reserve for the same period of 22,600oz. The variance in mined ounces was principally attributed to ounces that had been previously mined from the legacy Bluebird North and Bluebird pits. At the same time Reed estimated that a further 4,200oz may have previously been mined from the legacy Bluebird pit which had been included in the Reserve.

Reed also announced on 20 June that the mine to mill ounces reconciliation at MGO had declined materially from that previously achieved up until June. As announced on 9 July, Reed attributed the decline in the mine to mill ounces reconciliation to a change in geological modelling which tightly constrained Bluebird’s northern ore blocks, as recommended by an external and independent external review of MGO’s grade control processes and reconciliation processes.

Reed has compared Bluebird’s most recent grade control model ( GC Model ) with the depleted Bluebird Resource estimate ( Estimate ) prepared for Reed by Resource estimation specialists. Both the Estimate and GC Model indicate that approximately 58,500oz remain to be mined from Bluebird. 84% of the estimated remaining ounces to be mined are contained in the higher grade southern ore zones.

MGO has performed further grade control drilling in the northern and southern ore lodes in late June and early July, the results of which will be used to update Bluebird’s GC Model.

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Also as announced on 20 June, Reed has redesigned the Bluebird pit to mitigate the short term impact on cash flow from estimated ounces foregone from the legacy Bluebird pits. Two concurrent northern and southern stages of the Bluebird pit will commence in early July with the bulk of the initial material movement for the September quarter scheduled from the higher grade southern ore zones.

		Dec Qtr 2012	Mar Qtr 2013	June Qtr 2013	Full Year 12/13
Meekatharra	Units
Total Material Movement	BCM	1,347,045	1,833,410	1,380,020	4,560,475
Total ore tonnes mined	tonnes	38,787	314,184	317,781	670,752
Minedgrade	g/t	1.32	0.91	1.17	1.06
Total containedgold in ore	oz	1,642	9,211	12,004	22,857

Table 1: Meekatharra Gold Operation mine production statistics.

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Figure 2: Pit floor of the Bluebird open pit looking North at the end of March 2013.

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Figure 3: Pit floor of the Bluebird open pit looking North at the end of June 2013.

Processing

Ore processed through the Bluebird processing facility for the quarter was 404,282 tonnes containing 13,432 ounces and recovering 12,918 ounces at 96.2% recovery.

Mill throughput to the end of the quarter exceed target by 4% whilst recovery was 2.3% above target.

June quarter gold production was adversely affected by lower head grade attributable to the loss of high grade ore tonnes previously mined from the Bluebird North and Bluebird legacy open pits which were included in the Bluebird Reserve. June quarter gold production has also been adversely affected by the mine to mill ounces reconciliation which declined materially from that previously achieved up until June. Reed attributed the decline in mine to mill ounces reconciliation to a change in geological modelling which tightly constrained Bluebird’s northern ore blocks.

Bluebird Mill	Units	DecQtr 2012	MarQtr 2013	JuneQtr 2013	Full Year 2013
Ore tonnes milled	tonnes	39,033	342,233	404,282	785,548
Headgrade	g/t	0.74	0.90	1.03	0.96
Containedgold in ore	oz	929	9,914	13,432	24,275
Recovery	%	72.2	92.0	96.2	93.6
Goldproduced	oz	668	9,123	12,918	22,709
Finegold refined & sold	oz	-	7,336	13,474	20,810

Table 2: Meekatharra Gold Operation Bluebird mill production statistics.

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Cash Costs

Reed has released separately a detailed quarterly cash flow report Appendix 5B.

	Meekatharra Operation	Units	DecQtr 2012	MarchQtr 2013	JuneQtr 2013	Full Year 2013
	Cash Costs	$	-	16,849,204	21,215,012	38,064,216
	Royalties	$	-	305,283	732,606	1,037,889
	Goldproduced	oz	-	9,791	12,918	22,709
	Revenue	$	-	11,769,003	19,596,137	31,365,140
	Gold refined & sold	oz	-	7,336	13,474	20,810
	Cash Costs	$/oz	-	1,721	1,642	1,676
	Royalties	$/oz	-	31	57	46
	Average salesprice	$/oz	-	1,604	1,454	1,507
	Table 3:MGO gold sales, reven	ue and cost statistics.

Unaudited MGO C1 cash operating costs for the quarter were $1,642/oz.

Year to date unit mining costs of $8.62/BCM is approximately 7% higher than target, year to date unit milling costs were 14% below target whilst year to date site administration expenditure of $4.4 million was as targeted.

YTD unit mining costs were higher than targeted primarily due to increased volumes of material requiring blasting than planned.

Exploration and Project Generation

Nothing significant to report.

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MT MARION LITHIUM PROJECT

(Reed 70%, Mineral Resources Limited 30%)

During the quarter Reed Industrial Minerals Pty Ltd ( RIM ) continued to advance the Mt Marion Lithium Project ( Mt Marion ) with a metallurgical test work program at SGS Perth. RIM is owned 70:30 by Reed Resources Ltd and leading mining services provider Mineral Resources Limited ( MRL ). MRL fund and operate the project through their subsidiary, Process Minerals International Pty Ltd.

As part of RIM’s integrated down-streaming strategy, and following on from the 2012 Pre-feasibility Study, the “proof of technology” test work program involves the production of high-purity lithium battery feed-stocks, Lithium Hydroxide and Lithium Carbonate, on a continuous scale from RIM’s proprietary process flow sheet using spodumene concentrates from Mt Marion. The test work program is expected to be complete in September at which time a decision to complete the Engineering Cost Study will be made. Results to date are encouraging, an Australian patent has been lodged and a provisional World patent application is being prepared.

Roskill have forecast an extraordinary increase in the consumption of high-purity, battery-grade lithium hydroxide and carbonate, underpinned by growth in rechargeable batteries. The current median prices for lithium hydroxide and lithium carbonate is US$7,500 and US$7,100 per tonne on a CIF basis to US or Europe (source: Industrial Minerals 25 June 2013).

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Reed and MRL continue to assess the most effective production profile and optimal timing for the commencement of spodumene concentrate operations at Mt Marion. All project approvals for Mt Marion have been received.

During the quarter, a commodity trader was provided with sample product as part of a study to evaluate the economic contribution from producing high-grade mica products as a by-product of the spodumene recovery plant. Feedback to date suggests that a medium grade mica product may be suitable for a wide range of commercial applications.

Reed is working with MRL in preparing RIM to become an independently financed, advanced minerals company. An Initial Public Offering of RIM is currently Reed and MRL’s preferred financing strategy, with the anticipated timing to be determined post-completion of a Definitive Feasibility Study. Strategic discussions continue with third parties in relation to alternate transaction structures. Discussions remain preliminary and there can be no assurance that a binding proposal will emerge. Reed and Mineral Resources will keep the market informed as matters develop further.

BARRAMBIE FE-TI-V PROJECT

(Reed 100%)

Barrambie’s Eastern Band is one of the highest grade hard rock titanium deposits globally and contains a Mineral Resource (2005) of 48Mt @ 22% TiO2.

Formal laboratory scale test work in Canada has confirmed high-purity (>99%) titanium dioxide can be precipitated selectively from a leach solution at recoveries greater than 90%.

A continuous scale mini-plant evaluation of a proprietary hydrometallurgical technology to produce high-purity titanium is planned once appropriate resources and funding become available.

The Company is currently negotiating a technology transfer agreement for the process.

COMET VALE GOLD PROJECT

(Reed 100%)

The Sand Queen mine remains on care and maintenance.

A sale process for the Comet Vale project is continuing.

The project has combined underground and open-pitable resources of 792Kt @ 8.2g/t Au for 208,000 oz.

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MT FINNERTY PROJECT

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

Iron Ore (Cliffs 80%, Reed 20%)

Nothing significant to report.

Nickel (Barranco 100%, Reed option to acquire 100%)

Exploration within Mt Finnerty Project during the June quarter focused on diamond drilling and detailed logging of core at Green Dam Prospect within E16/305.

The drilling of 3 targets intersected variably altered, thick, high magnesian serpentinite after olivine mesocumulate. No footwall contacts were intersected due to collaring diamond holes higher in the Green Dam Ultramafic Complex (GDUC) stratigraphy, in order to test for remobilised NiS mineralisation.

One diamond drill-hole targeted a strong IP anomaly. The hole intersected multiple amphibolefuchsite-biotite-sulphide alteration zones and a massive chalcopyrite-(pentlandite)-(magnetite) mineralised vein system. Trace element geochemistry and sub-grade nickel values are interpreted to be highly prospective for more significant thicknesses and grades down the vein system.

Another diamond drill-hole targeted the anomalous palladium geochemistry of previous RC programmes. This hole intersected similar multiple amphibole-fuchsite-biotite-sulphide alteration zones.

The third diamond drill-hole targeted the “Green Dam Gossan” leakage anomaly that returned 2-4% Ni from pXRF estimates. The hole intersected multiple amphibole-fuchsite-biotite-sulphide alteration zones, the orientation of which can be interpreted to be continuous with the leakage anomaly.

All alteration zones and talc-carbonate altered serpentinite-with-disseminated sulphides were submitted for analysis of the comprehensive komatiite and pathfinder suite of elements. Results were received late in the quarter and are being collated and interpreted.

ROYALTY INTERESTS

Reed holds a 1% Net Smelter Royalty on all zinc extracted and recovered from M26/0490 and M26/0598, containing MRP’s Nimbus Silver-Gold-Zinc mine. MRP has reported to ASX that the mine has combined Resources of 4.4Mt @ 82g/t Ag, 0.23 g/t Au and 1.1% Zn, containing 48,800 tonnes of zinc, and that processing is planned to commence in first half of 2014.

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COMPETENT PERSONS STATEMENT

Geological aspects of this report have been compiled by Mr Craig Fawcett (MAIMM), a full time employee of Reed Resources Ltd. Mr Fawcett 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 (2004). Mr Fawcett consents to the inclusion in this report of the matters in the form and context in which they appear.

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APPENDIX A: MEEKATHARRA GOLD PROJECT RESOURCES & RESERVES AS AT 30 JUNE 2012

MINERAL RESOURCE INVENTORY

Project	Category	Tonnes (Mt)	Au (g/t)	Au (koz)
Meekatharra North	Indicated	1.2	1.8	66
	Inferred	0.2	1.6	9
Paddy's Flat	Indicated	25.2	1.6	1,281
	Inferred	13.4	1.6	670
Yaloginda	Indicated	10.1	1.7	564
	Inferred	6.2	1.7	347
Reedys	Indicated	2.7	3.1	276
	Inferred	4	2.7	338
	Indicated	39.2	1.7	2,187
TOTAL	Inferred	23.8	1.8	1,364
	TOTAL	63.0	1.8	3,551

ORE RESERVE INVENTORY

Project	Category	Tonnes (Mt)	Au (g/t)	Au (koz)
Bluebird	Probable	1.39	1.9	86.2
Prohibition	Probable	1.11	2.7	96
Mickey Doolan	Probable	3.31	1.1	121.7
Maid Marion	Probable	0.2	1.4	8.6
South Junction	Probable	0.1	1.5	4.5
Surprise	Probable	0.1	3	13
Batavia	Probable	0.2	2.4	14
Whangamata	Probable	0.3	1.4	11.9
GNH	Probable	0.9	1.3	35.6
Jack Ryan	Probable	0.2	3.1	21.8
Callisto	Probable	0.1	3.1	7.2
Rand	Probable	0.1	2.4	7.6
South Emu	Probable	0.1	4.7	13.9
TOTT	Probable	0.5	1.8	29.4
Total (Open Pit)	Probable	8.6	1.7	471.4
Prohibition	Probable	1.3	2.4	104.1
Vivian/Consols	Probable	0.3	7.7	63.6
Fatts/Mudlode	Probable	0.4	4.7	57.2
South Emu	Probable	0.2	4.3	34.2
Sub-Total	Probable	2.2	3.6	259.1
Total	Probable	10.8	2.1	730.5

Notes:

1. Resources and Reserves comply with the Australian JORC Code (2004) reporting guidelines. 2. Resources are inclusive of Reserves.

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