Reed, Chinese deal for Barrambie

Reed Resources has entered into an agreement with Chinese conglomerate China Nonferrous Metal Industry's Foreign Engineering and Construction (NFC) for its Barrambie Vanadium Project.

The Memorandum of Understanding covers an engineering procurement and construction contract and financing for the project.

As part of the deal, NFC and its WA engineering partner Arccon will provide a revised, fixed-price engineering procurement and construction contract estimate.

Reed also expects to deliver significant savings on the original Definitive Feasibility Study cost of $628.9 million by using Chinese equipment and services.

"The involvement of both NFC and Arccon in the EPC consortium enables Reed to access the cost benefits of a Chinese contractor, whilst retaining appropriate Australian expertise and experience, to ensure Australian standards and work practices are adhered to and construction of the Project can be executed smoothly," the company said in a statement to the Australian Securities Exchange.

Azure Capital is advising Reed in relation to the transaction.

See company statement below:

Australian diversified resources company Reed Resources Ltd (ASX: RDR) ("Reed" or "the Company") is pleased to announce it has entered into a Memorandum of Understanding (MoU) with Chinese conglomerate China Nonferrous Metal Industry's Foreign Engineering and Construction Co. Ltd ("NFC") for the Barrambie Vanadium Project in Western Australia.

The MoU formalises discussions to date between Reed and NFC, specifically covering an engineering procurement and construction contract (EPC) and project financing, and represents the next step towards the successful development of the Barrambie Vanadium Project, which is recognised as one of the world's highest grade vanadium deposits.

The MoU envisages NFC will undertake the engineering procurement and construction ("EPC") contract for Barrambie in conjunction with West Australian based engineering and construction company Arccon (WA) Pty Ltd ("Arccon"). NFC will also assist Reed in securing debt and equity funding for the development of Barrambie.

As part of the MoU, NFC and Arccon have agreed to provide Reed with an updated fixed-price EPC estmate by early 2011.

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

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

Reed and NFC are in discussions with banks and potential equity financing partners and will ensure the market remains fully informed about further developments as they arise.

Reed is being advised by Azure Capital Limited in relation to this transaction.

China Nonferrous Metal Industry's Foreign Engineering and Construction Co. Ltd. is a China‐based company primarily engaged in international projects contracting construction, development of nonferrous metal resources, as well as manufacture and sale of non‐ferrous metal products. The Company is also involved in the manufacture of equipment, international technology contracting services, international labour force cooperation, as well as import and export trading, among others. The Company operates projects in Kazakhstan, Zambia, Italy, Vietnam, India and Iran, among others.