REDSTONE RESOURCES LIMITED — Annual Report 2011

Oct 2, 2011

REDSTONE RESOURCES LIMITED ACN 090 169 154

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011

ACN 090 169 154

Contents of Financial Report Page

Corporate Directory	2
Directors' Report	3
Audit Independence Declaration	20
Corporate Governance Statements	21
Consolidated Statement of Comprehensive Income	29
Consolidated Statement of Financial Position	30
Consolidated Statement of Changes in Equity	31
Consolidated Statement of Cash Flows	32
Notes to the Consolidated Financial Statements	33
Directors' Declaration	68
Independent Audit Report to Members	69
Shareholder Information	71

REDSTONE RESOURCES LIMITED ACN 090 169 154

CORPORATE DIRECTORY

DIRECTORS: Mr Richard Homsany (Chairman) Mr Barry Woodhouse Mr David Le Roy SECRETARY: Ms Miranda Conti REGISTERED AND PRINCIPAL OFFICE: Suite 3, 110-116 East Parade EAST PERTH WA 6004 Tel: +61 8 9328 2552 Fax: +61 8 9328 2660 email: contact@redstone.com.au POSTAL ADDRESS: PO Box 8646 Perth Business Centre WA 6849 WEBSITE: www.redstone.com.au SHARE REGISTRY: Advanced Share Registry Services 150 Stirling Highway NEDLANDS WA 6009 Tel: +61 8 9389 8033 Fax: +61 8 9389 7871 HOME STOCK EXCHANGE: Australian Stock Exchange Limited Level 2 Exchange Plaza 2 The Esplanade PERTH WA 6000 ASX Code: RDS AUDITOR: Butler Settineri (Audit) Pty Ltd Unit 16, First Floor 100 Railway Road (Cnr Hay Street) SUBIACO WA 6008

COMPETENT PERSONS STATEMENT:

The information in this report that relates to exploration results is based on information compiled by Dr Joao Orestes Santos, a part-time employee of Redstone Resources Limited. Dr Santos is a member of the Australian Instituted of Geoscientists and has sufficient experience relevant to the style of mineralisation under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves'. Dr Santos consents to the inclusion in the report of the matter based on his information in the form and context in which it appears.

FORWARD LOOKING STATEMENTS:

This report contains certain forward-looking statements. Forward-looking statements are subject to a variety of risks and uncertainties beyond the Company's ability to control or predict which could cause actual events or results to differ materially from those anticipated in such forward-looking statements.

ADDITIONAL INFORMATION:

This report does not include reference to all available information on the Company or its Projects and should not be used in isolation as a basis to invest in Redstone Resources Limited. Any potential investors should refer to Redstone Resource Limited's other public releases and statutory reports and consult their professional advisers before considering investing in the Company.

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DIRECTORS' REPORT

The Directors present their report on the Entity consisting of Redstone Resources Limited ('Redstone' or the Company) and its controlled entities ('Entity') for the financial year ended 30 June 2011.

The names and details of directors in office during the financial year until the date of this report are as follows. Directors were in office for the entire period unless otherwise stated.

Mr Richard Homsany (B. Com, LL.B (Hons), ASA, FFin) (Non-Executive Chairman) Age 41

Mr Homsany is Executive Vice President of Mega Uranium Ltd, a TSX listed company.

Prior to this Mr Homsany was a corporate and commercial advisory partner with one of Australia's leading law firms, DLA Phillips Fox, based in Perth, Western Australia.

Mr Homsany has extensive experience in corporate law, including advising public resources and energy companies on corporate governance, finance, capital raisings, takeovers, mergers, acquisitions, joint ventures and divestments.

Mr Homsany also has significant board experience with publicly listed resource companies. He has also worked for an ASX top 50-listed internationally diversified resources company in operations, risk management and corporate.

Mr Homsany has completed the Certified Practising Accountant program and is a fellow of the Financial Services Institute of Australasia (FINSIA). He has a Commerce Degree and Honours Degree in Law from the University of Western Australia and a Graduate Diploma in Finance and Investment from FINSIA.

Over the last 3 years Mr Homsany has held the following directorships in listed companies:

• Convergent Minerals Limited September 2006 to 30 July 2008
• Central Iron Ore Limited (TSX-V) 27 October 2010 to Present

Mr Barry Woodhouse (B. Com, LL.B, CPA, FCIS) (Non-Executive Director) Age 45

Mr Woodhouse has significant experience in mineral and oil exploration and production industries having held a number of senior positions, including financial controller, company secretary and director, with companies operating in these sectors. Mr Woodhouse is particularly experienced in the establishment, listing, management, and administration of junior listed companies as well as the rejuvenation and recapitalisation of companies. Mr Woodhouse has recently been appointed as CFO of Alloy Steel International Inc.

Over the last 3 years Mr Woodhouse has held the following directorships in listed companies:

• Artemis Resources Limited 28 June 2006 to 21 April 2009
• Apollo Minerals Limited 22 June 2007 to 21 April 2009

Mr David Le Roy (Non-Executive Director) Age 61

Mr Le Roy has 25 years experience in the acquisition, reconstruction, operational, management and divestiture of private companies operating in the service and distribution industries.

Other than as stated for Messrs Homsany and Woodhouse, no other director has held directorships in other listed companies over the last three years.

Company Secretary – Miranda Conti (B. Com, CPA, ACIS)

Ms Conti is a chartered secretary and certified practising accountant who has been engaged by the Company since March 2006.

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DIRECTORS' REPORT

Principal Activities

The principal activities of the Entity during the financial year were:

• To carry out exploration of tenements in which the Entity has an interest, both on a joint venture basis and by the Entity in its own right;
• To evaluate results achieved through surface sampling, drilling and geophysical surveys carried out during the year;
• To evaluate and seek opportunities in the mineral sector globally by way of acquisition, investment or joint venture; and
• To identify opportunities, both locally and internationally, for resale and joint venture.

Review of Operations

The net loss after income tax attributable to members of the Entity for the financial year ended 30 June 2011 amounted to $1,159,899 (2010: $2,623,426) and net assets were $9,798,336 (2010: $4,895,006).

WEST MUSGRAVES

Figure 1. Locations of Blackstone Range, Tollu and Baggaley Hills Project Tenements

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DIRECTORS' REPORT

Tollu Project

(E69/2450) – 100% Redstone

Introduction

In November 2010, Redstone completed a second reverse circulation (RC) drilling programme at its wholly owned Tollu copper Project in the West Musgrave region of Western Australia.

The programme was focussed on testing the depth and strike of copper sulphide mineralisation which was intersected during an RC drilling programme in May 2010, at the Central Zone.

Background

The Tollu Project is a large hydrothermal Cu-rich mineralised system which is interpreted as a distal part of a giant, Voisey's Bay style magmatic Cu-Ni-(Co) system.

Key indicators of a Voisey's Bay style, mafic primary source present at Tollu:

• Extent/volume of remobilised copper sulphides.
• Hydrothermal Cu sulphide mineralisation.
• Significant association with Co.

The Tollu Cu sulphide (chalcopyrite) rich swarm of hydrothermal veins is interpreted as being derived from a large magmatic, Cu-Ni, or Ni-Cu, ore body(ies) at depth.

• The discovered sulphide mineralisation is almost entirely Cu. Further the only significant association found is with Co. These are indicators of a mafic source for mineralisation, suggesting a Voisey's Bay style deposit.
• The primary, magmatic, gabbro-related, mineralisation was formed during the Giles magmatism and was remobilised much later during the Petermann Orogen.

The large volume of remobilised (hydrothermal) Cu-mineralisation indicates the existence of a potentially large source of primary Ni-Cu magmatic mineralisation.

Mineralisation is genetically related to and hosted by an intrusive gabbro of the Giles Complex (1070MA). Widespread fine pyrite disseminated within Tollu volcanic host rocks has provided the sulphur source for the gabbro to form sulphide mineralisation (chalcopyrite and bornite). Additional deeper sources of sulphur at depth are possible.

This massive copper sulphide, gabbro-related mineralisation is interpreted as the shallow and distal part of a large copper-nickel sulphide system. The presence of cobalt values of up to 1931 ppm is a strong indicator for an association with nickel.

The Tollu copper mineralisation (chalcopyrite and bornite) is comparable to the copper-rich (chalcopyrite and bornite) veins adjacent to the world-class Voisey's Bay nickel deposit in Canada.

Drilling Results – Central Zone

Significant mineralisation was intersected at numerous holes (see Table 1 and Figure 2 for Central Zone details).

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DIRECTORS' REPORT

Tollu Project RC Drilling Results November – December 2010
Drill HoleCoordinates			Cu-Sulphide Intersections
Hole Number	Inclin.	Azimuth	EastingGDA	NorthingGDA	From (m)	To (m)	Interval (m)	Cu Grades (%)
TLC-020	60°	270°	438109	7108556	187inc. 191	199198	127	2.73.8
TLC-021	60°	270°	438132	7108555	249	253	4	2.5
TLC-023	60°	244°	438110	7108600	210	220	10	1.6
TLC-024	60°	268°	438120	7108515	194	198	4	2.7
TLC-030	60°	266°	438070	7108510	89	94	5	1.9
TLC-031	60°	270°	438090	7108510	127	136	9	2.8
					57	65	8	3.4
TLC-032	60°	264°	438075	7108550	inc. 60	64	4	5.3
					101	108	7	2.4
TLC-033	60°	270°	438060	7108600	101	107	6	2
TLC-034	60°	270°	438080	7108600	137	150	13	1.5
TLC-038	60°	264°	438105	7108435	71	76	5	2.6

Table 1. Tollu Nov-Dec 2010 RC Drilling Results

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DIRECTORS' REPORT

Figure 2. Significant Drill-holes in Tollu Central Zone

The overall outcomes from the November 2010 drilling are:

• This program extended copper sulphide mineralisation at the Central Zone to over 200m strike length and to a depth of 253m.
• The mineralisation remains open along strike to the Southeast.
• The mineralisation is open at depth, highlighting the potential to increase the size of the mineralised body.
• The Cu-only mineralisation is interpreted as a hydrothermal mineralisation occurring almost certainly during the Petermann Orogen (±600MA).
• The volume of copper ore has been significantly increased.

The search for high grade nickel sulphides at depth is a priority for the Company.

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DIRECTORS' REPORT

Drilling Results – North-South Tollu Shear (Eastern Zone)

Assay results for the final hole of the November 2010 drilling programme (TLC-042) indicate the presence of a second zone (Eastern Zone) of copper sulphide mineralisation approximately 500m South East from Central Zone discovery hole TLC-012.

Shallow RAB and RC drilling had previously been conducted over this area in 2008. A large low grade oxide copper halo was identified with intersections such as 43m @ 0.13% Cu open at depth and 35m @ 0.18% Cu open at depth. A total of seven shallow drill holes previously intersected copper mineralisation which remains open at depth.

Drill hole TLC-042 has returned 3m Cu @ 5.0% from 248m with mineralisation open at bottom of hole.

The drill hole TLC-042 intersection is significant for several reasons:

1. The drill hole ends in high grade copper sulphide mineralisation.

2. It has established that the Tollu Shear hosts sulphide mineralisation at depth. The size of this structure means it has the potential to host a substantial deposit.

3. The drill hole was positioned to test at depth a large low grade halo of copper oxide mineralisation with coincident EM and IP anomalies adjacent to and within the Tollu Shear zone. (The copper oxide mineralisation was previously identified by a shallow RAB and RC drilling programme conducted by Redstone in 2007).

4. It is the first copper sulphide intersection to also contain nickel and cobalt sulphides. This provides further evidence of magmatic Cu-Ni-(Co) style mineralisation being the source of the copper sulphide mineralisation which has been delineated to date.

Targeting Strategy

Redstone is pursuing a dual targeting strategy at Tollu:

1. Hydrothermal Copper sulphide is interpreted as having been remobilised from a primary magmatic copper-nickel-(cobalt) sulphide source. The drilling to date is showing this hydrothermal mineralisation to be more extensive than originally indicated. Intersections of copper sulphide mineralisation now extend over an area 1.8km long by up to 1km wide. It is anticipated that this area will be significantly increased with further drilling.

Within the hydrothermal zones at Tollu, Redstone is targeting a deposit with an average copper grade greater than 2%. Redstone expects to increase the size of the hydrothermal copper mineralisation at the Tollu deposit with further drilling at the Central Zone, the Eastern Zone and a third zone, 800m to the North East of the Central Zone.

2. Magmatic Cu-Ni-(Co) sulphide is the main target style of mineralisation which is interpreted to be the primary source of the hydrothermal mineralisation at Tollu. Typically, magmatic Cu-Ni-(Co) sulphide deposits are large to giant sized deposits often in excess of 100M tonnes of ore. The extent and volume of the remobilised copper sulphide mineralisation at Tollu suggests a major primary source of magmatic Cu-Ni-(Co) sulphide.

REDSTONE RESOURCES LIMITED ACN 090 169 154 DIRECTORS' REPORT

Figure 3. Tollu Central and Eastern zones

REDSTONE RESOURCES LIMITED ACN 090 169 154 DIRECTORS' REPORT

Figure 4. Tollu Conceptual Model

PLANNED AND NEW DRILLING

A third RC drilling programme commenced in August 2011. The 5,000m drilling programme is currently expected to be completed in October 2011. The primary focus of the programme is the two copper sulphide mineralisation zones identified at the Central Zone and the Eastern Zone.

The drilling programme is designed to:

• Investigate the extension at depth, to the southeast and northwest, of the Central Zone mineralisation;
• Confirm the significance of the discovery of high grade hydrothermal copper sulphide mineralisation (5% Cu) at the Eastern Zone;
• Identify the presence of gabbro stock (mafic) at depth which is interpreted to be the magmatic primary source of the mineralisation at Tollu; and
• Test part of the 1km of surface copper mineralisation which has recently been identified at the Western Zone (north-south vein structure approximately 400m west of the Central Zone).

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DIRECTORS' REPORT

Baggaley Hills

E69/2053, E69/2054, E69/2339, E69/2340, E69/2249 and E69/2200 – HJH Nominees Pty Ltd earning 80%

The Baggaley Hills is prospective for both Ni-Cu-PGE and Iron Oxide Copper Gold (IOCG) mineralisation. Several areas within the project have been identified as high priority targets based upon geochemical, magnetic and gravity signatures and IP surveys.

An induced polarization (IP) survey commenced to test for disseminated sulphides at the Antlion Cu-PGE target was completed in early October 2010.

A 6,800m drilling programme was completed at the Baggaley Hills Project in the West Musgrave region of Western Australia in early 2011. The programme was conducted by Redstone's farmin partner HJH Nominees Pty Ltd.

The main targets within the 1400m2 Baggaley Hills project are:

• The Antlion mafic intrusion where a PGE–Cu-(Ni) geochemical anomaly coincides with a geophysical (Induced Polarisation - IP) target defined during recent surveys. (The IP method is suitable for the detection of disseminated sulphides, which may be associated with PGE-Cu- (Ni) mineralisation).
• Two targets comprising coincident magnetic/gravity anomalies have been defined with ground magnetic and gravity surveys. They are being tested for "Olympic Dam Style" IOCG type mineralisation.

Blackstone Range Farmin/Joint Venture

E69/2108 and E69/2109 – Farmin with Resource Mining Corporation Ltd (ASX: RMI), Redstone earning 90%

The Blackstone Range Farmin/Joint Venture is located approximately 25km east of the BHP Babel and Nebo Ni-Cu-PGE discoveries. Under the terms of the Farmin/Joint Venture agreement Redstone can earn up to a 90% interest in the project by completing a feasibility study.

The project consists of 2 tenements (EL69/2108 and EL69/2109) covering roughly 338km2 . The project area is prospective for Cu-Ni-PGE + Au. The project contains a number of prospects including:

• Halleys
• Halleys NW
• Saturn
• Saturn East

An induced polarisation (IP) (dipole-dipole) survey to test for disseminated sulphides in the vicinity of previously discovered mineralisation at the Halley's prospect, was completed in June 2011 and geophysical interpretation is underway.

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DIRECTORS' REPORT

Stripeys

(E69/2435) - 100% Redstone

The Stripeys project is located approximately 60km northwest of the giant Wingellina Nickel deposit.

Exploration continued on this project during the period, with the completion of geophysical and geochemical surveys. Results will be analysed in late 2011.

The Stripeys project is currently subject to a sale and purchase agreement to be completed on or before 31 March 2012 as outlined in the Corporate section below.

CORPORATE

During the year the Company undertook various capital raising activities and sale and joint venture transactions as follows:

Placements and Capital Raising

In September 2010 the Company undertook a capital raising by placement of securities to sophisticated and professional investors totalling $4 million (before costs). These investors subscribed for 18,182,000 ordinary fully paid shares in Redstone at $0.22 per share.

Of the placement securities, 15,955,000 shares for a total $3,510,100 were issued and allotted on 3 September 2010 following finalisation of the placement, whilst the balance of 2,227,000 shares for a total of $489,940 (before costs) were issued and allotted on 25 February 2011 pursuant to shareholder approval obtained at the annual general meeting held in November 2010.

During the year 5,394,444 fully paid ordinary shares were issued and allotted upon the exercise of 4,394,444 $0.25 Placement options expiring 30 November 2012 and 1,000,000 $0.25 options expiring 17 June 2011, to raise a total of $1,472,360 (before costs).

Stripeys Sale and Purchase Agreement

The Entity entered into a Sale and Purchase Agreement for the sale of its Stripeys Project. In accordance with the Agreement the purchaser has paid Redstone a $100,000 cash deposit and is required to pay Redstone:

• $50,000 cash (First Payment) and allotment of 6,000,000 shares (the Shares) in the purchaser upon completion of the Agreement;
• $200,000 cash (Second Payment) payable on the earlier of:
  • (a) 31 March 2012; or
  • (b) The date of admission of the Shares to the Official List; and
• on the date of the Second Payment, a further $25,000, subject to the purchaser having received all Mining Information from Redstone.

Aneba and Apui Projects

The Entity entered into an Option Agreement for the sale of its interest in the Brazil Aneba (Potash) and Apui (Phosphate) Projects for a total consideration of $500,000 (comprised of half cash, half shares in the holding company of the owner of the Projects).

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DIRECTORS' REPORT

MBAC Sale and Joint Venture Agreement Termination

On 15 September 2010 Redstone and MBAC entered into an agreement concerning the Aneba and Apui Projects (at that time owned 35% by MBAC and 65% by the Entity), whereby Redstone transferred to MBAC (or subsidiary thereof) for nil consideration a 100% interest in four tenements forming part of the Aneba Project, namely 880240/2007, 880241/2007, 880658/2008 and 880659/2008 (Transferred Aneba Tenements).

Upon transfer of Redstone's 65% interest in the Transferred Aneba Tenements to MBAC, MBAC relinquished its 35% interest in the remaining Aneba tenements and the Apui Project, to give Redstone 100% ownership and/or rights to these tenements. Redstone was also granted a 1% net smelter return royalty with respect to proceeds of any future commercial production from the Transferred Aneba Tenements.

Trombetas (Potash) Sale Agreement

During the year, the Entity completed an agreement (Trombetas Agreement) for the divestment of 100% interest in its Brazil Trombetas (Potash) Project tenements for a total cash consideration of $450,000.

The purchaser has procured for Redstone an option to subscribe for shares in the purchaser worth $250,000 at the same price offered to the public or its shareholders, subject to the purchaser's Shares being listed within 12 months of November 2011.

Dividends

No dividends were paid during the year and the directors recommend that no dividends be paid or declared for the financial year ended 30 June 2011.

Significant Changes in State of Affairs

There have been no significant changes in the state of affairs of the Entity to the date of this report.

Significant Events after Balance Date

There has not been any matter or circumstance that has arisen after balance date that has significantly affected, or may significantly affect, the operations of the Entity, the results of those operations, or the state of affairs of the Entity in future financial periods.

Likely Developments

The Entity continues to seek and review opportunities to acquire and invest in mining and exploration projects globally. Likely developments in the operations of the Entity and the expected results of those operations have not been included in this report as the Directors believe, on reasonable grounds, that the inclusion of such information would be likely to result in unreasonable prejudice to the Entity.

Environmental Issues

The Entity's operations are subject to significant environmental regulation under the law of the Commonwealth and State. The Directors of the Company monitor compliance with environmental regulations. The Directors are not aware of any significant breaches during the period covered by this Report.

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DIRECTORS' REPORT

Share Options

As at the date of this report, 19,216,668 (2010:15,505,556) options over unissued ordinary shares in the Company have been granted. No options are listed on the Australian Stock Exchange. A total of 7,800,000 options were issued during the period to the date of this report and 5,394,444 options were exercised. No options lapsed during the period to the date of this report.

	Number	Exercise Price	Expiry Date
	400,000	$1.50	29 June 2012
	1,000,000	$0.95	28 November 2012
	500,000	$1.20	28 November 2012
	300,000	$0.75	20 February 2013
	1,500,000	$0.25	30 November 2014
	500,000	$0.30	30 November 2014
	500,000	$0.35	30 November 2014
	6,716,668	$0.25	30 November 2012
	3,750,000	$0.50	19 October 2013
	650,000	$0.50	04 November 2013
	500,000	$0.50	1 December 2013
	1,100,000	$0.50	24 February 2014
	950,000	$0.35	6 July 2015
	850,000	$0.45	6 July 2015
TOTAL	19,216,668

Directors' Interests

The relevant interests of directors held, directly, indirectly or beneficially, by each specified director including their personally-related entities, in the share capital and unissued shares of the Company as at the date of this report is as follows:

Director		Fully Paid Ordinary Shares		Share Options
	DirectlyIndirectly		Directly	Indirectly
Richard Homsany	-	-	-	4,000,000
Barry Woodhouse	-	-	-	300,000
David Le Roy	-	600,000	-	300,000

Meetings of Directors

During the financial year, the following meetings of directors were held:

		Directors' meetings
	Number eligibleto attend	Numberattended
Mr Richard Homsany	5	5
Mr Barry Woodhouse	5	5
Mr David Le Roy	5	5

There are no board committees.

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DIRECTORS' REPORT

Remuneration Report (audited)

This report details the nature and amount of remuneration for each director and key management personnel, including their personally-related entities, of the Company.

- Remuneration Policy

The Board of directors is responsible for determining and reviewing compensation arrangements for the directors and the executive team. The Board assesses the appropriateness of the nature and amount of remuneration of such officers on a periodic basis by reference to relevant employment conditions, with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and executive team.

The Board acts as the Remuneration Committee and assesses the nature and amount of compensation of key management personnel.

All remuneration paid to directors and executives is valued at cost to the Entity and expensed. Options granted to directors are valued using the Black-Scholes option pricing model. Directors are also eligible to participate in the Company's Employee Share Option Plan (ESOP). Any such options to be offered to Directors under the terms of the ESOP require shareholder approval. These Options are issued for nil consideration and do not have performance conditions attached other than continued employment with the Entity.

The Board policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. The Board determines payments to the non-executive directors and will review their remuneration annually, based on market practice, duties and accountability and to ensure their remuneration is competitive in attracting, retaining and motivating people with appropriate skills and experience. Independent external advice is sought where required.

The maximum amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Fees for non-executive directors are currently fixed at up to $250,000 and are not linked to the performance of the company. However, to align directors' interests with shareholder interests, the directors are encouraged to hold shares in the Company. Options have been and will be issued to directors of the Company. The purpose of issuing options to directors as part of a remuneration package is to be able to attract, retain and motivate people of the highest calibre to oversee management of the Company's operations by providing them with an opportunity to participate in the company's future growth and give them an incentive to contribute to that growth. The issue of options as a part of remuneration packages is a well established practice of public listed companies and, in the case of the Company, has the benefit of conserving cash whilst properly rewarding the directors.

- Performance based remuneration

The Board seeks to align the interests of shareholders and executive directors through a performance related incentive package where applicable. No performance based amounts have been paid or determined to be paid to the Executive at this stage of the Company's development.

- Company Performance, Shareholder Wealth and Director/Executive Remuneration

The Company's policy is to promote company performance and shareholder wealth by issuing options to directors with the purpose of:

• aligning the interests of directors with shareholders;
• rewarding capability and experience;
• providing competitive reward for contribution to shareholder wealth;
• providing a clear structure for earning rewards; and
• providing recognition for contribution.

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DIRECTORS' REPORT

Remuneration Report (audited) (continued)

- Details of Remuneration

Year ended 30 June 2011

Directors	CashSalaryand fees($)	Other –MotorVehicle($)	Superannuation($)	ShareOptions($)	Total($)	PerformanceRelated($)
Richard Homsany
Non-Executive Chairman	73,880	-	1,620	-	75,500	-
Barry Woodhouse
Non-Executive Director	30,000	-	-	39,780	69,780	-
David Le Roy
Non-Executive Director	30,000	-	-	26,520	56,520	-
Executive
Anthony AilakisOperations Manager	203,918	2,820	20,392	289,900	517,030	-

Year ended 30 June 2010

Directors	CashSalaryand fees($)	Other –MotorVehicle($)	Superannuation($)	ShareOptions($)	Total($)	PerformanceRelated($)
Richard Homsany
Non-Executive ChairmanBarry Woodhouse	105,000	-	-	90,675	195,675	-
Non-Executive Director
(appointed 1 October 2009)	18,000	-	-	-	18,000	-
David Le Roy
Non-Executive Director
(appointed 10 June 2010)Anthony John	-	-	-	-	-	-
Non-Executive Director
(appointed 30 November 2009)
(resigned 10 June 2010)	31,981	-	-	-	31,981	-
Anthony AilakisExecutive Director
(resigned 30 November 2009)	58,333	-	5,833	-	64,166	-
Juan Olivero
Non-Executive Director
(resigned 27 November 2009)	52,500	-	-	-	52,500	-
Executive
Anthony AilakisOperations Manager
(commenced 1 December 2009)	81,667	-	8,167	-	89,834	-

There are no performance conditions attached to remuneration paid during the current or previous financial year.

- Options Granted as Remuneration

Details of options over ordinary shares in the Company that were granted as compensation to each director and specified executive during the current and previous reporting periods and details of options that vested during the reporting period are as follows:

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DIRECTORS' REPORT

Remuneration Report (audited) (continued)

- Options Granted as Remuneration (continued)

	Number ofoptions	Grant Date	VestingDate	Fair Valueper option atgrant date($)	ExercisePrice peroption($)	Expiry Date
Directors
Richard Homsany	1,500,000	30 Nov 2009	30 Nov 2009	0.038	0.25	30 Nov 2014
	500,000	30 Nov 2009	30 Nov 2009	0.035	0.30	30 Nov 2014
	500,000	30 Nov 2009	30 Nov 2009	0.033	0.35	30 Nov 2014
Barry Woodhouse	300,000	1 Dec 2010	1 Dec 2010	0.133	0.50	1 Dec 2013
David Le Roy	200,000	1 Dec 2010	1 Dec 2010	0.133	0.50	1 Dec 2013
Executive
Anthony Ailakis	2,000,000	19 Oct 2010	19 Oct 2010	0.145	0.50	19 Oct 2013

- Employment Contracts of Directors and Senior Executive

Operations Manager (Mr A Ailakis)

Remuneration and other terms of employment for the Operations Manager (formerly Executive Director), Mr Ailakis, are formalised in an executive employment agreement. Major provisions of this agreement are set out below:

• Base salary reviewed annually, currently $180,000 (as of 1 January 2011) plus 10% superannuation, subject to review annually on the anniversary of the Company's listing on the ASX.
• Annual bonus, either by way of cash or shares or options in the Company in a manner to be agreed and determined by the Board.
• Other benefits including a vehicle to be leased by the Company for the exclusive use of the executive director, fully maintained and run, mobile phone and notebook with internet.
• The Company may pay a termination benefit in lieu of notice, being the amount payable for the termination period of 6 months, where termination is for other than misconduct or illness.
• Written notice of six months to terminate the agreement if Mr Ailakis becomes incapacitated by illness or accident for a period of 6 months in any 12 month period.

During the year Mr Ailakis was granted 2,000,000 $0.50 options exercisable any time on or before 19 October 2013 pursuant to the terms and conditions of the Redstone Resources Ltd Employee Share Option Plan.

Non-Executive Directors

Mr Homsany and his related entity, of which he is a director, Cardinals Corporate Pty Ltd, is paid an annual fee of $96,000 for director services and consulting fees as of 1 January 2011.

As of 1 January 2011 Messrs Woodhouse and Le Roy are each paid an annual directors fee of $36,000 (previously $24,000) inclusive of superannuation. Non-Executive directors may charge consulting fees at commercial rates.

Consulting fees paid to directors are separate from any responsibility they may have to the Company or the role they perform as a result of their appointment as a Director of the Company.

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DIRECTORS' REPORT

Remuneration Report (audited) (continued)

Option Holdings

The movement during the reporting period in the number of options over ordinary shares in the Company held directly, indirectly or beneficially, by each specified director and specified executive, including their personally-related entities, is as follows:

	Held1 July2010	Granted asremuneration	Exercised	Sold	Lapsed	Held as at30 June 2011
Director
Richard HomsanyNon-Executive Chairman	4,000,000	-	-	-	-	4,000,000
Barry WoodhouseNon-Executive Director	-	300,000	-	-	-	300,000
David Le RoyNon-Executive Director	100,000	200,000	-	-	-	300,000
Executive
Anthony AilakisOperations Manager	-	2,000,000	-	-	-	2,000,000

Equity Holdings and Transactions

The movement during the reporting period in the number of ordinary shares of the Company held directly, indirectly or beneficially, by each specified director and specified executive, including their personally-related entities is as follows:

	Held at1 July2010	Received onExercise ofOptions	Acquired/(Disposed)on Market	Otherchanges	Held as at30 June 2011
Directors
Richard HomsanyNon-Executive Chairman	-	-	-	-	-
Barry WoodhouseNon-Executive Director	-	-	-	-	-
David Le RoyNon-Executive Director	500,000	-	-	-	500,000
Executive
Anthony AilakisOperations Manager	494,108	-	(49,425)		444,683

Exercise of options granted as remuneration

During the period no shares were issued on the exercise of options granted as remuneration.

**** End of Remuneration Report ****

ACN 090 169 154

DIRECTORS' REPORT

Indemnification and insurance of Officers

The Company currently has Directors and Officers insurance. The Company has entered into deeds with each director indemnifying each director against liabilities arising out of their conduct while acting in the capacity of a director of the Company to the full extent permitted by law.

The insurance premium relates to liabilities that may arise from an Officer's position, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain personal advantage.

The Officers covered by the insurance policies are the Directors and the Company Secretary.

The contract of insurance prohibits the disclosure of the nature of the liabilities and the amount of the premium.

Auditor

Butler Settineri (Audit) Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.

There were no non-audit services provided by the Entity's auditor during the financial year.

Auditors' Independence Declaration

A copy of the auditors' independence declaration as required under section 307C of the Corporations Act 2001 is set out on the following page.

Legal Proceedings

No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.

Signed in accordance with a resolution of the Board of Directors.

R Homsany Chairman Perth, Western Australia

Dated this 30h day of September 2011

ACN 090 169 154

CORPORATE GOVERNANCE STATEMENT

Corporate Governance is a matter of high importance in the Company and is undertaken with due regard to all of the Company's stakeholders and its role in the community.

The Board supports the Corporate Governance Principles and Recommendations released by the ASX Corporate Governance Council (CGC).

The CGC's published guidelines are as follows:

Principle 1.	Lay solid foundations for management and oversight
Principle 2.	Structure the board to add value
Principle 3.	Promote ethical and responsible decision making
Principle 4.	Safeguard integrity in financial reporting
Principle 5.	Make timely and balanced disclosure
Principle 6.	Respect the rights of shareholders
Principle 7.	Recognise and manage risk
Principle 8.	Remunerate fairly and responsibly

The key corporate governance practices of the Company and the extent to which the Company has followed the Best Practice Recommendations during the financial year are summarised below. Amendments to the Corporate Governance Principles and Recommendations commencing from 1 July 2011 have not been incorporated below.

Principle 1: Lay solid foundations for management and oversight.

1.1 Formalise and disclose the functions reserved to the board and those delegated to management.

The Board represents shareholders' interests in continuing a successful business, which seeks to optimise medium to long-term financial gains for shareholders. The Board believes that this focus will ultimately result in the interests of all stakeholders being appropriately addressed when making business decisions.

The Board is responsible for ensuring that the Company is managed in such a way to best achieve this desired result. Given the current size and operations of the business, the Board currently undertakes an active, not passive, role.

The Board is responsible for evaluating and setting the strategic directions for the Company, establishing goals for management and monitoring the achievement of these goals. The Managing Director (or equivalent) is responsible to the Board for the day-to-day management of the Company.

The Board has primary responsibility for the following:

• oversight of the company, including its control and accountability systems,
• appointing and removing the chief executive officer (or equivalent),
• ratifying the appointment and, where appropriate, the removal of the chief financial officer (or equivalent) and the company secretary,
• input into and final approval of management's development of corporate strategy and performance objectives,
• reviewing and ratifying systems of risk management and internal compliance and control, codes of conduct, and legal compliance,
• monitoring senior management's performance and implementation of strategy, and ensuring appropriate resources are available,
• approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestitures, and
• approving and monitoring financial and other reporting.

ACN 090 169 154

CORPORATE GOVERNANCE STATEMENT

The Board's role and the Company's corporate governance practices are being continually reviewed and improved as required.

The Directors consider that the Company's procedures comply with ASX Principle 1.1.

1.2 Disclose the process for evaluation the performance of senior executives.

Arrangements put in place by the Board to monitor the performance of the Company's executives include annual performance appraisal meetings with each individual to ensure that the level of reward is aligned with respective responsibilities and individual contributions made to the success of the Company.

A performance evaluation was undertaken during the financial year with the Operations Manager (formerly Executive Director) in accordance with Company's policy.

The Board considers that the Company's procedures are consistent with ASX Principle 1.2

Principle 2: Structure the board to add value.

The Company's Constitution provides that the number of Directors shall not be less than three. There is no requirement for any share holding qualification.

• 2.1 A majority of the board should be independent directors
• 2.2 The chairperson should be an independent director.

The names of the Directors of the Company in office at the date of this Statement are set out in the Directors' Report. Directors are appointed based on their experience and on independence of their decision-making and judgement.

In considering the status of directors as independent directors the company has regard to the following:

An independent director is a non-executive director (ie is not a member of management) and:

• is not a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company.
• within the last three years has not been employed in an executive capacity by the Entity, or been a director after ceasing to hold any such employment.
• within the last three years has not been a principal of a material professional adviser or a material consultant to the Entity, or an employee materially associated with the service provided.
• is not a material supplier or customer of the Entity, or an officer of or otherwise associated directly or indirectly with a material supplier or customer.
• has no material contractual relationship with the Entity other than as a director of the Company.
• has not served on the board for a period which could, or could reasonably be perceived to, materially interfere with the director's ability to act in the best interests of the Company.
• is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director's ability to act in the best interests of the Company.

Having regard to the above criteria, the Company currently has all independent directors. Mr Homsany is the independent non-executive Chairman, whilst Mr Ailakis, Operations Manager (formerly the Executive Director) undertakes the equivalent role of Chief Executive Officer.

ACN 090 169 154

CORPORATE GOVERNANCE STATEMENT

The Board believes that the individuals on the Board can make, and do make, quality and independent judgements in the best interests of the Company on all relevant issues. Directors having a conflict of interest in relation to a particular item of business must absent themselves from the Board meeting before commencement of discussion on the topic.

The composition of the Board is reviewed periodically in view of the underlying scale, scope and complexity of the Company's operations. Changes are made where appropriate.

2.3 The roles of Chair and Chief Executive Officer should not be exercised by the same individual

The Company complies with ASX Principle 2.3

2.4 The board should establish a nomination committee.

The membership of the Board and its activities are subject to periodic review. The criteria for determining the identification and appointment of a suitable candidate for the Board shall include quality of the individual, background of experience and achievement, compatibility with other Board members, credibility within the Company's scope of activities, intellectual ability to contribute to Board's duties and physical ability to undertake the Board's duties and responsibilities.

The Board considers that the Company is not currently of such a size to justify the formation of a nomination committee. The Board as a whole undertakes the process of reviewing the skill base and experience of existing Directors to enable identification or attributes required in new Directors. Where appropriate, independent consultants are engaged to identify possible new candidates for the Board.

The Board acknowledges that this does not comply with recommendation 2.4 of the ASX Corporate Governance Guidelines. If the Company's activities increase in size, scope and nature, the appointment of a nomination committee will be reviewed by the Board and implemented if appropriate.

2.5 Disclose the process for performance evaluation of the board, its committees and individual directors.

The Board has adopted a self-evaluation process to measure its own performance during each financial year. Ongoing review is undertaken in relation to the composition and skills mix of the Directors of the Company.

The Board considers that the Company's procedures are consistent with ASX Principle 2.5.

2.6 Structure of the Board

The skills, experience and expertise relevant to the position of director held by each director in office at the date of the annual report is included in the Directors' Report. Directors of Redstone Resources Limited are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with – or could reasonably be perceived to materially interfere with – the exercise of their unfettered and independent judgment.

In the context of director independence, 'materiality' is considered from both the company and individual director perspective. The determination of materiality requires consideration of both quantitative and qualitative elements. An item is presumed to be quantitatively immaterial if it is equal to or less than 5% of the appropriate base amount. It is presumed to be material (unless there is qualitative evidence to the contrary) if it is equal to or greater than 10% of the appropriate base amount. Qualitative factors considered include whether a relationship is strategically important, the competitive landscape, the nature of the relationship and the contractual or other arrangements governing it and other factors that point to the actual ability of the director in question to shape the direction of the company's loyalty.

ACN 090 169 154

CORPORATE GOVERNANCE STATEMENT

The terms in office and independence of directors, based on the definition and materiality thresholds above, in office at the date of this statement are:

Name	Position	Term in Office	Independent
Richard Homsany	Chairman, Non-Executive	3 year 9 months	Yes
Barry Woodhouse	Non-Executive	2 years	Yes
David Le Roy	Non-Executive	15 months	Yes

The board does not currently have a nomination or audit committee.

Principle 3: Promote Ethical and Responsible Decision Making

• 3.1 Establish a code of conduct to guide the directors, the chief executive officer (or equivalent), the chief financial officer (or equivalent) and any other key executives as to:
  • (a) the practices necessary to maintain confidence in the company's integrity; and
  • (b) the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

The Board acknowledges the need for continued maintenance of a professional standard of corporate governance practice and ethical conduct by all Directors and employees of the Company.

The Board believes that the success of the Company has been and will continue to be enhanced by a strong ethical culture within the organisation. As the Company grows, the need to ensure that ethical standards remain has led the Board to embrace policies to ensure that all Directors, executives and employees act with the utmost integrity and objectivity in their dealings with all people that they come in contact with during their employment with the Company.

The Company is committed to achieving and maintaining high standards of conduct and to 'institutionalise' good corporate governance and generally build a culture of best practice.

The Board has adopted a Code of Conduct for Directors to promote ethical and responsible decision-making by the Directors and a Code of Conduct, which provides guidelines aimed at maintaining high ethical standards, corporate behaviour and accountability within the Company.

All Directors, executives and employees are charged with the responsibility to act with the utmost integrity.

Both the Code of Conduct for Directors and Code of Conduct are consistent with the ASX Principle 3.

Dealings in Company Securities

3.2 Disclose the policy concerning trading in company securities by directors, officers and employees.

The Company's share trading policy imposes basic trading restrictions on all employees of the Company with 'inside information', and additional trading restrictions on the Directors of the Company and employees who possess inside information.

In addition to the above, Directors must notify the Company Secretary as soon as practicable, but not later than 3 business days, after they have bought or sold the Company's securities or exercised options. In accordance with the provisions of the Corporations Act and the Listing rules of the ASX, the Company on behalf of the Directors must advise the ASX of any transactions conducted by them in the securities of the Company.

The Company's share trading policy is consistent with ASX Principle 3.2 during the financial year.

ACN 090 169 154

CORPORATE GOVERNANCE STATEMENT

Principle 4: Safeguard Integrity in Financial Reporting

4.1 The board should establish an audit committee.

The Board considers that it is not currently of a size to justify the formation of an audit committee. The Board as a whole undertakes the selection and proper application of accounting policies, the identification and management of risk and the review and operation of the internal control systems.

• 4.2 Structure an audit committee so that it consists of:
  • (a) only non-executive directors;
  • (b) a majority of independent directors;
  • (c) an independent chairperson, who is not chairperson of the board; and
  • (d) at least three members.

4.3 The audit committee should have a formal charter.

The Board acknowledges that the Company does not comply with recommendations 4.1, 4.2 and 4.3 of the ASX Corporate Governance Guidelines. If the Company's activities increase in size, scope and nature, the appointment of an audit committee and recommendations 4.2 and 4.3 will be reviewed by the Board and implemented if appropriate.

Principle 5: Make timely and balanced disclosure

5.1 Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance.

The Company has established a continuous disclosure policy in relation to the release of ASX announcements (and media releases) to ensure compliance with the ASX Listing Rule disclosure requirements and to ensure accountability for that compliance. In particular, the policy includes vetting and authorisation processes designed to ensure company announcements are timely, factual, complete and expressed in a clear and objective manner.

The continuous disclosure policy requires all executives and Directors to inform the Managing Director (or equivalent) or in his absence the Company Secretary of any potentially material information as soon as practicable after they become aware of that information.

The Managing Director (or equivalent) is responsible for interpreting and monitoring the Company's disclosure policy and where necessary informing the Board. The Company Secretary is responsible for all communications with ASX.

The Company's Continuous Disclosure Policy is consistent with ASX Principle 5.

Principle 6: Respect the rights of shareholders

6.1 Design and disclose a communications strategy to promote effective communication with shareholders and encourage effective participation at general meetings.

The Company places considerable importance on effective communications with shareholders.

The Company's communication strategy requires communication with shareholders and other stakeholders in an open, regular and timely manner so that the market has sufficient information to make informed investment decisions on the operations and results of the Company. The strategy provides for the use of systems that ensure a regular and timely release of information about the Company to shareholders.

ACN 090 169 154

CORPORATE GOVERNANCE STATEMENT

Mechanisms employed include:

• (i) announcements lodged with ASX;
• (ii) ASX Quarterly Activities and Cash Flow Reports;
• (iii) Half Yearly Report;
• (iv) presentations at the Annual General Meeting/General Meetings; and
• (v) Annual Report.

The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and understanding of the Company's strategy and goals.

The Company also posts all reports, ASX and media releases and copies of significant business presentations on the Company's website.

The Company's practice is to invite the auditor to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor's report.

The Company's policies are consistent with ASX Principle 6.

Principle 7: Recognise and manage risk

7.1 The board or appropriate board committee should establish policies on risk oversight and management.

The Board is responsible for overseeing the Company's risk management and control framework. The Board adopts an active approach to risk management which recognises that the Company is engaged in activities, which necessarily demand that the Company take certain usual business, entrepreneurial and operational risks. Accordingly, and in the interests of the enhanced performance of the Company, the Board embraces a responsible approach to risk management, as a risk-aware Company, and not a risk-averse one.

Responsibility for control and risk management is delegated to the appropriate level of management within the Company with the Managing Director (or equivalent) having ultimate responsibility to the Board for the risk management and control framework.

Arrangements put in place by the Board to monitor risk management include:

• (i) reporting to the Board in respect of operations and the financial position of the Company;
• (ii) Budgetary expenditure controls;
• (iii) Review of insurance requirements annually and as needed; and
• (iv) Regular reporting on adherence to health and safety guidelines and policies.

ACN 090 169 154

CORPORATE GOVERNANCE STATEMENT

Specifically, in managing risk, the Board and Management are to adhere to the following principles:

• (i) When considering new strategies or projects, management is to analyse the major risks of those opportunities being secured or being lost, and will consider appropriate strategies for minimising those risks where they are identified.
• (ii) The Company will, where thought prudent by the Managing Director (or equivalent) or the Board, take appropriate external advice to determine the best way to manage a particular risk.
• (iii) Financial risk will be managed by the whole of the Board working closely with the Managing Director (or equivalent) and the Chief Financial Officer (or equivalent), to ensure that the financial statements and other financial reporting are rigorously tested prior to submission for audit.
• (iv) To complement risk management by the Company, appropriate insurances are to be in place, and advice taken from the Company's brokers or insurers where necessary, to cover the usual risks for businesses such as that of the Company, and where practicable, to cover any particular extraordinary risks which arise in the circumstances of the Company.
• 7.2 The board should require management to design and implement the risk management and internal control system to manage the company's material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company's management of its material business risks.

The board has processes in place to monitor and manage risks whereby:

• risks are reported on at regular board meetings;
• the Company's financial position and operations are regularly reviewed; and
• each major transaction executed by the Company is accompanied by assessment of its risks.

Management reports to the board regularly as to the effectiveness of the Company's management of its material business risks.

7.3 The chief executive officer (or equivalent) and the chief financial officer (or equivalent) should state to the board in writing that:

(a) the statement given in accordance with best practice recommendation 4.1 (the integrity of financial statements) is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the board; and

(b) the company's risk management and internal compliance and control system is operating efficiently and effectively in all material respects.

The Company's Managing Director (or equivalent) and Chief Financial Officer (or equivalent) will report in writing to the Board that:

• (i) the financial statements of the Company for each half and full year present a true and fair view, in all material aspects, of the Company's financial condition and operational results and are in accordance with accounting standards;
• (ii) the above statement is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board; and
• (iii) the Company's risk management and internal compliance and control framework is operating efficiently and effectively in all material respects.

The Board considers that the Company's procedures are consistent with ASX Principle 7.

ACN 090 169 154

CORPORATE GOVERNANCE STATEMENT

Principle 8: Remunerate fairly and responsibly

The broad remuneration policy of the Company is to ensure that remuneration levels for executive Directors, secretaries and senior managers are set at competitive levels to attract and retain appropriately qualified and experienced personnel.

Remuneration packages offered by the Company are therefore geared to attracting talented employees through a combination of fixed remuneration and long term incentives, calibrated and individually tailored to be competitive in the external market to offer good incentive to join and remain with the Company.

8.1 The board should establish a remuneration committee.

The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the formation of a remuneration committee. The Board as a whole is responsible for the remuneration arrangements for Directors and executives of the Company.

The Board acknowledges that this does not comply with recommendation 8.1 of the ASX Corporate Governance Guidelines. If the Company's activities increase in size, scope and nature, the appointment of a remuneration committee will be reviewed by the Board and implemented if appropriate.

8.2 Clearly distinguish the structure of non-executive directors' remuneration from that of executives.

The remuneration of Non-executive Directors is determined by the Board as a whole having regard to the level of fees paid to Non-executive Directors by other companies of similar size in the industry.

The aggregate amount payable to the Company's Non-executive Directors must not exceed the maximum annual amount approved by the Company's shareholders, which is currently $250,000.

The remuneration of each director is set out in the Directors' Report included in the Annual Report.

The Directors consider that the Company complies with Principle 8.2 of the Principles of Good Corporate Governance.

8.3 Provide disclosure in relation to the company's remuneration policies to enable investors to understand (i) the costs and benefits of those policies and (ii) the link between remuneration paid to directors and key executives and corporate performance.

The Directors have provided a Remuneration Report which is included in the Directors Report of the Annual Report.

The Company complies with this recommendation.

The Company's website is to be updated so as to provide further information about the company's corporate governance policies. A copy of the Company's corporate governance policies is available on request.

ACN 090 169 154

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2011

		Consolidated
		2011	2010
	Note	$	$
Revenue
Other revenue	3(a)	476,985	100,000
Expenses
Administration expenses		142,049	129,974
Employee and directors' benefits expenses	3(c)	1,193,976	601,848
Consulting expense		101,447	57,809
Depreciation expense	3(b)	46,818	46,401
Finance costs	3(d)	253	5,269
Deferred exploration expenditure impairedand written off	7	-	1,822,377
Other expenses from ordinary activities		325,692	92,537
Loss before interest and taxes		(1,333,250)	(2,656,215)
Interest revenue	3(a)	173,351	32,789
Loss before income tax		(1,159,899)	(2,623,426)
Income tax expense	4	-	-
Loss after tax for the year		(1,159,899)	(2,623,426)
Other comprehensive income		-	-
Movement in foreign exchange translationreserve		(14,845)	-
Total comprehensive income for the year		(1,174,744)	(2,623,426)
Basic and Diluted Loss per share		(0.94)	(2.76)
(cents per share)	15

ACN 090 169 154

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2011

		Consolidated
		2011	2010
	Note	$	$
Current assets
Cash and cash equivalents	5	3,867,703	401,492
Trade and other receivables	6	183,977	171,007
Other assets	9	20,512	21,344
Total current assets		4,072,192	593,843
Non-current assets
Deferred exploration expenditure	7	6,396,664	4,661,218
Plant and equipment	8	131,847	121,971
Total non-current assets		6,528,511	4,783,189
Total assets		10,600,703	5,377,032
Current liabilities
Trade and other payables	10	677,813	359,858
Income in advance	11	110,000	-
Provisions	12	14,554	46,358
Total current liabilities		802,367	406,216
Non-current liabilities
Other payables	10	-	75,810
Total non-current liabilities		-	75,810
Total liabilities		802,367	482,026
Net assets		9,798,336	4,895,006
Equity
Issued capital	13	18,165,461	12,860,151
Reserves	14	2,040,877	1,282,958
Accumulated losses		(10,408,002)	(9,248,103)
Total equity		9,798,336	4,895,006

ACN 090 169 154

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2011

	ContributedEquity	AccumulatedLosses	Share OptionReserve	ForeignCurrencyTranslationReserve	Total Equity
	$	$	$	$	$
At 30 June 2009	10,720,583	(7,458,577)	1,743,816	-	5,005,822
Total comprehensive income
attributable to members	-	(2,623,426)	-	-	(2,623,426)
Share capital issued	2,139,568	-	-	-	2,139,568
Cost of share-based payment	-	-	373,042	-	373,042
Transfer on expiry of options	-	833,900	(833,900)	-	-
At 30 June 2010	12,860,151	(9,248,103)	1,282,958	-	4,895,006
Total comprehensive income
attributable to members	-	(1,159,899)	-	(14,845)	(1,174,744)
Share capital issued	5,181,561	-	-	-	5,181,561
Cost of share-based payment	-	-	896,513	-	896,513
Transfer on exercise ofoptions	123,749	-	(123,749)	-	-
At 30 June 2011	18,165,461	(10,408,002)	2,055,722	(14,845)	9,798,336

ACN 090 169 154

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2011

			Consolidated
		2011	2010
	Note	$	$
Cash flows from operating activities
Payments to suppliers and employees		(884,800)	(970,738)
Interest received		171,932	32,789
Interest paid		(253)	(5,269)
Income tax paid		-	-
Other income		63,780	-
Net cash flows used in operating activities	24	(649,341)	(943,218)
Cash flows from investing activities
Exploration expenditure		(1,538,859)	(1,880,926)
Payments for plant and equipment		(56,694)	(10,981)
Deposit from sale of Australian tenement rights		110,000	-
Proceeds from sale of foreign tenement rights		434,390	459,940
Net cash flows used in investing activities		(1,051,163)	(1,431,967)
Cash flows from financing activities
Proceeds from issue of shares		5,348,650	2,500,000
Payment of share issue costs		(167,090)	(78,766)
Repayment of borrowings from non-relatedparties		-	(79,893)
Net cash flows from financing activities		5,181,560	2,341,341
Net increase/(decrease) in cash held		3,481,056	(33,844)
Cash at the beginning of the financial year		401,492	435,336
Effect of foreign currency translation		(14,845)	-
Cash at end of financial year	5	3,867,703	401,492

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

1. Corporate information

The financial report of Redstone Resources Limited and its controlled entities (the Entity or Group) for the year ended 30 June 2011 was authorised for issue in accordance with a resolution of the directors of the Entity's parent entity, Redstone Resources Limited, on 30 September 2011.

Redstone Resources Limited (Redstone or the Company) is a company limited by shares incorporated and domiciled in Australia whose shares commenced public trading on the Australian Stock Exchange on 3 August 2006. The nature of operations and principal activities of the Entity are described in the Directors' Report.

2. Summary of significant accounting policies

The following is a summary of the material accounting policies adopted by the Entity in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

a) Basis of preparation

The financial report is a general purpose financial report which has been prepared in accordance with the requirements of the Corporations Act 2001, applicable Australian Accounting Standards, Accounting Interpretations and other mandatory professional reporting requirements. The financial report has been prepared on a historical cost basis and is presented in Australian dollars.

b) Statement of compliance

The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS).

Australian Accounting Standards that have recently been issued or amended but are not yet effective have not been adopted for the annual reporting period ended 30 June 2011.

c) Adoption of new and revised standards

The Entity has also reviewed all new Standards and Interpretations that have been issued and are effective for the year ended 30 June 2011. As a result of this review the Directors have determined that there is no material impact or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change necessary to the Entity's accounting policies.

d) New accounting standards not yet implemented

The AASB has issued new, revised and amended standards and interpretations that have mandatory application dates for future reporting periods. A discussion of those future requirements and their impact on the Entity follows:

• AASB 9: Financial Instruments and AASB 2009–11: Amendments to Australian Accounting Standards arising from AASB 9 [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 121, 127, 128, 131, 132, 136, 139, 1023 & 1038 and Interpretations 10 & 12] (applicable for annual reporting periods commencing on or after 1 January 2013).

These standards are applicable retrospectively and amend the classification and measurement of financial assets. The Entity has not yet determined the potential impact on the financial statements. The changes made to accounting requirements include:

• simplifying the classifications of financial assets into those carried at amortised cost and those carried at fair value;
• simplifying the requirements for embedded derivatives;

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

d) New accounting standards not yet implemented (continued)

• removing the tainting rules associated with held-to-maturity assets;
• removing the requirements to separate and fair value embedded derivatives for financial assets carried at amortised cost;
• allowing an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument; and
• reclassifying financial assets where there is a change in an entity's business model as they are initially classified based on:
  • a. the objective of the entity's business model for managing the financial assets; and
    • b. the characteristics of the contractual cash flows.
• AASB 124: Related Party Disclosures (applicable for annual reporting periods commencing on or after 1 January 2011).

This standard removes the requirement for government related entities to disclose details of all transactions with the government and other government related entities and clarifies the definition of a related party to remove inconsistencies and simplify the structure of the standard. These amendments are not expected to impact the Entity.

• AASB 2009–12: Amendments to Australian Accounting Standards [AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052] (applicable for annual reporting periods commencing on or after 1 January 2011).

This standard makes a number of editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of International Financial Reporting Standards by the AASB. The standard also amends AASB 8 to require entities to exercise judgment in assessing whether a government and entities known to be under the control of that government are considered a single customer for the purposes of certain operating segment disclosures. These amendments are not expected to impact the Entity.

• AASB 2009–14: Amendments to Australian Interpretation — Prepayments of a Minimum Funding Requirement [AASB Interpretation 14] (applicable for annual reporting periods commencing on or after 1 January 2011).

This standard amends Interpretation 14 to address unintended consequences that can arise from the previous accounting requirements when an entity prepays future contributions into a defined benefit pension plan. These amendments are not expected to impact the Entity.

• AASB 1053: Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements (applicable for annual reporting periods commencing on or after 1 July 2013).

On 30 June 2010 the AASB officially introduced a revised differential reporting framework in Australia. Under this framework, a two-tier differential reporting regime applies to all entities that prepare general purpose financial statements. Redstone Resources Limited is listed on the ASX and is not eligible to adopt the new Australian Accounting Standards – Reduced Disclosure Requirements. The two standards will therefore have no impact on the financial statements of the Group.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

d) New accounting standards not yet implemented (continued)

• AASB 1054: Australian Additional Disclosures (applicable for annual reporting periods commencing on or after 1 July 2011).

This standard is as a consequence of phase 1 of the joint Trans-Tasman Convergence project of the AASB and FRSB. This standard relocates all Australian specific disclosures from other standards to one place and revises disclosures in the following areas:

• (a) Compliance with Australian Accounting Standards;
• (b) The statutory basis or reporting framework for financial statements;
• (c) Whether the financial statements are general purpose or special purpose;
• (d) Audit fees; and
• (e) Imputation credits
• AASB 2010-4: Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1, AASB 7, AASB 101 & AASB 134 and Interpretation 13] (applicable for annual reporting periods commencing on or after 1 January 2011).

This standard:

• emphasises the interaction between quantitative and qualitative AASB7 disclosures and the nature and extent of risks associated with financial instruments.
• amends AASB 101 to the effect that disaggregation of changes in each component of equity arising from transactions in other comprehensive income is required to be presented, either in the statement of changes in equity or in the notes to the financial statements.
• provides guidance to illustrate how to apply disclosure principles in AASB134 for significant events and transactions.
• clarifies that when the fair value of award credits is measured based on the value of the awards for which they could be redeemed, the amount of discounts or incentives otherwise granted to customers not participating in the award credit scheme, is to be taken into account.

This standard is not expected to impact the Group.

• AASB 2010-5: Amendments to Australian Accounting Standards [AASB1, 3, 4, 5, 101, 107, 112, 118, 119, 121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and Interpretations 112, 115, 127, 132 & 1042] (applicable for annual reporting periods commencing on or after 1 January 2011).

This standard makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRS by the IASB.

These amendments are not expected to have a material impact on the consolidated financial statements of the Entity.

• AASB 2010-6: Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets (applicable for annual reporting periods commencing on or after 1 July 2011).

Amendments made to AASB 7 Financial Instruments: Disclosures in November 2010 introduce additional disclosures in respect of risk exposures arising from transferred financial assets. The amendments will affect particularly entities that sell, factor, securitise, lend or otherwise transfer financial assets to other parties. They are not expected to have any significant impact on the Group's disclosures.

AASB 2010-7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 140, 1023 & 1038 and Interpretations 2,5, 10, 12, 19 & 127] (applicable for annual reporting periods commencing on or after 1 January 2013).

This Standard makes amendments to a range of Australian Accounting Standards and Interpretations as a consequence of the issuance of AASB 9: Financial Instruments in December 2010. These amendments are not expected to have a material impact on the consolidated financial statements of the Entity.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

d) New accounting standards not yet implemented (continued)

• AASB 2010-8: Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets (applicable for annual reporting periods commencing on or after 1 January 2012).

In December 2010, the AASB amended AASB 112 Income Taxes to provide a practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model. AASB 112 requires the measurement of deferred tax assets or liabilities to reflect the tax consequences that would follow from the way management expects to recover or settle the carrying amount of the relevant assets or liabilities, that is through use or through sale. The amendment introduces a rebuttable presumption that investment property which is measured at fair value is recovered entirely by sale.

The Group does not expect this amendment to have any material impact on the consolidated financial statements.

AASB 2011-1: Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project - Reduced Disclosure Regime [AASB 101, AASB 1054] (applicable for annual reporting periods commencing on or after 1 July 2011).

This standard makes amendments to the application of the revised disclosures to Tier 2 entities that are applying AASB 1053.

The Group does not expect this amendment to have any material impact on the consolidated financial statements.

AASB 2011-2: Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project [AASB 1, AASB 5, AASB 101, AASB 107, AASB 108, AASB 121, AASB 128, AASB 132, AASB 134, Interpretation 2, 112 and 113] (applicable for annual reporting periods commencing on or after 1 July 2013).

This standard amends many Australian Accounting Standards, removing the disclosures which have been relocated to AASB 1054.

The Group does not expect this amendment to have any material impact on the consolidated financial statements.

• AASB 10: Consolidated Financial Statements (applicable for annual reporting periods commencing on or after 1 January 2013).

The objective of this Standard is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities.

This standard is not expected to materially impact the Entity.

• AASB 11: Joint Arrangements (applicable for annual reporting periods commencing on or after 1 January 2013).

This standard uses the principle of control in AASB 10 to define joint control, and therefore the determination of whether joint control exists may change. In addition AASB 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, accounting for a joint arrangement is dependent on the nature of the rights and obligations arising from the arrangement. Joint operations that give the venturers a right to the underlying assets and obligations themselves is accounted for by recognising the share of those assets and obligations. Joint ventures that give the venturers a right to the net assets is accounted for using the equity method.

This may result in a change in the accounting for the joint arrangements held by the Group.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

d) New accounting standards not yet implemented (continued)

• AASB 12: Disclosure of Interests in Other Entities ( applicable for annual reporting periods commencing on or after 1 January 2013).

This standard includes all disclosures relating to an entity's interests in subsidiaries, joint arrangements, associates and structures entities. New disclosures have been introduced about the judgements made by management to determine whether control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non-controlling interests.

• AASB 13: Fair Value Measurement (applicable for annual reporting periods commencing on or after 1 January 2013).

AASB 13 establishes a single source of guidance for determining the fair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value when fair value is required or permitted. Application of this definition may result in different fair values being determined for the relevant assets. AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined.

This standard is not expected to materially impact the Entity.

The Entity does not anticipate the early adoption of any of the above Australian Accounting Standards.

e) Parent entity information

The financial information for the Parent Entity, Redstone Resources Limited, disclosed in note 26 has been prepared on the same basis as the consolidated financial statements.

f) Significant accounting judgments, estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Capitalisation of exploration and evaluation expenditure

Under AASB 6 Exploration for and Evaluation of Mineral Resources the Entity has the option to either expense exploration and evaluation expenditure as incurred or to capitalise such expenditure provided that certain conditions are satisfied. The Entity applies the latter policy as outlined in note 2(n).

Impairment of plant and equipment

Plant and equipment are reviewed for impairment if there is any indication that the carrying amount may not be recoverable.

Where a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of 'value in use' (being net present value of expected future cash flows of the relevant cash generating unit) and 'fair value less costs to sell'.

Share based payment transactions

The Entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an independent valuer using either Black-Scholes or binomial methodology.

g) Revenue Recognition

Revenues are recognised to the extent that it is probable that the economic benefit will flow to the Entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue can be recognised.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

g) Revenue Recognition (continued)

(i) Sale of goods

Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Risks and rewards of ownership are considered passed to the buyer at the time of delivery of the goods to the customer.

(ii) Rendering of services

Revenue from the rendering of services is recognised by reference to the stage of completion of the contract.

(iii) Interest income

Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset.

(iv) Dividends

Revenue is recognised when the Entity's right to receive the payment is established.

h) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

i) Cash and cash equivalents

Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities in the Consolidated Statement of Financial Position.

For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

j) Trade and other receivables

Trade receivables are measured on initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method, less provision for impairment. Trade receivables are generally due for settlement within 30 days.

Impairment of trade receivables is continually reviewed and those that are considered to be uncollectible are written off by reducing the carrying amount directly. An allowance account is used when there is objective evidence that the Entity will not be able to collect all amounts due according to the original contractual terms. Factors considered by the Entity in making this determination include known significant financial difficulties of the debtor, review of financial information and significant delinquency in making contractual payments to the Entity. The impairment allowance is set equal to the difference between the carrying amount of the receivable and the present value of estimated future cash flows, discounted at the original effective interest rate. Where receivables are short-term, discounting is not applied in determining the allowance.

The amount of the impairment loss is recognised in the consolidated statement of comprehensive income within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other income in the consolidated statement of comprehensive income.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

k) Financial Assets

Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale investments, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transactions costs. The Entity determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end.

All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the Entity commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the marketplace.

(i) Financial assets at fair value through profit or loss

Financial assets classified as held for trading are included in the category 'financial assets at fair value through profit or loss'. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on investments held for trading are recognised in profit or loss.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

l) Income tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance date.

Deferred income tax is provided on all temporary differences at the balance date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except:

• when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
• when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:

• when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
• Unrecognised deferred income tax assets are reassessed at each balance date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

m) Goods and services tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.

Receivables and payables in the consolidated statement of financial position are shown inclusive of GST. The net amount of GST recoverable or payable is included as a current asset or current liability in the consolidated statement of financial position. Cash flows are included in the consolidated statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable or payable are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

n) Exploration and evaluation expenditure

Exploration and evaluation expenditure incurred is accumulated in respect of each separate area of interest.

Exploration and evaluation costs are carried forward where right of tenure of the area of interest is current and they are expected to be recouped through sale or successful development and exploitation of the area of interest, or, where exploration and evaluation activities in the area of interest have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

o) Plant and equipment

Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses. Plant and equipment is measured on a cost basis.

Depreciation

The depreciable amount of all fixed assets is depreciated on a diminishing balance basis over their useful lives to the Entity commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are:

Class of fixed asset	Depreciation rate
Office furniture & equipment	11.25%
Satellite phone & digital equipment	22.50%
Office paintings	1.50%
Computer equipment	37.50%
Generators	7.50%
Motor vehicles	22.50%

Derecognition and disposal

An item of plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Any gain of loss arising on derecognition of the asset (calculated as the difference between the net disposal and the carrying amount of the asset) is included in the profit and loss in the year the asset is derecognised.

p) Derecognition of financial assets and liabilities

(i) Financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

• the rights to receive cash flows from the asset have expired;
• the Entity retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a 'pass-through' arrangement; or
• the Entity has transferred its rights to receive cash flows from the asset and either:
  • (a) has transferred substantially all the risks and rewards of the asset, or
  • (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

p) Derecognition of financial assets and liabilities (continued)

When the Entity has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Entity's continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration received that the Entity could be required to repay.

When continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Entity's continuing involvement is the amount of the transferred asset that the Entity may repurchase, except that in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, the extent of the Entity's continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

(ii) Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

q) Impairment

The Entity assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Entity makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset's value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease).

An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

r) Goodwill

Goodwill acquired in a business combination is initially measured at its cost, being the excess of the cost of the business combination over the acquirer's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. Goodwill is subsequently measured at its cost less any impairment losses.

s) Trade and other payables

Liabilities for trade creditors and other amounts are carried at cost, which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Entity.

t) Employee benefits

i. Wages and salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other creditors in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. Annual leave entitlements are accounted for as a provision.

ii. Long service leave

The liability for long service leave expected to be settled within 12 months of the reporting date is recognised in the provision for employee benefits and is in accordance with i. above. The liability for long service leave expected to be settled more than 12 months from the reporting date is recognised in the provision for employee benefits and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

iii. Superannuation

Contributions are made by the Entity to employee superannuation funds and are charged as expenses when incurred.

u) Interest-Bearing Loans and Borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

Gains and losses are recognised in profit or loss when the liabilities are derecognised.

v) Provisions

Provisions are recognised when the Entity has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

When the Entity expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as separate assets but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the consolidated statement of comprehensive income net of any reimbursement.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

v) Provisions (continued)

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability.

When discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.

w) Share-based payment transactions

The Entity provides incentives to employees (including directors) of the Entity in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares ('equity-settled transactions').

The Company has in place an Employee Share Option Plan (ESOP) which provides benefits to directors, senior executives and key employees. Key terms of the ESOP are as follows:

• The Plan is available to eligible persons who will be determined by the Board but must be persons who are Directors or employees of the Entity;
• Options are issued for nil consideration;
• The exercise price is determined by the Board with regard to the market value of the Company's shares at the time it resolves to offer the options;
• Options will be issued subject to certain conditions that must be satisfied for them to be exercised to be determined by the Board when it resolves to offer the Options and in accordance with the purpose of the ESOP;
• The expiry date of the Options will be determined by the Board prior to the offer of the relevant options, subject to any restrictions in the Corporations Act, but in any event no longer than 5 years from the date of issue;
• Options will lapse if the eligible person ceases to be an eligible person for any reason other than retirement, permanent disability, redundancy or death;
• Options are not transferable;
• Any shares issued will rank equally with the Company's then existing issued shares;
• The issue of Options to Directors will require shareholder approval in accordance with the ASX Listing Rules and the Corporations Act.

The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an external valuer using Black-Scholes and binomial methods.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Redstone Resources Limited ('market conditions').

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award ('vesting date').

Where the Entity acquires some form of interest in an exploration tenement and the consideration comprises share based payment transactions, the fair value of the equity instruments granted is measured at the grant date. The cost of the equity securities is recognised within capitalised exploration expenditure together with a corresponding increase in equity.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

w) Share-based payment transactions (continued)

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the directors of the company, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.

x) Share capital

Ordinary share capital is recognised at the fair value of the consideration received by the Entity. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction in share proceeds received.

y) Earnings per share

Basic earnings per share

Basic earnings per share is determined by dividing net profit after income tax attributable to members of the Entity, excluding any costs of service equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

Diluted earnings per share

Diluted earnings per share adjusts the figure used in the determination of basic earnings per share to take into account the dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to potential ordinary shares.

z) Joint venture arrangements

Jointly controlled operations

Where the Entity is a venturer (and so has joint control) in a jointly controlled operation the Entity recognises the assets that it controls and the liabilities it incurs, along with the expenses that it incurs and the Entity's share of the income that it earns from the sale of goods and services by the joint venture.

aa) Comparative figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

ab) Foreign currency

Exchange differences are recognised in profit or loss in the period in which they arise except for exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur, which form part of the net investment in a foreign operation, and which are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of the net investment.

The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Australian dollars, which is the functional currency of the Entity, and the presentation currency for the consolidated financial statements.

ac) Principles of going concern

The Entity recorded a loss of $1,159,899 for the year ended 30 June 2011 and as at 30 June 2011 had net cash and cash equivalents of $3,867,703. The financial report has been prepared on the going concern basis, as the directors are of the opinion that the Entity will be able to pay it debts as and when they fall due. The directors contemplate continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

			Consolidated
			2011	2010
			$	$
3.		Revenue and expenses
	(a)	Revenue and Interest
		Interest revenue
		Interest income third party	173,351	32,789
		Other revenue
		Exploration services incomeTrombetas sale – non refundable option fee	139,548-	-100,000
		Gain on sale of foreign tenement	337,437	-
			476,985	100,000
	(b)	Depreciation expense
		Plant and equipment	46,818	46,401
	(c)	Employee and directors' benefits
		expenses
		Share-based payment	741,163	91,376
		Other	452,633	510,472
			1,193,796	601,848
	(d)	Finance costs
		Short term borrowings	-	5,000
		Other third parties	253	269
			253	5,269
		Interest is expensed as it accrues.
	(e)	Dividends	-	-
		No dividends have been paid or are proposed as at 30 June 2011.
		As at 30 June 2011 the Company has no franking credits available for use in future years.

4. Income tax

Current tax	-	-
Deferred tax	-	-
Under/(over) provisions in prior year	-	-
Income tax expense reported in the
statement of comprehensive income	-	-

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

4. Income tax (continued)

The prima facie income tax benefit on pre-tax accounting loss from operations reconciles to the income tax expense in the financial statements as follows:

	Consolidated
	2011$	2010$
Loss before income tax	(1,159,899)	(2,623,426)
Prima facie tax on loss	(347,970)	(787,028)
Tax effect of permanent itemsTemporary differences not brought to	269,600	116,757
account	78,730	670,271
Income tax expense reported in thestatement of comprehensive income	-	-

The tax rate used in the above reconciliation is the tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. No amounts of current or deferred tax have been recognised directly in equity as at 30 June 2011.

Deferred income tax
Unrecognised deferred income tax at 30
June relates to the following:
Deferred tax liabilities
Capitalised exploration and
evaluation expenditure	(1,918,999)	(1,398,365)
Deferred tax assets
Tax losses available to offset
against future income	3,015,750	2,345,480
Tax benefit of capital raising costs
not recognised	103,660	105,724
Deferred tax assets not brought to
account as realisation is not
considered probable	(1,200,411)	(1,052,839)
Gross deferred income tax assets	-	-

Redstone Resources Limited and its controlled entities have not elected to form a tax consolidation group.

It is considered that it is not probable that the Entity will utilise all its carry forward tax losses in the foreseeable future, hence it is not expected to pay tax in the foreseeable future. The deferred tax balances noted above have therefore not been accounted for in the consolidated statement of financial position.

At 30 June 2011, the Entity has tax losses in Australia of $12,275,067 (2010: $10,525,502) that are available indefinitely for offset against future taxable income. The Entity has not recognised deferred income tax assets in relation to these losses as realisation of the benefit is not regarded as probable.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

4. Income tax (continued)

These deferred tax assets will only be obtained if:

• a) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;
• b) the Entity continues to comply with the conditions for deductibility imposed by tax legislation; and
• c) no changes in the income tax legislation adversely affect the Entity in realising the benefit from the deduction of the loss.

			Consolidated
		2011$	2010$
5.	Cash and cash equivalents
	Cash at bank	88,590	229,749
	Cash on deposit	3,779,113	171,743
		3,867,703	401,492
6.	Trade and other receivablesCurrent
	Other receivable	140,974	103,500
	GST receivable	43,003	67,507
		183,977	171,007
7.	Deferred exploration expenditure
	Exploration costs brought forward	4,661,218	5,137,723
	Expenditure incurred on exploration	1,735,446	1,345,874
	Exploration costs impaired (i)	-	(1,672,856)
	Exploration costs written off (i)	-	(149,523)
	Carrying amount at the end of the year	6,396,664	4,661,218

(i) The ultimate recoupment of costs carried forward in relation to exploration expenditure is dependent on the successful development and commercial exploitation or sale of the areas of interest at an amount at least equal to the carrying value.

During the previous financial year the Entity surrendered West Musgrave exploration licences 69/2197, 69/2010, 69/2106, 69/2107, 69/1640 69/1642, 69/1662, 69/1663, 69/1903, 69/1904, 69/1905, 69/1906. Deferred exploration expenditure assets in relation to these licences totalling $1,376,848 were treated as impaired or written off during the 2010 financial year.

During the previous financial year the Entity also impaired previously deferred exploration expenditure relating to its Brazilian tenements totalling $445,531.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

		Consolidated
		2011	2010
		$	$
8.	Plant and equipment
	At cost	415,527	378,543
	Accumulated depreciation	(283,680)	(256,572)
	Total written down value	131,847	121,971
	ReconciliationA reconciliation of the carrying amounts ofplant and equipment at the beginning and
	end of the current financial period.
	Plant and equipment
	Carrying amount at beginning of year	121,971	157,391
	Additions	56,694	10,981
	Disposals	-	-
	Depreciation expense	(46,818)	(46,401)
	Total plant and equipment	131,847	121,971
9.	Other assets
	Current
	Prepayments	12,400	7,802
	Deposits and advances	8,112	13,542
	Total other current assets	20,512	21,344
10.	Trade and other payables
	Current
	Trade creditors (i)	225,160	100,679
	Other creditors (ii)	452,653	259,179
	Total current trade and other payables	677,813	359,858

Terms and conditions relating to the above financial instruments:

(i) Trade creditors are non-interest bearing and are normally settled on 30 days terms.

(ii) Other creditors include $72,200 payable in nine equal monthly instalments to 31 March 2012. Other than for this amount Other creditors are non-interest bearing and have an average term of 30 days.

Trade and other payables include $201,372 (2010: $198,473) relating to exploration expenditure.

Non-Current
Other creditors (i)	-	75,810
Total non-current other payables	-	75,810

Terms and conditions relating to the above financial instruments: (i) During the previous financial year Other creditors included $75,810 payable in nine monthly instalments from 1 June 2011 to 31 March 2012.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

			Consolidated
		2011	2010
11.	Income in advance	$	$
	Income in Advance	110,000	-

The Entity entered into a Sale and Purchase Agreement for the sale of its Stripeys Project. In accordance with the Agreement the purchaser paid Redstone a $100,000 (plus GST) cash deposit. This deposit will be recognised as income in advance until completion of the Agreement has occurred.

12. Provisions

Employee entitlements
Opening balance at 1 July 2010	46,358	62,700
Additional provisions	23,522	25,941
Amounts used	(55,326)	(42,283)
Balance as at 30 June 2011	14,554	46,358

13. Issued Capital

(a) Issued and paid up capital 129,969,390 (2010: 106,392,946) ordinary shares fully paid 18,165,461 12,860,151

Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore the company does not have a limited amount of authorised share capital and issued shares do not have a par value.

(b) Movements in fully paid ordinary shares during the year were as follows:

	2011		2010
	No. ofShares	$	No. ofShares	$
Movements in shares on issue
Opening balance	106,392,946	12,860,151	79,170,722	10,720,583
Shares issued to sophisticated and
private investors – 13 October 2009			3,575,000	321,750
Shares issued to sophisticated investor –
13 October 2009			2,500,000	250,000
Shares issued to sophisticated and
private investors – 3 December 2009			18,647,224	1,678,250
Shares issued to sophisticated investor –
26 February 2010Shares issued to sophisticated and			2,500,000	250,000
private investors – 3 September 2010	15,955,000	3,510,100	-	-
Shares issued upon exercise of $0.25
options – 1 December 2010	500,000	131,175	-	-
Shares issued upon exercise of $0.25
options – 23 February 2011	500,000	131,175	-	-
Shares issued upon exercise of $0.25
options expiring 30 November 2012 –
various dates	4,394,444	1,210,010	-	-
Shares issued to sophisticated and
private investors – 25 February 2011	2,227,000	489,940	-	-
Share issue costs	-	(167,090)	-	(360,432)
Closing balance	129,969,390	18,165,461	106,392,946	12,860,151

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

13. Issued Capital (continued)

(c) Reconciliation of options on issue

During the year 6,000,000 options over ordinary shares were issued and 5,394,444 options were converted into ordinary shares. During the financial year no options lapsed or expired.

Unlisted share	As at 30	Issued/	As at 30	Exercise	Exercisable	Expiry
options	June 2010	(Exercised)	June 2011	price	from
Unlisted options	400,000	-	400,000	1.50	29 Jun 08	29 Jun 12
Unlisted options	1,000,000	-	1,000,000	0.95	30 Nov 07	28 Nov 12
Unlisted options	500,000	-	500,000	1.20	30 Nov 07	28 Nov 12
Unlisted options	300,000	-	300,000	0.75	20 Feb 09	20 Feb 13
MBAC unlisted	1,000,000	(1,000,000)	-	0.25	22 Jun 09	17 Jun 11
options
Unlisted options	11,111,112	(4,394,444)	6,716,668	0.25	30 Nov 09	30 Nov 12
Unlisted options	1,500,000	-	1,500,000	0.25	30 Nov 09	30 Nov 14
Unlisted options	500,000	-	500,000	0.30	30 Nov 09	30 Nov 14
Unlisted options	500,000	-	500,000	0.35	30 Nov 09	30 Nov 14
Unlisted options	-	3,750,000	3,750,000	0.50	19 Oct 10	19 Oct 13
Unlisted options	-	650,000	650,000	0.50	4 Nov 10	4 Nov 13
Unlisted options	-	500,000	500,000	0.50	1 Dec 10	1 Dec 13
Unlisted options	-	1,000,000	1,000,000	0.50	25 Feb 11	24 Feb 14
Unlisted options	-	100,000	100,000	0.50	25 Feb 11	24 Feb 14
Total options	16,811,112	605,556	17,416,668
Weighted average
exercise price
(cents/share)	0.363		0.445
Weighted average
exercise price of
exercised options
(cents/share)		0.25
Weighted average
exercise price of
issued options
(cents/share)		0.50

The weighted average remaining contractual life of options on issue as at 30 June 2011 is 2.04 years (2010: 2.63 years).

The exercise prices of options on issue range from $0.25 per share to $1.50 per share.

(d) Terms and conditions of contributed equity

Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held. At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.

Option holders do not have the right to receive dividends nor are they entitled to vote at a meeting of the company.

(e) Employee Share Option Plan (ESOP)

Key terms relating to the Employee Share Option Plan (ESOP) are set out in note 2(w).

During the financial year 4,500,000 options were issued to eligible persons pursuant to the ESOP (2010: nil).

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

13. Issued Capital (continued)

(f) Share Issue

In September 2010 the Company undertook a capital raising by placement of securities to sophisticated and professional investors totalling $4 million (before costs). These investors subscribed for 18,182,000 ordinary fully paid shares in Redstone at $0.22 per share.

Of the placement securities, 15,955,000 shares for a total $3,510,100 were issued and allotted on 3 September 2010 following finalisation of the placement, whilst the balance of 2,227,000 shares for a total of $489,940 (before costs) were issued and allotted following shareholder approval on 25 February 2011.

During the year, 4,394,444 shares were issued upon exercise of 4,394,444 $0.25 options exercisable any time on or before 30 November 2012 to raise $1,098,611 (before costs) and 1,000,000 shares were issued upon exercise of 1,000,000 $0.25 MBAC options exercisable any time on or before 17 June 2011 to raise $250,000 (before costs).

14. Reserves

	Consolidated
	2011$	2010$
Share based payment reserve (i)	2,055,722	1,282,958
Foreign currency translation reserve (ii)	(14,845)	-
Total reserves	2,040,877	1,743,816

(i) This reserve is used to record the value of equity benefits provided to employees and directors as part of their remuneration and as consideration for other equity settled transactions.

(ii) This reserve is used to record exchange differences arising on translation of the foreign controlled entity, as described in note 1(ab). The reserve is recognised in profit and loss when the net investment is disposed of.

Movements in reserves are set out in the Statement of Changes in Equity.

15. Loss per share

	Consolidated
	2011	2010
Basic loss per share (cents per share)	(0.94)	(2.76)
Weighted average number of ordinary shares on issue used in thecalculation of basic earnings per share	123,310,081	95,024,886
Earnings used in the calculation of basic loss per share	(1,159,899)	(2,623,426)

As the Entity made a loss for the year, diluted earnings per share is the same as basic earnings per share.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

16. Key management personnel disclosures

(a) Key management personnel

The directors of Redstone Resources Limited during the financial year were: Richard Homsany (B. Com, LL.B (Hons)) - Non-Executive Chairman Barry Woodhouse (B. Com, LL. B, CPA, FCIS) – Non-Executive Director David Le Roy – Non-Executive Director

The senior executive of Redstone Resources Limited during the financial year was: Anthony Ailakis (B. Juris LL.B) – Operations Manager

(b) Remuneration of key management personnel

Refer to the Remuneration Report included on pages 15 to18 for details of remuneration paid to directors and the specified executive.

Options granted as remuneration to key management personnel

2011	Balance at startof year	Granted ascompensation	Exercised/(Lapsed)	Balance at endof year
Director
R Homsany	4,000,000	-	-	4,000,000
B Woodhouse	-	300,000	-	300,000
D Le Roy	-	200,000	-	200,000
	4,000,000	500,000	-	4,500,000
ExecutiveA Ailakis	-	2,000,000	-	2,000,000
	-	2,000,000	-	2,000,000

2,500,000 options were granted as remuneration to key management personnel or vested during the 2011 financial year.

2010	Balance at startof year	Granted ascompensation	Exercised/(Lapsed)	Balance at endof year
Director
R Homsany	1,500,000	2,500,000	-	4,000,000
J Olivero	750,000	-	(750,000)	-
	2,250,000	2,500,000	(750,000)	4,000,000
Executive
A Ailakis	750,000	-	(750,000)	-
	750,000	-	(750,000)	-

2,500,000 options were granted as remuneration to key management personnel or vested during the 2010 financial year. During the 2010 financial year, 750,000 options held as at 30 June 2009 by Mr J Olivero, a former director, lapsed upon his resignation.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

16. Key management personnel disclosures (continued)

(c) Share holdings of key management personnel

	Held as at1 July2010	Receivedon Exerciseof Options	Acquired/(Disposed)on Market	OtherChanges(directorappointment/resignation)	Held as at30 June2011
DirectorsR Homsany	-	-	-	-	-
B Woodhouse	-	-	-	-	-
D Le Roy	500,000	-	-	-	500,000
ExecutiveA Ailakis	494,108	-	(49,425)	-	444,683

	Held as at1 July2009	Received onExercise ofOptions	Acquired/(Disposed)on Market	OtherChanges(directorappointment/resignation)	Held as at30 June2010
Directors
R Homsany	-	-	-	-	-
B Woodhouse	-	-	-	-	-
D Le Roy	-	-	-	500,000	500,000
A John	-	-	-	-	-
J Olivero	837,500	-	-	(837,500)	-
ExecutiveA Ailakis	494,108	-		-	494,108

All equity transactions with key management personnel, other than those arising from the exercise of remuneration options, have been entered under terms and conditions no more favourable than those the Company would have adopted if dealing at arm's length.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

16. Key management personnel disclosures (continued)

(d) Transactions with key management personnel

During the financial year, Cardinals Corporate Pty Ltd, a company of which Mr Homsany is a director, undertook work for the Company totalling $8,276 excluding GST, in addition to the disclosures in the Directors' Report.

These services were provided on arms length terms.

During the 2010 financial year $19,500 was advanced to Mr Anthony Ailakis in lieu of unpaid accrued wages, with $46,667 of accrued wages payable as at 30 June 2010. The advanced amount of $19,500 was repaid to the Company without interest during the financial year upon payment of outstanding wages.

There were no loans outstanding to or from key management personnel during the year.

			Consolidated
		2011$	2010$
17.	Employee benefits
	Aggregate liability for employee benefits
	Current
	Trade and other payables	98,150	73,465
	Employee entitlement provision	14,554	46,358
		112,704	119,823

The Entity has in place an employee share option plan (ESOP) for the granting of non-transferable options to certain directors, senior executives and key employees, further details of which are provided in note 2(w).

18. Auditors remuneration

Amounts received or due and receivable by the auditors of the Entity for:

	29,455
-	-
	29,455
	29,65929,659

19. Subsequent events

There has not been any matter or circumstance that has arisen after balance date that has significantly affected, or may significantly affect, the operations of the Entity, the results of those operations, or the state of affairs of the Entity in future financial periods.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

20. Segment Reporting

The Entity has two operating segments being the distinct geographical location of its Areas of Interest in Australia and South America (The Entity's primary basis of segmentation).

The Entity has identified its operating segment based on the internal reports that are reviewed and used by management and the Board of Directors in determining the allocation of resources.

However, as the Entity is predominantly operating in Australia then pursuant to the quantitative threshold criteria in AASB8 Segment Reporting, the two segments have been aggregated.

The accounting policies used by the Entity in reporting segments are the same as those in the prior period.

21. Related Party Transactions

Controlled entities

During the year the Company provided loans to controlled entities. The loans are made in the ordinary course of business and are unsecured and interest free with no fixed term of repayment. The amounts receivable from these entities as at the end of the reporting period are as follows:

	2011	2010
	$	$
Westmin Exploration Pty Ltd	2,700,276	2,538,166
Minex Services Pty Ltd	-	3,483

During the 2011 financial year loan amounts of $3,483 to Minex Services Pty Ltd were treated as impaired.

Other than disclosed above and in note 16 there were no other related party transactions during the financial year.

22. Expenditure commitments

Exploration expenditure commitments

Australian tenements

In order to maintain current rights of tenure over its Australian mineral tenement leases, the Entity will be required to outlay amounts in respect of rent and to meet minimum expenditure requirements of the Department of Mines and Petroleum (DMP). Further, those tenements for which access agreements have been signed require annual access payments to be paid to the traditional owners.

The annual expenditure commitments, including access payments, on granted tenements as at 30 June 2011 amounted to $440,500 (2010: $615,791).

Brazilian tenements

In order to maintain current rights of tenure over Brazilian mineral tenement leases, the Company's controlled entity, Redstone Mineracao Do Brasil Ltda, will be required to outlay amounts in respect of annual rent and to meet minimum expenditure requirements of the National Department of Mineral Production (DNMP).

As such, the minimum expenditure commitments comprising annual rent on granted Brazilian tenements as at 30 June 2011 amounted to $24,890 (2010: $25,287). These obligations may vary from time to time and are expected to be fulfilled in the normal course of operations by the entity.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

22. Expenditure commitments (continued)

Exploration expenditure commitments (continued)

The future exploration commitment (including access costs) of the Entity relating to tenements which have been granted is as follows:

	Consolidated
Cancellable operating lease commitments forexploration tenements	2011$	2010$
Within one year	465,390	367,438
One year or later and no later than five yearsLater than five years	470,477-	452,984-
	935,867	820,422

These obligations may vary from time to time, are subject to approval and are expected to be fulfilled in the normal course of operations by the relevant entity. Further, these obligations are extinguished upon any surrender of the tenement.

Joint venture commitments

Baggaley Hills Joint Venture

The Baggaley Hills Sale and Farm-in Agreement dated 19 March 2009 is between Redstone Resources Limited and HJH Nominees Pty Ltd (HJH or the farminee) over the Entity's Baggaley Hills Project in the West Musgrave region, Australia.

Under the terms of the agreement, HJH paid the Entity $505,000. HJH has the right to earn 80% of the Baggaley Hills project tenements by spending a minimum of $2.5 million over a three year period to 19 March 2012 on the tenements and keeping the tenements in good standing. After earning an 80% interest, HJH will sole fund exploration and development expenditure on the Project Tenements until a Decision to Mine based on a bankable feasibility study.

Blackstone Range/Michael Hills Joint Venture

The Blackstone Range/Michael Hills Farm-In Deed dated 2 June 2005 is between Giles Exploration Pty Ltd (Giles), Resources Mining Corporation Ltd (RMC), Westmin Exploration Pty Ltd (Westmin) and Rivergold Exploration Pty Ltd (Rivergold).

As of September 2008 Westmin, a wholly owned subsidiary of the Company, acquired a 75% interest in the Blackstone Range/Michael Hills Exploration Licences (EL) by sole funding $2,000,000 of exploration costs. During the 2010 financial year RMC converted its 25% interest to a 10% free carried interest in which case Westmin will assume RMC's funding obligations to completion of a feasibility study, upon which Westmin will have earned a 90% interest in the EL.

On 26 February 2010 the Joint Venture parties surrendered Exploration Licences EL's 69/2106 and 2107. The Farmin Deed continues in respect of the remaining tenements, EL's 69/2108 and 2109.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

22. Expenditure commitments (continued)

Operating lease – corporate office premises

Effective from 1 August 2010, the Entity has a two year operating lease for its office premises and car bays at a current annual rental of $40,720 per annum plus variable outgoings plus GST.

Commencing from 1 July 2011 the Entity has agreed to a two year operating lease for storage premises expiring on 30 June 2013 at an annual rental of $22,800 (excluding GST).

		Consolidated
Cancellable operating leasecommitments	2011$	2010$
Within one yearOne year or later and no later than five	63,403	38,127
years	25,833	42,597
Later than five years	-	-
	89,236	80,724

Capital Commitments

The Entity does not have any capital commitments as at balance date.

23. Financial Risk Management

(a) Overview

The Entity has exposure to the following risks from use of their financial instruments

• credit risk
• liquidity risk
• market risk

This note presents information about the Entity's exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital.

The Board of directors has overall responsibility for the establishment and oversight of the risk management framework.

(b) Credit risk

Credit risk is the risk of financial loss to the Entity if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Entity's receivables from customers and investments.

(c) Liquidity risk

Liquidity risk is the risk that the Entity will not be able to meet its financial obligations as they fall due. The Entity's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Entity's reputation.

Ultimate responsibility for liquidity risk management rests with the Board of directors, who have built an appropriate liquidity risk management framework for the management of the Entity's short, medium and long-term funding and liquidity management requirements. The Entity manages liquidity risk by maintaining adequate reserves by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

23. Financial Risk Management (continued) (c) Liquidity risk (continued)

It is the Entity's objective to ensure that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations.

Other than for $72,200 which is payable in 9 instalments from 1 July 2011 to 31 March 2012 (2010: $151,620 from 1 October 2010 to 31 March 2012), the contractual maturities of the financial liabilities referred to in notes 10 and 11 to the financial report for the Entity, including estimated interest payments, at reporting date are less than 6 months.

(d) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Entity's income or the value of its holdings of financial instruments.

(i) Price Risk

The Entity has no exposure to price risk.

(ii) Currency risk

The Entity is exposed to currency risk on purchases and investments that are denominated in a currency other than their functional currency, namely the Australian dollar (AUD). The currencies in which these transactions primarily are denominated are the United States dollar (USD) and Brazilian Reais (BRL).

To date, currency risk has not been material to the Entity, however the Entity may use forward exchange contracts to hedge its currency risk, if and when this becomes more material to the Entity's operations.

(iii) Interest rate risk

The cash balance of $3,867,703 as at 30 June 2011 is sensitive to interest rate risk whereby a 1% per annum movement in interest rates would impact the consolidated statement of comprehensive income and net equity by $38,677. This risk is not considered to be material.

At reporting date the Entity does not have any short term borrowings.

(e) Capital risk management

Management's policy is to control the capital of the Company in order to maintain a strong capital base so as to maintain investor, creditor and market confidence and to ensure that the Entity can fund its operations and continue as a going concern.

The Entity's capital includes ordinary share capital and financial liabilities, comprising trade, other payables and income in advance totalling $787,813 (2010: $359,858) supported by financial assets of $4,051,680 (2010: $572,499).

Financial risk management objectives and policies

The Entity's principal financial instrument is cash. The main purpose of these financial instruments is to provide working capital for operations.

The Entity has various other financial assets and liabilities such as receivables and trade payables, which arise directly from its operations. The main risks currently arising from the Entity's financial instruments are interest rate risk and credit risk.

It is expected that the Entity will be undertaking certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations will arise.

Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis for measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 1 to the financial statements.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

23. Financial Risk Management (continued)

Credit risk

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is the carrying amount, net of any provisions for doubtful debts of those assets, as disclosed in the statement of financial position and the notes to the consolidated financial statements.

The Entity does not have any material credit risk exposure to debtors under financial instruments it has entered into, with the majority of trade receivables due from the Company's Baggaley Hills Project farmin Partner (HJH Nominees Pty Ltd) and the Australian Taxation Office (ATO).

As at 30 June 2011, financial assets which are neither past due or impaired mainly comprise cash held with reputable financial institutions and is therefore not considered to present material credit risk.

Net fair values

The carrying amount of financial assets and financial liabilities approximate their net fair values at balance date.

Interest rate risk

The following table sets out the carrying amount and maturity of the financial instruments exposed to interest rate risk:

Consolidated – 2011Category	TimePeriod	InterestBearing(Floating)	NonInterestBearing	Total CarryingAmount as perthe consolidatedstatement offinancial position	WeightedAverageEffectiveInterest Rate %
Financial assets:
Cash	<1 year	3,863,719	-	3,863,719	4.82%
Cash	<1 year	-	3,984	3,984	-
Trade and otherreceivables	<1 year	-	183,977	183,977	-
Total financial assets		3,863,719	187,961	4,051,680
Financial liabilities
Trade creditors andother payables	<1 year	-	677,813	677,813	-
Borrowings	< 1 year	-	-	-	-
Income in advance	<1 year	-	110,000	110,000	-
Total financial liabilities		-	787,813	787,813

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

23. Financial Risk Management (continued)

Consolidated – 2010Category	TimePeriod	InterestBearing(Floating)	NonInterestBearing	Total CarryingAmount as perthe consolidatedstatement offinancial position	WeightedAverageEffectiveInterest Rate %
Financial assets:
Cash	<1 year	397,570	-	397,570	3.20%
Cash	<1 year	-	3,922	3,922	-
Trade and other	<1 year	-	171,007	171,007	-
receivablesTotal financial assets		397,570	174,929	572,499
Financial liabilities
Trade creditors andother payables	<1 year	-	359,858	359,858	-
Borrowings	< 1 year	-	-	-	-
Other liabilities	>1 year	-	75,810	75,810	-
Total financial liabilities		-	435,668	435,668

		Consolidated
		2011	2010
24.	Cash flow information	$	$
	Reconciliation of loss after income tax to thenet cash flows from operations
	Loss from ordinary activities after income tax	(1,159,899)	(2,623,426)
	DepreciationGain on sale of assetImpairment of deferred exploration	46,818(337,437)	46,401-
	expenditureOption fee on sale of foreign tenementShare-based payments	--896,513	1,822,377(100,000)91,376
	Exploration expenditureChanges in operating assets and liabilities	-	1,999
	Decrease in provisionsIncrease/(decrease) in trade creditors and	(31,804)	(16,342)
	accrualsIncrease in sundry receivables and	48,605	(132,738)
	prepayments	(112,138)	(32,865)
	Net cash flow used in operating activities	(649,342)	(943,218)

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

25. Contingent Liabilities

The Entity had no contingent liabilities at 30 June 2011.

26. Parent Information

	Parent Entity
	2011	2010
	$	$
Current assets	4,070,915	592,566
Non-current assets	6,167,580	4,817,050
Total Assets	10,238,495	5,409,616
Current liabilities	680,167	406,216
Non-current liabilities	-	75,810
Total Liabilities	680,167	482,026
Net Assets	9,558,328	4,927,590
Equity
Issued capital	18,165,460	12,860,151
Reserves	2,055,722	1,282,958
Accumulated losses	(10,662,854)	(9,215,519)
Total RDS equity	9,558,328	4,927,590
Net loss for the year before othercomprehensive income	(1,447,336)	(2,722,528)
Total comprehensive income for the year	(1,447,336)	(2,722,528)
Earnings per share (EPS) – (cents per share)	(1.17)	(2.87)

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

26. Parent Information (continued)

Controlled entities

Redstone Resources Limited is the ultimate parent entity of the controlled entities.

(a)	Particulars in relation to controlled entities	Country ofincorporation	2011Ownership %	2010Ownership %
	Allhawk Nominees Pty Ltd	Australia	100	100
	Minex Services Pty Ltd	Australia	100	100
	Westmin Exploration Pty Ltd	Australia	100	100
	Redstone Mineracao Do Brasil Ltda1	Brazil	98	98

1Redstone Mineraco Do Brasil Ltda is 98% owned by the Company. The remaining 2% shareholding is held by an employee of the Entity, who is a Brazilian citizen and is holding these shares on trust for the Company. The Board and shareholding structure is in accordance with Brazilian law.

(b) Contribution to consolidated result

The results of the controlled entities inclusion in the consolidated statement of comprehensive income is a gain of $287,437 (2010: gain of $65,661).

27. Share based payments

The impact of share based payments on the consolidated statement of comprehensive income for the financial year ended 30 June 2011 is as follows:

	Consolidated
	2011$	2010$
Net loss after income tax and includingshare based payments	(1,159,899)	(2,623,426)
Add: share based payments expense	896,512	91,376
Net loss after income tax excluding sharebased payments	(263,387)	(2,532,050)

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

27. Share based payments (continued)

During the period the company granted 6,000,000 (2010: 13,611,112) share options for nil consideration. These share-based payments were independently valued using either Black Scholes or binomial methodology as detailed in note 2(w). The independent value of these, and existing, options for the year ending 30 June 2011 is as follows:

$ 256,100 400,000 Options granted to key employee on 29 June 2007. Exercise price $1.50 exercisable from 29 June 2008 and expiring 29 June 2012.

407,485 1,000,000 Options granted to a director on 30 November 2007. Exercise price $0.95 exercisable any time on or before 28 November 2012.

189,833 500,000 Options granted to a director on 30 November 2007. Exercise price $1.20 exercisable any time on or before 28 November 2012.

44,850 300,000 Options granted to a key consultant on 20 February 2008. Exercise price $0.75 exercisable from 20 February 2009 and expiring 20 February 2013.

170,267 6,716,668 Options granted to Placement Investors on 30 November 2009. Exercise price $0.25 exercisable from 30 November 2009 and expiring 30 November 2012.

56,550 1,500,000 Director Options granted on 30 November 2009. Exercise price $0.25 exercisable from 30 November 2009 and expiring 30 November 2014.

17,550 500,000 Director Options granted on 30 November 2009. Exercise price $0.30 exercisable from 30 November 2009 and expiring 30 November 2014.

16,575 500,000 Director Options granted on 30 November 2009. Exercise price $0.35 exercisable from 30 November 2009 and expiring 30 November 2014.

543,562 3,750,000 Employee Options granted on 19 October 2010. Exercise price $0.50 exercisable from 19 October 2010 and expiring 19 October 2013.

115,765 650,000 Employee Options granted on 4 November 2010. Exercise price $0.50 exercisable from 4 November 2010 and expiring 4 November 2013.

• 66,300 500,000 Director Options granted on 1 December 2010. Exercise price $0.50 exercisable from 1 December 2010 and expiring 1 December 2013.
• 155,350 1,000,000 Consultant Options granted on 25 February 2011. Exercise price $0.50 exercisable from 25 February 2011 and expiring 24 February 2014.
• 15,535 100,000 Employee Options granted on 25 February 2011. Exercise price $0. 50 exercisable from 25 February 2011 and expiring 24 February 2014.

2,055,722 Total Options 17,416,668

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

27. Share based payments (continued)

The option valuations adopted in the previous table are calculated using the following assumptions:

For options issued during the 2011 financial year

Underlying security spot price of between $0.38 and $0.47 Dividend rate of nil Volatility factor of 90% Risk free interest rate of between 4.94% and 5.13% Discount factor of 35% due to lack of marketability The weighted average exercise price is $0.50 and the weighted average expiry period is 3 years. The weighted average value per option as at the measurement date is $0.15 cents per option.

For options issued during the 2010 financial year

Underlying security spot price of $0.105 Dividend rate of nil Volatility factor of 85% Risk free interest rate of 5.29% Discount factor of 35% due to lack of marketability The weighted average exercise price is $0.26 and the weighted average expiry period is 3.37 years. The weighted average value per option as at the measurement date is $0.027cents per option.

For options issued during the 2009 financial year

Underlying security spot price of $0.09 Dividend rate of nil Volatility factor of 85% Risk free interest rate of 4.12% Discount factor of 35% due to lack of marketability The weighted average exercise price is $0.25 and the weighted average expiry period is 2 years. The weighted average value per option as at the measurement date is $0.019 cents per option.

For options issued during the 2008 financial year

Underlying security spot price of between $0.42 and $0.95 Dividend rate of nil Volatility factor of 75% Risk free interest rates between 6.25% and 6.61% Discount factor of 35% due to lack of marketability The weighted average exercise price is $0.974 and the weighted average expiry period is 5 years. The weighted average value per option as at the measurement date is $0.346 cents per option.

For options issued prior to 30 June 2007

Underlying security spot price of between $0.15 and $1.54 Dividend rate of nil Volatility factor of 70% Risk free interest rates between 5.23% and 6.40% The weighted average exercise price is $0.321 and the weighted average expiry period is 2.30 years. The weighted average value per option as at the measurement date is $0.078 cents per option.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

28. Jointly controlled operations and assets

Blackstone Range Project

As at 30 June 2011 and the date of this report the Entity has an interest in a joint venture arrangement in the Blackstone Range/Michael Hills Farm-In in Western Australia. The Entity has earned a 75% interest in this joint venture by funding and carrying out exploration on these tenements and is currently sole funding exploration and development expenditure on the Project Tenements until completion of a feasibility study to earn a 90% interest (refer to note 22).

Baggaley Hills Project

On 19 March 2009 the Entity entered into a farm in and joint venture agreement with HJH Nominees Pty Ltd (HJH) over its Baggaley Hills Project in the West Musgrave region, Australia.

Under the terms of the agreement, HJH paid the Entity $505,000. HJH has the right to earn 80% of the Baggaley Hills project tenements by spending a minimum of $2.5 million over a three year period to 19 March 2012 on the tenements. After earning an 80% interest, HJH will sole fund exploration and development expenditure on the Project Tenements until a Decision to Mine based on a bankable feasibility study.

Aneba (Potash) and Apui (Phosphate) Projects

Under the terms of the MBAC Agreement, MBAC acquired a 35% interest in both the Aneba and Apui Projects for US$250,000 following exercise of its First Option on 17 August 2009.

On 15 September 2010 the Entity and MBAC entered into an agreement concerning the Aneba and Apui Projects (at that time owned 35% by MBAC and 65% by the Entity), whereby the Entity transferred to MBAC (or subsidiary thereof) for nil consideration a 100% interest in four tenements forming part of the Aneba Project, namely 880240/2007, 880241/2007, 880658/2008 and 880659/2008 (Transferred Aneba Tenements).

Upon transfer of the Entity's 65% interest in the Transferred Aneba Tenements to MBAC, MBAC relinquished its 35% interest in the remaining Aneba tenements and the Apui Project, to give the Entity 100% ownership and/or rights to these tenements. The Entity was also granted a 1% net smelter return royalty with respect to proceeds of any future commercial production from the Transferred Aneba Tenements.

Pontal (Iron) Agreement

On 17 June 2010, the Entity divested a 90% interest in its Brazil Iron (Pontal) Project tenements for $160,000. The Pontal Agreement required the purchaser to incur exploration and other expenditure on the Tenements sufficient to satisfy the relevant Brazilian mining laws and keep the tenements in good standing at all times and sole fund exploration, development and other expenditure on the Tenements until a Decision to Mine in respect of each project on the Project area.

ACN 090 169 154

DIRECTORS' DECLARATION

In the directors' opinion:

• a) the financial statements and notes set out on pages 29 to 67 are in accordance with the Corporations Act 2001, including:
  • (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
  • (ii) giving a true and fair view of the Entity's financial position as at 30 June 2011 and its performance for the financial year ended on that date and
• b) there are reasonable grounds to believe that the Entity will be able to pay its debts as and when they become due and payable.

The directors have been given the declarations by the chief executive officer and chief financial officer required by s295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the directors.

R Homsany Chairman Perth, Western Australia

Dated this 30th day of September 2011

Perth
Date:	30 September 201

ACN 090 169 154

SHAREHOLDER INFORMATION AS OF 16 SEPTEMBER 2011

A. CORPORATE GOVERNANCE

A statement disclosing the extent to which the Company has followed the best practice recommendations set by the ASX Corporate Governance Council during the reporting period is contained on pages 21 to 28 of the Annual Report.

B. SHAREHOLDING

1. Substantial Shareholders

The names of the substantial shareholders listed on the company's register:

Shareholder	Number
EASTERN PROSPECTING PTY LTD	9,875,758
SAMARKAND HOLDING PTY LTD	9,875,758
BULLRUN INVESTMENTS PTY LTD	9,725,758
LANARK RESOURCES PTY LTD	6,895,758

1. Number of holders in each class of equity securities and the voting rights attached

There are 1,874 holders of ordinary shares. Each shareholder is entitled to one vote per share held. On a show of hands every shareholder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

There are 70 holders of unlisted options (details of which are set out in section 7 below). There are no voting rights attached to these options. There are no other unquoted securities of the Company.

1. Distribution schedule of the number of holders in each class is.

	Holders ofOrdinaryShares	Number ofOrdinaryShares	%
1 -1,000	98	62,110	0.05
1,001 -5,000	411	1,271,040	0.98
5,001 -10,000	373	3,091,998	2.38
10,001 - 100,000	827	28,792,869	22.15
100,001 and over	165	96,751,373	74.44
TOTALS	1,874	129,969,390	100.00

1. Marketable Parcel

There are 156 shareholders with less than a marketable parcel.

ACN 090 169 154

SHAREHOLDER INFORMATION

5. Twenty largest holders of each class of quoted equity security

The names of the twenty largest holders of each class of quoted equity security, the number of equity security each holds and the percentage of capital each holds are as follows:

		No. of
		Ordinary
	Rank Name	Shares	%
1	SAMARKAND HOLDING PTY LTD	9,875,758	7.60
2	EASTERN PROSPECTING PTY LTD	9,875,758	7.60
3	BULLRUN INVESTMENTS PTY LTD	9,725,758	7.48
4	LANARK RESOURCES PTY LTD	6,895,758	5.31
5	MR EDWARD VAN HEEMST & MRS MARILYN ELAINE VAN HEEMST	6,000,000	4.62
6	GREYHOUND INVESTMENTS PTY LTD	2,782,000	2.14
7	MUSCODA HOLDINGS PTY LTD	2,740,331	2.11
8	TROYWARD PTY LTD	2,350,000	1.81
9	POSSUM INVESTORS PTY LTD	1,500,000	1.15
10	ACEDAY INVESTMENTS PTY LTD	1,200,000	0.92
11	MR CHEE NAM LIEW & MRS LEE CHIN LIEW	1,133,800	0.87
12	ALL STATES FINANCE PTY LTD	1,131,818	0.87
13	ZEBRA CROSSING HOLDINGS PTY LTD	1,065,000	0.82
14	HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	1,009,035	0.78
15	MR BARRY JOHN ANGOVE & ANGOVE PROPERTIES PTY LTD	1,000,000	0.77
16	MR THOMAS MILENTIS	950,000	0.73
17	MIDALU PTY LTD	943,334	0.73
18	CAFFI LOGISTICS PTY LTD	818,863	0.63
19	ALL STATES SECRETARIAT PTY LTD <all a="" c<="" f="" s="" secretariat="" states="" td="">794,4860.61	794,486	0.61
20	MS MIRANDA CONTI & MR ANTON CONTI <the &="" a="" c="" conti="" family="" m="">	793,333	0.61
		62,585,032	48.15

6. Details of Restricted Securities

No ordinary securities are subject to escrow

ACN 090 169 154

SHAREHOLDER INFORMATION

1. Details of unlisted Options

% orNo. holders	No. Options	Name / Class of Option
1	400,000	Options
		Exercise price $1.50 from 29 June 2008 and expiring 29 June 2012
1	1,000,000	Director Options
		Exercise price $0.95 from 29 November 2007 and expiring 28 November 2012
	500,000	Director OptionsExercise price $1.20 from 29 November 2007 and expiring 28 November 2012
1	1,500,000	Director Options
		Exercise price $0.25 from 30 November 2009 and expiring 30 November 2014
	500,000	Director Options
		Exercise price $0.30 from 30 November 2009 and expiring 30 November 2014
	500,000	Director Options
		Exercise price $0.35 from 30 November 2009 and expiring 30 November 2014
1	300,000	Options
		Exercise price $0.75 from 20 February 2008 and expiring 20 February 2013
52	6,716,668	Placement Options
		Exercise price $0.25 from 30 November 2009 and expiring 30 November 2012
4	3,750,000	Options
		Exercise price $0.50 from 19 October 2010 and expiring 19 October 2013
3	650,000	OptionsExercise price $0.50 from 4 November 2010 and expiring 4 November 2013
2	500,000	Director Options
		Exercise price $0.50 from 1 December 2010 and expiring 1 December 2013
2	1,100,000	Options
		Exercise price $0.50 from 25 February 2011 and expiring 24 February 2014
	950,000	Options
		Exercise price $0.35 from 7 July 2011 and expiring 6 July 2015
3	850,000	Options
		Exercise price $0.45 from 7 July 2011 and expiring 6 July 2015

70 19,216,668 Total Share Options

C. OTHER DETAILS

1. Company Secretary

The name of the company secretary is Miranda Conti.

1. Address and telephone details of the entity's registered and administrative office

Suite 3, 110-116 East Parade East Perth WA 6004 Tel: + 61 8 9328 2552 Fax: + 61 8 9328 2660 email: contact@redstone.com.au

1. Address and telephone details of the office at which a register of securities is kept

Advanced Share Registry Services 150 Stirling Highway NEDLANDS WA 6009 Tel: +61 8 9389 8033

ACN 090 169 154

SHAREHOLDER INFORMATION

1. Stock exchange on which the Company's securities are quoted

The Company's listed equity securities are quoted on the Australian Stock Exchange (ASX: RDS).

5. Review of Operations

A review of operations is contained in the Directors' Report.

D. TENEMENT SUMMARY

Following is a list of the Entity's tenements which are live or active as at the date of this report.

West Musgrave, Australia

Project	Tenement	Registered Holder Applicant	HolderInterest	ConsolidatedEntity Interest	Grant Date(ApplicationDate)	Expiry	Blocks	Areakm2
Tollu		E 69/2450 Redstone Resources Limited	100%	100%	19/09/2008	18/09/2013	69	214.0
Baggaley (Antlion)		E 69/2200 Redstone Resources Limited	100%	100%	26/03/2007	25/03/2012	70	217.0
Baggaley North		E 69/2249 Redstone Resources Limited	100%	100%	9/08/2007	8/08/2012	60	186.0
Baggaley Hills		E 69/2053 Redstone Resources Limited	100%	100%	31/01/2007	30/01/2012	70	217.0
Baggaley Hills		E 69/2054 Redstone Resources Limited	100%	100%	28/04/2006	27/04/2013	70	217.0
Baggaley East		E 69/2339 Redstone Resources Limited	100%	100%	18/01/2008	17/01/2013	127	393.7
Baggaley South		E 69/2340 Redstone Resources Limited	100%	100%	18/01/2008	17/01/2013	79	244.9
Blackstone Range		E 69/2108 River Gold Exploration Pty Ltd	100%	75%	28/04/2006	27/04/2013	39	121.0
Blackstone Range		E 69/2109 River Gold Exploration Pty Ltd	100%	75%	28/04/2006	27/04/2013	70	217.0
Murray Hills		E 69/2435 Redstone Resources Limited	100%	100%	29/08/2008	28/08/2013	79	244.9
							733	2,272.5

Brazil, South America

Project	Tenement	Registered Holder Applicant	HolderInterest	ConsolidatedEntity Interest	Grant Date(ApplicationDate)	Expiry	Area ha
Pimenteiras		886252/2006 Joao Orestes Schneider Santos	100%	100%	24/09/2008	24/09/2011	391.59
Pimenteiras		886254/2006 Joao Orestes Schneider Santos	100%	100%	30/04/2008	30/04/2011	5,096.25
Pimenteiras		886255/2006 Joao Orestes Schneider Santos	100%	100%	30/07/2008	30/07/2011	4,430.53
Pimenteiras		886253/2006 Joao Orestes Schneider Santos	100%	100%	14/01/2009	14/01/2012	5,181.07
Arinos		866280/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	15/02/2008	15/02/2011	6,953.43

ACN 090 169 154

SHAREHOLDER INFORMATION

D. TENEMENT SUMMARY (continued)

Brazil, South America

			Holder	Consolidated	Grant Date
Project	Tenement	Registered Holder Applicant	Interest	Entity Interest	(ApplicationDate)	Expiry	Area ha
Aneba		880197/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	13/12/2007	13/12/2013	9,798.78
Aneba		880198/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	133/12/07	13/12/2013	9,952.42
Aneba		880224/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	20/11/2007	20/11/2010	9,247.90
Aneba		880225/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	20/11/2007	20/11/2010	9,689.45
Aneba		880226/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	20/11/2007	20/11/2010	9,666.00
Aneba		880227/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	20/11/2007	20/11/2010	9,845.80
Aneba		880228/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	20/11/2007	20/11/2010	9,909.76
Aneba		880229/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	20/11/2007	20/11/2010	9,886.50
Aneba		880230/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	20/11/2007	20/11/2010	8,718.22
Aneba		880231/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	20/11/2007	20/11/2010	9,874.91
Aneba		880232/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	20/11/2007	20/11/2010	8,312.84
Aneba		880233/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	20/11/2007	20/11/2010	7,751.14
Aneba		880238/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	28/09/2007	28/09/2010	6,645.80
Aneba		880239/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	28/09/2007	28/09/2010	9,656.23
Aneba		880242/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	28/09/2007	28/09/2010	9,819.14
Aneba		880243/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	28/09/2007	28/09/2010	9,094.08
Aneba		880244/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	28/09/2007	28/09/2010	9,959.90
Aneba		880245/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	28/09/2007	28/09/2010	9,331.15
Aneba		880246/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	28/09/2007	28/09/2010	8,430.06
Aneba		880247/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	28/09/2007	28/09/2010	9,900.00
Aneba		880248/2007 Redstone Mineracao Do Brasil Ltda	0%	0%	(10/08/2007)	N/A	4,754.24
Aneba		880249/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	28/09/2007	27/09/2010	9,717.16
Aneba		880250/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	28/09/2007	27/09/2010	9,898.28
Aneba		880259/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	20/11/2007	20/11/2010	9,558.95
Aneba		880260/2007 Redstone Mineracao Do Brasil Ltda	100%	100%	20/11/2007	20/11/2010	9,137.18
Aneba		880657/2008 Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	12/07/2014	1,999.00
Aneba		880052/2011 Redstone Mineracao Do Brasil Ltda	100%	100%	6/05/2011	5/05/2014	9,343.79
Aneba		880053/2011 Redstone Mineracao Do Brasil Ltda	100%	100%	6/05/2011	5/05/2014	9,609.82
Aneba		880054/2011 Redstone Mineracao Do Brasil Ltda	100%	100%	6/05/2011	5/05/2014	9,928.04
Aneba		880055/2011 Redstone Mineracao Do Brasil Ltda	100%	100%	6/05/2011	5/05/2014	9,948.43
Aneba		880056/2011 Redstone Mineracao Do Brasil Ltda	100%	100%	6/05/2011	5/05/2014	9,707.47
Apui		880167/2008 Redstone Mineracao Do Brasil Ltda	0%	0%	(25/04/2008)	N/A	9,458.70
Apui		880168/2008 Redstone Mineracao Do Brasil Ltda	0%	0%	(25/04/2008)	N/A	10,000.00
Apui		880169/2008 Redstone Mineracao Do Brasil Ltda	0%	0%	(25/04/2008)	N/A	9,677.51
Apui		880170/2008 Redstone Mineracao Do Brasil Ltda	0%	0%	(25/04/2008)	N/A	9,497.42
Apui		880171/2008 Redstone Mineracao Do Brasil Ltda	0%	0%	(25/04/2008)	N/A	9,879.48
Apui		880172/2008 Redstone Mineracao Do Brasil Ltda	0%	0%	(25/04/2008)	N/A	10,000.00
Apui		880173/2008 Redstone Mineracao Do Brasil Ltda	0%	0%	(25/04/2008)	N/A	9,474.50
Apui		880174/2008 Redstone Mineracao Do Brasil Ltda	0%	0%	(25/04/2008)	N/A	10,000.00
Apui		880175/2008 Redstone Mineracao Do Brasil Ltda	0%	0%	(25/04/2008)	N/A	10,000.00
Apui		880176/2008 Redstone Mineracao Do Brasil Ltda	0%	0%	(25/04/2008)	N/A	8,995.76
Apui		880177/2008 Redstone Mineracao Do Brasil Ltda	0%	0%	(25/04/2008)	N/A	10,000.00
Apui		880178/2008 Redstone Mineracao Do Brasil Ltda	0%	0%	(25/04/2008)	N/A	10,000.00
Apui		880179/2008 Redstone Mineracao Do Brasil Ltda	0%	0%	(25/04/2008)	N/A	10,000.00
Apui		880180/2008 Redstone Mineracao Do Brasil Ltda	0%	0%	(25/04/2008)	N/A	10,000.00
Apui		880181/2008 Redstone Mineracao Do Brasil Ltda	0%	0%	(25/04/2008)	N/A	10,000.00
Apui		880182/2008 Redstone Mineracao Do Brasil Ltda	0%	0%	(25/04/2008)	N/A	10,000.00
Apui		880246/2008 Redstone Mineracao Do Brasil Ltda	0%	0%	(23/05/2008)	N/A	10,000.00
Apui		880245/2008 Redstone Mineracao Do Brasil Ltda	0%	0%	(23/05/2008)	N/A	10,000.00
							478,128.68