REDSTONE RESOURCES LIMITED - Annual Report 2012

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ACN: 090 169 154 2012 Annual Report Redstone Resources Limited

ACN 090 169 154

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 Institute 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.

Contents Of Financial Report

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Corporate Directory 3
Directors’ Report 4
Auditor’s Independence Declaration 24
Corporate Governance Statements 25
Consolidated Statement of Comprehensive Income 34
Consolidated Statement of Financial Position 35
Consolidated Statement of Changes in Equity 36
Consolidated Statement of Cash Flows 37
Notes to the Consolidated Financial Statements 38
Directors’ Declaration 69
Independent Auditor Report to Members 70
Shareholder Information 72
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Corporate Directory

DIRECTORS:

Mr Richard Homsany (Chairman) Mr Edward van Heemst Mr Anthony Ailakis

SHARE REGISTRY:

Advanced Share Registry Services PO Box 1156 NEDLANDS WA 6009 Tel: +61 8 9389 8033 Fax: +61 8 9389 7871

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: [email protected]

POSTAL ADDRESS:

PO Box 8646 Perth Business Centre WA 6849

Level 6, 225 Clarence Street SYDNEY NSW 2000 PO Box Q1736 QUEEN VICTORIA BUILDING NSW 1230 Tel: +61 2 8906 3502

Website: www.advancedshare.com.au

HOME STOCK EXCHANGE:

Australian Stock Exchange Limited Level 2 Exchange Plaza 2 The Esplanade PERTH WA 6000 ASX Code: RDS

WEBSITE:

www.redstone.com.au

AUDITOR:

Butler Settineri (Audit) Pty Ltd Unit 16, First Floor 100 Railway Road (Cnr Hay Street) SUBIACO WA 6008

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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 2012.

The Board of Directors

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), CPA, Grad. Dip. FINSIA, F Fin, MAICD Age 42 Non-Executive Chairman

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. He is the principal of Cardinals Lawyers and Consultants and has been admitted as a solicitor for over 18 years. 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 is also a Certified Practising Accountant 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 a directorship in Toronto Stock Exchange (Venture Exchange) listed Central Iron Ore Limited and ASX listed Merah Resources Limited (27 August 2010 to present). Mr Homsany is also a director of the Health Insurance Fund of Australia Limited and is Chairman of its Audit and Risk Committee.

Mr Edward van Heemst

B. Com, MBA, CA, CPA Age 66 Non-Executive Director Appointed 9 July 2012

Mr Edward van Heemst is a prominent Perth businessman with 40 years experience in the management of a diverse range of activities with large private companies.

Mr van Heemst is currently the Managing Director of Vanguard Press and Chairman of Perth Racing. Mr van Heemst holds a Bachelor of Commerce degree from the University of Melbourne, an MBA from the University of Western Australia and is a member of the Institute of Chartered Accountants Australia.

Mr van Heemst has an extensive knowledge of capital markets and established mining industry networks.

Directors’ Report (continued)

Mr Anthony Ailakis

B. Juris LL.B Age 52 Executive Director Appointed 9 July 2012

Mr Anthony Ailakis is a founder of Redstone and returns to the Board after over 2 years as the Company’s Operations Manager, during which time he has overseen the discovery of the Tollu Cu-Ni Project.

Mr Ailakis has been involved in the exploration and mining industry for over 20 years. He obtained a law degree from the University of Western Australia in 1986 and worked as a general commercial and mining lawyer until he moved into the mining and exploration consultancy work on a project basis in the early 1990s.

Mr Ailakis has been involved in the development of constructive relationships with Aboriginal Land Councils and traditional owners and in the conduct of access and native title negotiations, as well as ground acquisition and matters relating to tenement management and Mining Act compliance.

Mr Ailakis has been actively involved in the development and implementation of Redstone’s acquisition strategy over the past several years.

Mr Barry Woodhouse

B. Com, LL.B, CPA, FCIS Age 46 Resigned 9 July 2012

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.

Mr David Le Roy

Age 62 Resigned 9 July 2012

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 Mr Homsany, no other director has held directorships in other listed companies over the last three years.

Company Secretary Ms 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.

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 2012 amounted to $1,894,133 (2011: $1,159,899) and net assets were $8,816,205 (2011: $9,798,336).

West Musgrave

Redstone has three projects in the West Musgrave province, namely, the Tollu Project, Baggaley Hills Project and the Blackstone Range Project (Halleys and Saturn prospects).

Tollu Project

(E69/2450; 100% Redstone)

Introduction

The Tollu Copper Nickel (Cu-Ni) Project (the Project) area hosts a giant swarm of hydrothermal copper rich veins in a mineralised system covering an area of at least 6km[2] and forming part of a dilation system between two major shears. Copper mineralisation exposed at the surface comprises malachite, tenorite and azurite, whereas mineralisation below 60-80 metres is composed by chalcopyrite and minor pyrite, chalcocite, and bornite.

During the year ended 30 June 2012 the company commenced its third phase RC drilling programme and its first diamond drilling programme at its wholly owned Tollu (Cu-Ni) Project. The primary focus of the RC drill programme was the two copper sulphide mineralisation zones identified at the Central Zone and the Eastern Zone (Figure 2).

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

Directors’ Report (continued)

Tollu Central Zone Drilling Programmes 2011 – 2012

The RC drilling programme was 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 from TC42;
Identify the presence of gabbro stock 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 identified at the Western Zone (see Figure 2).

During November 2011, the initial RC drilling programme was expanded to accelerate the pace of exploration in light of the continuing significant copper sulphide intersections encountered at the Project and to acquire data for a preliminary estimate of a copper resource.

A diamond drilling programme was designed to provide core of known mineralisation and to also test the mineralised bodies up to a depth of 600m, specifically to:

obtain core of the mineralised bodies of both Central Zone (Subzone 1) and the Eastern Zone to study the mineralisation in detail, including metallurgical assessment;
obtain core for assaying where RC holes TC45, TC52 and TC54 (Eastern Zone), which were affected by water (refer Tollu Eastern Zone summary); and
intersect and core the mineralised body of the Eastern Zone at depths greater than 400 metres.

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Figure 2. Target Zones at the Tollu Copper Nickel Project

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Figure 3. Map of Tollu Project area showing the exposed mineralised bodies (red lines) related to the three main target areas: The Eastern, Central and Western zones. *SWM refers to South Western Mines / INCO

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Directors’ Report (continued)

Drilling Results - Central Zone

The Central Zone is a swarm of hydrothermally mineralised bodies formed in a dilation system between two larger N-S bodies in an area of approximately 1.3 km long and 700 – 800m wide. Eight main clusters of mineralised bodies (Subzones) have been mapped at surface (see Figure 3). So far, exploration has only concentrated in Subzone 1.

Significant mineralisation was intersected (see Tables 1 and 2 and Figure 3).

In the Central Zone the RC drilling programme included hole TC80 which extended the depth of Subzone 1 copper sulphide mineralisation to 379m – open at depth.

TC80 intercepted the same mineralised body drilled by earlier drill holes TC32 (at 85 metres depth), TC15 (150m), TC20 (152m), and TC21 (212 m) (see Figure 4). All five of these drill holes have demonstrated mineralisation grades between 2.4% and 3.1% Cu. Their thicknesses of mineralisation are 6.1m, 15.6m, 10.4m, 3.5m, and 11.25m respectively.

The Central Zone (Subzone 1) mineralised body has:

mineralisation confirmed along 600 metres at surface. The average thickness is 9.37 metres; and
the average grade of mineralisation within this body is 2.68%.

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RC Drill bag showing Chalcopyrite powder (copper iron sulphide) at 373m depth.

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Drill Hole Coordinates Cu-Sulphide Intersections
Hole Easting Northing From Interval Cu
Inclin. Azimuth To (m)
Number GDA GDA (m) (m) Grades
TC76 60° 90° 438185 7108340 231 251 20 1.45%
TC77 60° 90° 438225 7108340 197 207 10 1.64%
TC78 60° 90° 438180 7108380 248 258 10 1.84%
TC80 60° 90° 437773 7108555 367.8 379 11.25 3.1%
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Table 1. Tollu Project RC Drilling Results November 2011 - February 2012

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Drill Hole Coordinates Cu-Sulphide Intersections
Hole Easting Northing From Interval Cu
Inclin. Azimuth To (m)
Number GDA GDA (m) (m) Grades
TD01 64° 265° 438463 7108291 237.2 246 8.8 2.5%
TD02 61° 235° 438061 7108635 109.9 118.6 8.7 3.25%
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Table 2. Tollu Project Diamond Drilling Results November 2011

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Figure 4. W-E Section of Central Zone (Subzone 1) looking North at 7108550N. Several mineralised bodies intercepted by drill holes TC15, TC20, TC21 and TC32. Drill hole TC80 intercepted four mineralised bodies and extended the depth of mineralisation to 368m (160m deeper than was established by previous drilling). The mineralised body remains open at depth.

Directors’ Report (continued)

Drilling Results - Central Zone (cont.)

Diamond drilling in the Subzone 1 using precollared RC drill holes was also undertaken to provide:

HQ coring of two mineralised zones, to have continuous samples of the mineralisation, to study in detail its mineral and chemical composition, texture and relationship with the volcanic host rock; and

Analysis of the drill core from TD3 revealed a 150m intersection of iron-cobalt sulphide mineralisation (see Panel 2) open at end of hole. This intersection includes grades of up to 0.56% Co with cobalt grades increasing at depth (see Figure 5).

This discovery of cobalt mineralisation is very significant for a number of reasons:

PQ coring of the mineralised zone, to obtain enough volume of mineralisation for metallurgical assays.

Diamond drill hole TD2 intersected the Central Zone (Subzone 1) mineralised body commencing from 127m downhole depth. The copper sulphide mineralisation is clearly visible in the drill core (see Panel 1).

Assay results received for TD2 received in February 2012 returned 10m @ 3.25% Cu from 127m where the mineralisation is open at depth and along strike.

The presence of cobalt is a strong indicator of Voisey’s Bay style Ni-Cu-(Co) magmatic mineralisation, in accordance with Redstone’s model of the Tollu mineralisation; and
Cobalt is much less mobile in a silica-rich hydrothermal setting than copper and grades of cobalt mineralisation are expected to increase closer to the primary source of mineralisation.

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Panel 1 Central Zone (Subzone 1) diamond cores from TD2 (PQ - diameter 8.5cm) displaying massive Cu-sulphide mineralisation.

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Figure 5 Cobalt distribution (ppm). Cobalt content is clearly increasing with depth. This is consistent with the geological model, which predicts higher values close to the primary magmatic Cu-Ni-(Co) source.

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Panel 2 Diamond drill core from TD3 showing cobalt-iron sulphide mineralisation.

Directors’ Report (continued)

Central Zone Exploration Target

The extension of the Central Zone (Subzone 1) mineralised body to the depth of 379m has allowed Redstone to develop a conceptual target estimate of this subzone’s copper potential:

During April 2012, the initial Exploration Target[1] for the Central Zone (Subzone 1) was estimated to be between 5.8 and 6.2 million tonnes of copper mineralisation at an expected grade of between 2.6% - 2.8% Cu, for between 150,000 and 170,000 tonnes of contained copper.
The Exploration Target at the Central Zone (Subzone 1) (based on the confirmed depth of mineralisation of 379m) is expected to increase with further drilling, given the mineralisation remains open at depth.
The potential resources of hydrothermal copper within the whole of the Tollu Project area are much larger than the Central Zone (Subzone 1) Exploration Target, given copper mineralisations exposed at surface of Subzones 2 to 8 of the Central Zone have not been evaluated at depth.

Eastern Zone

The Eastern Zone is a single sub-vertical hydrothermal body striking N-S and exposed at surface over a distance of 2500 metres. Less than 5% of the body is tested by drilling.

The initial three RC drill holes completed at the 2,500m outcropping Eastern Zone in September 2011 confirmed the earlier discovery in TC42, with thick zones of visible copper mineralisation being observed and significant copper sulphide intersections being intersected. However, high water flow rates resulted in high copper sulphide loss from some sections of the mineralised zones which was visibly observed as a “black emulsion”. This made a proper evaluation of the data difficult.

Three RC holes drilled into the Eastern Zone from the west (without water influx problems) returned the following results:

TC76 returned 20m @ 1.45% Cu from 231m,

TC77 returned 10m @ 1.64% Cu from 196m, and

TC78 returned 10m @ 1.84% Cu from 248m.

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Panel 3 Eastern Zone diamond cores from TD1 (NQ core of diameter 4.8cm) showing massive chalcopyrite (CuFeS2) mineralisation.

1 Exploration Target - the exploration target quoted above is conceptual in nature. All statements as to the potential quantity and grade of the exploration targets remain conceptual as there has been insufficient exploration to define a mineral resource and it is uncertain if further exploration will result in the determination of a mineral resource.

Diamond drilling was also undertaken to:

provide better samples of mineralisation to study its mineralogical and chemical composition in detail;
to examine the transition of the host rock from felsic volcanic to gabbro, which is seen as the primary source of the copper mineralisation; and
sample mineralisation previously detected by RC drill hole TC45 where the grade of mineralisation was unreliable because of high water influx.

Diamond drill hole TD1 produced an intersection of visible copper sulphide over an interval of 25m at the Eastern Zone where the mineralised body commences from 237m deep. The copper sulphide mineralisation is clearly visible in the drill core (see Panel 3).

Assay results received in February 2012 for TD1 returned 8.7m @ 2.5% Cu within the sulphide rich hydrothermal copper mineralised zone. The copper sulphide mineralisation intercepted by TD1 is open at depth and along strike.

Tollu 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 1.8 km long by up to 1 km 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 Tollu deposit with further drilling at the other subzones of the Central Zone, the Eastern Zone and the virtually unexplored Western Zone. The Plains Zone to the East of the Eastern Zone (see Figure 3) also requires exploration. This area is almost totally covered by regolith and includes several malachite and chalcopyrite occurrences (some of them coinciding with EM anomalies).

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 CuNi-(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.

Baggaley Hills

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

The Baggaley Hills Project 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.

A ground based magnetic survey to assist in the definition of drill targets was conducted during the year.

The main targets within the 1,252km[2] 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.

Directors’ Report (continued)

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.

Brazil

Apuí

During the year 18 phosphate tenements comprising the Apuí Project were granted.

An environmental study was commissioned and permits were granted by the National Department of Mineral Production (DNPM) to enable exploration to commence. The Entity is actively pursuing funding options to commence exploration of this Project.

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

Halleys

Corporate

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

Halleys NW
Saturn
Saturn East

During the year, an auger drilling programme was conducted to provide better quality soil geochemistry data.

Surface nickel and copper sulphide mineralisation (pentlandite and chalcopyrite) was discovered in rock samples during exploration at the Saturn prospect. Follow up exploration has commenced to assess the significance of this mineralisation.

Placements and Capital Raising

During the year, 2,000,000 shares were issued to a sophisticated investor at $0.18 per share to raise $360,000 (before costs) pursuant to the sale and purchase agreement for the Anebá (Potash) Project dated 7 May 2012.

The Company is also currently in the process of a capital raising by way of placement of fully paid ordinary shares to sophisticated investors to raise $2,000,000 (before costs).

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Stripeys Sale and Purchase Agreement

During the 2012 financial year a Sale and Purchase Agreement for the sale of the Entity’s Stripeys Project completed. In accordance with the Agreement the purchaser paid Redstone cash consideration of $350,000 and allotment of 6,000,000 shares (the Shares) in the purchaser.

Anebá and Autazes Project

During the 2012 a Sale and Purchase Agreement for the Apuí (Phosphate) and Anebá (Potash) Project tenements entered into last financial year was terminated.

In May 2012 the Entity entered into a Sale and Purchase Agreement for the sale of 100% of its interest in the Brazil Anebá (Potash) and Autazes (Potash) Projects comprising cash consideration of $390,000 payable in instalments combined with a share placement for 2,000,000 Redstone fully paid ordinary shares at an issue price of $0.18 per share to raise $360,000 (before costs). As at the end of the financial year, $280,000 of the cash consideration for the Project remains outstanding and is due to be paid in full by the time of completion of the Agreement, which is expected to be 8 November 2012.

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 2012.

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

Capital Raising

The Entity is currently in the process of undertaking a capital raising by way of placement of fully paid ordinary shares to sophisticated investors to raise $2,000,000 (before costs).

Anebá (Potash) Sale and Purchase Agreement

The terms of the Anebá (Potash) Sale and Purchase Agreement were varied on 7 August 2012, such that the final instalment of $280,000 cash due on that date would be paid in various monthly instalments by 8 November 2012.

There has not been any matter or circumstances that have arisen after balance date that have 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.

Directors’ Report (continued)

Share Options

As at the date of this report, 20,816,668 (2011:19,216,668) options over unissued ordinary shares in the Company have been granted. No options are listed on the Australian Stock Exchange. A total of 3,800,000 options were issued during the period to the date of this report and 400,000 options lapsed. No options were exercised during the period to the date of this report.

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Share Options On Issue as at the date of this Report
Number Exercise Price Expiry Date
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
1,000,000 $0.30 21 December 2014
1,000,000 $0.30 26 February 2015
TOTAL 20,816,668
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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:

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Fully Paid Ordinary Shares Share Options
Director
Directly Indirectly Directly Indirectly
- - -
Richard Homsany 4,000,000
Edward van Heemst - 10,050,000 - 750,000
- - -
Anthony Ailakis 2,000,000
- - -
Barry Woodhouse 800,000
- -
David Le Roy 841,788 800,000
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Meetings of Directors

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

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Directors’ meetings
Director
Number eligible to attend Number attended
Mr Richard Homsany 10 10
Mr Barry Woodhouse 10 10
Mr David Le Roy 10 10
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There are no board committees.

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 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.

Directors’ Report (continued)

Remuneration Report (audited) (continued)

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.

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.
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 2011 financial 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, are paid an annual fee of $96,000 for director and consulting services.

Messrs Woodhouse and Le Roy are each paid an annual directors fee of $36,000 inclusive of any applicable 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.

Other benefits including a vehicle to be leased by the Company for the exclusive use of the executive, fully maintained and run, mobile phone and notebook with internet.

Details of Remuneration

Year ended 30 June 2012

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----- Start of picture text -----

Cash Other –
Salary Motor Superan- Share Performance
Directors
and fees Vehicle nuation Options Total Related
($) ($) ($) ($) ($) ($)
Richard Homsany - - -
Non-Executive Chairman 96,000 1,620 97,620
Barry WoodhouseNon-Executive Director 36,000 - - 67,500 103,500 -
David Le RoyNon-Executive Director 36,000 - - 67,500 103,500 -
Executive
Anthony Ailakis - -
Operations Manager 180,000 1,224 18,000 199,224
Year ended 30 June 2011
Cash Other –
Salary Motor Superan- Share Performance
Directors
and fees Vehicle nuation Options Total Related
($) ($) ($) ($) ($) ($)
Richard HomsanyNon-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 Ailakis -
Operations Manager 203,918 2,820 20,392 289,900 517,030
----- End of picture text -----

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

Directors’ Report (continued)

Remuneration Report (audited) (continued)

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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Fair Value Exercise
Number of Grant Vesting per option Price per
Directors Expiry Date
options Date Date at grant option
date ($) ($)
Barry Woodhouse 500,000 22 Dec 2011 22 Dec 2011 0.135 0.30 21 Dec 2014
300,000 1 Dec 2010 1 Dec 2010 0.133 0.50 1 Dec 2013
David Le Roy 500,000 22 Dec 2011 22 Dec 2011 0.135 0.30 21 Dec 2014
200,000 1 Dec 2010 1 Dec 2011 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
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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:

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----- Start of picture text -----

Held as at
Held Granted as
Directors 1 July 2011 remuneration [Exercised] Sold Lapsed 30 June
2012
Richard Homsany - - - -
Non-Executive Chairman 4,000,000 4,000,000
Barry Woodhouse - - -
Non-Executive Director 300,000 500,000 800,000
David Le Roy - - -
Non-Executive Director 300,000 500,000 800,000
Executive
Anthony Ailakis - - - -
Operations Manager 2,000,000 2,000,000
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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:

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----- Start of picture text -----

Received on Acquired/
Held Other Held as at
Directors Exercise of (Disposed) on
1 July 2011 changes 30 June 2012
Options Market
Richard HomsanyNon-Executive Chairman - - - - -
Barry WoodhouseNon-Executive Director - - - - -
David Le Roy - -
Non-Executive Director 500,000 341,788 841,788
Executive
Anthony Ailakis - - -
444,683 (444,683)
Operations Manager
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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 -

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Directors’ Report (continued)

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.

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.

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R Homsany

Chairman Perth, Western Australia Dated this 28[th] day of September 2012

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.

Auditor’s Independence Declaration

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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 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.

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

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,

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

approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestitures, and
approving and monitoring financial and other reporting.

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

Corporate Governance Statement (continued)

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.

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.

Having regard to the above criteria, Mr Homsany in his role as non-executive Chairman, is considered to be the only independent director, given Mr Ailakis has been employed in an executive capacity in the last three years and Mr van Heemst and his associated entities have substantial shareholdings in the Company.

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.

As such, the Company does not comply with ASX Principle 2.1, however 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.

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:

The Company complies with ASX Principle 2.2.

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.

is not a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company.

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

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.

The Company complies with ASX Principle 2.3.

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.

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.

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.

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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.

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 as per the table below.

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

Name	Positon	Term in Ofce	Independent
Richard Homsany	Chairman, Non-Executve	4 year 9 months	Yes
Edward van Heemst	Non-Executve	3 months*	No
Anthony Ailakis	Executve	3 months*	No

*commenced 9 July 2012

Corporate Governance Statement (continued)

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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 practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders; and
c) 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.

3.2 Establish a policy concerning diversity and disclose the policy or summary of that policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity and for the board to assess annually both the objectives and progress in achieving them.

The company has established a Diversity Policy which complies with ASX Principle 3.2 as disclosed on the Company’s website.

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3.3 Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress toward achieving them.

Principle 4: Safeguard Integrity in Financial Reporting

4.1 The board should establish an audit committee.

3.4 Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board.

The board is committed to having an appropriate blend of diversity on the board and on the senior executive management team.

The Company has a measurable objective to achieve at least 25% female representation on the Board, in senior executive positions and the entire Group by 30 June 2016. The Company already meets the desired objective of at least 25% female representation in senior executive management, with one female senior executive representation (33%). There is currently no female representation on the Board and 14% female representation for the Group.

The Company complies with ASX Principles 3.1, 3.2, 3.3 and 3.4.

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.

Corporate Governance Statement (continued)

Principle 5: Make timely and balanced disclosure

Principle 6: Respect the rights of shareholders

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.

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 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 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.

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.

Mechanisms employed include:

i) announcements lodged with ASX;
ii) ASX Quarterly Activities and Cash Flow Reports;

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.

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’s Continuous Disclosure Policy is consistent with ASX Principle 5.

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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.

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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.

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 declaration provided in accordance with section 295A of the Corporations Act 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 in relation to financial reporting tasks.

Corporate Governance Statement (continued)

8.1 The board should establish a remuneration committee.

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

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. For further details please refer to the Remuneration Report included in the Directors’ Report.

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

The Board acknowledges that this does not comply with principle 8.1 and therefore also principle 8.2 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.

iii) the Company’s risk management and internal compliance and control framework is operating efficiently and effectively in all material respects.

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

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.

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.

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.

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.

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The Directors consider that the Company complies with Principle 8.3 of the Principles of Good Corporate Governance.

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.

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Consolidated Statement Of Comprehensive Income

For The Year Ended 30 June 2012

Note	Consolidated 2012 $ 2011 $
Revenue Other revenue 3(a) Expenses Administraton expenses Employee and directors’ benefts expenses 3(c) Consultng expense Depreciaton expense 3(b) Finance costs 3(d) Deferred exploraton expenditure impaired and writen of 7 Other expenses from ordinary actvites Loss before interest and taxes Interest revenue 3(a) Loss before income tax Income tax expense 4 Loss afer tax for the year Other comprehensive income Movement in foreign exchange translaton reserve Total comprehensive income for the year Basic and Diluted Loss per share (cents per share) 15	26,070 476,985 186,352 142,049 929,798 1,193,976 18,992 101,447 42,980 46,818 - 253 162,419 - 668,617 325,692
	(1,983,088) (1,333,250) 88,955 173,351
	(1,894,133) (1,159,899) - -
	(1,894,133) (1,159,899) - - (14,623) (14,845)
	(1,908,756) (1,174,744)

	(1.46) (0.94)

The accompanying notes form part of these financial statements.

Consolidated Statement Of Financial Position

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As at 30 June 2012

Note	Consolidated 2012 $ 2011 $
Current assets Cash and cash equivalents 5 Trade and other receivables 6 Other assets 9 Total current assets Non-current assets Deferred exploraton expenditure 7 Plant and equipment 8 Other fnancial assets 9 Total non-current assets Total assets Current liabilites Trade and other payables 10 Income in advance 11 Provisions 12 Total current liabilites Total liabilites Net assets Equity Issued capital 13(a) Reserves 14 Accumulated losses Total equity	325,173 3,867,703 33,029 183,977 24,141 20,512
	382,343 4,072,192
	8,922,063 6,396,664 105,473 131,847 6,000 -
	9,033,536 6,528,511
	9,415,879 10,600,703
	476,590 677,813 - 110,000 123,084 14,554
	599,674 802,367
	599,674 802,367

	8,816,205 9,798,336
	18,523,536 18,165,461 2,338,704 2,040,877 (12,046,035) (10,408,002)
	8,816,205 9,798,336

The accompanying notes form part of these financial statements.

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Consolidated Statement Of Changes in Equity

For The Year Ended 30 June 2012

	Contributed Equity Accumulated Losses Share Opton Reserve Foreign Currency Translaton Reserve Total Equity $ $ $ $ $
At 30 June 2010 Total comprehensive income atributable to members Share capital issued Cost of share-based payment Transfer on exercise of optons At 30 June 2011 Total comprehensive income atributable to members Share capital issued Cost of share-based payment Transfer on expiry of optons At 30 June 2012	12,860,151 (9,248,103) 1,282,958 - 4,895,006
	- (1,159,899) - (14,845) (1,174,744) 5,181,561 - - - 5,181,561 - - 896,513 - 896,513 123,749 - (123,749) - -
	18,165,461 (10,408,002) 2,055,722 (14,845) 9,798,336 - (1,894,133) - (14,623) (1,908,756) 358,075 - - - 358,075 - - 568,550 - 568,550 - 256,100 (256,100) - -
	18,523,536 (12,046,035) 2,368,172 (29,468) 8,816,205

The accompanying notes form part of these financial statements.

Consolidated Statement Of Cash Flows

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For The Year Ended 30 June 2012

Note	Consolidated 2012 $ 2011 $
Cash fows from operatng actvites Payments to suppliers and employees Interest received Interest paid Income tax paid Other income Net cash fows used in operatng actvites 24 Cash fows from investng actvites Exploraton expenditure Payments for plant and equipment Deposit from sale of Australian tenement rights Proceeds from sale of foreign tenement rights Net cash fows used in investng actvites Cash fows from fnancing actvites Proceeds from issue of shares Payment of share issue costs Net cash fows from fnancing actvites Net (decrease)/increase in cash held Cash at the beginning of the fnancial year Efect of foreign currency translaton Cash at end of fnancial year 5	(810,873) (884,800) 90,373 171,932 - (253) - - - 63,780
	(720,500) (649,341)
	(3,521,666) (1,538,859) (18,133) (56,694) 265,000 110,000 110,000 434,390
	(3,164,799) (1,051,163)
	360,000 5,348,650 (1,925) (167,090)
	358,075 5,181,560
	(3,527,224) 3,481,056 3,867,703 401,492 (15,306) (14,845)
	325,173 3,867,703

The accompanying notes form part of these financial statements.

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Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

1. Corporate information

The financial report of Redstone Resources Limited and its controlled entities (the Entity or Group) for the year ended 30 June 2012 was authorised for issue in accordance with a resolution of the directors of the Entity’s parent entity, Redstone Resources Limited, on 28 September 2012.

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.

The Group is a for-profit entity for the purpose of preparing financial statements.

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 2012.

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 2012. 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 2015).

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;
removing the tainting rules associated with heldto-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

Notes to the Consolidated Financial Statements

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For the Year Ended 30 June 2012

d) New accounting standards not yet implemented (continued)

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 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 January 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.

• 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.

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.

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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 TransTasman 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 2011-9: Amendments to Australian Accounting Standards - Presentation of Other Comprehensive Income [AASB 1, AASB 5, AASB 7, AASB 101, AASB 112, AASB 120, AASB 121, AASB 132, AASB 133, AASB 134, AASB 1039 & AASB 1049] (applicable for annual reporting periods commencing on or after 1 July 2012).

The main change arising from this is the requirement for entities to group items in other comprehensive income on the basis of whether they are potentially reclassifiable to profit or loss subsequently.

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.

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.

AASB 119: Employee Benefits (September 2011) and AASB 2011-10: Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) [AASB 1, 8, 101, 124, 134, 1049 & AASB 2011-8 and Interpretation 14] (applicable for annual reporting periods commencing on or after 1 January 2013).

These standards introduce a number of changes to accounting and presentation of defined benefit plans. The Entity does not have any defined benefit plans and is therefore not impacted by the amendment.

AASB 119 (September 2011) also includes changes to the accounting for termination benefits that require an entity to recognise an obligation for such benefits. The Entity does not expect to be materially impacted by these amendments at this stage.

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

Notes to the Consolidated Financial Statements

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For the Year Ended 30 June 2012

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.

(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.

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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.

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.

Notes to the Consolidated Financial Statements

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For the Year Ended 30 June 2012

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.

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 fxed asset	Depreciaton rate
Ofce furniture & equipment Satellite phone & digital equipment Ofce paintngs	11.25% 22.50% 1.50%
Computer equipment Generators	37.50% 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.

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 cashsettled 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 cashgenerating 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

Notes to the Consolidated Financial Statements

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For the Year Ended 30 June 2012

q) Impairment (continued)

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.

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 nonmonetary 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.

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.

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.

Notes to the Consolidated Financial Statements

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For the Year Ended 30 June 2012

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.

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 $1,894,133 for the year ended 30 June 2012 and as at 30 June 2012 had a net current asset deficiency of $217,331 and exploration commitments of $576,644 (note 22). Although this indicates a material uncertainty, the financial report has been prepared on a 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.

The Entity is currently in the process of a capital raising by placement of ordinary shares to sophisticated investors to raise $2 million (before costs) to fund operations and exploration for the medium term. In addition, the Board continues to investigate and pursue divestment opportunities, including joint ventures, for some of its West Musgrave and South American tenement holdings. For further information please refer to the Directors’ Report.

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3. Revenue and expenses (a) Revenue and Interest Interest revenue Interest income third party Other revenue Exploraton services income Trombetas sale – non refundable opton fee Gain on sale of foreign tenement (b) Depreciaton expense Plant and equipment (c) Employee and directors’ benefts expenses Share-based payment Other (d) Finance costs Short term borrowings Other third partes Interest is expensed as it accrues. (e) Dividends	Consolidated 2012 $ 2011 $ 88,955 173,351
	26,070 139,548 - 100,000 - 337,437
	26,070 476,985
	42,980 46,818
	183,800 741,163 745,998 452,633
	929,798 1,193,796
	- - - 253
	- 253
	- -

No dividends have been paid or are proposed as at 30 June 2012.

As at 30 June 2012 the Company has no franking credits available for use in future years.

Notes to the Consolidated Financial Statements

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For the Year Ended 30 June 2012

4. Income tax Current tax Deferred tax Under/(over) provisions in prior year Income tax expense reported in the statement of comprehensive income	Consolidated 2012 $ 2011 $ - - - - - -
	- -

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:

Loss before income tax Prima facie tax on loss Tax efect of permanent items Temporary diferences not brought to account Income tax expense reported in the statement of comprehensive income	(1,894,133) (1,159,899) (568,240) (347,970) 222,186 269,600 346,054 78,730
	- -

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 2012.

Deferred income tax

Unrecognised deferred income tax at 30 June
relates to the following:
Deferred tax liabilites
Capitalised exploraton and evaluaton
expenditure
Deferred tax assets
Tax losses available to ofset against future
income
Tax beneft of capital raising costs not
recognised
Provisions and accruals
Deferred tax assets not brought to account as
realisaton is not considered probable
Gross deferred income tax assets

(2,556,568)
(1,918,999)
5,395,026
3,015,750
73,328
103,660
44,455
-
(2,956,241)
(1,200,411)

-
-

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 2012, the Entity has tax losses in Australia of $17,983,419 (2011: $12,275,067) 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.

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.

5. Cash and cash equivalents Cash at bank Cash on deposit 6. Trade and other receivables Current Other receivable Provision for doubtul debtors GST receivable 7. Deferred exploraton expenditure Exploraton costs brought forward Expenditure incurred on exploraton Deposit received upon sale of Anebá (Potash) Project Exploraton costs writen of (i) Exploraton assets sold Carrying amount at the end of the year	Consolidated 2012 $ 2011 $ 295,173 88,590 30,000 3,779,113
	325,173 3,867,703
	4,563 140,974 (4,563) - 33,029 43,003
	33,029 183,977
	6,396,664 4,661,218 3,177,289 1,735,446 (110,000) - (162,419) - (379,471) -
	8,922,063 6,396,664

(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 financial year the Entity sold its Stripeys Project (exploration licence E69/2435).

The Entity’s Nickel Project in Brazil was written off during the year.

Notes to the Consolidated Financial Statements

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For the Year Ended 30 June 2012

lant and equipment At cost Accumulated depreciaton Total writen down value	Consolidated 2012 $ 2011 $ 424,660 415,527 (319,187) (283,680)
	105,473 131,847

8. Plant and equipment

Reconciliation

A reconciliation of the carrying amounts of plant and equipment at the beginning and end of the current financial period.

Plant and equipment Carrying amount at beginning of year Additons Disposals Depreciaton expense Total plant and equipment 9. Other assets Current Prepayments Deposits and advances Total other current assets Non-Current Investment in unlisted public company Total non-current other assets 10. Trade and other payables Current Trade creditors (i) Other creditors (ii) Total current trade and other payables	131,847 121,971 18,133 56,694 (1,527) - (42,980) (46,818)
	105,473 131,847
	9,657 12,400 14,484 8,112
	24,141 20,512
	6,000 -
	6,000 -
	238,461 225,160 238,129 452,653
	476,590 677,813

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 $213,012 (2011: $201,372) relating to exploration expenditure.

	Consolidated	Consolidated
	2012	2011
	$	$
ncome in Advance
Income in Advance	-	110,000

11. Income in Advance

During the 2011 year 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 $110,000 cash deposit. This deposit was recognised as income in advance until completion of the Agreement in March 2012.

12. Provisions

rovisions
Employee enttlements Opening balance at 1 July 2011 Additonal provisions Amounts used Balance as at 30 June 2012	14,554 46,358 126,704 23,522 (18,174) (55,326)
	123,084 14,554

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Notes to the Consolidated Financial Statements

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For the Year Ended 30 June 2012

13. Issued Capital

(a) Issued and paid up capital

Consolidated 2012 2011 $ $ 18,523,536 18,165,461

131,969,390 (2011: 129,969,390) ordinary shares fully paid

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:

Movements in shares on issue Opening balance Shares issued to sophistcated and private investors – 3 September 2010 Shares issued upon exercise of $0.25 optons – 1 December 2010 Shares issued upon exercise of $0.25 optons – 23 February 2011 Shares issued upon exercise of $0.25 optons expiring 30 November 2012 - various dates Shares issued to sophistcated and private investors – 25 February 2011 Shares issued to sophistcated and private investors – 29 May 2012 Shares issued to sophistcated investors pursuant to Anebá (Potash) Sale and Purchase Agreement – 19 June 2012 Share issue costs Closing balance	Consolidated 2012 2011
	No. of Shares $ No. of Shares $
	129,969,390 18,165,461 106,392,946 12,860,151 - - 15,955,000 3,510,100 - - 500,000 131,175 - - 500,000 131,175 - - 4,394,444 1,210,010 - - 2,227,000 489,940 1,111,111 200,000 - - 888,889 160,000 - - - (1,925) - (167,090)
	131,969,390 18,523,536 129,969,390 18,165,461

(c) Reconciliation of options on issue

During the year 3,800,000 options over ordinary shares were issued and 400,000 options lapsed or expired. During the financial year no options were converted into ordinary shares.

Unlisted share optons	As at 30 June 2011 Issued/ (Exercised) As at 30 June 2012 Exercise price Exercisable from Expiry
Unlisted optons Unlisted optons Unlisted optons Unlisted optons Unlisted optons Unlisted optons Unlisted optons Unlisted optons Unlisted optons Unlisted optons Unlisted optons Unlisted optons Unlisted optons Unlisted optons Unlisted optons Unlisted optons Unlisted optons Total optons	400,000 (400,000) - 1.50 29 Jun 08 29 Jun 12 1,000,000 - 1,000,000 0.95 30 Nov 07 28 Nov 12 500,000 - 500,000 1.20 30 Nov 07 28 Nov 12 300,000 - 300,000 0.75 20 Feb 09 20 Feb 13 6,716,668 - 6,716,668 0.25 30 Nov 09 30 Nov 12 1,500,000 - 1,500,000 0.25 30 Nov 09 30 Nov 14 500,000 - 500,000 0.30 30 Nov 09 30 Nov 14 500,000 - 500,000 0.35 30 Nov 09 30 Nov 14 3,750,000 - 3,750,000 0.50 19 Oct 10 19 Oct 13 650,000 - 650,000 0.50 4 Nov 10 4 Nov 13 500,000 - 500,000 0.50 1 Dec 10 1 Dec 13 1,000,000 - 1,000,000 0.50 25 Feb 11 24 Feb 14 100,000 - 100,000 0.50 25 Feb 11 24 Feb 14 - 950,000 950,000 0.35 7 Jul 11 6 Jul 15 - 850,000 850,000 0.45 7 Jul 11 6 Jul 15 - 1,000,000 1,000,000 0.30 22 Dec 11 21 Dec 14 - 1,000,000 1,000,000 0.30 27 Feb 12 26 Feb 15
	17,416,668 3,400,000 20,816,668

Weighted average exercise price (cents/share) Weighted average exercise price of lapsed optons (cents/share) Weighted average exercise price of issued optons (cents/share)	0.445 0.407 1.50 0.346

The weighted average remaining contractual life of options on issue as at 30 June 2012 is 2.37 years (2011: 2.04 years). The exercise prices of options on issue range from $0.25 per share to $1.20 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 300,000 options were issued to eligible persons pursuant to the ESOP (2011: 4,500,000).

Notes to the Consolidated Financial Statements

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For the Year Ended 30 June 2012

13. Issued Capital (continued)

(f) Share Issue

During the year, 2,000,000 shares were issued to a sophisticated investor at $0.18 per share to raise $360,000 (before costs) pursuant to the sale and purchase argeement for the Anebá (Potash) Project dated 7 May 2012.

14. Reserves Share based payment reserve (i) Foreign currency translaton reserve (ii) Total reserves	Consolidated 2012 $ 2011 $ 2,368,172 2,055,722 (29,468) (14,845)
	2,338,704 2,040,877

(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 Basic loss per share (cents per share) Weighted average number of ordinary shares on issue used in the calculaton of basic earnings per share Earnings used in the calculaton of basic loss per share	Consolidated 2012 2011 (1.46) (0.94)
	130,093,252 123,310,081 (1,894,133) (1,159,899)

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

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), CPA, Grad Dip. FINSIA, F Fin, MAICD ) - 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

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(b) Remuneration of key management personnel

Refer to the Remuneration Report included on pages 18 to 22 for details of remuneration paid to directors and the specified executive. Options granted as remuneration to key management personnel

2012	Balance at start ofyear	Granted as compensaton		Balance at end ofyear
Directors
R Homsany	4,000,000	-	-	4,000,000
B Woodhouse	300,000	500,000	-	800,000
D Le Roy	200,000	500,000	-	700,000
	4,500,000	1,000,000	-	5,500,000
Executve
A Ailakis	2,000,000	-	-	2,000,000
	2,000,000	-	-	2,000,000

1,000,000 options were granted as remuneration to key management personnel or vested during the 2012 financial year.

2011	Balance at start ofyear	Granted as compensaton		Balance at end ofyear
Directors
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
Executve
A 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.

Notes to the Consolidated Financial Statements

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For the Year Ended 30 June 2012

16. Key management personnel disclosures (continued)

(c) Share holdings of key management personnel

	Held as at 1 July 2011	Received on Exercise of Optons		Acquired/ (Disposed) on Market	Other changes	Held as at 30 June 2012
Directors
R Homsany	-		-	-	-	-
B Woodhouse	-		-	-	-	-
D Le Roy	500,000		-	341,788	-	841,788
Executve
A Ailakis	444,683		-	(444,683)	-	-

	Held as at 1 July 2010	Received on Exercise of Optons		Acquired/ (Disposed) on Market	Other changes (director appointment/ resignaton)	Held as at 30 June 2011
Directors
R Homsany	-		-	-	-	-
B Woodhouse	-		-	-	-	-
D Le Roy	500,000		-	-	-	500,000
Executve
A Ailakis	494,108		-	(49,425)	-	444,683

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.

(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 $2,447 excluding GST, in addition to the amount which has been disclosed as remuneration in the Directors’ Report.

These services were provided on arms length terms.

Pursuant to a Deed of Indemnity, Insurance and Access, Mr Ailakis, as an officer of the Company, has been reimbursed legal costs defending a legal claim made against him in the District Court of Western Australia. Total legal costs reimbursed for the financial year were $76,641.

As at 30 June 2012 $4,154 was outstanding in relation to amounts advanced to Mr Anthony Ailakis which is offset by amounts owing by the Company to Mr Ailakis totalling $2,923. The outstanding balance of $1,231 will be repaid to the Company without interest.

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

Consolidated	Consolidated
2012	2011
$	$

17. Employee benefits

Aggregate liability for employee benefits

Current Trade and other payables Employee enttlement provision	84,236 98,150 123,084 14,554
	207,320 112,704

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:

- an audit or review of the fnancial statements of the Entty - non audit services	29,556 29,659 - - 29,556 29,659

19. Subsequent events

Capital Raising

The Entity is currently in the process of undertaking a capital raising by way of placement of fully paid ordinary shares to sophisticated investors to raise $2,000,000 (before costs).

Anebá (Potash) Sale and Purchase Agreement

There has not been any other 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.

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Notes to the Consolidated Financial Statements

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For the Year Ended 30 June 2012

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:

	2012	2011
	$	$
Westmin Exploraton Pty Ltd	2,895,788	2,700,276
Minex Services Pty Ltd	-	-

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 2012 amounted to $356,500 (2010: $440,500).

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 2012 amounted to $189,903 (2011: $24,890). These obligations may vary from time to time and are expected to be fulfilled in the normal course of operations by the entity.

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

Cancellable operatng lease commitments for exploraton tenements Within one year One year or later and no later than fve years Later than fve years	Consolidated 2012 $ 2011 $ 546,309 465,390 30,335 470,477 - -
	576,644 935,867

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. As at 30 June 2012 HJH has incurred the requisite minimum expenditure requirement of $2.5 million to earn an 80% interest in the Project.

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.

Operating lease – corporate office premises

Effective from 1 August 2012, the Entity has a further one year operating lease for its office premises and car bays at a current annual rental of $42,820 per annum.

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 plus variable outgoings plus GST.

Cancellable operatng lease commitments Within one year One year or later and no later than fve years Later than fve years	Consolidated 2012 $ 2011 $ 65,445 63,403 3,568 25,833 - -
	69,013 89,236

Capital Commitments

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

Notes to the Consolidated Financial Statements

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For the Year Ended 30 June 2012

23. Financial Risk Management

(a) Overview

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

credit risk

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.

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.

(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 $325,173 as at 30 June 2012 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 $3,252. This risk is not considered to be material.

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

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.

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(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 and other payables totalling $476,590 (2011: $787,813) supported by financial assets of $358,202 (2011: $4,051,680).

The Entity is currently in the process of a capital raising by way of placement of fully paid ordinary shares to sophisticated investors to raise $2,000,000 (before costs).

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 2 to the financial statements.

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 investment partners and the Australian Taxation Office (ATO).

As at 30 June 2012, 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.

Notes to the Consolidated Financial Statements

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For the Year Ended 30 June 2012

23. Financial Risk Management (continued)

Interest rate risk

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

Consolidated – 2012 Category Financial assets: Cash Cash Trade and other receivables Total fnancial assets Financial liabilites Trade creditors and other payables Borrowings Income in advance Total fnancial liabilites Consolidated – 2011 Category Financial assets: Cash Cash Trade and other receivables Total fnancial assets Financial liabilites Trade creditors and other payables Borrowings Other liabilites Total fnancial liabilites	Time Period Interest Bearing (Floatng) Non- Interest Bearing Total Carrying Amount as per the consolidated statement of fnancialpositon Weighted Average Efectve Interest Rate % <1 year 321,612 - 321,612 4.75% <1 year - 3,561 3,561 - <1year - 33,029 33,029 - 321,612 36,590 358,202 <1 year - 476,590 476,590 - < 1 year - - - - <1year - - - - - 476,590 476,590 Time Period Interest Bearing (Floatng) Non- Interest Bearing Total Carrying Amount as per the consolidated statement of fnancialpositon Weighted Average Efectve Interest Rate %
	<1 year 3,863,719 - 3,863,719 4.82% <1 year - 3,984 3,984 - <1year - 183,977 183,977 -
	3,863,719 187,961 4,051,680
	<1 year - 677,813 677,813 - <1 year - - - - >1year - 110,000 110,000 -
	- 787,813 787,813

24. Cash fow informaton Reconciliaton of loss afer income tax to the net cash fows from operatons Loss from ordinary actvites afer income tax Depreciaton Loss/(gain) on sale of asset Impairment/write of of deferred exploraton expenditure Share-based payments Exploraton expenditure Changes in operatng assets and liabilites Increase/(decrease) in provisions Increase in trade creditors and accruals Increase/(decrease) in sundry receivables and prepayments Net cash fow used in operatng actvites	Consolidated 2012 $ 2011 $ (1,894,133) (1,159,899)
	42,980 46,818 30,414 (337,437) 132,005 - 568,550 896,513 7,616 - 113,093 (31,804) 79,070 48,605 199,905 (112,138)
	(720,500) (649,342)

24. Cash fow informaton
Reconciliaton of loss afer income tax to the net cash fows
from operatons
Loss from ordinary actvites afer income tax
Depreciaton
Loss/(gain) on sale of asset
Impairment/write of of deferred exploraton expenditure
Share-based payments
Exploraton expenditure
Changes in operatng assets and liabilites
Increase/(decrease) in provisions
Increase in trade creditors and accruals
Increase/(decrease) in sundry receivables and prepayments
Net cash fow used in operatng actvites

Consolidated
2012
$
2011
$
(1,894,133)
(1,159,899)

42,980
46,818
30,414
(337,437)
132,005
-
568,550
896,513
7,616
-
113,093
(31,804)
79,070
48,605
199,905
(112,138)

(720,500)
(649,342)

25. Contingent Liabilities

Lawsuit Expenses and Potential Loss

Mr Ailakis, an officer of the company is defending a legal claim (Claim) lodged against him in 21 February 2011 in the District Court of Western Australia (3982 of 2010 Olivero v Ailakis & Anor).

The Entity has in place Deeds of Indemnity, Insurance and Access with its officers, whereby inter alia the Company has agreed to indemnify and keep indemnified an officer against:

a) all liabilities incurred by the Officer as a director of the Company; and
b) without limiting the above, all Legal Expenses incurred by the Officer as a director of the Company.

The indemnity only applies to the extent and amount that the officer is not indemnified under any other indemnity, including an indemnity contained in any insurance policy taken out by the Company.

To date, the Company has indemnified Mr Ailakis for all legal expenses incurred in defending the Claim (2012: $76,641).

The Entity has also lodged an insurance claim for Legal Expenses and Losses that may arise from the Claim pursuant to the Entity’s Directors and Officers policy with QBE insurance. However, as at and subsequent to 30 June 2012, the amount of potential claim for defence cost reimbursement from QBE or potential loss from the Claim (subject to the jurisdictional limit of the District Court to award damages up to $750,000) is not known and a reasonable estimate cannot be made.

The Entity had no other contingent assets or liabilities as at 30 June 2012.

Notes to the Consolidated Financial Statements

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For the Year Ended 30 June 2012

26. Parent Informaton Current assets Non-current assets Total Assets Current liabilites Non-current liabilites Total Liabilites Net Assets Equity Issued capital Reserves Accumulated losses Total RDS equity Net loss for the year before other comprehensive income Total comprehensive income for the year Earnings per share (EPS) – (cents per share)	Parent Entty 2012 $ 2011 $ 381,066 4,070,915 8,755,617 6,167,580
	9,136,683 10,238,495
	545,863 680,167 - -
	545,863 680,167

	8,590,820 9,558,328
	18,523,535 18,165,460 2,368,172 2,055,722 (12,300,887) (10,662,854)
	8,590,820 9,558,328
	(1,894,133) (1,447,336)
	(1,894,133) (1,447,336)
	(1.46) (1.17)

Controlled entities

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

Partculars in relaton to controlled enttes	Country of incorporaton	2012 Ownership %	2011 Ownership %
Allhawk Nominees Pty Ltd	Australia	100	100
Minex Services Pty Ltd	Australia	100	100
Westmin Exploraton Pty Ltd	Australia	100	100
Redstone Mineracao Do Brasil Ltda1	Brazil	98	98

1 Redstone 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 nil (2011: gain of $287,437).

27. Share based payments

The impact of share based payments on the consolidated statement of comprehensive income for the financial year ended 30 June 2012 is as follows:

Net loss afer income tax and including share based payments Add: share based payments expense Net loss afer income tax excluding share based payments	Consolidated 2012 $ 2011 $ (1,894,133) (1,159,899) 568,550 896,512
	(1,325,583) (263,387)

During the period the company granted 3,800,000 (2011: 6,000,000) 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 2012 is detailed in the table on the next page.

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

For options issued during the 2012 financial year Underlying security spot price of between $0.24 and $0.27

Dividend rate of nil Volatility factor of 90-95%

Risk free interest rate of between 3.08% and 4.87% The weighted average exercise price is $0.35 and the weighted average expiry period is 3.47 years. The weighted average value per option as at the measurement date is $0.15 cents 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 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 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 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 $0.027 cents per option.

Notes to the Consolidated Financial Statements

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For the Year Ended 30 June 2012

27. Share based payments (continued)

$

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.
33,400 200,000 Employee Options granted on 7 July 2011. Exercise price $0.35 exercisable from 7 July 2011 and expiring 6 July 2015.
15,400 100,000 Employee Options granted on 7 July 2011. Exercise price $0.45 exercisable from 7 July 2011 and expiring 6 July 2015.
125,250 750,000 Consultant Options granted on 7 July 2011. Exercise price $0.35 exercisable from 7 July 2011 and expiring 6 July 2015.
115,500 750,000 Consultant Options granted on 7 July 2011. Exercise price $0.45 exercisable from 7 July 2011 and expiring 6 July 2015.
135,000 1,000,000 Director Options granted on 22 December 2011. Exercise price $0.30 exercisable from 22 December 2012 and expiring 21 December 2014.
144,000 1,000,000 Consultant Options granted on 27 February 2012. Exercise price $0.30 exercisable from 27 February 2012 and expiring 26 February 2016.
2,368,172 Total Options 20,816,668

28. Jointly controlled operations and assets

Blackstone Range Project

As at 30 June 2012 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. As at 30 June 2012 HJH has incurred the minimum expenditure requirement of $2.5 million to earn an 80% interest in the Project.

Anebá (Potash) and Apuí (Phosphate) Projects

Under the terms of the MBAC Agreement, MBAC acquired a 35% interest in both the Anebá and Apuí 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 Anebá and Apuí 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 Anebá Project, namely 880240/2007, 880241/2007, 880658/2008 and 880659/2008 (Transferred Anebá Tenements).

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Pontal (Iron) Agreement

On 17 June 2010, the Entity divested a 90% interest in its Brazil Iron (Pontal) Project tenements. 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.

Upon transfer of the Entity’s 65% interest in the Transferred Anebá Tenements to MBAC, MBAC relinquished its 35% interest in the remaining Anebá tenements and the Apuí 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 Anebá Tenements.

Directors’ Declaration

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In the directors’ opinion:

a) the financial statements and notes set out on pages 34 to 68 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 2012 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 200 1.

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

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R Homsany Chairman Perth, Western Australia

Dated this 28[th] day of September 2012

Independent Auditor Report to Members

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Independent Auditor Report to Members

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Shareholder Information

As of 19 September 2012

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 25 to 33 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

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

There are 1,751 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 72 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.

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

1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over TOTALS	Holders of Ordinary Shares Number of Ordinary Shares %
	99 56,618 0.04 381 1,197,705 0.91 338 2,806,902 2.13 771 26,881,362 20.37 162 101,026,803 76.55
	1,751 131,969,390 100.00

4. Marketable Parcel

There are 390 shareholders with less than a marketable parcel.

Shareholder Information Independent Auditor Report to Members

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As of 19 September 2012

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:

Rank	Name	No. of Ordinary Shares	%
1	Samarkand Holding Pty Ltd	9,875,758	7.60
2	Eastern Prospectng Pty Ltd	9,875,758	7.60
3	Bullrun Investments Pty Ltd	9,725,758	7.48
4	Lanark Resources Pty Ltd	6,195,758	4.77
5	Mr Edward Van Heemst & Mrs Marilyn Elaine Van Heemst	6,000,000	4.62
6	Troyward Pty Ltd	4,050,000	3.12
7	Greyhound Investments Pty Ltd	2,782,000	2.14
8	Muscoda Holdings Pty Ltd	2,702,731	2.08
9	HJH Nominees Pty Ltd	2,269,000	1.75
10	Aceday Investments Pty Ltd	1,500,000	1.15
11	Possum Investors Pty Ltd	1,500,000	1.15
12	HS Superannuaton	1,264,085	0.97
13	Mr Chee Nam Liew & Mrs Lee Chin Liew	1,145,900	0.87
14	Ajava Holdings Pty Ltd	1,131,818	0.87
15	Mr Thomas Milents	1,000,000	0.77
16	Mr Barry John Angove & Angove Propertes Pty Ltd	1,000,000	0.77
17	HSBC Custody Nominees (Australia) Limited	968,776	0.75
18	Midalu Pty Ltd	911,334	0.70
19	Vyscard Pty Ltd	841,788	0.65
20	Caf Logistcs Pty Ltd	818,863	0.63
		65,559,327	50.44

6. Details of Restricted Securities

No ordinary securities are subject to escrow

7. Details of unlisted Options

7. Details	of unlisted Optons
% or No. holders	No. Optons Name / Class of Opton
1 1 1 52 4 3 2 2 3 2 1 72	1,000,000 Director Optons Exercise price $0.95 from 29 November 2007 and expiring 28 November 2012 500,000 Director Optons Exercise price $1.20 from 29 November 2007 and expiring 28 November 2012 1,500,000 Director Optons Exercise price $0.25 from 30 November 2009 and expiring 30 November 2014 500,000 Director Optons Exercise price $0.30 from 30 November 2009 and expiring 30 November 2014 500,000 Director Optons Exercise price $0.35 from 30 November 2009 and expiring 30 November 2014 300,000 Optons Exercise price $0.75 from 20 February 2008 and expiring 20 February 2013 6,716,668 Placement Optons Exercise price $0.25 from 30 November 2009 and expiring 30 November 2012 3,750,000 Optons Exercise price $0.50 from 19 October 2010 and expiring 19 October 2013 650,000 Optons Exercise price $0.50 from 4 November 2010 and expiring 4 November 2013 500,000 Director Optons Exercise price $0.50 from 1 December 2010 and expiring 1 December 2013 1,100,000 Optons Exercise price $0.50 from 25 February 2011 and expiring 24 February 2014 950,000 Optons Exercise price $0.35 from 7 July 2011 and expiring 6 July 2015 850,000 Optons Exercise price $0.45 from 7 July 2011 and expiring 6 July 2015 1,000,000 Director Optons Exercise price $0.30 from 22 December 2011 and expiring 21 December 2014 1,000,000 Director Optons Exercise price $0.30 from 27 February 2012 and expiring 26 February 2015 20,816,668 Total Share Optons

7. Details

of unlisted Optons

% or
No. holders

No. Optons
Name / Class of Opton

1
1
1
52
4
3
2
2
3
2
1
72

1,000,000
Director Optons
Exercise price $0.95 from 29 November 2007 and expiring 28 November 2012
500,000
Director Optons
Exercise price $1.20 from 29 November 2007 and expiring 28 November 2012
1,500,000
Director Optons
Exercise price $0.25 from 30 November 2009 and expiring 30 November 2014
500,000
Director Optons
Exercise price $0.30 from 30 November 2009 and expiring 30 November 2014
500,000
Director Optons
Exercise price $0.35 from 30 November 2009 and expiring 30 November 2014
300,000
Optons
Exercise price $0.75 from 20 February 2008 and expiring 20 February 2013
6,716,668
Placement Optons
Exercise price $0.25 from 30 November 2009 and expiring 30 November 2012
3,750,000
Optons
Exercise price $0.50 from 19 October 2010 and expiring 19 October 2013
650,000
Optons
Exercise price $0.50 from 4 November 2010 and expiring 4 November 2013
500,000
Director Optons
Exercise price $0.50 from 1 December 2010 and expiring 1 December 2013
1,100,000
Optons
Exercise price $0.50 from 25 February 2011 and expiring 24 February 2014
950,000
Optons
Exercise price $0.35 from 7 July 2011 and expiring 6 July 2015
850,000
Optons
Exercise price $0.45 from 7 July 2011 and expiring 6 July 2015
1,000,000
Director Optons
Exercise price $0.30 from 22 December 2011 and expiring 21 December 2014
1,000,000
Director Optons
Exercise price $0.30 from 27 February 2012 and expiring 26 February 2015
20,816,668
Total Share Optons

Shareholder Information

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As of 19 September 2012

C. OTHER DETAILS

1. Company Secretary

The name of the company secretary is Miranda Conti.

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: [email protected]

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

4. 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.

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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

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----- Start of picture text -----

Consolidated Grant Date
Holder Area
Project Tenement Registered Holder Applicant Entity (Application Expiry Blocks
Interest km [2]
Interest Date)
----- End of picture text -----

Project	Tenement	Registered Holder Applicant	Holder Interest	Consolidated Entty Interest	Grant Date (Applicaton Date)	Expiry	Blocks	Area km2

Tollu Baggaley (Antlion) Baggaley North Baggaley Hills Baggaley Hills Baggaley East Baggaley South Blackstone Range Blackstone Range	E 69/2450 E 69/2200 E 69/2249 E 69/2053 E 69/2054 E 69/2339 E 69/2340 E 69/2108 E 69/2109	Redstone Resources Limited Redstone Resources Limited Redstone Resources Limited Redstone Resources Limited Redstone Resources Limited Redstone Resources Limited Redstone Resources Limited River Gold Exploraton Pty Ltd River Gold Exploraton Pty Ltd	100% 20% 20% 20% 20% 20% 20% 100% 100%	100% 20% 20% 20% 20% 20% 20% 75% 75%	19/09/2008 26/03/2007 9/08/2007 31/01/2007 28/04/2006 18/01/2008 18/01/2008 28/04/2006 28/04/2006	18/09/2013 25/03/2017 8/08/2017 30/01/2014 27/04/2013 17/01/2013 17/01/2013 27/04/2013 27/04/2013	69 70 60 35 35 127 79 39 70	214.0 217.0 179.8 108.5 108.5 393.7 244.9 121.0 217.0
							584	1,804.4

Tenement Summary continued on next page.

D. TENEMENT SUMMARY (continued)

Brazil, South America

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----- Start of picture text -----

Grant Date
Holder Consolidated
Project Tenement Registered Holder Applicant (Application Expiry Area ha
Interest Entity Interest
Date)
----- End of picture text -----

Project	Tenement	Registered Holder Applicant	Holder Interest	Consolidated Entty Interest	Grant Date (Applicaton Date)	Expiry	Area ha

Arinos	866280/2007	Redstone Mineracao Do Brasil Ltda	100%	100%	15/02/2008	15/02/2011	6,953.43
Bala and Pontal	850738/2011	HJH Mineração do Brasil Ltda.	90%	10%	3/10/2011	3/10/2014	9,203.78
Bala and Pontal	850739/2011	HJH Mineração do Brasil Ltda.	90%	10%	3/10/2011	3/10/2014	9,727.25
Anebá	880197/2007	Redstone Mineracao Do Brasil Ltda	0%	0%	13/12/2007	13/12/2013	9,798.78
Anebá	880198/2007	Redstone Mineracao Do Brasil Ltda	0%	0%	13/12/2007	13/12/2013	9,952.42
Anebá	880248/2007	Redstone Mineracao Do Brasil Ltda	0%	0%	(10/08/2007)	N/A	9,508.47
Anebá	880434/2011	Redstone Mineracao Do Brasil Ltda	0%	0%	(19/10/2011)	N/A	8,435.74
Anebá	880435/2011	Redstone Mineracao Do Brasil Ltda	0%	0%	(19/10/2011)	N/A	1,190.04
Anebá	880436/2011	Redstone Mineracao Do Brasil Ltda	0%	0%	(19/10/2011)	N/A	6,866.78
Autazes	880657/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	12/07/2014	1,998.71
Autazes	880052/2011	Redstone Mineracao Do Brasil Ltda	100%	100%	6/05/2011	5/05/2014	8,343.79
Autazes	880053/2011	Redstone Mineracao Do Brasil Ltda	100%	100%	6/05/2011	5/05/2014	9,609.82
Autazes	880054/2011	Redstone Mineracao Do Brasil Ltda	100%	100%	6/05/2011	5/05/2014	9,928.04
Autazes	880055/2011	Redstone Mineracao Do Brasil Ltda	100%	100%	6/05/2011	5/05/2014	9,948.43
Autazes	880056/2011	Redstone Mineracao Do Brasil Ltda	100%	100%	6/05/2011	5/05/2014	9,707.47
Apuí	880167/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	13/07/2014	9,458.70
Apuí	880168/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	13/07/2014	10,000.00
Apuí	880169/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	13/07/2014	9,673.96
Apuí	880170/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	13/07/2014	9,497.42
Apuí	880171/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	13/07/2014	9,879.48
Apuí	880172/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	13/07/2014	10,000.00
Apuí	880173/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	13/07/2014	8,018.98
Apuí	880174/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	13/07/2014	9,995.62
Apuí	880175/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	13/07/2014	9,996.36
Apuí	880176/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	13/07/2014	8,157.49
Apuí	880177/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	13/07/2014	10,000.00
Apuí	880178/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	13/07/2014	10,000.00
Apuí	880179/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	13/07/2014	9,996.61
Apuí	880180/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	13/07/2014	9,993.28
Apuí	880181/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	13/07/2014	2,940.94
Apuí	880182/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	13/07/2014	9,886.78
Apuí	880245/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	13/07/2014	9,998.90
Apuí	880246/2008	Redstone Mineracao Do Brasil Ltda	100%	100%	13/07/2011	13/07/2014	9,440.21
							288,107.46

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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: [email protected]

POSTAL ADDRESS PO Box 8646 Perth Business Centre WA 6849

WEBSITE www.redstone.com.au

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AI assistant

REDSTONE RESOURCES LIMITED — Annual Report 2012

65676_rns_2012-10-25_47176174-aea9-4ff8-940c-e6f1eb8ad62a.pdf

COMPETENT PERSONS STATEMENT:

FORWARD LOOKING STATEMENTS:

ADDITIONAL INFORMATION:

Contents

Corporate Directory

DIRECTORS:

SHARE REGISTRY:

REGISTERED AND PRINCIPAL OFFICE:

POSTAL ADDRESS:

HOME STOCK EXCHANGE:

WEBSITE:

AUDITOR:

Directors’ Report

The Board of Directors

Mr Richard Homsany

B. Com, LL.B (Hons), CPA, Grad. Dip. FINSIA, F Fin, MAICD Age 42 Non-Executive Chairman

Mr Edward van Heemst

B. Com, MBA, CA, CPA Age 66 Non-Executive Director Appointed 9 July 2012

Directors’ Report (continued)

Mr Anthony Ailakis

Mr Barry Woodhouse

B. Com, LL.B, CPA, FCIS Age 46 Resigned 9 July 2012

Mr David Le Roy

Company Secretary Ms Miranda Conti

B. Com, CPA, ACIS

Principal Activities

Review of Operations

West Musgrave

Tollu Project

Introduction

Directors’ Report (continued)

Tollu Central Zone Drilling Programmes 2011 – 2012

Directors’ Report (continued)

Drilling Results - Central Zone

Directors’ Report (continued)

Drilling Results - Central Zone (cont.)

Directors’ Report (continued)

Central Zone Exploration Target

Eastern Zone

Tollu Targeting Strategy

Baggaley Hills

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

Blackstone Range Farmin/Joint Venture

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

Brazil

Apuí

Corporate

Placements and Capital Raising

Stripeys Sale and Purchase Agreement

Anebá and Autazes Project

Dividends

Significant Changes in State of Affairs

Significant Events after Balance Date

Capital Raising

Anebá (Potash) Sale and Purchase Agreement

Likely Developments

Environmental Issues

Share Options

Directors’ Interests

Meetings of Directors

Remuneration Report (audited)

Remuneration Policy

Performance based remuneration

Remuneration Report (audited) (continued)

Company Performance, Shareholder Wealth and Director/ Executive Remuneration

Employment Contracts of Directors and Senior Executive Operations Manager (Mr A Ailakis)

Non-Executive Directors

Details of Remuneration

Year ended 30 June 2012

Remuneration Report (audited) (continued)

Options Granted as Remuneration

Option Holdings

Equity Holdings and Transactions

Exercise of options granted as remuneration

- End of Remuneration Report -

Directors’ Report (continued)

Indemnification and Insurance of Officers

REDSTONE RESOURCES LIMITED Annual Report 2012