REDSTONE RESOURCES LIMITED — Capital/Financing Update 2006

Aug 1, 2006

31 July 2006

Ms Melissa Grundy Principal Adviser, Issuers Australian Stock Exchange Exchange Plaza 2 The Esplanade PERTH WA 6000

Options issued to North Eastern Mining Services (NEMS)

Dear Melissa

Pursuant to a Deed of Release dated 12 March 2006, Redstone Resources Ltd ("the Company) issued 3,000,000 Options to North Eastern Mining Services ("NEMS") or its nominee upon listing of the Company. The Options have an exercise price of 25 cents per Share and have an expiry date of 3 years from the date Redstone is listed on the ASX.

In consideration for the Options, NEMS releases and discharges Allhawk Nominees Pty Ltd (a wholly owned subsidiary of the Company) from all its obligations under a Royalty Deed dated 29 March 2002 between Allhawk Nominees Pty Ltd, NEMS and Redstone. The Royalty Deed had granted to NEMS a royalty over mineral production from, among others, exploration licences 69/1507, 69/1528 and 69/1537 and a charge over those tenements.

Yours sincerely

Anthony Ailakis Managing Director