REDSTONE RESOURCES LIMITED — Interim / Quarterly Report 2007

Mar 15, 2007

ACN 090 169 154

CONSOLIDATED FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

ACN 090 169 154

CONTENTS

Corporate directory	1
Directors' Report	2
Auditor's Independence Declaration	4
Consolidated Income Statement	5
Consolidated Balance Sheet	6
Consolidated Statements of Changes in Equity
Consolidated Cash Flow Statement	8
Notes to the Consolidated Financial Statements	9
Directors' Declaration	12
Independent Review Report to the Members	13-14

CORPORATE DIRECTORY

DIRECTORS:	Professor David Ian Groves (Chairman)Mr Anthony Alexander Ailakis (Managing Director)Mr Juan Carlos Olivero
COMPANY SECRETARY:	Ms Miranda Conti
REGISTERED AND PRINCIPAL OFFICE:	Suite 3, 110-116 East ParadeEAST PERTH WA 6004Tel: (08) 9328 2552Fax: (08) 9328 2660Infernef: www.redstone.com.auemail: contact@redstone.com.au
SHARE REGISTRY:	Computershare Investor Services Pty LtdLevel 2Reserve Bank Building45 St Georges TerracePERTH WA 6000
HOME STOCK EXCHANGE:	Australian Stock Exchange LimitedLevel 2Exchange Plaza2 The EsplanadePERTH WA 6000ASX Code: RDS
AUDITOR:	Butler Settineri (Audit) Pty LtdLevel 135 - 37 Havelock StreetWEST PERTH WA 6005

ACN 090 169 154

DIRECTORS' REPORT

The directors of Redstone Resources Limited submit the interim financial report for the half-vear ended 31 December 2006.

The Board of Directors

The names of Redstone Resources Limited's directors in office during the whole of the half-year and until the date of this report are:

David Ian Groves	(Chairman)
Anthony Alexander Ailakis	(Managing Director)
Juan Carlos Olivero	(Non-Executive Director)

Review of Operations

Redstone Resources Limited (Redstone) raised $5.5 million through the issue of 22,000,000 shares culminating in its listing on the Australian Stock Exchange on 3 August 2006.

Since listing Redstone has carried out extensive ground clearances and regional geochemical sampling along clearance lines on three of its projects in the West Musgrave Region. These regional geochemical sampling programmes have been completed for the Blackstone Range Project, which includes the Saturn Complex, for part of the Tollu Project, and for part of the Mt Muir Project.

These reconnaissance geochemical surveys have confirmed several zones of copper anomalism in the Tollu Project near the old Tollu Mining Centre and a zone of copper-molybdenum-lead anomalism in the south west of the project area. In the Blackstone Range Project, several anomalous zones of Ni-Cu-PGE or Cu anomalism have been identified. Two of these, Halleys and Titan, are particularly encouraging. At Mt Muir, several anomalies have been defined, which require further investigation.

The geological team has also defined a prospective magmatic corridor, possibly a failed rift, in the West Musgrave Region. This contains a number of circular intrusions, both of Giles Complex mafic rocks and Atype Granites. The former are prospective for Voisey's Bay-type Ni-Cu-PGE deposits and the latter for Olympic Dam-type iron-oxide Cu-Au deposits.

Redstone has proactively acquired additional tenements (total 2,209 km2) to cover this magmatic corridor and other geological or structural targets in the West Musgrave Region.

In January 2007 an agreement was executed with Discovery Metals Limited (ASX: DML) enabling Redstone to farm-in to five of Discovery's tenements in the West Musgrave. 33 airborne EM targets have been defined over these tenements which are highly prospective for Ni-Cu-PGE mineralisation.

Redstone has made significant progress in the half-year ended 31 December 2006 which is set to continue through 2007.

ACN 090 169 154

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.

Signed in accordance with a resolution of the directors:

On behalf of the Directors

A A Ailakis Managing Director Perth, Western Australia 15 March 2007

AUDITOR'S INDEPENDENCE DECLARATION

As lead auditor for the review of Redstone Resources Ltd for the half year ended 31 December 2006, I declare that, to the best of my knowledge and belief, there have been:

• a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and
• b) no contraventions of any applicable code of professional conduct in relation to the review.

Batter Settimin (Andit) Phyltod

BUTLER SETTINERI (AUDIT) PTY LTD

Lay Gede

LUCY P GARDNER Director

Perth Date: 15 March 2007 Accountants

Chartered

UTLER SETTIN

Level 1

Construction House 35-37 Havelock Street West Perth 6005

Locked Bag 18 West Perth 6872 Western Australia

Phone: (08) 9426 4444 (08) 9321 5215 Fax: Email: mail@butlersettineri.com.ou

Directors: Colin Butler FCA Paul Chabrel FCA Lucy Gardner CA

Butler Settineri (Audit) Pty Ltd A.C.N. 112 942 373 Registered Company Auditor Number 289109

ACN 090 169 154

CONSOLIDATED INCOME STATEMENT

FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

	Note	Half-year ended31 December2006$
Revenue		34,551
Administration expensesEmployee benefit expenseConsulting expenseDepreciation and amortisation expenseFinance costsOther expenses from ordinary activities		(66, 354)(272, 258)(55, 150)(32, 344)(8,706)(369,308)
Loss Before Income TaxIncome tax expense		(769, 569)
Net Loss attributable to members ofRedstone Resources Limited		(769,569)
Basic and Diluted Loss per share(cents per share)	8(c)	(1.09)

The above Consolidated Income Statement should be read in conjunction with the accompanying notes.

ACN 090 169 154

CONSOLIDATED BALANCE SHEET

FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

	Note	At31 December2006$	At30 June2006$
CURRENT ASSETS
Cash and Cash EquivalentsTrade and other ReceivablesOther Financial AssetsTOTAL CURRENT ASSETS		3,121,48399,33261,0123,281,827	339,32522,845263,184625,354
NON-CURRENT ASSETS
Deferred Exploration and Evaluation CostsPlant and EquipmentTOTAL NON-CURRENT ASSETS		2,926,672260,0003,186,672	1,582,21082,4411,664,651
TOTAL ASSETS		6,468,499	2,290,005
CURRENT LIABILITIES
Trade and other PayablesBorrowingsShare Applications in advanceProvisionsTOTAL CURRENT LIABILITIES		315,47531,978347,453	514,355159,438351,00024,9001,049,693
NON-CURRENT LIABILITIESLoans
TOTAL NON-CURRENT LIABILITIES		w.
TOTAL LIABILITIES		347,453	1,049,693
NET ASSETS		6,121,046	1,240,312
EQUITY
Issued CapitalReservesAccumulated losses	8	7,254,903612,522(1,746,379)	1,989,504227,619(976, 811)
TOTAL EQUITY		6,121,046	1,240,312

The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.

ACN 090 169 154

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

	ContributedEquity	AccumulatedLosses	Share based-PaymentsReserve	Total Equity
	$	$	$	$
At 1 July 2006	1,989,504	(976, 811)	227,619	1,240,312
Net Loss for the period	۰	(769, 568)		(769, 568)
Share Capital issued	5,500,000			5,500,000
Cost of Share Capital issued	(234, 601)			(234, 601)
Cost of share-based payment	۰		384,903	384.903
At 31 December 2006	7,254,903	(1,746,379)	612,522	6,121,046

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

ACN 090 169 154

CONSOLIDATED CASH FLOW STATEMENT

FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

	Half-year ended31 December2006$
CASH FLOWS FROM OPERATINGACTIVITIES
Payments to suppliers and employeesInterest receivedInterest paidIncome tax paid	(728, 344)34,551(16, 679)
Net cash flows used in operating activities	(710, 472)
CASH FLOWS FROM INVESTINGACTIVITIES
Payments for exploration and evaluationProceeds on sale of plant and equipmentPayments for plant and equipmentPayments to acquire subsidiaryDeposits paid	(1,026,601)(208, 133)(66,000)(54, 503)
Net cash flows used in investing activities	(1, 355, 237)
CASH FLOWS FROM FINANCINGACTIVITIES
Funds received from IPOPayment of Share Issue CostsProceeds from seed capital contributionsProceeds from borrowings from related partiesRepayment of borrowings from related partiesRepayment of borrowings from non-relatedparties	5,149,000(150, 760)87,000(139, 498)(97, 875)
Net cash flows from financing activities	4,847,867
Net increase in cash heldCash at the beginning of the half year	2,782,158339,325
CASH AT END OF THE PERIOD	3,121,483

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

1. Corporate Information

The financial report of Redstone Resources Limited (the Company) for the half-year ended 31 December 2006 was authorised for issue in accordance with a resolution of the directors on 15 March 2007.

Redstone Resources Limited 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.

$\overline{2}$ . Summary of Significant Accounting Policies

The half-year financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report.

This half-year financial report should be read in conjunction with the annual financial report of Redstone Resources Limited for the year ending 30 June 2006.

It is also recommended that the half-year financial report be considered together with any public announcements made by Redstone Resources during the half-year ended 31 December 2006 in accordance with the continuous disclosure obligations arising under the Corporations Act 2001.

Basis of Accounting a)

The half-year financial report is a general purpose financial report which has been prepared in accordance with the requirements of the Corporations Act 2001 and AASB 134 "Interim Financial Reporting".

For the purposes of preparing the half-year financial report, the half-year has been treated as a discrete reporting period.

Significant Accounting Policies

The half-year consolidated financial statements have been prepared using the same accounting policies as the annual financial statements for the year ended 30 June 2006.

Basis of Consolidation b)

The half-year consolidated financial statements comprise the financial statements of Redstone Resources Limited and its subsidiaries as at 31 December 2006 ("the Group") - refer note 7.

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

NOTE 3: DIVIDENDS

The consolidated entity has not declared or paid a dividend during the half-year ended 31 December 2006.

NOTE 4: SEGMENT INFORMATION

The consolidated entity operates in the mineral exploration industry in Australia only.

NOTE 5: CONTINGENT LIABILITIES

There has been no change in contingent liabilities since the last annual reporting date.

NOTE 6: EVENTS SUBSEQUENT TO REPORTING DATE

Subsequent to 31 December 2006, Redstone Resources Limited ("Redstone") entered into an agreement with Discovery Metals Limited enabling Redstone to farm-in to five of Discovery Metals West Musgrave tenements (E69/1640, E69/1641, E69/1642, E69/1663 and E69/1662) in the Murray Range region, 50km to the west-northwest of the Wingellina Ni-Co Deposit.

The key terms of the farm-in include:

• Redstone have a minimum expenditure commitment of $260,000 $\bullet$
• Redstone can earn a 51% interest in the Musgrave Project for the expenditure of $\bullet$ $1,000,000.
• Redstone can earn a 75% interest in the Musgrave Project for a total expenditure of $2,000,000.
• As an alternative, Discovery has also granted Redstone an option to purchase the Musgrave Project up until 30th April 2007 for $300,000 in Redstone shares and a cash payment of $190,000.
• Discovery will retain a 2% Net Smelter Return royalty, in either case.

NOTE 7: CONTROLLED ENTITIES

During the period and upon listing on the Australian Stock Exchange, the Company acquired all the shares of Westmin Exploration Pty Ltd pursuant to an agreement dated 5 August 2005.

Redstone Resources Limited is the parent entity of the wholly owned group.

	At 31 December2006$%$	At 30 June2006%
Particulars in relation to wholly owned entities
Allhawk Nominees Pty LtdMinex Services Pty LtdWestmin Corporation Pty Ltd	100100100	100100

ACN 090 169 154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

	At31 December2006S	At30 June2006
NOTE 8: ISSUED CAPITAL
(a) Issued and Paid Up Capital
Issued and paid-up capital - 74,368,860 (June2006:52,368,860) ordinary shares fully paid	7.254.903	1,989,504

Pursuant to a Prospectus dated 8 June 2006 the Company issued 22,000,000 ordinary fully paid shares at 25 cents per share and commenced official quotation on the Australian Stock Exchange on 3 August 2006 during the period.

Issued Capital as at 31 December 2006 includes $234,601 of share issue costs relating to the company's initial public offering.

(b) Movement of fully paid ordinary shares during the period

	No. Shares	S
Opening Balance as at 1 July 2006	52,368,860	1,989,504
Shares issued pursuant to Prospectus on 27July 2006	22,000,000	5,500,000
Cost of Share Capital Issued		(234, 601)
Closing Balance as at 31 December 2006	74,368,860	7,254,903
(c) Earnings per Share		Half-year ended31 December2006
Basic loss per share (cents per share)		(1.09)
Weighted average number of ordinary shareson issue used in the calculation of basicearnings per share (number)		70,303,603
Earnings used in the calculation of basic lossper share $($)$		(769, 568)
Options on issue are not considered dilutive.

ACN 090 169 154

DIRECTORS' DECLARATION

In accordance with a resolution of the directors of Redstone Resources Limited, we state that:

In the opinion of the directors:

• The financial statements and notes of the consolidated entity are in accordance with the Corporations $11$ Act 2001 including:
  • a. giving a true and fair view of the financial position as at 31 December 2006 and the performance for the half-year ended on that date of the consolidated entity; and
  • complying with Australian Accounting Standards and the Corporations Regulations 2001; b. and
• there are reasonable grounds to believe that the Company will be able to pay its debts as and when $2.$ they become due and payable.

On behalf of the Board

A A Ailakis Managing Director Perth, Western Australia 15 March 2007

INDEPENDENT REVIEW REPORT TO THE MEMBERS OF REDSTONE RESOURCES LIMITED

Scope

We have reviewed the accompanying financial report of the Redstone Resources Limited Group (the consolidated entity) which comprises the balance sheet as at 31 December 2006, and the income statement, statement of changes in equity and cash flow statement for the half year ended on that date, a statement of accounting policies, other selected explanatory notes and the directors' declaration. The consolidated entity comprises both Redstone Resources Limited (the company) and the entities it controlled during the half year.

Directors' Responsibility for the Half Year Financial Report

The directors are responsible for the preparation and fair presentation of the half year financial report in accordance with Australian Accounting Standards (including the Australian Accountina Interpretations) and the Corporations Act 2001. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the half year financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor's Responsibility

Our responsibility is to express a conclusion on the half year financial report based on our review. We conducted our review in accordance with the Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity's financial position as at 31 December 2006 and its performance for the half year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Redstone Resources Limited ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual report.

A review of a half year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain the assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

13 Butler Settineri (Audit) Pty Ltd A.C.N. 112 942 373 Registered Company Auditor Number 289109

RNA 二三二

Level 1

Construction House 35-37 Havelock Street West Perth 6005

Locked Bag 18 West Perth 6872 Western Australia

Phone: (08) 9426 4444 Fox: (08) 9321 5215 Email: mail@butlersettineri.com.au

Directors: Colin Butler FCA Paul Chabrel FCA Lucy Gardner CA

www.butlersettineri.com.au

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half year financial report of Redstone Resources Limited is not in accordance with the Corporations Act 2001 including:

• a) giving a true and fair view of the consolidated entity's financial position as at 31 December 2006 and of its performance for the half-year ended on that date: and
• b) complying with Accounting Standard AASB 134: Interim Financial Reporting and the Corporations Regulations 2001.

Butter Setter (Analite) Phylites

BUTLER SETTINERI (AUDIT) PTY LTD

Laming Cooler

LUCY P GARDNER Director

Perth Date: 15 March 2007