REDSTONE RESOURCES LIMITED — Interim / Quarterly Report 2011

Mar 15, 2011

ACN 090 169 154

CONSOLIDATED FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

ACN 090 169 154

CONTENTS

Corporate Directory	1
Directors' Report	2
Auditor's Independence Declaration	7
Consolidated Statement of Comprehensive Income	8
Consolidated Statement of Financial Position	9
Consolidated Statement of Changes in Equity	10
Consolidated Statement of Cash Flows	11
Notes to the Half-Year Financial Statements	12
Directors' Declaration	20
Independent Auditor's Review Report to the Members	21-22

CORPORATE DIRECTORY

DIRECTORS:	Mr Richard Homsany (Chairman)Mr Barry Woodhouse (Non-Executive Director)Mr David Le Roy (Non-Executive Director)
COMPANY SECRETARY:	Ms Miranda Conti
REGISTERED AND PRINCIPAL OFFICE:	Suite 3, 110-116 East ParadeEAST PERTH WA 6004Tel: (08) 9328 2552Fax: (08) 9328 2660Internet: www.redstone.com.auemail: contact@redstone.com.au
SHARE REGISTRY:	Advanced Share Registry Services150 Stirling HighwayNEDLANDS WA 6009Tel: +61 8 9389 8033Fax: +61 8 9389 7871
HOME STOCK EXCHANGE:	Australian Stock Exchange LimitedLevel 2Exchange Plaza2 The EsplanadePERTH WA 6000ASX Code: RDS
AUDITOR:	Butler Settineri (Audit) Pty LtdUnit 16, Level 1100 Railway Road (Cnr Hay Street)SUBIACO WA 6008

ACN 090 169 154

DIRECTORS' REPORT

Your directors submit the financial report of the Redstone Resources Limited and its controlled entities ("Redstone or the Entity") for the half-year ended 31 December 2010. In order to comply with the provisions of the Corporations Act 2001, the directors' report follows:

The Board of Directors

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

Richard Homsany (Chairman)

Barry Woodhouse (Non-Executive Director) David Le Roy (Non-Executive Director)

Review of Operations

The consolidated loss after income tax for the half year is $830,883 (2009: $1,835,791).

WEST MUSGRAVES

Tollu Project (E69/2450 – 100% Redstone)

The Tollu project is part of a 200 km2 exploration licence held by Redstone. The focus of Redstone's exploration is a giant swarm of hydrothermal copper rich veins in a mineralised system covering an area of at least 6km2 and forming part of a dilation system between two major shears. The mineralisation at surface comprises malachite, tenorite and azurite. High grade copper sulphide mineralisation was discovered in April 2010 following RC drilling to test at depth; part of the Central Zone of the vein swarm. Three holes intercepted high-grade massive copper sulphide mineralisation (see ASX releases of 21 June 2010 and 28 June 2010).

During the half year period ending 31 December 2010, Redstone completed geophysics surveys (electromagnetic and induced polarisation) and a reverse circulation (RC) drilling programme.

An electromagnetic (EM) survey was conducted over part of the mineralised system which included surface and downhole surveys. Several conductors were identified.

A limited induced polarisation survey (Dipole–Dipole) was conducted over part of the major North-South Tollu shear. Three chargeable anomalies were identified.

A programme of RC drilling commenced at Tollu in November 2010. The programme was focussed on:

• increasing the depth and strike length of the copper sulphide mineralisation in the Central Zone.
• testing the geophysical targets identified from the EM survey and IP surveys.
• testing at depth a large low grade copper oxide halo with coincident EM and IP anomalies adjacent to the major North-South Tollu shear. The oxide mineralisation was previously identified by a shallow RAB and RC drilling programme conducted in 2008.

The drilling intersected further significant copper sulphide mineralisation over a 210m strike at the Central Zone.

ACN 090 169 154

DIRECTORS' REPORT

Assay results included:

• TLC 020: 12m @ 2.7% Cu from 187m including 7m @ 3.8% from 191m;
• TLC 032: 8m @ 3.4% Cu from 57m including 4m @ 5.3% from 60m and 7m @ 2.5% Cu from 101m;
• TLC 031: 9m @ 2.8% Cu from from 127m; and
• TLC 034: 13m @ 1.5% Cu from 137m

Copper sulphide mineralisation at the Central Zone has been extended to over 200m strike length to a depth of 253m, and remains open along strike to the southeast and open at depth, highlighting the potential to increase the size of the mineralised body.

Results are pending for one hole (TLC 042) which was drilled within the Tollu shear zone. The hole encountered but did not fully penetrate the target, however visible copper sulphide (chalcopyrite) mineralisation was intersected over the last 3 metres and is open at depth.

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

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

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

During the half year period ending 31 December 2010, Redstone's farmin partner completed induced polarisation (IP) surveys (Gradient Array, Dipole-Dipole and Pole-Dipole surveys) at the Baggaley Hills project. The IP method is suitable for the detection of disseminated sulphides such as pyrite, pyrrhotite and pentlandite.

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 have been commissioned at three of these targets – Antlion, Area 6 and Area 7.

The IP surveys at the Antlion [PGE-Cu-(Ni)] prospect identified a number of anomalous zones of higher chargeability, which may provide a vector towards sulphide mineralisation. Initially, gradient array IP surveys were completed over anomalous [PGE-Cu-(Ni)] geochemical areas. Dipole-dipole IP survey lines were then completed over anomalous gradient array results to determine the depth of the sources of chargeability anomalies.

During the period, planning was completed for a 6,000m RC drilling programme to test the Antlion chargeability anomalies and the targets at the Area 6 and Area 7 prospects.

ATTRIBUTION

The information in this report that relates to exploration results is based on information compiled by Dr Joao Orestes Santos, a member of the Australiasian Institute of Geoscientists. Dr Santos 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 matters based on his information in the form and context in which it appears.

ACN 090 169 154

DIRECTORS' REPORT

Stripeys

Stripeys Sale and Purchase Agreement

On 29 October 2010, the Company entered into a Sale and Purchase Agreement with respect to the sale of its 100% interest in the Stripeys Project.

In accordance with the terms of the Agreement the purchaser is required to pay Redstone:

• $100,000 cash deposit within 5 days of execution;
• $50,000 cash (First Payment) and allotment of 6,000,000 shares (the Shares) in the purchaser upon completion of the Agreement;
• $200,000 cash (Second Payment) payable on the earlier of:
  • (a) 30 June 2011; or
  • (b) The date of admission of the Shares to the Official List; and

• on the date of the Second Payment, a further $25,000, subject to the purchaser having received all Mining Information from Redstone.

As at the date of this report the Stripeys Agreement had not completed.

BRAZIL

Aneba (Potash) and Apui (Phosphate) Projects

Termination of MBAC Sale and Joint Venture Agreement

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

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

Redstone continues to pursue opportunities to sell and/or joint venture these Projects.

Trombetas (Potash) Project

Trombetas Sale Agreement

On 29 June 2010, the Entity entered into an option agreement (Agreement) for the divestment of 100% interest in its Brazil Potash (Trombetas) Project tenements for a total consideration of $450,000 (Purchase Price). The consideration included a $100,000 non refundable Option Fee, which provides the purchaser with an option to 31 October 2010 to purchase the Project on the terms set out in the Agreement.

Within 30 days of exercise of the Option to purchase the Project (the Settlement Date), the purchaser was required to pay the $350,000 balance of consideration which was comprised as follows:

• $100,000 cash; and

• $250,000 by allotment and issue, or transfer to Redstone of shares (Shares) in a company to be nominated by the purchaser, listed on the Australian Stock Exchange (ASX), the Shares to have a value of $250,000 based on the volume weighted average market price for Shares, calculated over the five days on which sales in the Shares are recorded on ASX before the day on which the issue is made.

ACN 090 169 154

DIRECTORS' REPORT

However in November 2010, various terms of the Agreement were varied, such that within 30 days of exercise the Option to purchase the Project the purchaser was required to pay $100,000 cash and the $250,000 balance of consideration be paid on the Settlement Date, being a date mutually agreed by the parties but in any event no later than 90 days after the date of the exercise notice.

The varied terms enabled the purchaser an election to satisfy the payment of the $250,000 on Settlement by the allotment and issue of Shares or in cash. Further, the purchaser would procure Redstone an option to subscribe for shares in the purchaser worth $250,000 at the same price offered to the public or its shareholders, subject to the purchaser's Shares being listed within 12 months of the Deed of Variation.

Settlement of the Trombetas Agreement occurred on 18 February 2011 by payment of $250,000 cash by the purchaser to Redstone.

CORPORATE

Capital Raising

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

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

During the half-year period to 31 December 2010, 3,708,334 fully paid ordinary shares were issued and allotted upon the exercise of 3,208,334 $0.25 Placement options expiring 30 November 2012 and 500,000 $0.25 MBAC options expiring 17 June 2011, to raise a total of $927,084.

Subsequent Events

Capital Raising

Subsequent to 31 December 2010 and upto the date of this report, 1,349,999 fully paid ordinary shares were issued and allotted upon the exercise of 849,999 unquoted $0.25 Placement options expiring 30 November 2012 and 500,000 MBAC options expiring 17 June 2011, to raise a total of $337,500.

Issue of Options

On 25 February 2011 the Company issued and allotted 1,000,000 unquoted $0.50 consultant options pursuant to shareholder approval obtained at the annual general meeting held in November 2010. A further 100,000 unquoted $0.50 options were issued to an employee of the Company in accordance with the 2006 Redstone Resources Employee Share Option Plan. These options are exercisable on or before 24 February 2014.

No other matters or circumstances have arisen since the end of the half year which have significantly affected or may significantly affect the operations or the state of affairs of the Entity in future financial years.

ACN 090 169 154

DIRECTORS' REPORT

Auditor's Independence Declaration

Section 307C of the Corporations Act 2001 requires our auditors, Butler Settineri (Audit) Pty Ltd, to provide the directors of the company with an Independence Declaration in relation to the review of the half-year financial report. This Independence Declaration is set out on the following page and forms part of this directors' report for the half-year ended 31 December 2010.

This report is signed in accordance with a resolution of the Board of Directors made pursuant to s306(3) of the Corporations Act 2001.

On behalf of the Directors

R Homsany Chairman Perth, Western Australia 16 March 2011

ACN 090 169 154

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

	Note	Half-year ended31 December2010$	Half-year ended31 December2009$
Revenue
Income from sale of foreign interests		99,827	-
Other Income		17,050	-
Total revenue		116,877	-
Expenses
Administration expenses		(66,556)	(52,749)
Employee benefit expense		(878,587)	(388,084)
Consulting expense		(23,020)	(35,061)
Depreciation and amortisation expense		(22,347)	(22,944)
Finance costs		(158)	(5,609)
Write off of deferred exploration asset	5	-	(1,278,506)
Other expenses from ordinary activities		(24,559)	(67,489)
Total expenses		(1,015,227)	(1,850,442)
Loss before interest and taxes		(898,350)	(1,850,442)
Interest revenue		67,467	14,651
Loss before income tax		(830,883)	(1,835,791)
Income tax expense		-	-
Net Loss		(830,883)	(1,835,791)
Total comprehensive loss for the period		(830,883)	(1,835,791)
Earnings per share (cents per share)		Cents	Cents
- Basic and diluted loss for the half-year	10(c)	(0.70)	(2.17)

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

ACN 090 169 154

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2010

	Note	At31 December2010$	At30 June2010$
CURRENT ASSETS
Cash and Cash EquivalentsTrade and Other ReceivablesOther AssetsTOTAL CURRENT ASSETS		3,761,342133,14739,2723,933,761	401,492171,00721,344593,843
NON-CURRENT ASSETS
Deferred Exploration ExpenditureProperty, Plant and EquipmentTOTAL NON-CURRENT ASSETS	5	5,586,407152,8425,739,249	4,661,218121,9714,783,189
TOTAL ASSETS		9,673,010	5,377,032
CURRENT LIABILITIES
Trade and Other PayablesProvisionsTOTAL CURRENT LIABILITIES		540,21837,776577,994	359,85846,358406,216
NON-CURRENT LIABILITIES
Other Payables		24,067	75,810
TOTAL NON-CURRENT LIABILITIES		24,067	75,810
TOTAL LIABILITIES		602,061	482,026
NET ASSETS		9,070,949	4,895,006
EQUITY
Issued CapitalReservesAccumulated Losses	10	17,228,8551,921,080(10,078,986)	12,860,1511,282,958(9,248,103)
TOTAL EQUITY		9,070,949	4,895,006

The above Consolidated Statement of Financial Position 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 2010

Six months ended 31 December 2010

	IssuedCapital	AccumulatedLosses	Share basedPaymentsReserve	Total Equity
	$	$	$	$
At 1 July 2010	12,860,151	(9,248,103)	1,282,958	4,895,006
(Loss) attributable to membersof the company	-	(830,883)	-	(830,883)
Other comprehensiveincome/(loss)	-	-	-	-
Total comprehensive (loss) netof tax	-	(830,883)	-	(830,883)
Share capital issued	4,437,184	-	-	4,437,184
Equity raising costs	(155,986)	-	-	(155,986)
Cost of share-based paymentsexercised	87,506	-	(87,506)	-
Share-based payments	-	-	725,628	725,628
At 31 December 2010	17,228,855	(10,078,986)	1,921,080	9,070,949

Six months ended 31 December 2009

	IssuedCapital	AccumulatedLosses	Share basedPaymentsReserve	Total Equity
	$	$	$	$
At 1 July 2009	10,720,583	(7,458,577)	1,743,816	5,005,822
(Loss) attributable to membersof the company	-	(1,835,791)	-	(1,835,791)
Other comprehensiveincome/(loss)	-	-	-	-
Total comprehensive (loss) netof tax	-	(1,835,791)	-	(1,835,791)
Share capital issued	2,250,000	-	-	2,250,000
Equity raising costs	(358,230)	-	-	(358,230)
Share-based payments expiring	-	787,500	(787,500)	-
Share-based payments	-	-	372,341	372,341
At 31 December 2009	12,612,353	(8,506,868)	1,328,657	5,434,142

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

ACN 090 169 154

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

	Half-year ended31 December2010$	Half-year ended31 December2009$
CASH FLOWS FROM OPERATINGACTIVITIES
Payments to suppliers and employeesInterest receivedInterest paid	(447,417)63,177(158)	(538,598)14,651(5,269)
Net cash flows used in operating activities	(384,398)	(529,216)
CASH FLOWS FROM INVESTINGACTIVITIES
Exploration expenditurePayments for property, plant and equipmentProceeds on sale of foreign interestsProceeds on sale of Australian interestsDeposits paid	(781,122)(53,217)199,989110,000(12,600)	(913,389)(1,214)299,940--
Net cash flows used in investing activities	(536,950)	(614,663)
CASH FLOWS FROM FINANCINGACTIVITIES
Proceeds from issue of sharesPayment of share issue costsRepayment of borrowings	4,437,184(155,986)-	2,250,000(60,563)(79,893)
Net cash flows from financing activities	4,281,198	2,109,544
Net increase in cash heldCash at the beginning of the half-year	3,359,850401,492	965,665435,336
CASH AT THE END OF THE HALF-YEAR	3,761,342	1,401,001

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

ACN 090 169 154

NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

1. Corporate Information

The financial report of Redstone Resources Limited (the Company) for the half-year ended 31 December 2010 was authorised for issue in accordance with a resolution of the directors on 16 March 2011.

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.

The nature of the operations and principal activities of the Company are described on pages 2 to 5 in the Directors' Report.

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 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 ended 30 June 2010.

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 2010 in accordance with the continuous disclosure obligations arising under the Corporations Act 2001.

a) Basis of Accounting

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" and other mandatory professional reporting requirements.

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 2010.

The Entity has reviewed all of the new and revised standards and interpretations issued by the AASB that are relevant to its operations and effective for annual reporting periods beginning on or after 1 January 2010. It has been determined that there is no impact, material or otherwise, and therefore no change is required to the Entity's accounting policies.

The Entity has also reviewed all new standards and interpretations that have been issued but are not yet effective for the half-year ended 31 December 2010. As a result of this review, the Director's have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and therefore, no change necessary in the Company's accounting policies.

ACN 090 169 154

NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

2. Summary of Significant Accounting Policies (continued)

b) Basis of Consolidation

The half-year consolidated financial statements comprise the financial statements of Redstone Resources Limited and its controlled entities as at 31 December 2010 ("the Entity or Group") - refer note 9.

c) Going Concern

The half-year financial report has been prepared on a going concern basis which contemplates the continuation of business activity and the realisation of assets and the settlement of liabilities in the ordinary course of business. As at 31 December 2010 the Entity has cash on hand of $3,761,342. Based on the Entity's projected cash flows this will be sufficient for the Entity to continue its projected activities until at least March 2012.

ACN 090 169 154

NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

NOTE 3: DIVIDENDS

The Entity has not declared or paid a dividend during the half-year ended 31 December 2010.

NOTE 4: SEGMENT INFORMATION

The Entity has two operating segments being mineral exploration in the geographical segments of Australia and South America (the Entity's primary basis of segmentation).

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

The results for the operating segments have been aggregated on the basis that they have the same economic characteristics.

NOTE 5: DEFERRED EXPLORATION EXPENDITURE

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 half year ended 31 December 2009 the Entity wrote off deferred exploration expenditure assets totalling $1,278,506 relating to tenements surrendered subsequent to the end of the half-year period.

No deferred exploration assets were treated as impaired during the half year ended 31 December 2010.

NOTE 6: CAPITAL AND EXPLORATION 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 31 December 2010 amounted to $371,000 (excluding joint venture tenements).

The future exploration commitment (including access costs) of the Entity relating to tenements to their expiry is as follows:

ACN 090 169 154

NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

NOTE 6: CAPITAL AND EXPLORATION EXPENDITURE COMMITMENTS (continued)

Cancellable operating lease commitments forexploration tenements	31 December2010$	30 June2010$
Within one yearOne year or later and no later than five yearsLater than five years	259,534348,704-	342,151452,984-
	608,238	795,135

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.

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). In the event that minimum expenditure requirements are not met, the entity will be fined BRL$1,500 (Brazilian Reais) per tenement.

As such, the minimum expenditure commitments comprising annual rent and fines for nonexpenditure on granted Brazilian tenements as at 31 December 2010 amounted to $27,627. These obligations may vary from time to time and are expected to be fulfilled in the normal course of operations by the entity. Further, these obligations are extinguished upon any surrender of the tenement.

Cancellable operating lease commitments forexploration tenements	31 December2010$	30 June2010$
Within one yearOne year or later and no later than five yearsLater than five years	27,627--	25,287--
	27,627	25,287

Joint venture commitments

Blackstone Range/Michael Hills Joint Venture

Pursuant to a Farm-in Deed dated 2 June 2005 between Resource Mining Corporation Limited (ASX: RMI) and Westmin Exploration Pty Ltd (Westmin), a wholly owned subsidiary of the Company, Westmin has acquired a 75% interest in the Blackstone Range/Michael Hills Exploration Licences (EL's) by solely funding $2,000,000 of exploration costs.

During the 2009 financial year RMI 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's.

During the 2010 financial year the Michael Hills Exploration Licences (EL's 69/2106 and 2107) were surrendered and excised from the farmin and joint venture by mutual agreement between the parties.

ACN 090 169 154

NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

NOTE 6: CAPITAL AND EXPLORATION EXPENDITURE COMMITMENTS (continued)

Capital Commitments

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

Operating lease – corporate office premises

Effective from 1 August 2010, the Entity has a two year operating lease for its office premises and car bays for $39,320 (excluding GST) per annum plus variable outgoings.

The Entity also has an operating lease for storage premises on a monthly tenancy of $1,600 (excluding GST).

Cancellable operating lease commitments forexploration tenements	31 December2010$	30 June2010$
Within one yearOne year or later and no later than five yearsLater than five years	40,92022,937-	38,12742,597-
	63,857	80,724

NOTE 7: CONTINGENT LIABILITIES

There have been no material changes in contingent liabilities since 30 June 2010.

NOTE 8: EVENTS AFTER BALANCE DATE

Capital Raising

Subsequent to 31 December 2010 and upto the date of this report, 1,349,999 fully paid ordinary shares were issued and allotted upon the exercise of 849,999 unquoted $0.25 Placement options expiring 30 November 2012 and 500,000 MBAC options expiring 17 June 2011, to raise a total of $337,500.

Issue of Options

On 25 February 2011 the Company issued and allotted 1,000,000 unquoted $0.50 consultant options pursuant to shareholder approval obtained at the annual general meeting held in November 2010. A further 100,000 unquoted $0.50 options were issued to an employee of the Company in accordance with the 2006 Redstone Resources Employee Share Option Plan. These options are exercisable on or before 24 February 2014.

No other matters or circumstances have arisen since the end of the half year which have significantly affected or may significantly affect the operations or the state of affairs of the Entity in future financial years.

ACN 090 169 154

NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

NOTE 9: CONTROLLED ENTITIES

Redstone Resources Limited is the parent entity of the Group.

	At 31 December2010%	At 31 December2009%
Particulars in relation to wholly owned entities
Allhawk Nominees Pty LtdMinex Services Pty LtdWestmin Exploration Pty Ltd	100100100	100100100
Redstone Mineracao Do Brasil Ltda*	98	98

*The remaining 2% shareholding is held by an employee of Redstone Resources Limited, who is a Brazilian citizen. The Board and shareholding structure is in accordance with Brazilian law.

At	At
31 December	30 June
2010	2010
$	$

NOTE 10: CONTRIBUTED EQUITY

(a) Issued and Paid Up Capital

Shares issued and fully paid - 126,056,280(June 2010: 106,392,946) ordinary sharesfully paid	18,030,116	13,505,426
Capital raising costs	(801,261)	(645,275)
Issued and fully paid capital	17,228,855	12,860,151

During the half-year period to 31 December 2010 the following unquoted options were issued:

• 3,750,000 options issued to Redstone employees exercisable at $0.50 per share on or before 19 October 2013;
• 650,000 options issued to Redstone employees exercisable at $0.50 per share on or before 4 November 2013; and
• 500,000 options issued to Directors exercisable at $0.50 per share on or before 1 December 2013.

Accordingly, a share based payment expense of $725,628 has been recognised during the halfyear period.

During the half-year period to 31 December 2010 the following options were exercised:

• 500,000 $0.25 cent MBAC options; and
• 3,208,334 $0.25 cent Placement options.

Accordingly, a corresponding credit of $87,506 for the share based payment previously recognised has been applied to share capital from the share based payments reserve.

ACN 090 169 154

NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

NOTE 10: CONTRIBUTED EQUITY (continued)

(a) Issued and Paid Up Capital (continued)

Reconciliation of options on issue

Unlisted shareoptions	As at 30June 2010	Issued/(Exercisedor lapsed)	As at 31December2010	Exerciseprice$	Exercisablefrom	Expiry
Unlisted options	400,000	-	400,000	1.50	29 Jun 08	29 Jun 12
Unlisted options	1,000,000	-	1,000,000	0.95	29 Nov 07	28 Nov 12
Unlisted options	500,000	-	500,000	1.20	29 Nov 07	28 Nov 12
Unlisted options	300,000	-	300,000	0.75	20 Feb 09	20 Feb 13
MBAC unlisted	1,000,000	(500,000)	500,000	0.25	17 Jun 09	17 Jun 11
options
Placement options	11,111,112	(3,208,334)	7,902,778	0.25	3 Dec 09	30 Nov 12
Unlisted options	1,500,000	-	1,500,000	0.25	3 Dec 09	30 Nov 14
Unlisted options	500,000	-	500,000	0.30	3 Dec 09	30 Nov 14
Unlisted options	500,000	-	500,000	0.35	3 Dec 09	30 Nov 14
Unlisted options	-	3,750,000	3,750,000	0.50	19 Oct 10	19 Oct 13
Unlisted options	-	650,000	650,000	0.50	4 Nov 10	4 Nov 13
Unlisted options	-	500,000	500,000	0.50	1 Dec 10	1 Dec 13
Total options	16,811,112	1,191,666	18,002,778

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

	No. Shares	$
Opening Balance as at 1 July 2010	106,392,946	13,505,426
Share placement to sophisticated andprivate investors at $0.22/share – 03/09/10	15,955,000	3,510,100
Exercise of unlisted Placement options at$0.25/share expiring 30 Nov 12 – 21/09/10	1,305,556	359,485
Exercise of unlisted Placement options at$0.25/share expiring 30 Nov 12 – 19/10/10	142,778	39,313
Exercise of unlisted Placement options at$0.25/share expiring 30 Nov 12 – 29/10/10	236,666	65,166
Exercise of unlisted Placement options at$0.25/share expiring 30 Nov 12 – 15/11/10	305,556	84,135
Exercise of unlisted Placement options at$0.25/share expiring 30 Nov 12 – 01/12/10	940,000	258,829
Exercise of unlisted MBAC options at$0.25/share expiring 17/06/11 – 01/12/10	500,000	131,175
Exercise of unlisted Placement options at$0.25/share expiring 30 Nov 12 – 21/12/10	277,778	76,487
Closing Balance as at 31 December 2010	126,056,280	18,030,116

ACN 090 169 154

NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

NOTE 10: CONTRIBUTED EQUITY (continued)

(c) Earnings per Share

	Half-year ended31 December2010	Half-year ended31 December2009
Basic loss per share (cents per share)	(0.70)	(2.17)
Weighted average number of ordinaryshares on issue used in the calculation ofbasic earnings per share (number)	117,892,252	84,616,631
Earnings used in the calculation of basic lossper share ($)	(830,883)	(1,835,791)
As the Entity made a loss for the year,diluted earnings per share is the same as

basic earnings per share.

ACN 090 169 154

DIRECTORS' DECLARATION

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

In the opinion of the directors:

• 1. The financial statements and notes of the Entity set out on pages 8 to 19 are in accordance with the Corporations Act 2001 including:
  • a. giving a true and fair view of the financial position as at 31 December 2010 and the performance for the half-year ended on that date of the Entity; and
  • b. complying with Australian Accounting Standards and the Corporations Regulations 2001; and
• 1. there are reasonable grounds to believe that the Entity will be able to pay its debts as and when they become due and payable.

On behalf of the Board

R Homsany Director Perth, Western Australia 16 March 2011