XSTATE RESOURCES LIMITED — Capital/Financing Update 2010

Sep 30, 2010

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XState Resources Limited

Registered office 41 Stirling Highway Nedlands WA 6009 Tel: +61 8 9423 3200 Fax: +61 8 9389 8327

ABN 96 009 217 154

Postal address PO Box 985 Nedlands WA 6909 Website www.xstate.com.au

30 September 2010

Dear Shareholder

Non-Renounceable Pro-Rata Entitlements Issue of Options

On 29 September 2010 Xstate Resources Limited (“Xstate” or “Company”) announced that it would undertake a non-renounceable pro-rata entitlements issue (“Entitlements Issue”) on the basis of 4 shares for every 5 shares held, with 1 listed option (expiring on 30 June 2013) to be issued for no additional consideration for every 2 shares subscribed for. The issue price is 10 cents per share.

The Entitlements Issue will be offered to existing Xstate shareholders on the Entitlements Issue Record Date (being 11 October 2010). The Entitlements Issue will result in the issue of up to 30,016,261 new shares and up to 15,008,130 new options and will raise up to $3,001,626 in working capital. The Entitlements Issue is conditionally underwritten by Argonaut Capital Limited. Cygnet Capital Pty Ltd is the manager of the offer.

The Entitlements Issue will only be made to shareholders with registered addresses in Australia and New Zealand on the relevant Record Date, being 11 October 2010.

As a shareholder whose registered address is outside Australia or New Zealand, you are not entitled to participate in the Entitlements Issue. A copy of the Prospectus can be viewed on the Company’s website (www.xstate.com.au).

Shareholders with any queries should contact the Company Secretary, Mr David McArthur.

Yours faithfully XSTATE RESOURCES LIMITED

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DAVID McARTHUR Company Secretary

Phone: +61 8 9423 3200 Email: davidm@broadwaymgt.com.au