XSTATE RESOURCES LIMITED — Capital/Financing Update 2010

Aug 15, 2010

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ABN 96 009 217 154

16 August 2010

ASX Limited

Electronic lodgement

ISSUE OF INCENTIVE OPTIONS

The Board of Xstate Resources Limited advises it has resolved to issue incentive options following a remuneration review for key members of Xstate’s new management team. The Board has agreed to issue 1,000,000 options to the Company’s new Corporate Director Mr Brett Mitchell to form part of his remuneration package. The options will be the same class and issued on the same terms as the listed options created as part of the recent Bombora Energy Ltd acquisition in July 2010. The options will be exercisable at 24 cents each on or before 30 June 2013 and will be fully vested by July 2012.

The issue of these options have been approved by the Company’s remuneration committee and will be subject to shareholder approval at the next general meeting of shareholders of the Company.

The primary purpose for the grant of the above options is to provide cost effective consideration to Mr Mitchell, to form a key part of his remuneration package for his past and ongoing contribution to the Company in his role as Corporate Director.

In addition, the Board has also resolved to issue a further 200,000 employee options exercisable at 24 cents each on or before 30 June 2013 as part of a salary package for a key management role that is currently under negotiation.

The issue of options enables the Company to attract and engage high calibre professionals, whilst maintaining the Company’s cash resources.

For and on behalf of the Board

41 Stirling Highway, Nedlands WA 6009 Tel + 61 8 9423 3200 Fax +61 8 9389 8327 www.xstate.com.au