XSTATE RESOURCES LIMITED — Capital/Financing Update 2010

May 27, 2010

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XState Resources Limited ABN 96 009 217 154 Registered office Postal address Level 2 PO Box 985 45 Stirling Highway Nedlands WA 6909 Nedlands WA 6009 Tel: +61 8 9423 3200 Website Fax: +61 8 9389 8327 www.xstate.com.au

26 May 2010

Dear Shareholder,

Non­ Renounceable Pro Rata Entitlements Issue of Options

The Directors of XState Resources Limited ( “Company”) advise that a Prospectus dated 26 May 2010 for a pro rata non‐ renounceable entitlements issue of up to 9,179,932 options, each to acquire a fully paid share in the capital of the Company ( “Option”), at an issue price of $ 0.01 per Option exercisable at $0.24 on or before 30 June 2013 ( “Entitlements Issue”) has been lodged with the ASX and ASIC.

The Entitlements Issue will comprise one Option for every 3 shares held (such shareholding to be post a proposed 1 for 3 consolidation of capital).

The Entitlements Issue will only be made to shareholders with registered addresses in Australia and New Zealand on the relevant record date, being 4 June 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 web site – www.xstate.com.au

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

Yours faithfully,

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David McArthur

Company Secretary

Phone: +61 8 94233200 E‐mail davidm@broadwaymgt.com.au