XSTATE RESOURCES LIMITED — Interim / Quarterly Report 2007

Jul 30, 2007

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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 9389 8799 Website Fax: +61 8 9389 8327 www.xstate.com.au

31 July 2007

ASX LIMITED

Dear Sir / Madam

The following summarises the exploration activity for the quarter ended 30 June 2007:

ELLE URANIUM JOINT VENTURE – ARIZONA USA (XSTATE 50%)

The Elle Joint Venture is owned 50% by XState and 50% by US listed Liberty Star Uranium and Metals Inc (“Liberty Star”). The joint venture area comprises 22 square miles (57km[2] ). Within this area, there are 17 prospective uranium targets of which three have been allocated to the joint venture and the balance are subject to a first right of refusal.

The joint venture area of mutual interest is strategically located within a large uranium bearing breccia pipe terrain which occurs on the Arizona Strip lying just south of the Utah border. Eight mines were brought into production during the 1970s and early 1980s on deposits discovered within the immediate area.

The uranium bearing pipes which were mined are the second highest grade uranium mineral deposits in the world and the highest grade in the United States. Previously mined mineralisation in these pipes has graded about 0.6% to 0.7% uranium or about 12 to 14 pounds per tonne. In addition to uranium they are known to contain copper, zinc, silver, vanadium, cobalt, nickel, molybdenum, gallium, germanium and other metals. Past producers have recovered copper, silver and vanadium as by-products of uranium mining.

The joint venture area hosts numerous visible collapsed features, and the joint venture partners are assessing complementary geophysical, geochemical and geological techniques to locate breccia pipes within the collapsed features. A number of other companies exploring along the Arizona Strip are utilising a number of geophysical techniques including the techniques trialled above with some encouraging reported results.

On 13 June 2007 XState Resources Limited (“Xstate”) announced the scheduled commencement of a geochemical exploration program over three circular features that form part of the Elle joint venture.

Over the past 6 months Liberty Star has conducted a number of geochemical orientation surveys over 12 existing circular features. The majority of these circular features were located within the Elle joint venture area of mutual interest.

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In addition, Liberty Star has reviewed soil geochemical programs conducted by the United States Geological Survey (“USGS”) over 50 collapsed features during the 1970’s and 1980’s. This work included three mineralised pipes. The work conducted by the USGS suggests that geochemical sampling is a useful tool for assisting exploration for mineralised breccia pipes. Results indicate that mineralised pipes are often enriched in a number of varied elements against a background of sedimentary rocks.

A multi phased geochemical soil survey is planned with phase 1 consisting of an east-west and a north-south traverse over the circular features with samples collected every 50 metres. The collected samples will be sent for multi-elemental analysis using 4 acid digest and ICP-MS analysis. Anomalous results will be followed up by infill grid sampling on a nominal 50 metre grid pattern.

On 27 June 2007 Liberty Star Uranium announced as follows:

“Liberty Star Uranium & Metals Corp. (the “Company”), (OTCBB: LBSU and Frankfurt: LBV) is pleased to announce it has commenced an aggressive geochemical sampling program of all of its uranium breccia pipe targets (Pipes) to evaluate and prioritise drill testing of the best Pipes first. The objective is to collect 13,000 soil samples oriented as crosses across each Pipe target. These samples are to be assayed by a certified analytical laboratory for sixty-three elements. Computer analysis will show which Pipes have the strongest geochemical metal pattern indicating uranium mineralization at depth. For those Pipes that show the best geochemical signatures a geochemical sample grid will be collected to closely define the anomaly and thus the throat of the breccia zone. The XState Joint Venture Pipes and Area of Mutual Interest (AMI) will be the first priority in this sampling campaign.

The methodology, patterned after USGS (US Geological Survey) geochemical surveys reported in the mid 1980s and early 1990s, has been undergoing refinement for about six months by the Company. The perfected program started the first part of June with training and shakedown and now three 2-person field crews are collecting samples and an average of seven people are in the field.

In addition to geochemical sampling, each Pipe is being mapped for geology, rock alteration, and indications of previous sulphide minerals in the rock related to mineralization known as “leached capping”. All of this data including that for the geochemical mapping is located and recorded by our Pocket PC, GPS equipped data collectors. Information is downloaded each evening and transmitted to our main office for map plotting and interpretation. This approach provides speed and accuracy previously unattainable.

At this time 50 pipes have geochemical crosses collected and samples are in route to the certified geochemical lab. Approximately 200 samples are projected for collection each day. Twenty-two Pipes have undergone detailed geologic, alteration and leached capping mapping while eighteen have preliminary geologic mapping. All of the Pipes in the XState AMI have been sampled and detailed sampling is underway on the Elle and Hermina Pipes and surrounding area”.

Future Exploration

It is expected that a successful soil survey program will be followed by detailed drilling determined in conjunction with XStates technical team. Previous drilling by explorers in the region have used shallow drilling to confirm the surface expression of the collapsed feature, locate the breccia pipe within the collapsed feature and analyse the pipe and surrounds for anomalous uranium and base metals that distinguish the mineralised pipes.

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Corporate

Of the US$2.9 million contributed by XState to the joint venture, a balance of US$2.23 million remains at 30 June 2007. XState also has cash reserves of A$2.5 million in its own right.

Given the availability of significant cash reserves within the Company, the directors continue to assess possible investment opportunities for the Company.

Yours faithfully XSTATE RESOURCES LIMITED

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DAVID McARTHUR

Director

The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information provided by Liberty Star Uranium and Metals Corp and compiled by Mr R Grivas, MAIG, MAusIMM an employee of Goodheart Pty Ltd. Mr Grivas has sufficient experience that is relevant to the style of mineralisation and type of deposit 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 of Exploration Results, Mineral Resources and Ore Reserves. Mr Grivas consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

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Appendix 5B Mining exploration entity quarterly report

Rule 5.3

Appendix 5B

Mining exploration entity quarterly report

Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98.

Name of entity

XSTATE RESOURCES LIMITED

ACN or ARBN Quarter ended (“current quarter”) 009 217 154 30 June 2007

Consolidated statement of cash flows

Cash flows related to operating activities 1.1 Receipts from product sales and related debtors 1.2 Payments for (a) exploration and evaluation (b) development (c) production (d) administration 1.3 Dividends received 1.4 Interest and other items of a similar nature received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Other (provide details if material) Net Operating Cash Flows	Current quarter $A’000	Year to date (6 months) $A’000
	- - - - (116) - 37 - - -	- - - - (266) - 77 - - -
	(79)	(189)
Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects (b) equity investments (c) other fixed assets 1.9 Proceeds from sale of: (a) prospects (b) equity investments (c) other fixed assets 1.10 Loans to other entities 1.11 Loans repaid by other entities 1.12 Other (provide details if material) Net investing cash flows 1.13 Total operating and investing cash flows (carried forward)	- (16) - - - - - - -	- (29) - - - - - - -
	(16)	(29)
	(95)	(218)

• See chapter 19 for defined terms.

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Appendix 5B Page 1

Appendix 5B Mining exploration entity quarterly report

1.13 Total operating and investing cash flows (brought forward)	(95)	(218)
Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc. 1.15 Proceeds from sale of forfeited shares 1.16 Proceeds from borrowings 1.17 Repayment of borrowings 1.18 Dividends paid 1.19 Other (provide details if material) Net financing cash flows	50 - - - - -	330 - - - - -
	50	330
Net increase (decrease) in cash held 1.20 Cash at beginning of quarter/year to date 1.21 Exchange rate adjustments to item 1.20 1.22 Cash at end of quarter	(45) 2,508 -	112 2,351 -
	2,463	2,463

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

1.23 1.24	1.23 1.24	Aggregate amount of payments to the parties included in item 1.2 Aggregate amount of loans to the parties included in item 1.10	Current quarter $A'000
			49
			-
1.25 Explanation necessaryforanunderstanding of thetransactions Includes all management and consulting fees and salaries paid to directors and director-related entities during quarter, as well as superannuation paid on behalf of directors. Non-cash financing and investing activities 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows N/A 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entityhas an interest N/A		Explanation necessaryforanunderstanding of thetransactions
		Includes all management and consulting fees and salaries paid to directors and director-related entities during quarter, as well as superannuation paid on behalf of directors.
	N/A
	Details of outlays made by other entities to establish or increase their share in projects in which the reporting entityhas an interest
	N/A

• See chapter 19 for defined terms.

Appendix 5B Page 2

1/7/2000

Appendix 5B Mining exploration entity quarterly report

Financing facilities available

Add notes as necessary for an understanding of the position.

	3.1 Loan facilities 3.2 Credit standby arrangements	Amount available $A’000	Amount used $A’000
		-	-
		-	-

Estimated cash outflows for next quarter

$A’000

4.1 Exploration and evaluation paid via JV investment - 4.2 Development - Total -

Reconciliation of cash

Reconciliation of cash
Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.2	Current quarter $A’000	Previous quarter $A’000
5.1 Cash on hand and at bank 5.2 Deposits at call 5.3 Bank overdraft 5.4 Other (provide details)	2,463	2,508
	-	-
	-	-
	-	-
Total: cash at end of quarter(item 1.22)	2,463	2,508

Changes in interests in mining tenements

6.1 Interests in mining tenements relinquished, reduced or lapsed 6.2 Interests in mining tenements acquired or increased	Tenement reference	Nature of interest (note (2))	Interest at beginning of quarter	Interest at end of quarter

• See chapter 19 for defined terms.

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Appendix 5B Page 3

Appendix 5B Mining exploration entity quarterly report

Issued and quoted securities at end of current quarter

Description includes rate of interest and any redemption or conversion rights together with prices and dates.

	Total number	Number quoted	Issue price per security (see note 3) (cents)	Amount paid up per security (see note 3) (cents)
7.1 Preference +securities 7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy-backs, redemptions	Nil	N/A	N/A	N/A
	N/A	N/A	N/A	N/A
7.3 +Ordinary securities ** 7.4 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy-backs	55,079,593	50,279,593	N/A	N/A
7.5 +Convertible debt securities 7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted	Nil	N/A	N/A	N/A
	N/A	N/A	N/A	N/A
7.7 Options Listed options 7.8 Issued during quarter 7.9 Exercised during quarter 7.10 Expired during quarter	0	0	Exercise price N/A	Expiry date N/A
	N/A	N/A	N/A	N/A
	0	0	N/A	N/A
	Nil	N/A	N/A	N/A
7.11 Debentures (totals only)	Nil	N/A
7.12 Unsecured notes (totals only)	Nil	N/A

• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity quarterly report

Compliance statement

• 1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Law or other standards acceptable to ASX (see note 4).

• 2 This statement does give a true and fair view of the matters disclosed.

Sign here:

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Date: 31 July 2007

Director

Print name: David McArthur

Notes

• 1 The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

• 2 The “Nature of interest” (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.

• 3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities .

• 4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: Statement of Cash Flows apply to this report.

• 5 Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

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• See chapter 19 for defined terms.

1/7/2000

Appendix 5B Page 5