XSTATE RESOURCES LIMITED — Interim / Quarterly Report 2009

Jan 28, 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

29 January 2010

ASX LIMITED

ASX Code: XST

Dear Sir / Madam

During the quarter ended 31 December 2009, Xstate Resources Limited continued to assess possible projects or investment opportunities with which to recapitalise the company.

On 21 January 2010, Xstate announced it had acquired a substantial surface geochemical database covering the main mineral provinces of Nevada in the USA. Xstate has signed an agreement to acquire the database for the issuances of 200,000 options with an exercise price of 8 cents on signing of the agreement and the issuance of a further 300,000 options with an exercise price of 10 cents on pegging of the first claim (“tenement”) within Nevada. Both tranches of options are to be exercised within 3 years of the date of issue.

Nevada, located in western United States of America (“USA”) is the best gold address in the USA, arguably the world, with historical gold production in excess of 150 million ounces and existing reserves of more than 70 million ounces and growing. The Nevada state hosts large world class gold mines such as Carlin and Cortez Hills and is home to the world’s largest producers, including Barrick and Newmont.

The 25,000 sample database was collected in the 1980’s and 1990’s and has remained dormant since that time. The USA doesn’t have a centralised exploration reporting requirement as is compulsory in the Australian states and as a result exploration information is often lost as companies relocate exploration focus.

The surface geochemical data was collected primarily from stream sediment samples with some limited follow‐up rock chip and soil sampling. A reanalysis of the database with known deposits and discoveries in the last 20 years has highlighted the success of the sampling at defining positive targets areas.

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The reanalysis of the data, coupled with recent tenement maps and research into other company activity, has highlighted a number of targets in prospective areas with either vacant land or land owned by prospectors or small junior explorers.

Xstate is planning to complete an extensive reconnaissance field trip and follow up geochemical sampling during the next quarter to prioritise target areas and determine availability and prospectivity.

With cash of $3.02 million and administrative costs reduced to a mimimum, Xstate is well placed to ultimately complete a transaction that will bring value to the Xstate shareholders.

Yours faithfully

XSTATE RESOURCES LIMITED

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David McArthur Director

The information in this report that relates to Exploration Results, Mineral Resources and/or Ore Reserves is compiled by Rhod Grivas MAusIMM, MAIG director of Xstate Resources Limited. 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 009 217 154	Quarter ended (“current quarter”)
009 217 154	31 December 2009

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 - Net Operating Cash Flows	Current quarter $A’000	Year to date (12 months) $A’000
	- - - - (86) - 21 - - -	- - - - (382) - 85 - - -
	(65)	(297)
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)	- - - - - - - - -	- - - - - - - - -
	-	-
	(65)	(297)

• See chapter 19 for defined terms.

Appendix 5B Page 1

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Appendix 5B Mining exploration entity quarterly report

1.13 Total operating and investing cash flows (brought forward)	(65)	(297)
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 Net financing cash flows	- - - - - -	- - - - - -
	-	-
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 ofquarter	(65) 3,087 -	(297) 3,348 (29)
	3,022	3,022

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
			75
			-
1.25 Explanation necessary for an understanding of the transactions 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 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 necessary for an understanding of the transactions
	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

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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

4.1 Exploration and evaluation paid via JV investment 4.2 Development	$A’000
	NIL
	NIL
Total	NIL

Reconciliation of cash

Reconciliation of cash
Reconciliation of cash at the end of the quarter (as shown in	Current quarter		Previous quarter
the consolidated statement of cash flows) to the related items	$A’000		$A’000
in the accounts is as follows.2
5.1 Cash on hand and at bank		3,022		3,087
5.2 Deposits at call		-		-
5.3 Bank overdraft		-		-
5.4 Other (provide details)		-		-
Total: cash at end of quarter(item 1.22)		3,022		3,087

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.

Appendix 5B Page 3

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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	55,079,593	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			Exercise price	Expiry date
	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: 29 January 2010

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.

Appendix 5B Page 5

1/7/2000