REDSTONE RESOURCES LIMITED

ACN 090 169 154

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED

30 JUNE 2015

Contents of Financial Report Page

Corporate Directory 1

Directors' Report 2-18

Audit Independence Declaration 19

Corporate Governance Statement 20

Consolidated Statement of Comprehensive Income 21

Consolidated Statement of Financial Position 22

Consolidated Statement of Changes in Equity 23

Consolidated Statement of Cash Flows 24

Notes to the Consolidated Financial Statements 25-61

Directors' Declaration 62

Independent Audit Report to Members 63-64

Shareholder Information 65-68

COMPETENT PERSONS STATEMENT:

The information in this document that relates to Exploration Targets and Exploration Results was authorised by Mr Darryl Mapleson, a Principal Geologist and a full time employee of BM Geological Services, who are engaged as consultant geologists to Redstone Resources Limited. Mr Mapleson is a Fellow of the Australian Institute of Mining and Metallurgy. Mr Mapleson has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration to act as a competent person as defined in the 2012 edition of the 'Australasian Code for reporting of Exploration results, Mineral Resources and Ore Reserves'. Mr Mapleson consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

FORWARD LOOKING STATEMENTS:

This report contains certain forward-looking statements. Forward-looking statements are subject to a variety of risks and uncertainties beyond the Company's ability to control or predict which could cause actual events or results to differ materially from those anticipated in such forward-looking statements.

ADDITIONAL INFORMATION:

This report does not include reference to all available information on the Company or its Projects and should not be used in isolation as a basis to invest in Redstone Resources Limited. Any potential investors should refer to Redstone Resource Limited's other public releases and statutory reports and consult their professional advisers before considering investing in the Company.

CORPORATE DIRECTORY

DIRECTORS: Mr Richard Homsany (Chairman) Mr Edward van Heemst

Mr Brett Hodgins

SECRETARY: Ms Miranda Conti

REGISTERED AND PRINCIPAL OFFICE: 60 Havelock Street

WEST PERTH WA 6005 Tel: +61 8 9328 2552

Fax: +61 8 9328 2660

email: [email protected]

POSTAL ADDRESS: PO Box 8646

Perth Business Centre WA 6849

WEBSITE: www.redstone.com.au

SHARE REGISTRY: Advanced Share Registry Limited 110 Stirling Highway

NEDLANDS WA 6009

PO Box 1156, NEDLANDS WA 6909

Tel: +61 8 9389 8033

Fax: +61 8 9262 3723

Suite 601, Level 6

225 Clarence Street

SYDNEY NSW 2000 PO Box Q1736

QUEEN VICTORIA BUILDING NSW 1230 Tel: +61 2 8096 3502

Website: www.advancedshare.com.au

HOME STOCK EXCHANGE: Australian Stock Exchange Limited Level 40, Central Park

152-158 St George's Terrace PERTH WA 6000

ASX Codes: RDS, RDSO Tel: +61 8 9224 0000

AUDITOR: Butler Settineri (Audit) Pty Ltd

Unit 16, First Floor

100 Railway Road (Cnr Hay Street) SUBIACO WA 6008

Tel: +61 8 9389 5222

The Directors present their report on the Entity consisting of Redstone Resources Limited ('Redstone' or the Company) and its controlled entities ('Entity') for the financial year ended 30 June 2015.

The names and details of directors in office during the financial year until the date of this report are as follows. Directors were in office for the entire period unless otherwise stated.

Mr Richard Homsany (BCom, LLB (Hons), CPA, Grad Dip FINSIA, F Fin, MAICD, Non-Executive Chairman, Age 45

Mr Homsany is Executive Vice President of Mega Uranium Ltd, a Toronto Stock Exchange listed company.

Prior to this Mr Homsany was a corporate and commercial advisory partner with one of Australia's leading law firms.

He is the principal of Cardinals Lawyers and Consultants and has been admitted as a solicitor for over 20 years. Mr Homsany has extensive experience in corporate law, including advising public resources and energy companies on corporate governance, finance, capital raisings, takeovers, mergers, acquisitions, joint ventures and divestments.

Mr Homsany also has significant board experience with publicly listed resource companies and in the resources industry. He has also worked for an ASX top 50-listed internationally diversified resources company in operations, risk management and corporate.

Mr Homsany is a Certified Practising Accountant and is a fellow of the Financial Services Institute of Australasia (FINSIA). He has a Commerce Degree and Honours Degree in Law from the University of Western Australia and a Graduate Diploma in Finance and Investment from FINSIA.

Over the last 3 years Mr Homsany has held a directorship in Toronto Stock Exchange (Venture Exchange) listed Central Iron Ore Limited (TSX-V) (27 October 2010 to present), ASX Listed Toro Energy Ltd (1 December 2013 to present) and ASX listed Minquest Limited (formerly Merah Resources Ltd) (27 August 2010 to 30 April 2014). Mr Homsany is also chairman of the Health Insurance Fund of Australia Limited.

Mr Edward van Heemst (BCom, MBA, CA, CPA), Non-Executive Director, Age 69

Mr Edward van Heemst is a prominent Perth businessman with over 40 years' experience in the management of a diverse range of activities with large private companies.

Mr van Heemst is currently the Managing Director of Vanguard Press and Chairman of Perth Racing. Mr van Heemst holds a Bachelor of Commerce degree from the University of Melbourne, an MBA from the University of Western Australia and is a member of the Institute of Chartered Accountants Australia.

Mr van Heemst has an extensive knowledge of capital markets and established mining industry networks.

Mr Clinton Wolf (LLB, BA), Non-Executive Director, Age 46 (resigned 7 September 2015)

Mr Wolf is a non-executive director of boutique financial services firm Azure Capital and is a highly regarded Australian Indigenous leader with over 20 years professional experience in the mining industry. Mr Wolf has completed a Bachelor of Laws and Bachelor of Arts degree at Murdoch University.

Mr Wolf is the Chairman of the rapidly growing mining, civil and construction company, Indigenous Construction Resource Group (ICRG). He is also the Chairman of the Western Australian Aboriginal Lands Trust, a significant landholder with responsibility for approximately 27 million hectares or 11% of the State's land mass.

Mr Wolf's previous executive leadership roles include as Chief Executive Officer of the Western Desert Lands Aboriginal Council. He was also Chief Executive Officer of the Yamatji Land and Sea Council and of the Pilbara Native Title Service. Mr Wolf has also consulted to a number of significant mining and exploration companies, including Kimberley Diamonds, Consolidated Minerals, Pilbara Manganese, Pilbara Chromite, Rio Tinto, De Grey Mining, Atlas Iron, Sons of Gwalia, Aquila Resources, Moly Mines and Blina Diamonds.

Mr Brett Hodgins (BSc (Hons), Grad Dip FINSIA), Technical Director, Age 42

Mr Hodgins has over 20 years of professional experience in the resources sector primarily focused on exploration and mining operations. He began his career as a geologist with Robe River Mining and Rio Tinto Iron Ore. During that time he was involved with the commissioning and development of the West Angelas and Hope Downs operations. Mr Hodgins' recent roles include General Manager Project Development for Iron Ore Holdings and he is President / CEO of Central Iron Ore Ltd, a TSX-V listed company gold and iron ore explorer. He brings a wide range of experience in exploration, feasibility studies, operations, and has a broad knowledge of the resource sector.

Mr Hodgins has completed a Bachelor of Science Degree with Honours in Geology from Newcastle University, Diploma of Management and a Graduate Diploma in Finance and Investment from Financial Services Institute of Australasia.

Over the last 3 years Mr Hodgins has held a directorship in Toronto Stock Exchange (Venture Exchange) listed Central Iron Ore Limited (TSX-V) (27 October 2010 to present).

Mr Wrixon Gasteen (BE (Mining) Hons, Qld, MBA (Distinction), Geneva), Interim Managing Director, Age 64 (appointed 12 February 2015, resigned 30 April 2015)

Mr Wrixon Gasteen has a public track record as a Director and Chief Executive Officer of both listed and private companies with a focus on growth, corporate governance and transparency issues. He is a proven 'turnaround' specialist, project implementer and business developer.

Mr Gasteen was appointed as interim managing director on 12 February 2015 to lead the implementation of the Tollu Copper Project Development Plan on its 100% owned tenement (E69/2450), such appointment as Managing Director being conditional on his raising the required funds to facilitate further drilling for the Tollu Development Plan.

This condition was not met and Mr Gasteen resigned as a director of the Company on 30 April 2015.

Company Secretary - Miranda Conti (BCom, CPA, AGIA, ACIS)

Ms Conti is a chartered secretary and certified practising accountant who has been engaged by the Company since March 2006.

Principal Activities

The principal activity of the Entity during the financial year was mineral exploration in Australia.

Review of Operations

The net loss after income tax attributable to members of the Entity for the financial year ended 30 June 2015 amounted to $519,835 (2014: $1,444,367) and net assets were $5,146,897 (2014: $5,666,732).

WEST MUSGRAVE

E69/2450 - 100% Redstone

Redstone Resources Ltd (ASX: RDS) is a Perth-based company focused on highly prospective copper exploration properties in the West Musgrave region of Western Australia.

Redstone's 100% owned E69/2450 tenement is located in the south-east portion of the West Musgrave region of Western Australia. The tenement is located immediately south of a deep-seated crustal suture and hosts Proterozoic-aged volcanic, sedimentary and intrusive rocks that were formed in a failed intra-cratonic rift setting. This has been determined on the basis of evaluating the geodynamic setting, stratigraphic architecture, fluid reservoirs, flow drivers, fluid pathways and mechanisms for metal deposition. Projects identified to-date include the:

• Tollu Project.

• Atlas Project

• Babylon Project

• Pompeii Project.

• Pergamon Project.

• Herculaneum Project

  
  

  Figure 1 - West Musgrave - Location Map Figure 2 - West Musgrave - Project Map

  
  

  Tollu Project

  (E69/2450) - 100% Redstone

  
  

  Redstone's 100% owned Tollu Project is located in the southeast portion of the West Musgrave region of Western Australia (Figure 1). The project is approximately 20km south east of the Blackstone Community on Company's 100% owned tenement E69/2450 (Figure 3).

  
  

  The Tollu Project consists of a large swarm of hydrothermal copper rich quartz veins in a mineralised system covering an area at least 5km2. Malachite rich gossans associated with quartz veins are exposed at surface and form part of a dilatational system between two major structures within the

  Tollu Fault Zone.

  
  

  The Company has identified 16 prospects in total within the Tollu Project. The Company has also identified the potential for a number of other projects on the Tollu tenement (E69/2450) in addition to the Tollu Project. The initial focus is on the Chatsworth Prospect, the Eastern Reef Prospect, the Main Reef Prospect and the Dawyck Prospect (Figure 4).

  
  

  Figure 3 - Tollu Project - Location Map Figure 4 - Tollu Project - 15 of the 16 Prospects

  
  

  Tollu Project - Conceptual Exploration Target

  
  

  During the year Redstone defined an increased Conceptual Exploration Target (Target) for the Tollu Project of 22 to 33 million tonnes of mineralisation at a conceptual grade range of 0.9 - 1.3% Cu, containing 198,000 to 445,000 tonnes of copper. This includes an estimate of 4.3 to 6.4 million tonnes of mineralisation at a conceptual grade range of 1.6 - 2.4%, containing 69,000 to 154,000 tonnes of copper on the Chatsworth Prospect.

  
  

  The potential quantity and grade of the Target is conceptual in nature. It is important to note that there has been insufficient exploration to estimate a Mineral Resource and it is uncertain if further exploration will result in the estimation of a Mineral Resource.

  
  

  This Target is based on the current geological understanding of the mineralised outcrop area at Tollu and coupled with geophysical evidence to suggest that the mineralised environment extends beneath cover to the north and south. Table 1 describes the Target breakdown by Prospect.

  
  

  The Tollu deposit is located in a large, reverse fault system where Cu mineralisation is focused into low stress dilatational jog positions along a north-south structural corridor (Figure 5). High grade Cu mineralisation appears to be constrained to late stage veining within the dilatational positions which results in a limited strike length of the mineralisation. Drilling at the Project has showed these mineralised jogs have a steep plunge competent which has been tested down to a vertical depth of 360 metres. Mineralised jog positions occur at relatively regular intervals of 100 - 300 metres along the structural corridor.

  
  

  Geophysical interpretation suggests this structural corridor extends up to 30 km to the north of the Tollu deposit and acts as a transform structure from the Tjuni Purlka Tectonic Zone, a deep-seated crustal suture. For the purpose of the Target estimation, it is assumed that these reoccurring mineralised pods extend 2 km beneath cover to the north and 1 km to the south of the known mineralisation at Tollu (Figure 5).

  
  

  Prospect	Tonnes Lower	Tonnes Upper	Grade Lower Cu%	Grade Upper Cu%	Contained Copper Lower	Contained Copper Upper
  Eastern Reef	11,67,0000	17,500,000	0.6%	1.0%	75,000	168,000
  Chatsworth	4,300,000	6,400,000	1.6%	2.4%	69,000	154,000
  Main Reef	5,500,000	8,300,000	0.8%	1.2%	44,000	100,000
  Dawyck	200,000	310,000	2.0%	3.0%	4,000	9,000
  Forio	240,000	360,000	1.2%	1.8%	3,000	6,000
  Hampton	180,000	260,000	0.8%	1.2%	1,000	3,000
  Boboli	90,000	140,000	1.2%	1.8%	1,000	3,000
  Killruddery	50,000	80,000	1.2%	1.8%	1,000	1,000
  Tiergarten	40,000	60,000	1.2%	1.8%	500	1,000
  22,270,000	33,410,000	0.9%	1.3%	198,500	445,000

  Table 1 - Tollu Project - Target - Prospect Breakdown

  
  

  Figure 5 - Tollu Project - Exploration Target - Surface Mapping

  
  

  
  

  Chatsworth Prospect

  
  

  The Chatsworth Prospect is a single sub vertical hydrothermal body exposed at the surface. This prospect forms part of the dilation system between two north south trending shears. The Chatsworth Prospect has received the majority of the technical and drilling activity to date.

  
  

  Figure 6 - Tollu Project - Plan Section

  
  

  Figure 7- Chatsworth Long Section

  
  

  
  

  Figure 8- Chatsworth Cross Section

  
  

  
  

  Atlas Project

  E69/2450 - 100% Redstone

  
  

  The Atlas Project lies to the immediate north of the Tollu Project and is proximal to the Tollu Fault Zone (Figure 9). Most of the Project area appears to be under a thin Tertiary under cover. Importantly, much of the architecture of the Tollu Project is repeated in Atlas. In addition is the inclusion of intermediate volcanic rocks of the Hogarth Formation and the intrusion of a granite. In combination with the proximity of the Tollu Fault Zone, and expanse of Tertiary cover, this Project is prospective for a blind Mt Isa style-copper sediment-hosted deposit.

  
  

  Figure 9 - Atlas Project -Location Map

  
  

  The Atlas project is also prospective for the IOCG mineralisation. In the northern portion of the Project, a felsic intrusion is positioned at the margin to the Tollu Fault Zone. Immediately north of this is a magnetised unit with a strike of 1200 metres and width of 500m. The rock type is interpreted to be a porphyritic rhyolite. As a magnetised feature it could represent a portion of stratigraphy not demagnetised by the Tollu Fault Zone, or the footprint of a hydrothermal cell that caused magnetisation consistent with an IOCG analogy. Adjacent to this location, within the damaged and demagnetised domain of the Tollu Fault Zone is a rock specimen P709660. This specimen was studied by petrographic analysis by Teale and Associates (2006) and was observed to be a porphyritic rhyolite that has been sulphidised. It contained pyrite, chalcopyrite, covellite, magnetite and haematite as accessory minerals. Abundant K-feldspar and biotite was present but it is unclear from the description if these were primary or a product of metasomatism. The observation of pyrite, chalcopyrite, covellite, magnetite and haematite favour an IOCG deposit model.

  REDSTONE RESOURCES LIMITED

  ACN 090 169 154

  
  

  DIRECTORS' REPORT

  
  

  Blackstone Range Farmin/Joint Venture

  E69/2108 and E69/2109 - Farmin with Resource Mining Corporation Ltd (ASX: RMI), Redstone earning 90%

  
  

  The Blackstone Range Farmin/Joint Venture is located approximately 25km east of the BHP Babel and Nebo Ni-Cu-PGE discoveries. Under the terms of the Farmin/Joint Venture agreement Redstone can earn up to a 90% interest in the project by completing a feasibility study.

  
  

  The Blackstone Range Project consists of two exploration licences (E69/2108 and E69/2109) (the EL's) covering roughly 338km2 corresponding to two projects: Halley and Saturn. The first is prospective for PGE- (Ni-Cu-Au) and the second for Ni-Cu-PGE. The two projects contain a number of prospects including:

  
  

  • Halleys

  • Halleys NW

  • Saturn; and

  • Saturn East

During the 2014 financial year Applications for Forfeiture (the Plaints) on the EL's were lodged in the Wardens Court by Blackstone Exploration Pty Ltd, in relation to both the 2013 and 2014 expenditure years (collectively the 2013 and 2014 Expenditure Years). The Entity defended these Plaints, which were dismissed on 31 July 2015.

Further, the tenement holders lodged applications for exemption from expenditure for the ELs for the 2013 and 2014 Expenditure Years, which were subject to objections by Blackstone Exploration Pty Ltd. The applications for exemption for the 2013 Expenditure Year was before the Mining Warden during the year, however on 31 July 2015 the Mining Warden dismissed the objection applications by Blackstone Exploration Pty Ltd for both the 2013 and 2014 Expenditure Years.

The Blackstone Range Project tenements were due to expire on 27 April 2015, however the Entity applied to the Department of Mines and Petroleum for extensions of term for a further one year to 27 April 2016 for the EL's, which were granted on 2 September 2015.

Competent Persons Statement

The information in this announcement that relates to Exploration Targets and Exploration Results was authorised by Mr Darryl Mapleson, a Principal Geologist and a full time employee of BM Geological Services, who are engaged as consultant geologists to Redstone Resources Limited. Mr Mapleson is a Fellow of the Australian Institute of Mining and Metallurgy. Mr Mapleson has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration to act as a competent person as defined in the 2012 edition of the 'Australasian Code for reporting of Exploration results, Mineral Resources and Ore Reserves'. Mr Mapleson consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.