UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
  
 FORM
10-Q
 
 [
      X ]
              QUARTERLY
      REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
quarterly period ended July 31,
2008
 
 [   
      ]
              TRANSITION
      REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
transition period from to
 
 Commission
file number 000-52055
  RED
      METAL RESOURCES LTD.
                (Formerly
      Red Lake Exploration, Inc.)(Exact
      name of small business issuer as specified in its
  charter)
  Nevada
                (State
      or other jurisdiction
                of
      incorporation or organization)
              20-2138504
                (I.R.S.
      Employer
                Identification
      No.)195 Park Avenue,
      Thunder Bay Ontario, Canada P7B 1B9
                (Address
      of principal executive offices) (Zip Code)(807)
      345-5380
                (Issuer’s
      telephone number)
 
 Indicate
by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  [ X ] Yes [   ] No
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filed,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
  Large
      accelerated filer
                o
                
                Accelerated
      filer
                oNon-accelerated
      filer
                o
                (Do
      not check if a smaller reporting company)
                Smaller
      reporting company
                x
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). [   ] Yes [ X ] No
 
 Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.  As of September 12, 2008
the number of shares of the registrant’s classes of common stock outstanding was
58,183,333.
  
  TABLE
OF CONTENTS
  PagePart I - Financial
      InformationItem
      1.
              Financial
      StatementsConsolidated
      Balance Sheets – July 31, 2008 (unaudited) and January 31,
      2008
              1Consolidated
      Statements of Operations – For the Three and Six Months EndedJuly
      31, 2008 and 2007 (unaudited)
              2Consolidated
      Statements of Stockholders’ Equity And Comprehensive Loss - ForThePeriod
      From January 10, 2005 (Inception) To July 31, 2008
      (unaudited)
              3Consolidated
      Statements of Cash Flows – For the Six  Months Ended July 31,
      2008and
      2007 (unaudited)
              4Notes
      to Consolidated Financial Statements
              5Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              16Item
      3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              28Item
      4.
              Controls
      and Procedures
              28Part
      II - Other InformationItem
      1.
              Legal
      Proceedings
              28Item
      1A.
              Risk
      Factors
              28Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              28Item
      3.
              Defaults
      Upon Senior Securities
              28Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              28Item
      5.
              Other
      Information
              29Item
      6.
              Exhibits
              29Signatures
              
              30
  
  RED
      METAL RESOURCES LTD.(Formerly
      Red Lake Exploration, Inc.)(AN
      EXPLORATION STAGE COMPANY)CONSOLIDATED
      BALANCE SHEETSJuly
      31,
                
                
                January
      31,2008
                
                
                2008(Unaudited)ASSETSCurrent
      assets:Cash
                
                $
                414,536
                
                
                $
                1,901Accounts
      and other receivables
                
                
                47,707
                
                
                
                -Prepaid
      expenses
                
                
                17,563
                
                
                
                -Total
      current assets
                
                
                479,806
                
                
                
                1,901Unproved
      mineral properties
                
                
                657,000
                
                
                
                -Total
      assets
                
                $
                1,136,806
                
                
                $
                1,901LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)Current
      liabilities:Accounts
      payable
                
                $
                38,212
                
                
                $
                44,719Accrued
      professional fees
                
                
                41,925
                
                
                
                32,018Due
      to related parties
                
                
                102,460
                
                
                
                41,237Notes
      payable to related party, including accrued interest
                
                
                400,656
                
                
                
                -Total
      liabilities
                
                
                583,253
                
                
                
                117,974Commitments
      and contingenciesStockholders'
      equity (deficit):Common
      stock, $0.001 par value, authorized 500,000,000,58,183,333
      and 53,183,334   issued and outstandingat
      July 31, 2008 and January 31, 2008, respectively
                
                
                58,182
                
                
                
                53,183Additional
      paid in capital
                
                
                1,415,317
                
                
                
                120,316Deficit
      accumulated during the exploration stage
                
                
                (927,365
                )
                
                
                (289,572
                )Accumulated
      other comprehensive income
                
                
                7,419
                
                
                
                -Total
      stockholders' equity (deficit)
                
                
                553,553
                
                
                
                (116,073
                )Total
      liabilities and stockholders' equity (deficit)
                
                $
                1,136,806
                
                
                $
                1,901
  The
accompanying notes are an integral part of these consolidated financial
statements
  1
 
 RED
      METAL RESOURCES LTD.(Formerly
      Red Lake Exploration, Inc.)(AN
      EXPLORATION STAGE COMPANY)CONSOLIDATED
      STATEMENTS OF OPERATIONS(UNAUDITED)Three
      Months
                
                
                Six
      Months
                
                
                From
      January 10,Ended
      July 31,
                
                
                Ended
      July 31,
                
                
                2005
      (Inception)2008
                
                
                2007
                
                
                2008
                
                
                2007
                
                
                to
      July 31, 2008RevenueRoyalties
                
                $
                4,537
                
                
                $
                -
                
                
                $
                9,799
                
                
                $
                -
                
                
                $
                9,799Operating
      Expenses:Administration
                
                
                9,012
                
                
                
                -
                
                
                
                51,364
                
                
                
                -
                
                
                
                52,623Advertising
      and promotion
                
                
                22,447
                
                
                
                -
                
                
                
                73,246
                
                
                
                -
                
                
                
                78,083Bank
      charges and interest
                
                
                1,104
                
                
                
                62
                
                
                
                2,600
                
                
                
                109
                
                
                
                3,507Consulting
      fees
                
                
                23,625
                
                
                
                7,950
                
                
                
                47,250
                
                
                
                7,950
                
                
                
                102,900Donated
      rent
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                750
                
                
                
                4,750Donated
      service fees
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,500
                
                
                
                9,500Mineral
      exploration costs
                
                
                233,142
                
                
                
                13,030
                
                
                
                361,687
                
                
                
                13,030
                
                
                
                429,985Office
                
                
                6,285
                
                
                
                6
                
                
                
                10,041
                
                
                
                36
                
                
                
                12,102Professional
      fees
                
                
                32,745
                
                
                
                17,723
                
                
                
                56,709
                
                
                
                25,123
                
                
                
                148,531Regulatory
                
                
                4,230
                
                
                
                4,134
                
                
                
                4,255
                
                
                
                4,159
                
                
                
                15,925Travel
      and entertainment
                
                
                28,379
                
                
                
                27,777
                
                
                
                34,854
                
                
                
                27,777
                
                
                
                63,985Salaries,
      wages and benefits
                
                
                4,930
                
                
                
                -
                
                
                
                4,930
                
                
                
                -
                
                
                
                4,930Impairment
      loss on mineral property costs
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                9,000Foreign
      exchange gains
                
                
                223
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                687Total
      operating expenses
                
                
                366,122
                
                
                
                70,682
                
                
                
                646,936
                
                
                
                80,434
                
                
                
                936,508Operating
      loss
                
                
                (361,585
                )
                
                
                (70,682
                )
                
                
                (637,137
                )
                
                
                (80,434
                )
                
                
                (926,709
                )Interest
      on notes payable
                
                
                (656
                )
                
                
                -
                
                
                
                (656
                )
                
                
                -
                
                
                
                (656
                )Net
      loss for the period
                
                $
                (362,241
                )
                
                $
                (70,682
                )
                
                $
                (637,793
                )
                
                $
                (80,434
                )
                
                $
                (927,365
                )Net
      loss per share - basic and diluted
                
                $
                (0.01
                )
                
                $
                (0.00
                )
                
                $
                (0.01
                )
                
                $
                (0.00
                )Weighted
      average number of sharesoutstanding
      - basic and diluted
                
                
                58,031,159
                
                
                
                66,431,522
                
                
                
                55,677,839
                
                
                
                71,800,276
  The
accompanying notes are an integral part of these unaudited consolidated
financial statements
  2
  RED
      METAL RESOURCES LTD.(Formerly
      Red Lake Exploration, Inc.)(AN
      EXPLORATION STAGE COMPANY)CONSOLIDATED
      STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSSFOR
      THE PERIOD FROM JANUARY 10, 2005 (INCEPTION) TO JULY 31,
    2008(UNAUDITED)Common
      Stock Issued
              
              
              AccumulatedAdditional
              
              
              OtherNumber
      of
              
              
              
              
              
              Paid-in
              
              
              ComprehensiveShares
              
              
              Amount
              
              
              Capital
              
              
              Income
      (Loss)
              
              
              TotalBalance
      at January 10,  2005 (Inception)
              
              
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (825
              )
              
              
              (825
              )Balance
      at January 31, 2005
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (825
              )
              
              
              (825
              )Common
      stock issued for cash
              
              
              77,350,000
              
              
              
              77,350
              
              
              
              (18,100
              )
              
              
              -
              
              
              
              59,250Donated
      services
              
              
              -
              
              
              
              -
              
              
              
              3,000
              
              
              
              -
              
              
              
              3,000Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (12,363
              )
              
              
              (12,363
              )Balance
      at January 31, 2006
              
              
              77,350,000
              
              
              
              77,350
              
              
              
              (15,100
              )
              
              
              (13,188
              )
              
              
              49,062Donated
      services
              
              
              -
              
              
              
              -
              
              
              
              9,000
              
              
              
              -
              
              
              
              9,000Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (43,885
              )
              
              
              (43,885
              )-Balance
      at January 31, 2007
              
              
              77,350,000
              
              
              
              77,350
              
              
              
              (6,100
              )
              
              
              (57,073
              )
              
              
              14,177Donated
      services
              
              
              -
              
              
              
              -
              
              
              
              2,250
              
              
              
              -
              
              
              
              2,250Return
      of common shares to treasury
              
              
              (24,500,000
              )
              
              
              (24,500
              )
              
              
              24,499
              
              
              
              -
              
              
              
              (1
              )Net
      loss for the six months ended July 31, 2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (80,434
              )
              
              
              (80,434
              )Balance
      at July 31, 2007
              
              
              52,850,000
              
              
              
              52,850
              
              
              
              20,649
              
              
              
              (137,507
              )
              
              
              (64,008
              )Common
      stock issued for cash
              
              
              333,334
              
              
              
              333
              
              
              
              99,667
              
              
              
              -
              
              
              
              100,000Net
      loss for the six months ended January 31, 2008
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (152,065
              )
              
              
              (152,065
              )Balance
      at January 31, 2008
              
              
              53,183,334
              
              
              
              53,183
              
              
              
              120,316
              
              
              
              (289,572
              )
              
              
              (116,073
              )Common
      stock issued for cash
              
              
              4,999,999
              
              
              
              4,999
              
              
              
              1,295,001
              
              
              
              -
              
              
              
              1,300,000Balance
      before net loss and foreign currency exchange gain
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,183,927Net
      loss for the six months ended July 31, 2008
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (637,793
              )
              
              
              (637,793
              )Foreign
      currency exchange gain
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              7,419
              
              
              
              7,419Comprehensive
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (630,374
              )Balance
      at July 31, 2008
              
              
              58,183,333
              
              
              $
              58,182
              
              
              $
              1,415,317
              
              
              $
              (919,946
              )
              
              $
              553,553




On June
15, 2007, the Company declared a forward split of 13 new common shares for every
one common share outstanding. All share amounts have been retroactively adjusted
for all periods presented.


The
accompanying notes are an integral part of these unaudited consolidated
financial statements


3
  RED
      METAL RESOURCES LTD.(Formerly
      Red Lake Exploration, Inc.)(AN
      EXPLORATION STAGE COMPANY)CONSOLIDATED
      STATEMENTS OF CASH FLOWS(UNAUDITED)Six
      Months
                
                
                From
      January 10,Ended
      July 31,
                
                
                2005
      (Inception)2008
                
                
                2007
                
                
                to
      July 31, 2008Cash
      flows from operating activities:Net
      loss
                
                $
                (637,793
                )
                
                $
                (80,434
                )
                
                $
                (927,365
                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Donated
      services and rent
                
                
                -
                
                
                
                2,250
                
                
                
                14,250Impairment
      loss on mineral property costs
                
                
                -
                
                
                
                -
                
                
                
                9,000Changes
      in operating assets and liabilities:Accounts
      and other receivables
                
                
                (47,707
                )
                
                
                -
                
                
                
                (47,707
                )Prepaid
      expenses
                
                
                (17,563
                )
                
                
                -
                
                
                
                (17,563
                )Accounts
      payable
                
                
                (6,507
                )
                
                
                55,040
                
                
                
                38,213Accrued
      professional fees
                
                
                9,907
                
                
                
                9,514
                
                
                
                41,925Due
      to related parties
                
                
                61,223
                
                
                
                -
                
                
                
                102,458Accrued
      interest on notes payable
                
                
                656
                
                
                
                -
                
                
                
                656Net
      cash used in operating activities
                
                
                (637,784
                )
                
                
                (13,630
                )
                
                
                (786,133
                )Cash
      flows from investing activities:Acquisition
      of unproved mineral properties
                
                
                (657,000
                )
                
                
                -
                
                
                
                (666,000
                )Net
      cash used in investing activities
                
                
                (657,000
                )
                
                
                -
                
                
                
                (666,000
                )Cash
      flows from financing activities:Notes
      payable
                
                
                400,000
                
                
                
                -
                
                
                
                400,000Proceeds
      from issuance of common stock
                
                
                1,300,000
                
                
                
                -
                
                
                
                1,459,250Net
      cash provided by financing activities
                
                
                1,700,000
                
                
                
                -
                
                
                
                1,859,250Effects
      of foreign currency exchange
                
                
                7,419
                
                
                
                -
                
                
                
                7,419Increase
      (decrease) in cash during the period
                
                
                412,635
                
                
                
                (13,630
                )
                
                
                414,536Cash,
      beginning of period
                
                
                1,901
                
                
                
                15,477
                
                
                
                -Cash,
      end of period
                
                $
                414,536
                
                
                $
                1,847
                
                
                $
                414,536Supplemental
      disclosures:Cash
      paid during the period for:Taxes
                
                $
                -
                
                
                $
                -
                
                
                $
                -Interest
                
                $
                -
                
                
                $
                -
                
                
                $
                -Non-cash
      financing transaction:Acquisition
      of 24,500,000 common shares
                
                $
                -
                
                
                $
                -
                
                
                $
                1
 The
accompanying notes are an integral part of these unaudited consolidated
financial statements
 4
  RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JULY
31, 2008
 (UNAUDITED)


NOTE
1 – ORGANIZATION AND BASIS OF PRESENTATION
  Nature
of Operations
  Red Metal
Resources Ltd. was incorporated on January 10, 2005 under the laws of the State
of Nevada as Red Lake Exploration, Inc. and changed its name to Red Metal
Resources Ltd. on August 27, 2008.  On August 21, 2007, Red Metal
acquired a 99% interest in Minera Polymet Limitada (Polymet), a limited
liability company formed on August 21, 2007 under the laws of the Republic of
Chile. In these notes, the terms “Red Metal”, “Company”, “we”, “us” or “our”
mean Red Metal Resources Ltd. and its subsidiary, Polymet, whose operations are
included in these unaudited consolidated financial statements.  (Note
10)
 
 Red Metal
is involved in acquiring and exploring mineral properties in
Chile.  The Company has not determined whether its properties contain
mineral reserves that are economically recoverable.
 
 Exploration
Stage
 
 These
unaudited consolidated financial statements and related notes are presented in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and are expressed in United States
dollars.  Red Metal has not produced any significant revenues from its
principal business or commenced significant operations and is considered an
exploration stage company as defined by SEC Guide 7 with reference to Statement
of Financial Accounting Standard (SFAS) No.7 Accounting and Reporting by
Development Stage Enterprises.
 
 The
Company is in the early exploration stage.  In the exploration stage,
management devotes most of its time to conducting exploratory work and
developing its business.  These unaudited consolidated financial
statements have been prepared on a going-concern basis, which implies the
Company will continue to realize its assets and discharge its liabilities in the
normal course of business.  The Company has never paid any dividends
and is unlikely to pay dividends or generate earnings in the immediate or
foreseeable future.  The Company’s continuation as a going concern and
its ability to emerge from the exploration stage with any planned principal
business activity is dependent upon the continued financial support of its
shareholders and its ability to obtain the necessary equity financing and attain
profitable operations.
 
 Basis
of Presentation
 
 These
unaudited consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States for interim
financial information and with the instructions to Form 10-Q and Article 8 of
Regulation S-X.  They do not include all information and notes
required by generally accepted accounting principles for complete financial
statements.  However, except as disclosed herein, there have been no
material changes in the information disclosed in the notes to the consolidated
financial statements included in Red Metal’s annual report on Form 10-KSB for
the year ended January 31, 2008. In the opinion of management, all adjustments
(including normal recurring accruals) considered necessary for a fair
presentation have been included.  Operating results for the three and
six months ended July 31, 2008 are not necessarily indicative of the results
that may be expected for any other interim period or the entire
year.  For further information, these unaudited consolidated financial
statements and the related notes should be read in conjunction with the
Company’s audited consolidated financial statements for the year ended January
31, 2008 included in the Company’s annual report on Form 10-KSB.
  5
  RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JULY
31, 2008
 (UNAUDITED)
 
 
 NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
 
 A summary
of the Company’s significant accounting policies is included in the Company’s
annual report on form 10-KSB for the year ended January 31, 2008. Additional
significant accounting policies that either affect the Company or have been
developed since January 31, 2008 are summarized below:
  Reclassifications
 
 Certain
prior period amounts in the accompanying financial statements have been
reclassified to conform to the current period’s presentation. These
reclassifications had no effect on the results of operations or financial
position for any period presented.
 
 Financial
Instruments
 
 Foreign
Exchange Risk
 
 The
Company is subject to foreign exchange risk for sales and purchases denominated
in foreign currencies. The functional currency for Polymet is the Chilean peso.
Foreign currency risk arises from the fluctuation of foreign exchange rates and
the degree of volatility of these rates relative to the United States
dollar.  The Company does not believe that it has any material risk to
its foreign currency exchange.
 
 Concentration
of Credit Risk
 
 Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash.
 
 At July
31, 2008 and January 31, 2008, the Company had approximately $415,000 and
$1,900, respectively in cash that was not insured. This cash is on deposit with
a major chartered Canadian bank and a Chilean bank. As part of its cash
management process, the Company performs periodic evaluations of the relative
credit standing of these financial institutions. The Company has not experienced
any cash losses and does not believe that its cash is exposed to any significant
credit risk.
 
 Revenue
Recognition
 
 The
Company records revenues and royalties from the sale of minerals when persuasive
evidence of an arrangement exists, delivery to the customer has occurred and
risk of ownership or title has transferred, and collectability is reasonably
assured. Interest income is recognized at the end of each month.
 
 During
the six months ended July 31, 2008, we received $9,799 in royalty
revenue.   (Notes 4 and 6)
 
 Unproved
Mineral Properties and Exploration and Development Costs
  The costs
of acquiring mineral properties are capitalized at the date of acquisition.
After acquisition, various factors can affect the recoverability of the
capitalized costs. If, after review, management concludes that the carrying
amount of a mineral property is impaired, it will be written down to estimated
fair value. Exploration costs incurred on mineral properties are expensed as
incurred. Development costs incurred on proven and probable reserves will be
capitalized. Upon commencement of production, capitalized costs will be
amortized using the unit-of-production method over the estimated life of the ore
body based on proven and probable reserves (which exclude non-recoverable
reserves and anticipated processing losses).
  6
 
 RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JULY
31, 2008
 (UNAUDITED)
   NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, continued
 
 Long-Lived
Assets
  The
Company accounts for long-lived assets under SFAS Nos. 142 and 144 (SFAS 142 and
144), Accounting for Goodwill
and Other Intangible Assets and Accounting for Impairment or
Disposal of Long-Lived Assets.  In accordance with SFAS 142 and
144, long-lived assets held and used by the Company are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The Company recognizes impairment when the sum
of the expected undiscounted future cash flows is less than the carrying amount
of the asset. Impairment losses, if any, are measured as the excess of the
carrying amount of the asset over its estimated fair value.  The
Company’s only long-lived assets are its unproven mineral
interests.  At July 31, 2008, the Company had no impairment losses
with respect to its unproven mineral interests.
  Asset
Retirement Obligations
  The
Company will record the fair value of an asset retirement obligation as a
liability in the period in which it incurs a legal obligation associated with
the retirement of tangible long-lived assets that result from the acquisition,
construction, development, and/or normal use of the long-lived assets. The
Company will also record a corresponding asset which it will amortize over the
life of the asset. Subsequent to the initial measurement of the asset retirement
obligation, the Company will adjust the obligation at the end of each period to
reflect the passage of time (accretion expense) and changes in the estimated
future cash flows underlying the obligation (asset retirement cost). At July 31,
2008 and January 31, 2008, the Company had no asset retirement
obligations.
  Comprehensive
Loss
 
 Comprehensive
loss reflects changes in equity that result from transactions and economic
events from non-owner sources. At July 31, 2008, the Company had a foreign
currency exchange gain of $7,419 and a comprehensive loss of
$630,374.
 
 Recent
Accounting Pronouncements
  In
September 2006, the Financial Accounting Standards Board (FASB) issued SFAS
No. 157, Fair Value
Measurements(SFAS No. 157).  SFAS No. 157 defines
fair value, establishes a framework for measuring fair value and enhances
disclosures about fair value measures required under other accounting
pronouncements, but does not change existing guidance as to whether or not an
instrument is carried at fair value.  SFAS No. 157 was effective
for the Company as of February 1, 2008.  The adoption of SFAS 157 did
not have a significant impact on our unaudited consolidated financial
statements.
  7
  RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JULY
31, 2008
 (UNAUDITED)
 NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, continued
 
 Recent
Accounting Pronouncements, continued
 
 In
February 2007, the FASB issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial
Assets and Financial Liabilities,including an amendment of
SFAS No. 115 (SFAS 115), Accounting for Certain Investments
in Debt and Equity Securities, which applies to all entities with
available-for-sale and trading securities. This statement permits entities to
choose to measure many financial instruments and certain other items at fair
value. The objective is to improve financial reporting by providing entities
with the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. This statement is effective as of the
beginning of an entity’s first fiscal year that begins after November 15, 2007.
Early adoption is permitted as of the beginning of a fiscal year that begins on
or before November 15, 2007, provided the entity also elects to apply the
provisions of FASB Statement No. 157, Fair Value Measurements. The
Company adopted SFAS 159 on February 1, 2008. The adoption of SFAS 159 did not
have a material impact on the Company’s unaudited consolidated financial
statements as the Company did not elect the fair value option for any of its
financial assets or liabilities.
 
 In
June 2007, the Emerging Issues Task Force (EITF) of the FASB reached a
consensus on Issue No. 07-3, Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and
Development Activities(EITF 07-3). EITF 07-3 requires that
non-refundable advance payments for goods or services that will be used or
rendered for future research and development activities must be deferred and
capitalized.  As the related goods are delivered or the services are
performed, or when the goods or services are no longer expected to be provided,
the deferred amounts must be recognized as an expense.  This issue is
effective for financial statements issued for fiscal years beginning after
December 15, 2007 and earlier application is not permitted. This consensus
is to be applied prospectively for new contracts entered into on or after the
effective date.  The Company adopted EITF 07-03 on February 1,
2008.  The adoption of EITF 07-03 did not have a material effect on
our unaudited consolidated financial statements.
 
 In
March 2008, the FASB issued SFAS No. 161 (SFAS 161), Disclosures about Derivative
Instruments and Hedging Activities – An Amendment of FASB Statement No. 133
(SFAS 133). This statement is intended to improve financial
reporting of derivative instruments and hedging activities by requiring enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS 133
and its related interpretations and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance and
cash flows. The provisions of SFAS 161 are effective for fiscal years beginning
after November 15, 2008.  SFAS 161 will be effective for the
Company on February 1, 2009.  The Company is evaluating the impact
that adoption of SFAS 161 might have on its consolidated financial statement
disclosures.
  In May,
2008, FASB issued SFAS No. 162 (SFAS 162), The Hierarchy of Generally Accepted
Accounting Principles. SFAS 162 identifies the sources of accounting
principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States. SFAS 162 is effective 60 days following the SEC's approval of the
Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. The Company is
reviewing the effect, if any, that the proposed guidance will have on its
consolidated financial statements disclosures.
  8
  RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JULY
31, 2008
 (UNAUDITED)
 NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, continued
 
 Recent
Accounting Pronouncements, continued
 
 In May,
2008, FASB issued SFAS No. 163 (SFAS 163), Accounting for Financial Guarantee
Insurance Contracts—an interpretation of FASB Statement No.
60.  Diversity exists in practice in accounting for financial
guarantee insurance contracts by insurance enterprises under FASB Statement No.
60, Accounting and Reporting
by Insurance Enterprises. That diversity results in inconsistencies in
the recognition and measurement of claim liabilities because of differing views
about when a loss has been incurred under FASB Statement No. 5, Accounting for Contingencies.
This Statement requires that an insurance enterprise recognize a claim liability
prior to an event of default (insured event) when there is evidence that credit
deterioration has occurred in an insured financial obligation. This Statement
also clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement to be used to account for
premium revenue and claim liabilities. Those clarifications will increase
comparability in financial reporting of financial guarantee insurance contracts
by insurance enterprises. This Statement requires expanded disclosures about
financial guarantee insurance contracts. The accounting and disclosure
requirements of the Statement will improve the quality of information provided
to users of financial statements. SFAS 163 will be effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years; disclosure requirements in paragraphs
30(g) and 31 are effective for the first period (including interim periods)
beginning after May 23, 2008. We do not expect the adoption of SFAS 163 to have
a significant impact on our consolidated financial statements.
  NOTE
3 – GOING CONCERN
 
 These
unaudited consolidated financial statements have been prepared on a going
concern basis, which implies the Company will continue to realize its assets and
discharge its liabilities in the normal course of business. The Company has not
generated any significant revenues from mineral sales since inception, has never
paid any dividends and is unlikely to pay dividends or generate significant
earnings in the immediate or foreseeable future. The continuation of the Company
as a going concern is dependent upon the continued financial support of its
shareholders, the ability of the Company to obtain necessary equity financing to
continue operations, and the attainment of profitable operations. The Company’s
ability to achieve and maintain profitability and positive cash flows is
dependent upon its ability to locate profitable mineral properties, generate
revenues from mineral production and control production costs. Based upon its
current plans, the Company expects to incur operating losses in future periods.
At July 31, 2008, the Company had a working capital deficit of $103,447 and has
accumulated losses of $927,365 since inception. These factors raise substantial
doubt regarding the Company’s ability to continue as a going concern. There is
no assurance that the Company will be able to generate significant revenues in
the future. These unaudited consolidated financial statements do not give any
effect to any adjustments that would be necessary should the Company be unable
to continue as a going concern and therefore be required to realize its assets
and discharge its liabilities in other than the normal course of business and at
amounts different from those reflected in the accompanying unaudited
consolidated financial statements.
  9
  RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JULY
31, 2008
 (UNAUDITED)
 NOTE 4 – RELATED-PARTY
TRANSACTIONS
  The
following amounts were due to related parties at July 31, 2008 and January 31,
2008:
 
 July
      31,
                  2008
                
                
                January
      31,
                  2008Due
      to a company controlled by an officer (a)
                
                $
                2,519
                
                
                $
                -Due
      to a company controlled by directors (b)
                
                
                82,572
                
                
                
                39,010Due
      to a company owned by a major shareholder and a relative of the president
      (c)
                
                
                14,273
                
                
                
                -Due
      to a major shareholder (d)
                
                
                3,096
                
                
                
                -Due
      to a former president (e)
                
                
                -
                
                
                
                2,227Total
      due to related parties
                
                $
                102,460
                
                
                $
                41,237
  (a)
                During
      the six months ended July 31, 2008, the Company paid or accrued a total of
      $53,674 in consulting, office and travel and entertainment costs to a
      company controlled by an officer.
 
 (b)
                During
      the six months ended July 31, 2008 and 2007, the Company paid or accrued a
      total of $190,699 and $0 respectively in administration, advertising and
      promotion, mineral exploration, office, and travel and entertainment costs
      to a company controlled by two
directors.
 
 (c)
                During
      the six months ended July 31, 2008, the Company paid $357,000in unproved
      mineral property costs and received $9,799 in royalty income from a
      company controlled by a major shareholder and a relative of the
      president.  The Company also paid or accrued $78,567 in costs
      due to the same company for administration, office, advertising and
      promotion, professional fees, mineral exploration and travel and
      entertainment.  During the six months ended July 31, 2007, the
      Company had no transactions with this company.  (Notes 2, 6 and
      10)
 
 (d)
                During
      the six months ended July 31, 2008 and 2007, the Company paid or accrued
      $18,046 and $0, respectively, in administration, office, mineral
      exploration and travel and entertainment costs to a major
      shareholder.
 
 (e)
                During
      the six months ended July 31, 2008 and 2007, the Company recognized $0 and
      $2,250 in donated rent and services provided by a former
      president.
  10
 
 RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JULY
31, 2008
 (UNAUDITED)
   NOTE
4 – RELATED-PARTY TRANSACTIONS, continued
 
 On August
1, 2007, the Company issued 333,334 units at $0.30 per unit in a private
placement of securities for cash of $100,000 to a relative of the
president.  (Notes 7 and 8)
 
 On April
21, 2008, the Company issued 40,000 units at $0.25 per unit in a private
placement of securities for cash of $10,000 to a director.  (Notes 7
and 8)
 
 On April
21, 2008, the Company issued 2,000,000 units at $0.25 per unit in a private
placement of securities for cash of $500,000 to a relative of the
president.  (Notes 7 and 8)
 
 On May
14, 2008, the Company issued 333,333 units at $0.30 per unit in a private
placement of securities for cash of $100,000 to a relative of the
president.  (Notes 7 and 8)
  NOTE
5 – NOTES PAYABLE TO RELATED PARTY, INCLUDING ACCRUED INTEREST
 
 July
      31,
                  2008
                
                
                January
      31,
                  2008Notes
      payable, on demand, unsecured, bearing interest at 8% per annum,
      compounded monthly
                
                $
                400,000
                
                
                $
                -Accrued
      interest
                
                
                656
                
                
                
                -Notes
      payable to related party, including accrued interest
                
                $
                400,656
                
                
                $
                -
 
 NOTE
6 – UNPROVED MINERAL PROPERTIES
  July
      31,
                  2008
                
                
                January
      31,
                  2008Acquisition
      costs
                
                $
                657,000
                
                
                $
                -Total
      acquisition costs
                
                $
                657,000
                
                
                $
                -
  Farellon
Alto Uno al Ocho Mineral Properties
 
 On
September 25, 2007, Polymet entered into an agreement with a related company to
acquire by assignment the option to purchase the Farellon Alto Uno al Ocho
mineral properties located in the Sierra Pan de Azucar, Province of Huasco, III
Region of Atacama in Chile. On April 25, 2008, we exercised the option to
acquire the right to purchase the Farellon Alto Uno al Ocho mining holdings by
paying $250,000 to the optionor.  On April 25, 2008 we paid $300,000
to the vendor to acquire title to the properties. We can complete our
acquisition of the properties by paying a royalty equal to 1.5% of the net sales
of minerals extracted from the property up to a total of
$600,000.  The royalty payments are due monthly once exploitation
begins, and are subject to minimum payments of $1,000 per month.  The
Company can pay any remainder due on the royalty at any time. (Notes 4 and
9)
  11
  RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JULY
31, 2008
 (UNAUDITED)
   NOTE
6 – UNPROVED MINERAL PROPERTIES, continued
 
 Camila
Mineral Properties
  On
February 1, 2008, Polymet entered into an option agreement with a related
company to acquire an option to purchase the Camila, Camila Dos, Camila Tres and
Camila Cuatro mineral properties, located in Quebrada Jilguero, Commune of
Vallenar, Province of Huasco, III Region of Atacama in Chile.  Under
the terms of the agreement, we paid $5,000 on February 1, 2008 and $50,000 on
May 23, 2008, and agreed to pay $50,000 by November 21, 2008 to exercise the
option.  If we exercise the option, we are required to pay $50,000 by
December 7, 2008 and $100,000 by June 7, 2009 to the owners of the properties to
keep the option in good standing.  The Company can exercise the option and
purchase the properties by paying $200,000 to the owners by December 7, 2009 and
a royalty equal to 6% of the net sale of minerals extracted from the properties
to a total of $1,000,000.  The full $1,000,000 or unpaid portion is
due and payable by December 7, 2011.  (Notes 4 and 9)
  Santa
Rosa Mineral Properties
  On
February 1, 2008, Polymet entered into an option agreement with a related
company to acquire an option to purchase the Santa Rosa Uno Al Seis and Porfiada
Uno Al Diez mining properties, located in Sierra Cordon El Tomate, Quebrada de
Agua Grande, Commune of Freirina, Province of Huasco, III Region of Atacama in
Chile.  Under the terms of the agreement we paid $9,500 on February 1,
2008, $8,500 per month from March 5, 2008 to July 5, 2008 and $50,000 by August
5, 2008, to exercise the option.  Once we exercise the option, we are
required to pay $7,500 per month from August 20, 2008 to August 20, 2009 and
$10,000 per month from September 20, 2009 to June 20, 2011 to the owners of the
properties to exercise the property purchase option.
 
 Once the
option with the property owner is exercised, we can purchase the mineral
properties by paying the owners of the properties the greater of a royalty equal
to 1.5% of the net sale of minerals extracted from the properties or a minimum
of $1,000 per month once exploitation begins, until the total purchase price of
$600,000 has been paid.  The related company has been conducting
exploitation work since October 2007 and made royalty payments to the owners of
the properties from October 2007 to July 2008 of $10,000.  At July 31,
2008 we are required to pay $590,000 to acquire the property because these
royalty payments have been applied against the $600,000 property acquisition
price.  (Notes 9 and 10)
 
 This same
related company has the rights to extract and sell minerals from the property
until August 5, 2008, and must pay us a royalty equal to 5% of the net proceeds
it receives from the processor. During the six months ended July 31, 2008,
we received $9,799 in royalties from the related company’s sale of minerals
extracted from the Santa Rosa properties.  (Notes 2 and
4)
 
 See Note
10 for additional mineral property acquisitions.
 
 NOTE
7 – COMMON STOCK
  On May
14, 2008, the Company issued 999,999 units at $0.30 per unit in a private
placement for cash of $300,000.  Each unit consists of one share of
common stock and one warrant entitling the holder to purchase one share of
common stock for $0.50.   (Notes 4 and 8)
 
 On April
21, 2008, the Company issued 4,000,000 units at $0.25 per unit in a private
placement for cash of $1,000,000.  Each unit consists of one share of
common stock and one warrant entitling the holder to purchase one share of
common stock for $0.35.  (Notes 4 and 8)
  12
 RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JULY
31, 2008
 (UNAUDITED)
   NOTE
7 – COMMON STOCK, continued
 
 On August
1, 2007, the Company issued 333,334 units at $0.30 per unit in a private
placement for cash of $100,000. Each unit consists of one common share and 1⁄2 of
one warrant (a total of 166,667 warrants).  (Notes 4 and
8)
 
 On June
20, 2007 the Company acquired 24,500,000 shares of its own common stock
from its former president for consideration of $1.  The Company
cancelled these shares.
  On June
15, 2007, the Company declared a forward stock split of 13 shares for every one
share of common stock.   All issued shares were retroactively
adjusted for all periods presented.
  On
January 31, 2006, the Company issued 10,850,000 shares of common stock (adjusted
to reflect the forward split) at $0.0035714 per share for proceeds of
$38,750.
  On
October 28, 2005, the Company issued 24,500,000 shares of common stock (adjusted
to reflect the forward split) at $0.0007143 per share for proceeds of
$17,500.
  On
October 3, 2005, the Company issued 42,000,000 shares of common stock (adjusted
to reflect the forward split) to its president at $0.00007143 per share for
proceeds of $3,000.
  For
subsequent increase in the authorized capital, refer to Note
10.
 
 NOTE
      8 – WARRANTS
 
 On May
14, 2008, the Company issued 999,999 share purchase warrants which entitle the
holder to purchase up to 999,999 shares of the Company’s common stock at $0.50
per share.  The warrants have a term of two years and will expire on
May 14, 2010.  The warrants are required to be exercised if, at any
time after November 14, 2008 the Company’s shares trade at $0.80 per share for
30 consecutive days or more. At July 31, 2008 none of these warrants had been
exercised. (Notes 4 and 7)
  On April
21, 2008, the Company issued 4,000,000 share purchase warrants which entitle the
holder to purchase up to 4,000,000 shares of the Company’s common stock at $0.35
per share. The warrants have a term of two years and will expire on April 21,
2010.   At July 31, 2008 none of these warrants had been
exercised. (Notes 4 and 7)
 
 On August
1, 2007, the Company issued 333,334 share purchase warrants which entitle the
holder to purchase up to 166,667 shares of the Company’s common stock at $0.50
per share.  Two warrants entitle the holder to purchase one share of
common stock for $0.50. The warrants have a two-year term and will expire on
August 1, 2009.  At July 31, 2008 none of these warrants had been
exercised.  (Notes 4 and 7)
 
 All of
the Company’s warrants were issued in units that included shares of common
stock.  When the units were issued, the Company allocated 25% of the
proceeds of the issuance to the estimated fair value of the
warrants.  The Company considers the fair value amount to be
reasonable and this allocation has been consistently applied.
  13
 
 RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JULY
31, 2008
 (UNAUDITED)
   NOTE
8 – WARRANTS, continued
 
 Warrants
Outstanding
 
 At July
31, 2008, the following share purchase warrants were outstanding:
 
 Number
      of Shares
                
                
                Exercise
      Price Per Share
                
                Expiry
      Date166,667
                
                
                $
                0.50
                
                August
      13, 20094,000,000
                
                
                $
                0.35
                
                April
      21, 2010999,999
                
                
                $
                0.50
                
                May
      14, 20105,166,666
 
 NOTE
9 – COMMITMENTS
 
 Financing
 
 On May 2,
2008, the Company entered into a letter agreement with a brokerage house whereby
the brokerage house agreed to privately place up to $6,000,000 of units of the
Company’s common stock and common stock purchase warrants.  The
Company has agreed to a pay the brokerage house a commission equal to 9% of the
total financing and issue warrants equal to 10% of the total number of units
issued.  The Company paid a non-refundable work fee of $25,000 which
will be deducted from the commission.  The contract is effective for
six months.
 
 Drilling
Contract
 
 On March
5, 2008, we entered into a contract with a Chilean drilling company for
exploration drilling on the Camila and Santa Rosa mineral properties. Under the
terms of the contract the Company agreed to pay $335,596 (169,400,000 Chilean
pesos) and the drilling company agreed to drill a total of 3,000 meters on our
properties.
 
 Commitments
 
 At July
31, 2008, the Company had the following contractual obligations under their
drilling contract and the Farellon, Camila and Santa Rosa
agreements.  (Notes 6 and 10)
  Future
      minimum payments
                
                Drilling
                  Contract
                
                
                Property
                  option
                  payments
                
                
                Partial
                  purchase
      payments
                
                
                Royalty
                  payments2009
                
                
                106,379
                
                
                
                100,000
                
                
                
                240,000
                
                
                
                12,0002010
                
                
                -
                
                
                
                -
                
                
                
                317,500
                
                
                
                12,0002011
                
                
                -
                
                
                
                -
                
                
                
                110,000
                
                
                
                12,0002012
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,012,0002013
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                12,000After
      2013
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,130,000Total
      future minimum payments
                
                
                106,379
                
                
                
                100,000
                
                
                
                667,500
                
                
                
                2,190,000
  14
  RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JULY
31, 2008
 (UNAUDITED)
   NOTE
10 – SUBSEQUENT EVENT
 
 Santa
Rosa Mineral Properties
 
 On August
8, 2008, we paid $50,000 and exercised our option with a related company to
acquire an option to purchase the Santa Rosa mineral
properties.  (Notes 4, 6 and 9)
 
 On August
8, 2008, our agreement with a related company to extract and sell minerals from
the Santa Rosa mineral properties expired.  Subsequent to August 8,
2008, we reached a verbal agreement with this same related company whereby they
will continue to extract and sell minerals from the Santa Rosa mineral
properties and pay us a royalty equal to 5% of the net proceeds they receive
from the processor.  (Notes 4 and 6)
 
 Matteo
Mineral Properties
 
 On
September 9, 2008, we signed a letter of intent to acquire 76 hectares near the
Camila property from a related party for $20,000, and applied to the government
for exploration licenses covering 800 hectares surrounding the 76
hectares.  (Notes 4 and 6)
 
 Cecil
Mineral Properties
 
 On
September 9, 2008, we bought the Cecil claims covering 730 hectares consisting
of 500 hectares of exploration licenses and 230 hectares of titled mining claims
near the Farellon property for $20,000.  (Note 6)
 
 Common
Stock
 
 On August
27, 2008, our authorized common stock increased from 75,000,000 to 500,000,000
with a par value of $0.001 per share.  (Note 7)
 
 Change
of Name
 
 On August
27, 2008, we changed our name to Red Metal Resources Ltd.  (Note
1)
  15
 
 Item
2.  Management’s Discussion and Analysis or Plan of
Operation
 
 Forward-Looking Statements
 
 This
quarterly report on Form 10-Q filed by Red Metal Resources Ltd. contains
forward-looking statements.  These are statements regarding financial
and operating performance and results and other statements that are not
historical facts.  The words “expect,” “project,” “estimate,”
“believe,” “anticipate,” “intend,” “plan,” “forecast,” and similar expressions
are intended to identify forward-looking statements.  Certain
important risks could cause results to differ materially from those anticipated
by some of the forward-looking statements.  Some, but not all, of
these risks include, among other things:
 ·
                  general
      economic conditions, because they may affect our ability to raise
      money,
 ·
                  our
      ability to raise enough money to continue our
  operations,
 ·
                  changes
      in regulatory requirements that adversely affect our
    business,
 ·
                  changes
      in the prices for minerals that adversely affect our
    business,
 ·
                  political
      changes in Chile, which could affect our interests there,
    and
 ·
                  other
      uncertainties, all of which are difficult to predict and many of which are
      beyond our control.
 
 We
caution you not to place undue reliance on these forward-looking statements,
which reflect our management’s view only as of the date of this
report.  We are not obligated to update these statements or publicly
release the results of any revisions to them to reflect events or circumstances
after the date of this report or to reflect the occurrence of unanticipated
events.  You should refer to and carefully review the information in
future documents we file with the Securities and Exchange
Commission.
 
 GENERAL
  You
should read this discussion and analysis in conjunction with our interim
unaudited consolidated financial statements and related notes included in this
Form 10-Q and the audited consolidated financial statements and related notes
included in our Annual Report on Form 10-KSB for the fiscal year ended January
31, 2008.  The inclusion of supplementary analytical and related
information may require us to make estimates and assumptions to enable us to
fairly present, in all material respects, our analysis of trends and
expectations with respect to our results of operations and financial position
taken as a whole.  Actual results may vary from the estimates and
assumptions we make.
  On August
22, 2008, our shareholders approved an amendment to our articles of
incorporation to change our name from Red Lake Exploration, Inc. to Red Metal
Resources Ltd. to reflect our shift in focus from the Red Lake area of Ontario,
Canada, to Chile, and to increase our authorized capital from 75 million shares
of common stock to 500 million shares of common stock. The amendment was
effective on August 27, 2008 when it was filed with the Nevada Secretary of
State.
 
 When we
use the words “we”, “us” or “our” in this report, we are referring to Red Metal
Resources Ltd. and its subsidiary, Minera Polymet Limitada, which we sometimes
refer to in this report as “Polymet”.
  Our
principal business is acquiring, exploring and developing mineral
resources. As of the date of this report we have exercised options to
purchase the Farellon mineral concession and to acquire an option to purchase
the Santa Rosa mineral concession in Chile, and we have an option to acquire an
option to purchase the Camila mineral concessions.  In this report, we
sometimes collectively refer to these agreements as our “property
agreements”.  The address of our website is www.redlakeexploration.com
(but soon will change to www.redmetalresources.com
to reflect our new name).  Information included on our website is not
a part of this report.  We have not determined whether our properties
contain mineral reserves that are economically recoverable.  We have
not begun significant operations and are considered an exploration stage company
as defined by SEC Guide 7 with reference to Statement of Financial Accounting
Standard (SFAS) No.7 Accounting and Reporting by
Development Stage Enterprises.
  16
 
 Critical
Accounting Policies and Estimates
 
 We have
prepared our consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America. The reported
financial results and disclosures were determined using the significant
accounting policies, practices and estimates described below.  These
policies, practices and estimates require us to make difficult and subjective
judgments. Actual results may differ significantly from these
estimates.
  A summary
of our significant accounting policies is included in our Annual Report on Form
10-KSB for the fiscal year ended January 31, 2008. Additional significant
accounting policies which either affect us or have been developed since January
31, 2008, are summarized below.
 
 Reclassifications
 
 Certain
prior period amounts in the accompanying financial statements have been
reclassified to conform to the current period’s presentation. These
reclassifications had no effect on the results of operations or financial
position for any period presented.
 
 Financial
Instruments
 
 Foreign
Exchange Risk
 
 We are
subject to foreign exchange risk for sales and purchases denominated in foreign
currencies.  The functional currency for our operating subsidiary,
Polymet, is the Chilean peso, but we raise our working capital in United States
dollars.  Foreign currency risk arises from the fluctuation of foreign
exchange rates and the degree of volatility of these rates relative to the
United States dollar.  Payments under our property agreements
constitute the majority of our expenditures. As these are usually negotiated in
United States dollars, we do not believe that we have any material risk to our
foreign currency exchange.
 
 Concentration
of Credit Risk
 
 Financial
instruments that potentially subject us to significant concentrations of credit
risk consist principally of cash.
 
 At July
31, 2008, we had approximately $415,000 in cash that was not
insured.  This cash is on deposit with a major chartered Canadian bank
and a Chilean bank.  As part of our cash management process, we
perform periodic evaluations of the relative credit standing of these financial
institutions.  We have not suffered any losses of cash and do not
believe that our cash is exposed to any significant credit risk.
 
 Revenue
Recognition
 
 We record
revenues and royalties from the sale of minerals when pervasive evidence of an
arrangement exists, delivery to the customer has occurred and risk of ownership
or title has transferred, and collectability is reasonably
assured.   Interest income is recognized at the end of each
month.
 
 During
the six months ended July 31, 2008, we received $9,799 in royalty revenue from a
related company.
 
 Unproved
Mineral Properties and Exploration and Development Costs
  We
capitalize the acquisition costs of our mineral properties when we acquire them.
After acquisition, various factors can affect the recoverability of the
capitalized costs. If, after review, we conclude that the carrying amount of a
mineral property is impaired, we will write it down to estimated fair value. We
expense exploration costs on mineral properties when we incur them. We will
capitalize development costs incurred on proven and probable reserves. When we
begin production, we will amortize capitalized costs using the
unit-of-production method over the estimated life of the ore body based on
proven and probable reserves (which exclude non-recoverable reserves and
anticipated processing losses).
  17
  During
the six months ended July 31, 2008, we spent approximately $360,000 conducting
groundwork on mineral properties of interest to us in Chile.
  Long-Lived Assets
  We
account for long-lived assets under SFAS Nos. 142 and 144, Accounting for Goodwill and Other
Intangible Assets and Accounting for Impairment or
Disposal of Long-Lived Assets.  In accordance with SFAS 142 and
144, we review our long-lived assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. We recognize impairment when the sum of the expected undiscounted
future cash flows is less than the carrying amount of the asset. Impairment
losses, if any, are measured as the excess of the carrying amount of the asset
over its estimated fair value.  Our only long-lived assets are our
unproven mineral interests.  At July 31, 2008, we had no impairment
losses with respect to our unproven mineral interests.
  Asset
Retirement Obligations
  We will
record the fair value of an asset retirement obligation as a liability in the
period in which we incur a legal obligation associated with the retirement of
tangible long-lived assets that result from the acquisition, construction,
development, or normal use of our long-lived assets. We will record a
corresponding asset and will amortize the asset over its useful life. We will
adjust the obligation at the end of each period to reflect the passage of time
(accretion expense) and changes in the estimated future cash flows underlying
the obligation (asset retirement cost). At July 31, 2008 we had no asset
retirement obligations.
  Comprehensive
Loss
 
 Comprehensive
loss reflects changes in equity that result from transactions and economic
events from non-owner sources.  At July 31, 2008, we had a
foreign currency exchange gain of $7,419 and a comprehensive loss of
$630,374.
 
 Recent
Accounting Pronouncements
  In
September 2006, the Financial Accounting Standards Board (FASB) issued SFAS
No. 157, Fair Value
Measurements.  SFAS No. 157 defines fair value,
establishes a framework for measuring fair value and enhances disclosures about
fair value measures required under other accounting pronouncements, but does not
change existing guidance as to whether or not an instrument is carried at fair
value.  SFAS No. 157 was effective for us beginning on February
1, 2008.  The adoption of SFAS 157 did not have a significant impact
on our unaudited consolidated financial statements.
 
 In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities-including an amendment of
SFAS No. 115 (SFAS 115), Accounting for Certain Investments
in Debt and Equity Securities, which applies to all entities with
available-for-sale and trading securities. This statement permits entities to
choose to measure many financial instruments and certain other items at fair
value. The objective is to improve financial reporting by providing entities
with the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. This statement is effective as of the
beginning of an entity’s first fiscal year that begins after November 15, 2007.
Early adoption is permitted as of the beginning of a fiscal year that begins on
or before November 15, 2007, provided the entity also elects to apply the
provisions of FASB Statement No. 157, Fair Value Measurements. We
adopted SFAS 159 on February 1, 2008. The adoption of SFAS 159 did not have a
material impact on our unaudited consolidated financial statements as we did not
elect the fair value option for any of our financial assets or
liabilities.
  18
 
 In
June 2007, the Emerging Issues Task Force (EITF) of the FASB reached a
consensus on Issue No. 07-3, Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and
Development Activities(EITF 07-3). EITF 07-3 requires that
non-refundable advance payments for goods or services that will be used or
rendered for future research and development activities must be deferred and
capitalized.  As the related goods are delivered or the services are
performed, or when the goods or services are no longer expected to be provided,
the deferred amounts must be recognized as an expense.  This issue is
effective for financial statements issued for fiscal years beginning after
December 15, 2007 and earlier application is not permitted. This consensus
is to be applied prospectively for new contracts entered into on or after the
effective date.  We adopted EITF 07-03 on February 1,
2008.  The adoption of EITF 07-03 did not have a material effect on
our unaudited consolidated financial statements.
 
 In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities – An Amendment of FASB Statement No.
133. This statement is intended to improve financial
reporting of derivative instruments and hedging activities by requiring enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS 133
and its related interpretations and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance and
cash flows. The provisions of SFAS 161 are effective for fiscal years beginning
after November 15, 2008.  SFAS 161 will be effective for us
on February 1, 2009.  We are evaluating the impact the adoption of
SFAS 161 might have on our consolidated financial statement
disclosures.
  In May,
2008, FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles. SFAS 162 identifies the sources of accounting
principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States. SFAS 162 is effective 60 days following the SEC's approval of the
Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. We are
reviewing the effect, if any, the proposed guidance will have on our
consolidated financial statements disclosures.
  In May,
2008, FASB issued SFAS No. 163, Accounting for Financial Guarantee
Insurance Contracts—an interpretation of FASB Statement No.
60.  Diversity exists in practice in accounting for financial
guarantee insurance contracts by insurance enterprises under FASB Statement No.
60, Accounting and Reporting
by Insurance Enterprises. That diversity results in inconsistencies in
the recognition and measurement of claim liabilities because of differing views
about when a loss has been incurred under FASB Statement No. 5, Accounting for Contingencies.
This statement requires that an insurance enterprise recognize a claim liability
prior to an event of default (insured event) when there is evidence that credit
deterioration has occurred in an insured financial obligation. This statement
also clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement to be used to account for
premium revenue and claim liabilities. Those clarifications will increase
comparability in financial reporting of financial guarantee insurance contracts
by insurance enterprises. This statement requires expanded disclosures about
financial guarantee insurance contracts. The accounting and disclosure
requirements of the statement will improve the quality of information provided
to users of financial statements. SFAS 163 will be effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years; disclosure requirements in paragraphs
30(g) and 31 are effective for the first period (including interim periods)
beginning after May 23, 2008. We do not expect the adoption of SFAS 163 to have
a significant impact on our consolidated financial statements.
 
 Overview
  On
November 27, 2007 we abandoned our mineral claims in the Red Lake Mining
District, Ontario, Canada.
  19
  In
anticipation of acquiring properties in Chile, on August 21, 2007 we formed
Minera Polymet Limitada, a Chilean limited liability company, to hold our
Chilean mineral property interests.  We have a 99% interest in
Polymet. Polymet had no assets, liabilities or operations when we formed
it.
  On
November 20, 2007, we acquired an option to buy the Farellon mineral properties
covering 66 hectares in the III Region of Chile. On April 25, 2008 we exercised
this option and acquired title to the property. On February 1, 2008, we acquired
options to purchase the Camila and Santa Rosa mineral properties covering a
total of 880 hectares in the III Region of Chile. On August 8, 2008, we
exercised our option to acquire the option to purchase the Santa Rosa property.
All of these agreements are with Minera Farellon Limitada, a company controlled
by Kevin Mitchell, a significant shareholder.
 
 On August
6, 2008, we applied for exploration licences covering 2,250 hectares surrounding
the Santa Rosa property.  On September 5, 2008, we bought the exploration
and mining rights to 730 hectares near the Farellon property from Henry Edward
Cecil Floyd, an unrelated party, for the sum of $20,000. On September 9, 2008,
we signed a letter of intent with Minera Farellon to acquire two titled mining
claims covering 76 hectares near the Camila property. We intend to pay $20,000
for these claims, as well as the legal and transfer costs. The acquisition is
conditioned upon the completion of a satisfactory due diligence
investigation. We have applied for exploration licences covering 800 hectares in
the same area. We continue to conduct groundwork on and discuss terms for
the purchase of other properties of interest to us in Chile.
 
 Over the
next year we plan to concentrate on exploring and developing our properties in
Chile.
  Plan
of Operation
  Through
Minera Farellon, we have contracted for the services of Mr. Mitchell, an
experienced manager resident in Chile who has organized our office, reviews
potential properties, and expedites other resources for us. He also acts as the
legal representative for Polymet.
  Chilean
Mineral Claims
  During
the last twelve months, we have conducted groundwork on numerous properties of
interest to us in the III Region of Chile. We have acquired several of these
properties, have options to acquire others, and have staked claims in the same
areas. These properties are described below. We are continuing to compile data
on and review other properties and discuss terms with various
owners.
  FARELLON
MINERAL PROPERTIES
  On
September 25, 2007, Minera Farellon agreed to assign to us its option to buy the
mineral concessions Farellon Alto Uno al Ocho located in the Sierra Pan de
Azucar, Province of Huasco, III Region of Atacama in Chile.  We agreed
to pay Minera Farellon $250,000 when the assignment was recorded with the
Conservator of Mines in Freirina, Chile. The assignment was recorded on
November 20, 2007. Minera Farellon granted us an extension for the payment
of $250,000 until April 30, 2008. On April 25, 2008, we paid Minera Farellon
$250,000 to exercise our option and paid the vendor $300,000 to acquire title to
the property. We still owe the vendor a royalty equal to 1.5% of the net sales
of minerals extracted from the property for a total of $600,000.  The
royalty payments are due monthly once exploitation begins, and are subject to a
minimum monthly payment of $1,000.  We can pay any remainder due on
the royalty at any time. We have not begun exploiting the property.
  20
  The
Farellon property is located in Chile's III Region in the highly prospective
Candelaria iron-oxide-copper-gold (IOCG) belt, home of the Phelps Dodge
Candelaria Mine.  The Candelaria copper mine has been in production
since 1993 and has reported proven reserves of 283 million tonnes grading 0.64%
copper.  Recent surface sampling on the Farellon property has returned
values of up to 6.7% copper, and ICP analysis of surface samples indicates
mineralogy assemblages consistent with classic IOCG deposits. Historic drilling
on the property intersected sulphide and oxide mineralization to a depth of 150
meters and outlined a 1.7 kilometer strike length. Four significant
intersections are summarized in table 1.
  Table
      1. Farellon Significant IntersectionsMetres
                  Gold
                    (grams/tonne)
                  Copper
                    (%)
                  Cobalt
                    (%)9
                  3.72
                  2.49
                  .063
                  4.17
                  5.29
                  .1110
                  1.53
                  1.31
                  .0420
                  .97
                  1.22
                  .02
  On
September 9, 2008, we bought the Cecil claims covering 730 hectares consisting
of 500 hectares of exploration licences and 230 hectares of titled mining claims
near the Farellon property for $20,000.
 
 CAMILA
MINERAL PROPERTIES
  On
February 1, 2008, Minera Farellon granted us an option to acquire its option to
buy the Camila mineral concessions located in the Sector of Quebrada, Commune of
Vallenar, Province of Huasco, III Region of Atacama, Chile. We paid Minera
Farellon $5,000 when we signed the agreement and agreed to pay an additional
$100,000 in two equal payments of $50,000. On May 23, 2008 we paid the first
$50,000 and must pay the remaining $50,000 on November 21, 2008 if we elect to
exercise our option. If we exercise our option on November 21, 2008, we will
assume all of Minera Farellon’s rights and obligations for the mining properties
and will be required to pay the vendor $50,000 by December 7, 2008 and $100,000
by June 7, 2009 to keep the option in good standing. We can exercise our option
to buy the mining property by paying the vendor $200,000 by December 7,
2009.  Thereafter, we must pay the vendor a royalty equal to 6% of the
net sales of minerals extracted from the property for a total of
$1,000,000.  The royalty payments are due monthly once exploitation
begins. Any unpaid amount is payable in full by December 7, 2011. We have not
begun exploiting the property.
  The
Camila property is made up of four mining and exploration concessions totaling
770 hectares. The property is located in the highly prospective Candelaria IOCG
Belt. The Camila property was last explored in the late 1990s by Trilogy Metals,
Inc., formerly Thyssen Mining Exploration Inc., which identified two mineralized
structures with up to 1.12% copper and 7.5 grams per tonne gold from surface
grab samples.
  We began
exploring the Camila property on March 14, 2008. The planned exploration program
consisted of six drill holes totaling approximately 1,000 metres of diamond
drilling on two previously identified mineralized structures to target depth
extents of surface copper mineralization and coincident induced polarization
anomalies identified in the previous geophysics survey.
 
 We
completed four diamond drill holes totaling 939 metres. Two of the holes
targeted the Zorro Vein at depth and two holes tested the nearby Camila Breccia.
Results from the program have been reviewed and several anomalous zones of
copper mineralization were intersected.  Three significant
intersections are summarized in table 2.
 
 Table 2. Camila Significant IntersectionsMetres
                  Copper(%)19
                  0.064
                  0.102
                  0.10
 
 On
September 9, 2008, we signed a letter of intent to acquire 76 hectares near the
Camila property from Minera Farellon for $20,000, and applied to the government
for exploration licenses covering 800 hectares surrounding the 76 hectares. We
call these properties Matteo.
  21
  SANTA
ROSA MINERAL PROPERTIES
  On
February 1, 2008, Minera Farellon granted us an option to acquire its option to
buy the Santa Rosa mineral concessions located in Sierra Cordon El Tomate,
Province of Huasco, III Region of Atacama, Chile. We paid $9,500 when we signed
the agreement and agreed to pay $8,500 per month for five months ending July 5,
2008 and $50,000 by August 5, 2008 to exercise the option, for a total exercise
price of $102,000.  We exercised the option with Minera Farellon and
acquired its option to buy the property. Under the option, we are required to
pay the vendor a total of $317,500 by June 20, 2011, on monthly terms. If we
make all of these payments, we will acquire the title to the property. In
October 2007, Minera Farellon commenced exploitation work on the property and
paid a total royalty of $10,000 to the vendor by the end of July
2008.  Since we acquired the option to purchase the property, we owe
the vendor a royalty equal to 1.5% of the net sales of minerals extracted from
the property for a total of $590,000.  The royalty payments are due
monthly and are subject to a minimum monthly payment of
$1,000.  Minera Farellon retained the right to continue to mine the
property until August 5, 2008 and paid us a royalty equal to 5% of the net
proceeds from the sale of ore. During the first two quarters of 2008 we received
approximately $10,000 in royalty payments. We have an oral agreement with Minera
Farellon to continue mining under the same terms.
  The Santa
Rosa property is made up of two mining and exploration concessions totaling 110
hectares. The property is located in the highly prospective Candelaria IOCG
belt. Recent exploration has identified multiple mineralized structures with
significant alteration indicators of IOCG systems. Minera Farellon is selling
the ore that it mines to Enami, a Chilean national mining
company.  The ore is returning grades of up to 19.78% copper and 13.9
grams per tonne gold.
 
 We moved
the diamond drill to the Santa Rosa property in June 2008 and have begun
exploring the property. The planned program consists of approximately 1000
metres of near-surface diamond drilling and is designed to extend to depth the
mineralization that is currently the focus of Minera Farellon’s small-scale,
near-surface mining.
 
 To date
we have completed three diamond drillholes totaling 311 metres.  We
logged the core and sent samples to ALS Chemex’s laboratories in La Serena. We
expect results in late September 2008.
 
 On August
6, 2008 Polymet applied for 11 exploration licenses totaling 2,250 hectares
surrounding the Santa Rosa property.  There is no guarantee we will be
able to convert all of these exploration licenses into mining
licenses.
  OTHER
PROPERTIES
  While we intend
to concentrate our efforts on exploring and developing the properties that we
have, we are reviewing other interesting properties in the same general area and
discussing terms with various owners. We have contracted with geologists to
analyze the rock samples, perform due diligence, evaluate and analyze their
findings, and prepare geological reports. If our initial evaluation results are
promising, we intend to acquire additional Chilean mineral
properties.
  The acquisition
and exploration of our Chilean mineral claims are subject to our obtaining the
necessary funding. On May 2, 2008, we entered into a letter agreement with a
brokerage house whereby the brokerage house agreed to privately place up to
$6,000,000 of units of our common stock and common stock purchase warrants. We
have agreed to a pay the brokerage house a commission equal to 9% of the total
financing and issue warrants equal to 10% of the total number of units issued.
We paid a non-refundable work fee of $25,000 which will be deducted from the
commission. The contract is effective for six months. The units to be offered
will not be registered under the Securities Act of 1933, as amended, and may not
be offered or sold in the United States absent registration or an applicable
exemption from registration requirements.
 
 Chilean
Subsidiary
 
 On August
21, 2007, we formed Minera Polymet Limitada, a limited liability company, under
the laws of the Republic of Chile.  We own a 99% interest in this company,
which holds our Chilean mineral property interests.  The 1% interest
that we don’t own is held for us by a Chilean resident as required by Chilean
law.  He is an experienced manager who has organized an office and
expedites other resources for us.  We have agreed to pay him $2,000
per month to act as the legal representative and manager.
  22
  Equity
Financing
 
 To
generate working capital during the last twelve months, we have issued shares
and warrants under Regulation S promulgated under the Securities Act of 1933 as
set out in table 3.
  Table
      3. Equity FinancingShares
                  
                  Warrants*Date
      of issue
                  
                  Number
                  
                  Price
                  
                  Proceeds
                  
                  Number
                  
                  Price
                  
                  ExpiryAugust
      1, 2007
                  
                  
                  333,334
                  
                  $
                  0.30
                  
                  $
                  100,000
                  
                  
                  166,667
                  
                  $
                  0.50
                  
                  August
      1, 2009April
      21, 2008
                  
                  
                  4,000,000
                  
                  $
                  0.25
                  
                  
                  1,000,000
                  
                  
                  4,000,000
                  
                  $
                  0.35
                  
                  April
      21, 2010May
      14, 2008
                  
                  
                  999,999
                  
                  $
                  0.30
                  
                  
                  300,000
                  
                  
                  999,999
                  
                  $
                  0.50
                  
                  May
      14, 2010†5,333,333
                  
                  
                  
                  
                  $
                  1,400,000
                  
                  
                  5,166,666*The
      warrants can be exercised any time before their expiry date for one share
      of our common stock at the exercise price.
                    †These
      warrants must be exercised if our stock trades at $0.80 per share for 30
      consecutive trading days.
 
 Based on
our operating plan, we anticipate incurring operating losses in the foreseeable
future and will require additional equity capital to support our operations and
develop our business plan.  Our ability to achieve and maintain
profitability and positive cash flow depends upon our ability to locate economic
mineral properties, generate revenue from our mineral production and control
production costs.  Our failure to generate sufficient revenue or raise
sufficient working capital will adversely affect our ability to achieve our
ultimate business objectives.  We cannot assure you that we will be
able to raise additional equity capital, locate economic mineral properties,
generate revenue from our mineral production or control production costs in the
future.  These factors raise substantial doubt about our ability to
continue as a going concern.  The accompanying consolidated financial
statements do not give effect to any adjustments that would be necessary should
we be unable to continue as a going concern and be required to liquidate our
assets and discharge our liabilities in other than the normal course of business
and at amounts different from those reflected in our consolidated financial
statements.
  If we are
successful in completing future equity financing, the issuance of additional
shares will result in dilution to our existing shareholders.
 
 Debt
Financing
 
 During
our second quarter, we borrowed $400,000 from Richard N. Jeffs, the father of
our president, to whom we issued demand promissory notes to secure our repayment
of the principal sum together with interest at 8%.
  Other
Trends, Events or Uncertainties that may Impact Results of Operations or
Liquidity
  Although
we have raised $1,700,000 since January 31, 2008, our cash position as of the
date of this report is inadequate to satisfy our working capital needs for the
next twelve months.  Over the next twelve months we will need to raise
capital to cover our operating costs, fulfill the obligations we may incur under
our property agreements and cover any exploration or development costs on our
properties.
  We expect
our general and administrative expenses to increase due to the costs associated
with setting up and increasing the scope of our operations in Chile, which
include exploring and developing our mineral properties and sourcing additional
mineral properties.  We have no capital expenditures planned, but we
are reviewing other mineral properties and could decide to buy or acquire an
option to buy more properties, which would require that we raise more
capital.
  23
  We do not
anticipate generating any revenue over the next twelve months other than the 5%
royalty that Minera Farellon pays us from its mining of the Santa Rosa property,
which is not enough to cover our operating costs. The contract with Minera
Farellon expired on August 5, 2008, when we exercised our option for the Santa
Rosa property option. Since then, we have an oral agreement with Minera Farellon
to mine under the same terms. We plan to fund our operations through any
combination of equity financing from the sale of our securities, private loans,
joint ventures or through the sale of a part interest in our mineral properties.
 We do not have any financing arranged and, although we have succeeded in
raising funds as we have needed them, we cannot assure you that we will be able
to raise sufficient funds in order to cover our general and administrative
expenses and acquire and develop properties. Although we have not obtained any
financing in the United States and have no plans to, any downturn in the United
States economy could affect the willingness of non-US persons to invest their
United States funds in risky ventures such as ours.
  We may
consider entering into a joint venture partnership with a more senior resource
company to provide the funding that we need to complete a mineral exploration
program in Chile.  Although we have not attempted to locate a joint
venture partner, if we enter into a joint venture arrangement, we would likely
have to assign a percentage of our interest in our mineral property to our joint
venture partner in exchange for the funding.
 
 Other
than as discussed in this quarterly report, we know of no other trends, events
or uncertainties that have or are reasonably likely to have a material impact on
our short-term or long-term liquidity.
 
 Related-Party
Transactions
 
 At July
31, 2008, we had paid $357,000 to Minera Farellon to acquire unproved mineral
properties in Chile and we owed Minera Farellon $14,273. During the six months
ended July 31, 2008 we paid Minera Farellon a total of $78,567 for
administration, office, professional fees, mineral exploration and travel and
entertainment costs and we received $9,799 in royalty payments from Minera
Farellon.
 
 At July
31, 2008, we owed $82,572 to Fladgate Exploration Consulting Corporation, a
company controlled by our directors. During the six months ended July 31, 2008,
we paid or accrued a total of $190,699 in administration, advertising and
promotion, office, mineral exploration and travel and entertainment expenses to
Fladgate.
 
 At July
31, 2008, we owed $3,096 to Kevin Mitchell, a major shareholder. During the six
months ended July 31, 2008, we paid or accrued a total of $18,046 in
administration, office, mineral exploration and travel and entertainment costs
to Mr. Mitchell.
 
 At July
31, 2008, we owed $2,519 to a company owned by John Da Costa, our chief
financial officer. During the six months ended July 31, 2008, we paid or accrued
a total of $47,250 in costs for consulting, office and travel and entertainment
to this company.
 
 At July
31, 2008, we owed $400,000 to Richard N. Jeffs, a relative of a director, to
whom we issued promissory notes to secure our repayment of the borrowed
funds.  During the six months ended July 31, 2008, we accrued $656 in
interest on these notes payable.
 
 We do not
have any commitments to pay any administrative or directors’ fees to any related
party other than verbal agreements to pay $2,000 per month to Mr. Mitchell to
act as Polymet’s legal representative and manager in Chile, to pay Minera
Farellon an expediting fee for sourcing and providing our field office and
accommodations and other facilities in Chile, and to pay a company owned by our
chief financial officer for providing accounting and related
services.
 
 On April
21, 2008, we issued 40,000 units of our securities to Michael Thompson, a
director, at $0.25 per unit for cash of $10,000.  Each unit consists
of one share of our common stock and one warrant entitling the holder to
purchase one share of our common stock for $0.35 until the warrants expire on
April 21, 2010.
  24
 
 On April
21, 2008, we issued 2,000,000 units of our securities to Mr. Jeffs, a relative
of a director, at $0.25 per unit for cash of $500,000.  Each unit
consists of one share of our common stock and one warrant entitling the holder
to purchase one share of our common stock for $0.35 until the warrants expire on
April 21, 2010.
  On May
14, 2008, we issued 333,333 units of our securities Mr. Jeffs at $0.30 per unit
for cash of $100,000.  Each unit consists of one share of our common
stock and one warrant entitling the holder to purchase one share of our common
stock for $0.50 until the warrants expire on May 14, 2010.
  On
September 9, 2008, we signed a letter of intent to buy mining claims covering 76
hectares from Minera Farellon for $20,000.
 
 Comparison
of the Three and Six Months Ended July 31 2008 and 2007
  Overall
Results of Operations
  During
the six months ended July 31, 2008, we had a net loss of $637,793, which is an
increase of $557,359 from our net loss of $80,434 for the six months ended July
31, 2007.  This increase was primarily due to increases in the costs
of our administration, consulting, advertising and promotion, mineral
exploration and professional fees.
  Over the
next twelve months we expect our net loss to be significantly
higher.  We do not expect to generate any significant revenue from
mineral sales and we expect our operating costs to increase as the scope of our
operations in Chile increases.
  Revenue
  Our
revenue for the three months ended July 31, 2008 was $4,537 compared to $0 for
the three months ended July 31, 2007.
 
 Our
revenue for the six months ended July 31, 2008 was $9,799 compared to $0 for the
six months ended July 31, 2007.
 
 All of
the revenue was the result of a 5% royalty from Minera Farellon which has the right
to mine our Santa Rosa properties.  Due to the nature of our business,
we do not expect to have operating revenue within the next year other than the
royalty revenue from MineraFarellon, which is not enough to cover our
operating costs.
  Operating
Expenses
  Our
operating expenses increased by $295,440 or 418% from $70,682 for the three
months ended July 31, 2007 to $366,122, for the three months ended July 31,
2008.  This increase was primarily due to increases of approximately
$9,000 in administration costs, $16,000 in consulting fees, $220,000 in mineral
exploration costs, $6,000 in office costs, $22,000 in advertising and promotion
costs, $15,000 in professional fees and $5,000 in salaries, wages and
benefits.
  Our
operating expenses increased by $566,502 or 704% from $80,434 for the six months
ended July 31, 2007 to $646,936, for the six months ended July 31,
2008.  This increase was primarily due to increases of approximately
$51,000 in administration costs, $73,000 in advertising and promotional
activities, $3,000 in bank charges and interest, $39,000 in consulting fees,
$349,000 in mineral exploration expenses, $10,000 in office costs, $32,000 in
professional fees, $7,000 in travel and entertainment costs and $5,000 in
salaries, wages and benefits. These costs were partially offset by decreases in
donated rent and services of approximately $2,000.
 
 The
increase in our operating expenses was primarily due to increases in mineral
exploration programs on our Chilean properties; increases in the costs
associated with outsourcing our administration, accounting services and rent;
increases in the costs of advertising and promotion and the costs associated
with raising equity capital; increases in travel and entertainment costs
associated with our professional geologists traveling to Chile; professional
fees due to regulatory compliance; and salaries, wages and benefits due to
hiring employees in Chile.
  25
  Over the
next twelve months we expect our net loss to increase primarily due to increases
in the costs of outsourcing our administration and accounting services; having a
resident manager and employees in Chile;  renting our field facilities
in Chile; obtaining the legal services as necessary to enforce our rights and
discharge our obligations under the property agreements and associated with
regulatory compliance; retaining geologists and drilling contractors to explore
our properties; and raising equity capital.
  Interest
Expense
 
 During
July of 2008 we issued $400,000 in notes payable.  During six months
ended July 31, 2008, we accrued $656 in interest on these notes
payable.
  Off-Balance-Sheet
Arrangements
  We have
no off-balance sheet arrangements and no non-consolidated, special-purpose
entities.
  Liquidity,
Capital Resources and Financial Position
  At July
31, 2008, we had a cash balance of $414,536 and negative cash flow from
operations of $637,784.
  The notes
to our unaudited consolidated financial statements as of July 31, 2008 disclose
our uncertain ability to continue as a going concern.  We have not
generated, and do not expect to generate, enough operating revenue to cover our
expenses while we are in the exploration stage and as a result we have
accumulated a deficit of $927,365 since inception.  As of July 31,
2008, we had $583,253 in current liabilities.  After offsetting our
current liabilities against our current assets of $479,806, we have a working
capital deficit of $103,447.  While we have successfully generated
enough working capital to the date of this report through the sale of our
securities and we believe that we can continue to do so for the next year, we
cannot assure you that we will succeed in generating enough working capital to
meet our ongoing cash needs.
  Net
Cash Used In Operating Activities
  We used
$637,784 net cash in operating activities during the six months ended July 31,
2008.  We used $637,793 to cover our net loss for the period. Our
accounts and other receivables increased by $47,707 primarily due to refundable
taxes from the Chilean government, we spent $17,563 on prepaid expenses and
reduced our accounts payable by $6,507. These uses of cash were partially
offset by increases in accrued professional fees of $9,907, amounts due to
related parties of $61,223 and interest accrued on our notes payable of
$656.
  We intend
to continue to sell our securities to raise sufficient working capital and
obtain advances and loans to sustain our operating and exploration activities;
however, we cannot assure you that we will be successful in raising the funds
necessary to continue our operations or that we will ever become
profitable.
  Net
Cash Used in Investing Activities
  During
the six months ended July 31, 2008, we spent $657,000 on the acquisition of
mineral properties and options to acquire mineral properties.
  26
  Net
Cash Provided By Financing Activities
  During
the six months ended July 31, 2008, we received $1,300,000 in cash on the
issuance of 4,999,999 shares of our common stock and warrants for the purchase
of 4,999,999 shares of our common stock.
 
 During
the six months ended July 31, 2008, we received cash of $400,000 on the issuance
of notes payable to a relative of a director.
 
 Contingencies
and Commitments
  We had no
contingencies at July 31, 2008.
 
 Our
long-term contractual obligations and commitments are options to purchase
mineral properties in Chile and a drilling contract.
 
 Internal
and External Sources of Liquidity
  To date
we have funded our operations by selling our securities and borrowing funds
secured with promissory notes, and from mining royalties.
 
 Foreign
Exchange
  We are
subject to foreign exchange risk for transactions denominated in foreign
currencies.  Foreign currency risk arises from the fluctuation of
foreign exchange rates and the degree of volatility of these rates relative to
the United States dollar.  We do not believe that we have any material
risk due to foreign currency exchange.
  Inflation
  We do not
believe that inflation will have a material impact on our future
operations.
 27
 
 Part
I, Item 3.  Quantitative and Qualitative Disclosures about Market
Risk.
 
 As a
smaller reporting company, we are not required to provide this
disclosure.
 
 Part
I, Item 4T.  Controls and Procedures.
 
 (a)
Disclosure Controls and Procedures
 
 We
carried out an evaluation, under the supervision and with the participation of
our management, including our president and our chief financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this report.  We
undertook our evaluation in consultation with our accounting
personnel.  Based on that evaluation, the president and the chief
financial officer concluded that, as of the evaluation date, our disclosure
controls and procedures are effective to ensure that information that we must
disclose in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission’s rules and forms.
 
 (b)
Changes in internal control over financial reporting
 
 We did
not make any changes in our internal control over financial reporting during
the second quarter of the fiscal year that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
 
 Part
II, Item 1.  Legal Proceedings.
 
 We are
not a party to any pending legal proceedings and, to the best of our knowledge,
none of our properties or assets is the subject of any pending legal
proceedings.
 
 Part
II, Item 1A.  Risk Factors.
 
 There
have been no material changes from the risk factors previously disclosed in our
Annual Report on Form 10-KSB which was filed on May 13, 2008.
 
 Part
II, Item 2.  Unregistered Sales of Equity Securities and Use of
Proceeds.
  On May
14, 2008, we issued 999,999 units at $0.30 per unit by way of a private
placement for cash of $300,000. Each unit consists of one share of common stock
and one common stock purchase warrant entitling the holder to purchase one share
of common stock for $0.50. The warrants have a term of two years and will expire
on May 14, 2010.  The warrants are required to be exercised if, at any
time after November 14, 2008, the Company’s shares trade at $0.80 per share for
30 consecutive days or more.
 
 We relied
on Regulation S promulgated under the Securities Act of 1933 to sell these
securities inasmuch as the securities were sold to non-U.S. persons in offshore
transactions, we did not engage in any directed selling efforts in the United
States, and each investor represented to us that the investor was not a U.S.
person and was not acquiring the stock for the account or benefit of a U.S.
person.
  Part
II, Item 3.  Defaults upon Senior Securities.
 
 None.
 
 Part
II, Item 4.  Submission of Matters to a Vote of Security
Holders.
 
 No
matters were submitted to the vote of security holders during the quarter ended
July 31, 2008.
  28
 
 Part
II, Item 5.  Other Information.
 
 On May 2,
2008 we entered into a letter agreement with a brokerage house for the private
placement of up to $6,000,000 of units of our common stock and common stock
purchase warrants. We agreed to pay the brokerage house a commission equal to 9%
of the total financing and issue warrants equal to 10% of the total number of
units issued. We paid a non-refundable work fee of $25,000 which will be
deducted from the commission. The contract is effective for 6 months. The
securities Act of 1933, as amended, and may not be offered or sold in the United
States absent registration or an applicable exemption from registration
requirements.
 
 Part
II, Item 6.  Exhibits.
 
 Exhibit
      No.
              Description
      of Exhibit3.1
              Articles
      of Incorporation(1)3.2
              Bylaws(1)31.1
              Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002*31.2
              Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002*32
              Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002*
 * Filed
herewith.
 (1)
Incorporated by reference from the Registration Statement on Form SB-2 filed
with the Securities and Exchange Commission on May 22, 2006 as file number
333-134363.
  29
 
 SIGNATURES
 
 In
accordance with the requirements of the Securities Exchange Act of 1934, Red
Metal Resources Ltd. has caused this report to be signed on its behalf by the
undersigned, duly authorized.
  September
15, 2008
  RED
      METAL RESOURCES LTD.By:
              /s/
      Caitlin JeffsCaitlin
      Jeffs, President
  By:
              /s/
      John DaCostaJohn
      DaCosta, Chief Financial Officer