Issued Capital:

Ordinary Shares 82.5M Contributing 12.7M Options 12.5M

Cash (Sept 2008) A\$6.1M

Major Shareholders:

POSCO 19.99% Founders/Board 18.00% High net worth 24.00%

Directors:

Miles A Kennedy Chairman

John R. Hutton Director

Jonghun Jong Director

Karl M Simich Director

W. John Evans Technical Director

QUARTERLY ACTIVITIES REPORT – SEPTEMBER 2008

HIGHLIGHTS

DOOLGUNNA GOLD PROJECT (Western Australia)

Gold

Significant gold mineralization intersected at the DeGrussa Gold Prospect extending the gold-bearing zone to a strike length of 220m.
Best results from RAB drilling at DeGrussa in July included: 10m @ 3.90g/t Au and 22m @ 1.50g/t Au
Recent results reinforce the strategic value of the DeGrussa Prospect and the Old Highway Prospect, located 22km south west of DeGrussa. Previous drilling at these two prospects have returned significant gold intersections, including:

DeGrussa

8m @ 8.80g/t Au 12m @ 2.83g/t Au 9m @ 2.80g/t Au 3m @ 8.53g/t Au 24m @ 6.80g/t Au Old Highway 10m @ 7.15g/t Au 23m @ 4.07g/t Au 22m @ 3.01g/t Au 9m @ 4.47g/t Au 7m @ 7.28g/t Au

These two prospects represent priority exploration targets at Doolgunna, where a total of 7 virgin gold discoveries have been made in close proximity to major gold deposits including Fortnum, Peak Hill, Harmony and Harbour Lights.

Iron Ore

Detailed mapping of high-grade DSO iron deposits indicates a total area of outcropping hematite over an area of +200,000m2 in two moderate sized deposits and five small deposits.

BORROLOOLA PROJECT (Northern Territory)

Manganese

Two extensive areas of manganese mineralization discovered within the Rosie Creek locality.
42 drill holes intersect manganese.
Close-spaced drilling continuing on both areas aimed at establishing JORC Code compliant mineral resources.

CORPORATE

Strong cash position of A\$6.1 million at end of the September Quarter following completion of the A\$7.23M share placement to Posco Australia under the Strategic Alliance completed last Quarter.

OVERVIEW

During the September 2008 Quarter, Sandfire Resources NL (Sandfire or the Company) continued to progress aggressive exploration programs across its portfolio of gold, manganese, lead/zinc and iron ore projects in Western Australia and the Northern Territory.

Following the completion of the Strategic Alliance last Quarter with Posco Australia, a subsidiary of the Korean-based POSCO, the world's fourth largest steel producer, Sandfire remains in a strong position and uniquely placed in the junior exploration sector in Australia.

Notwithstanding the consequences of the global financial and economic crisis, which will impact significantly on the ability of exploration companies to raise additional funding, Sandfire has a strong financial position with cash resources of \$6.1 million at the end of the September Quarter. In addition, through its relationship with Posco Australia as its cornerstone investor, Sandfire has a significant competitive advantage in terms of its ability to access future funding.

The Company is currently reviewing its exploration budgets and priorities in light of the changed environment. The focus of exploration moving forward is likely to be on the Doolgunna Gold Project, which offers the potential to define a significant medium-sized gold resource in the near-term, and the extensive manganese mineralisation discovered at the Borroloola Project in the Northern Territory.

Highlights of the September Quarter included the receipt of additional significant gold results from the DeGrussa Gold Prospect within the Doolgunna Project in Western Australia. Exploration to date at Doolgunna has resulted in 7 virgin near-surface gold discoveries.

The gold mineralisation at DeGrussa has now been confirmed over a 220m strike length of the shear zone that hosts the gold mineralisation. The Company is encouraged that drilling continues to report moderate to high grade gold mineralisation in the near-surface zone being tested by the shallow drilling. The zone of gold mineralisation is open to the southwest and northeast and no deep testing has yet been carried out.

This relatively recent primary gold discovery confirms the Company's confidence in the Doolgunna Project with the strategic focus of ongoing exploration in the short term expected to be on the DeGrussa and Old Highway Prospects, which lie 22km apart.

Detailed geological mapping of the iron ore mineralisation along the Robinson Range in the western sector of the Doolgunna Project has defined the outcropping mineralisation. With the imminent signing of the Heritage Agreement with the Jidi Jidi Aboriginal Corporation, drilling may be able to commence in 2009.

In the Northern Territory at the Borroloola Project, drilling commenced in the Rosie Creek catchment and successfully delineated widespread manganese mineralisation on the basal contact of the Cretaceous with basement rocks. This setting is similar to the Groote Eylandt manganese deposit located 190 kilometres to the northeast.

At the Borroloola Project, in addition to the higher priority manganese program, Sandfire has carried out a diamond core drilling campaign testing a variety of targets for lead and zinc mineralisation within sediments of the McArthur Group. In addition, the Company tested five topographic features for the presence of concealed kimberlite bodies and possible diamonds.

1.0 DOOLGUNNA PROJECT, Western Australia (Sandfire - 100%)

Sandfire's wholly owned Doolgunna Project is located some 900km north of Perth. The property is prospective for gold and iron ore. Two principal gold prospects, Old Highway and DeGrussa, have been discovered by Sandfire together with five other gold prospects for which the Company has reported high grade drill intersections. During July 2008, RAB drilling was carried out on the DeGrussa gold prospect. The iron ore at Doolgunna is high grade, low phosphorus, hematite-goethite mineralisation located in the banded iron formations of the Robinson Range.

1.1 Gold Exploration

During July 2008, Sandfire carried out a program of close-spaced, inclined RAB drilling testing for strike extensions of the previously reported gold mineralisation at the DeGrussa gold prospect. A total of 57 shallow drill holes were completed for 2,662 metres, during this program.

All drilling was restricted to the near surface, strongly weathered and oxidised saprolitic basalt that hosts the pyrite-mineralised shear. From the drilling to date the gold does not appear to be associated with quartz veining but rather with a pyritic zone. Five drill holes recorded significant intervals of gold mineralisation, with a best intersection of 10 metres averaging 3.90 grams per tonne (g/t) gold from 18 metres depth in hole DGRB2479. This program of drilling has extended the gold-bearing strike length to 220 metres, with potential for further extensions.

TABLE 1 DeGRUSSA PROSPECT RAB DRILLING 2008 SIGNIFICANT INTERSECTIONS

Hole	Northing	Easting	From (m)	To (m)	Interval (m)	Gold Grade (g/t)	Comments
DGRB2233	7173161	734004	0	10	10	5.71
DGRB2268	7173171	733997	2	14	12	2.83
DGRB2272	7173161	734003	2	10	8	8.73
DGRB2283	7173142	733961	5 17	14 20	9 3	2.80 8.53
DGRB2288	7173161	733959	19	40	21	7.00
DGRB2479	7173163	733910	18	28	10	3.90
DGRB2481	7173123	733900	51	54	3	3.08	Wet and open at EOH*
DGRB2482	7173100	733904	53	60	7	2.57	Open at EOH
DGRB2496	7173219	723102	22	26	4	4.53
DGRB2500	7173244	734094	20	42	22	1.50	Open at EOH
*End of Hole

To date significant gold intersections at DeGrussa and Old Highway are detailed below in Tables 1 and 2 and located on the accompanying plans (Figures 2 and 3).

TABLE 2 OLD HIGHWAY PROSPECT RC DRILLING 2008 SIGNIFICANT INTERSECTIONS
Hole	Northing	Easting	EOH (M)	From-To (m)	Interval (m)	Gold (g/t)
DGRC067	7161385	717327	52	18 - 24	6	2.99
DGRC068	7161385	717309	88	38 - 45	7	3.27
DGRC069	7161361	717291	58	33 - 43	10	2.08
DGRC070	7161361	717267	40	3 - 11 15 - 24	8 9	3.34 5.50
DGRC071	7161352	717271	62	25 - 35	10	7.15
DGRC072	7161343	717253	100	29 - 52 57 – 79	23 22	4.07 3.01
DGRC073	7161340	717214	40	8 - 17	9	4.47
DGRC074	7161331	717218	58	1 - 7	6	7.64
DGRC075	7161347	717238	46	16 - 23 33 - 42	7 9	7.28* 3.25
DGRC076	7161338	717242	70	30 - 37	7	2.85
DGRC080	7161325	717265	130	49 - 55	6	9.72*
	*Interval includes grades cut to 20.00 g/t Au

Sandfire will be assessing the results of all of the 2008 drilling programs in planning for further testing and evaluation of the DeGrussa and Old Highway prospects during 2009.

1.2 Iron Ore Exploration

During the third quarter Sandfire carried out a small drilling program in the vicinity of a large isolated magnetic anomaly known to be caused by a concealed banded iron formation body. Modelling of geophysical data suggested the potential for a non-magnetic component of the iron formation possibly high grade iron ore. Drilling intersected oxidised iron formation without any secondary enrichment. Three holes were drilled, totalling 201 metres.

Finalisation of the detailed geological mapping of the high grade iron ore deposits in the Robinson Ranges, within Sandfire's Doolgunna Project was achieved during the quarter. The total area of outcropping low phosphorus, hematite goethite iron ore mineralisation is in excess of 200,000 square metres, in two moderate sized deposits and five small deposits and with several areas where the mineralisation extends under superficial cover. Drill testing of the iron ore will be necessary to determine the extent of the resources present and Heritage Site surveys will be necessary before any drilling can be carried out. This work is planned for the mid–2009 year.

1.3 Native Title

Resolution of the dispute between the holders, in trust, of Native Title over the western sector of the Doolgunna Project, the Jidi Jidi Aboriginal Corporation, has finally been achieved. Sandfire Resources anticipates executing the Heritage Agreement during the fourth quarter of 2008. This will enable harmonious Heritage Clearances to be carried out on the areas where Sandfire is planning to carry out exploration activities. This affects part of the gold and all of the iron ore exploration planned by Sandfire for 2009.

2. BORROLOOLA PROJECT, Northern Territory (Sandfire - 100%)

The Borroloola Project comprises a 13,400km2 tenement area in the Northern Territory which encompasses a significant proportion of the Batten Fault Zone. This important geological structure hosts the world-class McArthur River Mine, the second largest SEDEX hosted base metal deposit in the world. Sandfire's tenements also cover a coastal strip which is considered highly prospective for Cretaceous-style manganese deposits, similar to the world-class Groote Eylandt manganese deposits (BHP Billiton).

2.1 Manganese Exploration

Sandfire commenced a RAB and aircore drilling program in mid-August, 2008 testing a combination of known manganese occurrences at Rosie Creek South, lateral extensions to the known manganese occurrences and shallow flat-lying-air borne electromagnetic anomalies within the Cretaceous host sequence.

To the end of the September quarter Sandfire had completed 138 holes for a total of 4,042 metres of both RAB and air core drilling. Initial drilling work was time consuming due to ground clearance and drill rig movements to various locations. Since the end of the quarter, a further 300 holes have been drilled.

The initial program aimed to test 12 targets within or near to the Rosie Creek catchment; however, during September the program was altered to focus on completing both reconnaissance testing of the Rosie South West reconnaissance area and more closely testing the known manganese mineralisation at the Rosie Creek South Prospect. Essentially, the focus on the Rosie Creek locality resulted in two new areas of manganese mineralisation being discovered. The objective of the revised program is to outline, in greater detail, the potential for a manganese mineral resource in these areas.

A total of 42 holes, including widespread reconnaissance drilling, have intersected manganese mineralisation in the Rosie Creek South and reconnaissance areas. Drilling is continuing in both these areas delineating the zones of basal, modular, manganese mineralisation.

A further four of the initial twelve targets were also tested by selected reconnaissance drill lines without intersecting manganese mineralisation. These were Tawallah 1 and 2, Yiyintyi Range and Eastern Creek.

Typically the manganese mineralisation is between 1 and 3 metres thick, located on the contact between the basement rocks and the overlying Cretaceous sediments. The manganese mineralisation is usually modular, in a fine-grained manganiferous sandstone with minor clay. Most of the mineralisation is at shallow deeps.

Sandfire is submitting each 1 metre drill interval of manganese-bearing material for analysis with all the results expected in late 2008, early 2009. These initial assay results will be of all the intersection without selective sampling of the nodular manganese. Subsequently, Sandfire will composite the entire manganese intersections for each area of mineralisation and carry out preliminary metallurgical test work. This will probably involve screening out of various size fractions, scrubbing and heavy media separation of lump and fine fractions to determine if a manganese product can be produced meeting market specifications.

Infill drilling on the known manganese mineralisation at the Rosie Creek South and Rosie S.W. Reconnaissance Area was continuing at the end of the quarter and will be continuing until the onset of the northern monsoon 'wet' season.

2.2 Base Metal Exploration

A principal exploration objective of the Borroloola Project is zinc, lead and silver mineralisation within the McArthur Basin, Paleoproterozoic sedimentary rock sequences. The giant sedimentary HYC basemetal deposit at the McArthur mine is located some 26 kilometres south of Sandfire's Project. This deposit is closely related to the Emu Fault zone that extends northward for 100 kilometres through the Borroloola Project.

During the September quarter Sandfire commenced a diamond core drilling program to test a combination of airborne electromagnetic and gravity targets at two localities along the Emu Fault corridor.

At the Yalco Project four holes were completed with a total of 1,146.6m of drilling. Since the end of the September quarter Sandfire has completed two holes at the Warramana Prospect for a total of 747.7m of drilling. No significant basemetal mineralisation was intersected by this drilling.

In August 2008, Sandfire carried out a 1234.7km detailed airborne electromagnetic survey, using the VTEM System over the Rosie Creek lower catchment area. Sandfire is currently working in partnership with the CSIRO in processing and modelling these data.

2.3 Diamond Exploration

During the quarter, Sandfire carried out an aircore and RAB drilling program testing 5 topographic features, surface depressions, in an area 30 kilometres northerly of Cape Crawford. The area has previously been drainage sampled with diamonds, (micro and macro) and kimberlitic indicator mineral grains recovered. Using a RAB drilling rig mobilised to the Project for the priority manganese testwork, a total of 8 holes for 253 metres were drilled in testing the five depressions in a thin Cretaceous cover sequence, over the basement rocks.

Whilst no kimberlite rocks were intersected by the drilling, the locality is still considered to be a highpriority diamond exploration area and future work, including high-resolution airborne magnetic surveys, is recommended.

3. URANDY PROJECT: Western Australia (Sandfire 100%)

The Urandy Project, in the West Pilbara, was initially acquired by Sandfire because of its prospectivity for primary gold mineralisation north of a granite intrusion into the metasedimentery rocks of the Ashburton Formation.

Previous widely spaced bed-rock geochemistry carried out by Sandfire has located two areas of ongoing interest. One being a centre of gold anomalism associated with the margins of the granite intrusion, the other is an area of elevated lead copper (and lesser zinc) associated with carbonate rocks.

During the quarter Sandfire has completed detailed soil geochemistry over both these target areas. For the gold target a total of 1,755 samples were collected on a grid, 200m and 400m apart and the samples submitted for gold analysis.

For the area of basemetal anomalism a total of 1,303 samples were collected and submitted for a suite of basemetal analysis. Samples were also collected on grid lines variously 200m and 400m apart. The laboratory results of gold and basemetal sampling are expected in late 2008 and early 2009.

4. YANNARIE PROJECT: Western Australia (Sandfire 100%)

No field work was carried out on this Project during the September quarter, with a planned induced polarisation (I.P.) survey being deferred.

Currently Sandfire is reviewing its strategic options with regard to this project.

5. SANDFIRE PROJECT: Western Australia (Sandfire 100%)

No field work was carried out on this Project during the September 2008 quarter. Sandfire Resources is reviewing its strategic options with regard to this Project.

SCHEDULE OF MINING TENEMENTS – 30 SEPTEMBER 2008
PROJECT AND TENEMENT	NOTES	AREA (Graticule Blocks)	Date of Grant
BORROLOOLA
MLN624		16.18ha	4/8/1971
El10121		5	05/09/2002
EL24349		367	10/04/2005
EL24373		45	10/04/2005
EL24374		79	10/04/2005
EL24401		413	03/06/2005
EL24402		433	03/06/2005
EL24664		139	21/12/2005
EL24700		310	21/12/2005
EL24714		18	01/12/2005
EL24778		143	27/04/2006
EL24942		161	23/08/2006
EL24943		146	01/08/2006
EL24946		70	18/04/2006
EL24996		39	15/08/2006
EL24997		106	15/08/2006
EL25070		488	15/08/2006
EL25312		48	01/06/2007
EL25328		37	06/03/2007
EL25462		159	02/08/2007
EL25501		37	Application
EL25590		38	13/07/2007
EL25591		11	13/07/2007
EL25592		23	13/07/2007
EL25647		16	02/08/2007
EL26298		29	05/03/2008
EL26299 EL26321		52 30	Application 21/04/2008
EL26480		3	07/07/2008
EL26481		4	07/07/2008
EL26482		11	07/07/2008
EL26486		10	07/07/2008
EL26555		312	11/09/2008
EL26587		25	11/09/2008
EL26599	Moratorium	326	Application
EL26637		47	22/08/2008
EL26908		2	Application
EL26909		1	Application
EL26953		42	Application
SEL26831		402	Application
SEL26833		380	Application
SEL26835		413	Application
SEL26836		500	Application
SEL26837		473	Application
SEL26938 SEL26939		437 393	Application Application
DOOLGUNNA
E52/1697		12	22/06/2005
E52/1698		14	01/08/2005
E52/1699		54	01/08/2005
E52/1715		54	22/06/2005
P52/1123		200ha	Application
E52/2208		1	Application

Page | 7 Quarterly Activities Report – September 2008

E52/2209		1	Application
GLEN ROSS
E52/1840		70	Application
E52/1841		70	Application
E52/1842		66	Application
E52/1843		68	Application
E52/1844		70	Application
E52/1845		68	Application
MT ANDERSON
E04/1828		140	Application
E04/1829		190	Application
MT BOGGOLA
E08/1433	1	68	11/10/2005
E08/1460	1	35	14/10/2004
E52/1736	1	66	11/10/2005
SANDFIRE
E04/1344		35	20/10/2003
E04/1425		24	10/01/2005
E04/1449		35	13/04/2005
E04/1451		34	13/04/2005
TANGADEE
E52/1794		70	Application
E52/1795		70	Application
E52/1796		70	Application
E52/1797		70	Application
E52/1798		49	Application
E52/1799		40	Application
E52/1800		70	Application
E52/1801		70	Application
URANDY
E08/1462		35	26/07/2005
E08/1463		35	26/07/2005
YANNAIRE
E08/1374	1	13	01/08/2005
E08/1409		35	24/05/2004
E09/1111		35	22/06/2005
E09/1510		12	Application

Note 1 Faustus Nominees Pty Ltd

JOHN EVANS TECHNICAL DIRECTOR

31 October 2008

The information in this report that relates to Exploration Results is based on information compiled by John Evans who is a Fellow of the Australasian Institute of Mining and Metallurgy. John Evans has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves. John Evans consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

AI assistant

SANDFIRE RESOURCES LIMITED Interim / Quarterly Report 2008

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