STELLAR RESOURCES LIMITED — Annual Report 2007

Oct 30, 2007

Chairman’s Report and Review of Activities 2007

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Chairman’s letter

The past year has witnessed another very busy period, with exploration and drilling activity across the majority of our projects. Our intention is to make excellent mineral discoveries and substantial progress has been made in our determined endeavour to unlock “the big one”.

Activity on some of the Company’s better projects has made a signifi cant addition to our knowledge base. This is not always refl ected in our share price, especially given the high volatility in the market. Like many small exploration companies Stellar is susceptible to market trends and fashions over which we have no control. Early in the year and taking a strategic view of the company’s risk profi le, we “laid off” some risk by joint venturing out some of our projects to other high quality exploration companies. We also earned new shares by co-sponsoring the IPO of UraniumSA Limited (USA) – which adds value to Stellar.

Around mid 2007, the uranium sector lost much of its share market lustre but our uranium endeavour remains active. Stellar’s Joint Venture partners have been advancing our South Australian project areas. More work, especially drilling, is underway or in fi nal planning stages by both Toro Energy Limited – at our Warrior project, and USA – on our extensive Tarcoola tenements covering the Kingoonya palaeochannel.

Stellar is an exploration/discovery company and, as such, some of the prospects that we tested were assessed as having little economic potential. Consequently, we relinquished them in order to allow greater focus on higher perceived reward projects.

Key achievements

Alpine and Tasmania:

• Drilling has substantially expanded the footprint of the Alpine copper deposit in Tasmania and, importantly, has showed the presence of gold in one part of the mineralised system. Alpine continues to “lead the charge” for us in Tasmania. Of the fourteen holes now drilled by Stellar at Alpine, 11 have intersected copper over substantial widths, albeit at modest grades. We remain excited by the large potential size of this system, which is only partly tested.

• There is currently one higher grade zone (22m @ 1.22% Cu in AP04) within a longer intersection of 95m @ 0.45% Cu.

• Importantly, we partially tested an area on the northern edge of the magnetic zone with two holes and were pleased to see copper and gold hosted in a zone of siliceous alteration – quite different to the magnetite hosted mineralisation in the other holes. This indicates that the copper mineralisation may not be restricted to just the magnetic zone.

The Alpine project remains “early days” – more drilling is required to test it in every dimension as our geological understanding of controls on mineralisation improve. The regional potential for Alpine style targets is also very promising.

Stellar’s ground position has increased and our enthusiasm for the discovery of orebodies in the world class west coast of Tasmania remains high. The historic Magnet silver-lead-zinc workings are also receiving extra attention, in a proven base metals area.

Goldfi nger:

• Work over the past year has confi rmed signifi cant zones of sulphide mineralisation in the previously undrilled western half of the Goldfi nger gravity feature. Drilling beneath a new “lode” sequence of Pb/Zn/Cu mineralisation, which was identifi ed in shallow RAB geochemistry, has intercepted a zone of very high iron sulphide content – with some visible copper and lead mineralisation, worthy of more attention.

• Our programs have completed our expenditure requirement to earn 60% equity in this exciting project.

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South Australia’s IOCGU province:

• We increased our land position in South Australia’s “copper belt” area to target large “IOCGU” or Prominent Hill/Olympic Dam style copper-gold-uranium discoveries. Stellar tenements include the large Robins Rise and Lake Woorong exploration licenses in the Coober Pedy region, northwest of Prominent Hill. These titles cover some 2,000 square kilometres and are included in our “Robins Rise” joint venture with Red Metal Limited and Phelps Dodge Australasia, Inc. During the year Red Metal carried out an initial drilling program and extensive gravity survey of the JV area. Although drilling results have not defi ned any immediate mineralised targets, the gravity surveys have outlined a number of additional features for future drill testing.

• Also in the Coober Pedy region, we were granted two new licences immediately north of the Robins Rise JV and have an application for a third new licence to the south-east, towards the Prominent Hill area.

• Within the Pernatty exploration licence area, to the west of the Carrapateena IOCGU project, a lack of suitable drilling rigs has delayed the initial drill tests of gravity targets. These are relatively deep and it is important that we utilise the correct drill rigs to test these potentially very large and rewarding targets.

• To the south of Pernatty we acquired the Carriewerloo project, located mid way between Carrapateena and the historical copper mining district of Moonta. We look forward to generating targets to test in this region in 2008.

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R. C. drilling, Gourlays Creek, Tasmania

• A new Joint Venture was entered into with Avoca Resources in the Cowell area of the eastern Eyre Peninsula. Drilling returned strongly anomalous uranium levels within an unusual intrusive rock type, similar to host rocks for the large, low grade Rossing uranium mine, in Namibia. Further work is planned in the coming year.

Coolybring/Wilgena Iron

• Further limited metallurgical tests were completed on iron ore samples from the Coolybring project, to evaluate the amenability of Coolybring magnetite to magnetic benefi ciation. Results indicate that a signifi cant proportion of the samples are potentially suitable for this processing. Further drilling is warranted to assess the distribution and volume of this type of material.

• A project summary has been prepared for possible partners interested to become involved in further assessing this potentially large project.

• This region of S.A. has recently been receiving prominence and the expected higher iron ore prices improve the prospects for this project.

Uranium

• USA advises us that exciting targets have been delineated from its initial reconnaissance surveys and that it is planning active follow-up drilling programs using its own rig.

• Our Warrior joint venture with Toro Energy has reported progress this year with a busier drilling year expected ahead.

A key feature for Stellar has been the growth in value of its investments portfolio. By co-sponsoring the IPO of USA, we acquired over 10 million shares and 5 million options in that company, with a present value exceeding $2 million. As the largest shareholder in USA, we watch its progress with much interest, particularly within our JV ground, where USA’s planned work provides excellent exposure for Stellar to participate in the discovery of uranium in the extensive Kingoonya palaeochannel system. Our holding in Gippsland Offshore Petroleum Limited (GOP) options has also risen in value, in line with the GOP share price.

Shareholders are again promised an active year ahead. We thank, of course, our staff and consultants and JV partners for their hard and dedicated work. In particular, our key stakeholders, our shareholders, are thanked for their patience and providing essential fi nancial support.

T J Burrowes

Executive Chairman

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REVIEW OF ACTIVITIES

TASMANIA (Stellar 100%)

The west coast of Tasmania is host to an exceptional variety of mineralised terrains and to a number of world class orebodies. These include Rosebery, Renison and Mt Lyell and the more recently discovered Avebury nickel mine near Zeehan. Stellar holds an excellent ground position in the region, mostly around Zeehan and trending towards Waratah.

Tasmania’s west coast has a fabulous mining heritage and pro-mining culture, in a very fertile geological environment. On many of Stellar’s projects, past explorers have conducted extensive work, but with little follow up drilling. Consequently, Stellar’s data reviews have defi ned numerous “drill ready” targets.

Heemskirk Exploration Licence

In March, a detailed aeromagnetic survey was fl own at 50 metre line spacing over a large portion of the Heemskirk licence. The results of the survey better defi ned the lithological and structural patterns on the tenement area. With this improved data, we are confi dent that other prospective targets will be generated.

Alpine Copper

Located in the Heemskirk exploration licence is The Alpine copper prospect was the scene of substantial drilling activity during the year. Alpine is favourably located some 35 kilometres north west of Zeehan, adjacent to a sealed road and power line. Substantial existing mining and processing facilities are located within a 100 kilometres radius of Alpine, which will assist in any future development. Previous work by CRA Exploration (CRAE) outlined anomalous copper mineralisation within a geophysical target zone of 1 kilometre length. CRAE intersected 27m @ 0.53% Cu in its second and last hole, AP02. A signifi cant intersection of copper of 22.25m @ 1.23% Cu at shallow depth was reported by Stellar in drill hole, AP04, in April 2006.

Over the past year, a further 11 diamond drill holes were completed at Alpine central with copper mineralisation intersected in 9 of these holes over substantial widths, some commencing at relatively shallow depths. The copper mineralisation has so far been demonstrated over more than 250 metres both in a north-south and an east-west direction. Signifi cantly, the average width of mineralisation appears to be around 50 metres. Diamond drilling has recently been designed to “step out” from the known mineralisation and to further test the Alpine magnetic anomaly and less magnetic surrounds.

The areal extent and the thickness of the mineralisation continues to indicate potential for a substantial tonnage, modest grade deposit.

Drilling has mainly tested the Alpine magnetic anomaly and the drill logs indicate that the copper is broadly coincident with elevated magnetite content. Higher copper assays are apparent in two stratigraphic horizons. In addition, elevated cobalt values – 200ppm to 300ppm – have been observed in some zones of higher copper. The prospectivity of Alpine is improved by the presence of gold in some holes near the margin of the magnetite zone. Alpine appears to represent a style of mineral deposit not previously recognised in Tasmania and is located along a substantial belt of magnetically susceptible rocks, indicating exploration and discovery opportunity over an extensive region within Stellar’s tenement.

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Figure 1 – Drill collars on RTP aeromagnetic image, Alpine Prospect showing possible orientation and extent of known mineralisation

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Drill AMG AMG From To Interval Grade
-hole Easting Northing (m) (m) (m) Cu Co
(%) (ppm)
AP02^ 44.50 56.20 11.70 0.63
58.60 66.65 8.05 0.72
341200 5376661 69.65 71.40 1.75 0.44
AP04 57.70 152.80(EOH) 95.10 0.46
341200 5376646 (incl) 64.65 86.90 22.25 1.23
AP06 341333 5376692 42.00 91.00 49.00 0.39
AP07 62.00 148.00 86.00 0.50
341273 5376509 (incl) 129.00 135.00 6.00 1.05
AP08 341110 5376575 29.80 70.80 41.00 0.48
AP11 341180 5376725 27.00 76.00 49.00 0.36
(incl) 37.00 42.00 5.00 0.54
AP12A 58.60 241.00 182.40 0.17
(incl) 77.00 112.22 35.22 0.39
(and) 121.70 126.70 5.00 0.30
341348 5376768 (and) 213.00 215.00 2.00 0.70
AP13 341449 5376736 250.00 305.00 55.00 0.35 225.00
AP14 341028 5376442 152.00 182.00 30.00 0.50 262.00
AP16 341152 5376453 72.00 88.00 16.00 0.62 253.00
and 164.00 205.00 41.00 0.33 146.00
AP17 341306 5376423 222.00 246.70 24.70 0.53 216.00
----- End of picture text -----

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Calcrete sampling at Sunshine, SA

^Drilled by CRAE Table 1 – Alpine Copper table of signifi cant intercepts

Tin Exploration

During the year, the price of tin on the LME strengthened considerably to reach a ten year high; confi rming the improved fundamentals in the global tin market.

Stellar’s Heemskirk EL46/2003 includes much of the historic North Heemskirk Tinfi elds. The licence area covers the extensive northern contact zone between the Heemskirk Granite and Neoproterozoic sediments that include the key carbonate horizons that are essential for the formation of these potentially very profi table skarn and replacement style tin deposits. The area is well serviced by a network of sealed and unsealed roads and power lines. Substantial existing mining and processing facilities are located within a 50 kilometres radius of the tenement.

Refl ecting the renewed confi dence in its tin assets, the Company completed an initial drilling program at the St Dizier tin deposit and a fi rst pass RC drill program at the Gourlays Creek prospect.

A number of geophysical targets remain to be investigated.

St Dizier Tin Deposit

The St Dizier tin deposit is located within Heemskirk EL46/2003 in open, button grass country, just 18 kilometres from Zeehan. At St Dizier, skarn style tin mineralisation was intersected by drilling over twenty years ago. Previous estimates by Gold Fields Exploration Pty Limited (Renison Limited), suggest a mineralised zone with a potential 800,000 tonnes at 0.70% Sn in the Central Block (non JORC). Resource delineation drilling is required to assess metallurgical characteristics and potentially upgrade this mineralisation to JORC status.

The skarn trend extends eastwards from St Dizier for approximately 3 kilometres, wrapping around the northern contact of the Heemskirk Granite with prospects including the Central and, the Big H, deposit. No work has been conducted on any of these prospects for 20 years. In mid 2007, Stellar completed three angled diamond cored drill holes into the St Dizier Central Zone with all holes reporting excellent tin assays over wide intercepts. Results were reported in July 2007 and are repeated below:

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Hole No. [1] Easting Northing Depth Intercept [2] Grade
AGD66 AGD66 From To (m) (% Sn) (% soluble Sn)
(m) (m)
ST01 345034 5367624 44.00 101.00 57.00 0.60 0.14
including 55.00 63.00 8.00 0.90 0.33
and 86.00 101.00 15.00 0.95 0.03
ST02 345080 5367600 13.00 35.00 22.00 1.12 0.12
ST03 344992 5367640 39.20 43.70 4.50 3.82 1.09
----- End of picture text -----*

^Drilled by CRAE

*Core recovery in ST03 is estimated at 40% in that zone.

1Holes were drilled on an azimuth of 190o and at an inclination of between 60° and 70°.

2Downhole intercepts – no estimation can be made of true widths at this stage.

Table 2 – St Dizier tin intercepts

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Figure 2 – St Dizier plan showing the location of drill holes ST01 – ST03

At Granville East, approximately 5 kilometres north-west of St Dizier, a northerly trending skarn zone estimated from aeromagnetic data as having a strike length in excess of 2 kilometre, includes a small open pit tin mine (McDermott’s pit) within Stonehenge Metal’s 21M/2003 and 9M/2006. These two tenements (excluded from Stellar’s EL) cover only 10% of the overall 2 kilometres trend held by Stellar. The tin mineralisation at McDermott’s Pit is now recognised to have a pipe-like distribution similar to the mineralisation at St Dizier.

Three similar, signifi cant aeromagnetic anomalies within the Granville East trend; “Big Toe”, “Little Toe” (Donnellys) and “11,000”, have not been adequately drill tested. These anomalies may represent additional tin rich pipes, of a size comparable to St Dizier. Two similar, but less intense aeromagnetic anomalies also warrant exploration follow-up.

At Gourlays Creek, an initial scout program of 7 RC drill holes for 780 metres was conducted to test a large magnetic and EM anomaly. The holes were drilled approximately 400 metres north of an area where Geopeko conducted a limited drill program. It returned anomalous tin and copper mineralisation in two sulphide rich horizons, over widths of 9 to 16 metres, in the early 1980s. Drilling diffi culties meant not all holes intersected target but signifi cant copper mineralisation was encountered. Stellar believes there is excellent scope to discover areas of tin enrichment based on a Renison Bell style pyrrhotite cassiterite replacement model and/or copper of the Alpine style.

page six

Dundas Exploration Licence

The Dundas exploration licence comprises an area of 12 square kilometres covering a discrete and high intensity magnetic anomaly. It shows strong similarities to the magnetic feature associated with the nickel mineralisation at the Avebury nickel deposit located some 15 kilometres west of the Dundas EL.

At Avebury, nickel mineralisation is related to hydrothermal fl uids interacting with mafi c/ultramafi c rocks close to Devonian granitoids. These critical factors for Avebury style nickel mineralisation appear to be present within the Dundas EL. Previous exploration in the area has not targeted nickel.

Towards the end of the year, Stellar commenced an initial two hole scout drill program to test a zone of discrete magnetic highs in a mapped serpentinised Cambrian ultra mafi c rock unit (which occupies some 30% of the Dundas EL).

Ramsay River Exploration Licence

Stellar holds some 12 strike kilometres of elevated magnetic signatures which are interpreted in part to indicate an ultramafi c belt, the eastern portion of which lies under basalt cover. The area is near a sealed highway and is within easy trucking distance of the existing concentrator at Hellyer. Detailed geological mapping has been conducted over part of the exposed western magnetic arc and indicates that magnetic highs partly represent the metamorphic aureole of the Meredith granite and partly represent outcropping

Data compilation of the Magnet project area was carried out in the year, with particular attention being devoted to the south-westerly extension of the historic Magnet Mine in Stellar’s ground. The Magnet mine has a recorded production of some 620,000 tonnes @ approx 13% combined lead/zinc, plus high grade silver of 390g/t from 1895 to 1940.

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Serpentinite at Dundas, Tasmania

The Magnet area is one of Stellar’s more advanced exploration plays.

The Arthur Dam project area is favorably located geologically within 5 kilometres of three important historic mines – Mt Bischoff (tin), Cleveland (tin, copper) and Magnet (silver, lead, zinc). The drilling program, carried out in late 2005, confi rmed anomalous zinc and copper in and adjacent to an ultramafi c unit. Geophysical anomalies on the eastern side of the licence, where ultramafi c rocks are inferred to lie under shallow cover of Tertiary basalt, are being assessed as drill targets.

Corinna Exploration Licence

This area adjoins Stellar’s present exploration licences EL46/2003 (Heemskirk) and the smaller EL21/2006 (Hangman’s Creek). Stellar is reviewing targets in this region based on our emerging knowledge of the “Alpine” style of mineralisation. Compilations of historical geochemical sampling have outlined zones of strongly anomalous copper levels which have not been fully assessed. The area has one key access road (Corinna-Savage) along its western edge.

The Rayne licence covers a potential anomalous ultramafi c unit 7.5 kilometres east-north-east of Zeehan.

URANIUM

Warrior Uranium Joint Venture (Stellar 100%; Toro able to earn 70%)

The Warrior uranium deposit was defi ned from prior exploration drilling by Power Nuclear Corporation Ltd (PNC) in the 1970s and was selected by Stellar for initial drill testing in May 2006. This area was chosen as an area of higher grade mineralisation, with limited prior drill testing.

In early 2006, Stellar conducted an initial drilling program at nominal 200 metre spacing between drillholes on fi ve regional traverses to test approximately 9 kilometres strike extent of the interpreted main Warrior palaeochannel.

In response to approaches from industry, Stellar entered into a joint venture agreement with uranium explorer, Toro Energy Limited. Under the terms of the JV, Toro may spend over $3 million in a staged farm-in over four years on the Warrior Project, to earn 70% equity.

Toro Energy Limited started its drilling program on the Warrior palaeochannel uranium project Joint Venture (JV) in March. Initial drill results were released in April 2007.

page seven

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Figure 3 – Toro Energy plan showing locations for Areas “A” and “B” within Stellar’s EL3372

Assays confi rm past results and show that, in Area “A”, the uranium mineralisation lies at a relatively shallow depth of some 30 metres.

The drilling completed thus far has only tested a small portion of the Warrior palaeochannel system but results presented by Toro confi rm the inferred distribution of higher grade mineralisation near the eastern margin of the channel, as interpreted from airborne HoistEM™ data. This zone trends to the SSE from the area of Toro’s best results to date, in an area untested by historical drilling. Toro’s drilling program is continuing into this area and Stellar believes that there is a high possibility of increasing the extent of this zone.

Figure 4 – Showing identifi ed palaeochannel system using HoistEM™ at Warrior JV

page eight

Kingoonya Palaeochannel Joint Venture (Stellar 100%; UraniumSA able to earn 70%)

In August 2006 Stellar entered into a JV with UraniumSA Limited (USA) for uranium exploration on six of Stellar’s exploration licences in the Tarcoola region of the central Gawler Craton. The JV and collaboration with USA is providing equity participation in a signifi cantly expanded coverage of the Kingoonya Palaeochannel System well in excess of Stellar’s existing Tarcoola landholding and provides a JV partner focussed on exploration of the Kingoonya Palaeochannel System. Stellar presently holds a 100% interest in these areas, with USA able to earn up to 70% interest. In addition, Stellar owns a substantial 16% shareholding in USA.

Stellar has received preliminary results from USA’s recently completed airborne EM survey covering substantial areas of Stellar’s tenement holding across the Kingoonya palaeochannel. Data mapping defi ned large palaeodrainage systems, as indicated in earlier reconnaissance lines fl own by Stellar. These are prospective for roll-front uranium deposits sourced from known uraniferous granites in the area.

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Drill core Alpine, Tasmania

Figure 5 – Merged image of airborne EM conductivity, showing likely palaeochannel distribution

USA has scheduled an aircore drilling program to start on the Stellar Kingoonya Palaeochannel JV ground in September 2007, to investigate the geology of the palaeodrainages and to determine the broad controls on the location of uranium mineralisation.

NEW SOUTH WALES

Goldfi nger (Stellar 60%)

Systematic coverage of the 3 kilometre strike length of the Goldfi nger gravity target and the southern Galena Hill prospect area with the deep penetrating “MIMDAS” Induced Polarisation technique was completed in the middle of the year. The survey, funded by BHP Billiton, identifi ed a strongly chargeable and conductive zone coincident with the western half of the Goldfi nger trend, untested by previous drilling.

Two diamond drill holes were completed to test the centre of the MIMDAS chargeability and conductivity zones (holes DD007, DD008). Although no visible intersections of signifi cant zinc/lead sulphide mineralisation were recorded, a zone of intense pyrrhotite (iron sulphide) mineralisation was intersected at the target depth in hole DD007. Subsequent downhole EM surveying confi rmed that this zone is contributing to the geophysical responses. Pyrrhotite is commonly observed in the same environment as Broken Hill type mineralisation, and potential exists for economic sulphide mineralisation in close proximity to the drilled section.

During June, a small Rotary Air Blast (RAB) program of 6 holes, totalling 246 metres, was carried out on Section 545000E to assess the interpreted position of mineralised “lode sequence” rocks immediately above hole DD008. Three of these holes intersected siliceous, blue quartz “lode” style material with visible sulphide mineralisation. Following up on this encouragement, four additional diamond cored holes were drilled to test the extent of this mineralisation on Section 545000E. Zones of signifi cant sulphide mineralisation were observed in holes DD009 and DD011.

Further quantitative interpretation of the structural and geophysical models for this section is continuing.

page nine

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Figure 6 – Goldfi nger Section 545000E showing proposed holes to test interpreted “lode sequence” and EM conductive target

Stellar has now earned a 60% interest in this joint venture.

Panama Exploration Licence (Stellar 100%)

Panama EL 6556 is located immediately to the east of the Goldfi nger and Copper Blow areas. A gravity survey completed in 2006 defi ned a number of signifi cant gravity highs including a major anomaly (4mGals) immediately west of the historic Panama gold workings. Initial RAB drilling of four gravity features in the Panama area was completed in late June. The drilling program tested geochemical levels across four large gravity targets identifi ed on the Panama licence. The program comprised 59 shallow RAB holes drilled at 50 metres spacing. Assessment of the geochemical and geophysical results are continuing.

SOUTH AUSTRALIA

Pernatty Exploration Licence (Stellar 100%)

The Pernatty EL3583 is located to the west and south of the historic Mt Gunson copper mining area. The Carrapateena IOCG prospect, held by RMG Services Pty Ltd/Teck Cominco Limited, occurs some 30 – 40 kilometres to the east.

Four higher priority gravity features have been selected for drill testing IOCGU mineralisation at depth and access inspection carried out as a precursor to drilling.

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RAB drilling at Panama, NSW

page ten

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Ford across Dundas River, Tasmania

Figure 7 – Pernatty, summary of residual gravity IOCGU targets

Deep diamond drill testing of two priority targets is planned to commence in late 2007/early 2008 quarter.

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Figure 8 – Same scale comparison between gravity anomalies at Pernatty (Windabout target) and Carrapateena

Robins Rise Joint Venture (Stellar 100%; Red Metal right to earn 60%)

In early October 2006, Stellar concluded an exploration Earn-In Agreement with Australian explorer Red Metal Limited and Phelps Dodge Australasia, Inc., together known as “the Alliance”. The technical input from the highly experienced exploration professionals from within the Alliance will ensure the effective exploration of these tenements. The increased expenditure rate will expedite the chances of making signifi cant discoveries within this very large project area.

The agreement with the Alliance covers some 1,700 square kilometres of EL3336 and EL3436 and is located 100 kilometres north-west of the Prominent Hill copper-gold deposit within the Gawler Craton. Red Metal advises that processing of the expanded gravity survey has highlighted several anomalies which are considered prospective for copper-gold mineralisation. Drilling is planned for 2007, dependent upon rig availability.

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Coober Pedy Ridge (Stellar 100%)

Title was granted over EL3752 and EL3753 over the northern portion of the Coober Pedy Ridge area. These licence areas are contiguous with the Robins Rise JV tenements. Interpretation of aeromagnetic data has outlined a number of target areas for IOCGU style mineralisation and a gravity survey covering outlined magnetic target zones is scheduled for September – October 2007.

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Figure 9 – Aeromagnetic image for the Robins Rise JV (EL3336 and EL3436) and North Coober Pedy (EL3752 and EL3753) project areas

Cowell Joint Venture (Stellar able to earn 75%)

Review of existing data for the Cowell Joint Venture area, Eyre Peninsula, confi rmed the high prospectivity of the project area for IOCGU style mineralisation, under relatively shallow cover (100 metre). In the “Glensea” prospect area, the existing 3 holes completed by Avoca Resources Limited returned highly encouraging levels of copper, rare earth and uranium mineralisation. Follow up drilling by Stellar intersected a number of narrow (1 – 5 centimetres) quartz-pyrite-chalcopyrite veins in three of fi ve holes drilled. Holes COD08 and COD10, near the northern and southern ends of the 15 kilometres target “zone”, both returned intervals of pyrite alteration, with some copper veining and possible mylonitised pegmatite intrusions. Although assays returned only low levels of copper mineralisation, signifi cant intervals of strongly anomalous uranium values were returned from holes COD08 and COD06, in the northern portion of the project area, approximately 1.5 kilometres north and 1 kilometre west of earlier hole COD02, drilled by Avoca:

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Figure 10 – Existing gravity data (on aeromagnetic) for the Glensea project area, with drill collar locations

page twelve

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----- Start of picture text -----

Hole Depth Interval Grade
From (m) To (m) (m) (ppm U3°8)
COD02 (Avoca hole) 87.0 115.0 28.0 182
Including 89.0 95.0 6.0 310
97.0 99.0 2.0 312
102.0 114.0 12.0 199
COD06 (SRZ – approx 1.5km north) 111.6 171.3(EOH) 59.7 30
COD08 (SRZ – approx 1km west) 169.8 172.8 3.0 130
and 205.5 210.6 5.1 74
----- End of picture text -----

Table 3 – Cowell JV – Uranium intercepts for the “Glensea” project area

Petrological descriptions received for the anomalous uranium intervals describe the host lithology as sodic pegmatoidals in hole COD08 through to fi ne grained aplitic monzogranite in hole COD06. The pegmatoidal intrusive rocks show some strong textural and chemical affi nities with the “alaskite” host intrusives for the Rossing uranium mine in Namibia.

Although the grades encountered so far are unlikely to be of an economic tenor, Stellar considers that the discovery of strong uranium mineralisation within a sodic pegmatite to be highly signifi cant. Further drilling of the northern Glensea project area is planned to determine the extent of the anomalous uranium zone, in addition to evaluating other geophysical targets within the licence area.

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Access track on Dundas EL, Tasmania

Tarcoola Region – Sunshine Gold Project (Stellar 100%)

A comprehensive review of known gold occurrences within Stellar’s Tarcoola licence areas recommended the further evaluation of the “Sunshine” prospect, in particular for Archean-hosted gold mineralisation comparable to the “Challenger” gold mine, approximately 120 kilometres to the north-west. Previous drilling at Sunshine returned signifi cant intervals of low to moderate grade gold mineralisation (e.g. RCSUN012, 18-38 (20m) at 0.41g/t Au, RCSUN014 56-66 (10m) at 1.44g/t Au). An initial geochemical survey comprising 220 calcrete samples was completed in the Sunshine prospect area over a target area of approximately 2.5 square kilometres on a 50 metres by 50 metres sample spacing. The results defi ned a number of signifi cant anomalous zones, with a prominent north-north-east trending linear feature of up to 50ppb Au in the central portion of the area, over approximately 400 metres by 100 metres. A signifi cant drilling program is being planned to assess the area. Stellar is very encouraged by the regional geological similarities between this area and Dominion’s Challenger gold mine.

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Figure 11 – Gold geochemistry for detailed calcrete sampling of the Sunshine Gold Project – read areas greater than 10ppb Au

page thirteen

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Tarcoola Region – Coolybring Magnetite Project (Stellar 100%)

A specialist’s report on the Coolybring and Wilgena magnetite projects was completed during the year. The study consolidated previous analyses and assessed the results of additional metallurgical work carried out to clarify the benefi ciation characteristics of the magnetite bodies. The report concluded that there is potential for commercial quantities of benefi ciable magnetite ore, and further drilling is warranted to quantify the extent and detailed nature of the “more favourable ore types”.

Tarcoola Basin Zinc (Stellar 100%)

The “PACE” subsidised drilling program to test for Proterozoic sediment hosted base metal mineralisation in the vicinity of the Ella zinc prospect was designed to test a local magnetic and gravity target anomaly along structure from the low-level zinc mineralisation intersected in earlier RC drill holes at Ella. Unfortunately, the rig proved unable to complete the proposed program.

VICTORIA

North Bendigo Joint Venture (Stellar 50%)

This area, north of Bendigo, is under cover and is considered prospective for previously undiscovered gold deposits.

Some of the basement samples which were recovered from previous drilling into weathered basement rocks were submitted to a laboratory for follow-up bottle roll analysis, prior to targeting further aircore drilling. Anomalous gold was noticed in several intercepts at a cover depth of some 60 metre. However, the exploration program during the year was delayed due to diffi culties sourcing a suitable drill rig. A short aircore drill program to test anomalous basement gold assays from the 2006 aircore program, in the zone along strike of Bendigo and Sebastian, was carried out late in the year.

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page fourteen Panama, near Broken Hill, NSW

CORPORATE DIRECTORY

Directors

Thomas J Burrowes (Chairman) Barrie E Laws (Non-executive) David J Isles (Executive) Christopher G Anderson (Executive)

Company Secretary Melvyn J Drummond

Registered Offi ce

Level 7 Exchange Tower 530 Little Collins Street Melbourne VIC 3000

Telephone: (03) 9909 7618 Facsimile: (03) 9909 7621 E-mail: srzinfo@stellarresources.com.au Website: www.stellarresources.com.au

Auditors

DTT Victoria QV Building 180 Lonsdale Street Melbourne VIC 3000

Legal Advisor

Bryan Cumming Level 7 Exchange Tower 530 Little Collins Street Melbourne VIC 3000

Bankers

National Australia Bank Limited Level 2, 330 Collins Street Melbourne VIC 3000

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Nick Turner (Contract Geologist), ,Chris Anderson (Director) and Tom Burrowes (Chairman) discuss aeromagnetic data over Alpine

Stock Exchange

63 King William Street Kent Town SA 5067

Australian Stock Exchange Limited 530 Collins Street Melbourne VIC 3000

ASX code for shares: SRZ

Telephone: (08) 8363 1589

Share Registry

Link Market Services Limited Level 9, 333 Collins Street Melbourne VIC 3000

Telephone: 1300 554 474

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Registered Offi ce Level 7 Exchange Tower 530 Little Collins Street, Melbourne VIC 3000

Telephone: (03) 9909 7618 Facsimile: (03) 9909 7621 E-mail: srzinfo@stellarresources.com.au Website: www.stellarresources.com.au