STELLAR RESOURCES LIMITED — Annual Report 2009

Oct 14, 2009

Business Review 2009

Forward Looking Statements

This Business Review contains certain forward looking statements with respect to the company that involve known and unknown risks that are beyond the company's control. In light of these risks, actual results could be materially different from any future results express or implied by these forward looking statements which speak only as at the date of this Business Review.

Business Review 2009

Contents

Chairman's Report	02
Review of Activities	04
Tarcoola Iron Ore Project	05
Tenement Maps	06
Heemskirk Tin Project	08
Uranium Assets	09
Exploration	10
Directors and Executives	12
Corporate Directory	13

Maximising shareholder wealth by identifying the quickest path to JORC resources

Chairman's Report

Overview

The past year has been difficult for our company as the full impact of the Global Financial Crisis (GFC) effected the stockmarket hard, including junior resources companies like ourselves. We saw our share price plummet to quite unreasonable levels during the slump, from which it is only now recovering. Deals and programs stopped overnight, creating strain for all.

We are pleased to observe some signs of recovery and we certainly hope this continues!

We responded to the GFC by making substantial reductions in our cost structure, including at senior management and Board level. Unfortunately we were forced to reduce drilling activity, but we were nonetheless able to continue with our focus on our large magnetite deposit in South Australia.

Our work provided:

• Greater understanding of the deposit tonnage potential through the November 2008 drilling program.
• High assay grades of 35% iron and confirmation that the iron content can be upgraded to 65% plus.
• Positive conceptual mining study implying a competitive mining cost structure.
• Confirmation of competitive third party rail freight rates.

We remain very positive about this large magnetite deposit located adjacent to a railway line.

The company's plan to IPO its Tasmanian tin assets into Columbus Metals Limited progressed to the final stage of prospectus preparation but listing was ultimately deferred due to equity market weakness in September 2008. The potential for IPO is still intact as confidence improves through 2009 and hopefully into 2010.

Uranium is an important asset for Stellar in 2009. In particular, the company has benefited from a significant increase in value for its 11% shareholding in UraniumSA Limited following that company's discovery of the Blackbush sedimentary uranium deposit south of Whyalla in South Australia. Importantly, a regional uranium target extends to the south of Blackbush into joint venture property held by Stellar and potentially further into Stellar's fully owned ground.

Stellar has resumed full ownership of the known Warrior uranium deposit, which is slated for further assessment in the coming year.

All exploration properties were reviewed and ranked during the year. Five properties considered to have a low chance of providing a suitable drilling target or a joint venture partner were relinquished. Against this, two new applications for properties neighbouring existing projects were acquired.

Strategy

Stellar continues to focus on those projects that have the potential to deliver the quickest path to a JORC resource and mine development. Magnetite can achieve this goal and we continue to work at securing a suitable partner. Tin is being assessed to determine whether previous drilling can be used to define a JORC resource. Uranium at Warrior is under assessment for its resource potential. Exploration spending will remain focused on high conviction targets.

Funding

Stellar raised $1.0 million through a placement to an institutional investor in September 2008, followed by raising $391,000 in April 2009 through a shareholder share purchase plan. The company

is well placed to fund its activities into 2010 with cash of $1.6 million, an 11% shareholding in UraniumSA and proceeds from the disposal of non-core properties.

Key Personnel

Mr Barrie E Laws resigned as a non-executive director in February 2009 reducing board membership from four to three as the Board was rebalanced with a majority of non executive directors. Mr Laws' contribution to the Board since joining prior to the IPO in April 2005 is highly valued and his resignation was accepted with regret.

Outlook

Moving into 2010, Stellar has three primary objectives:

• Complete scoping of the Tarcoola Iron Ore Project and move into resource drilling, preferably in joint venture.
• Determine the best way to commercialise the Heemskirk Tin Project.
• Advance our uranium assets towards resource definition.

Stellar Resources holds an excellent portfolio of resource projects which we are constantly striving to advance towards profitable development.

Acknowledgements

During the past difficult year we thank our staff and consultants who have accepted work reductions but have stayed loyal to the cause. We of course thank shareholders – both new and continuing – for their continued support and involvement in the progress of our company.

We look forward to more prosperous times ahead as markets improve.

T J Burrowes Chairman

Review of Activities

Tarcoola Iron Ore Project (Stellar 100%)

Review of 2009

• Drilling identified the target tonnage potential at Coolybring to be large – up to 500 million tonnes.
• Iron grade averages 35% the high end of the range for magnetite banded iron formation.
• Davis Tube Recovery tests produced a 65% iron concentrate with potential to upgrade to 67% and low impurities.
• Positive mining concept comparable to the Prominent Hill mining situation.
• Water study highlights potential sources within 100 kilometres of Tarcoola.
• Competitive rail freight rates from Tarcoola to Port Bonython confirmed.

Key Features

Mining One developed a conceptual open pit mine for the Coolybring deposit showing that a competitive mining cost could be achieved over a mine life in excess of 30 years.

• Annual ore production of 13.5 million tonnes yielding 5 million tonnes of magnetite concentrate.
• Waste to ore ratio of 0.85/1.00, excluding overburden removal, is achievable in the first 5 years.
• Life of mine waste to ore ratio including overburden is 1.44/1.00.

Title over Hicks Hill, an out-cropping magnetite deposit located 30 kilometres to the east of Coolybring, was recently awarded to Stellar. Due to its limited overburden, Hicks Hill provides the opportunity for a lower cost start-up mine with potential for a 10 year life.

Aquaterra completed a water study indicating a number of target areas for groundwater within 100 kilometres of Tarcoola and highlighting the positive outcome achieved for the Prominent Hill mine for comparable water requirements in similar terrain.

Coolybring is the closest magnetite project in South Australia to an open access, standard gauge railway line that connects the project with the planned Port Bonython bulk commodity terminal.

• Track rating was recently upgraded and can handle 10,000 tonne iron ore trains.
• Rail capacity should handle 10 million tonnes of magnetite concentrate annually.
• Competitive rail freights are available for annual shipments of 5 million tonnes.

The Port Bonython bulk commodity terminal feasibility study was completed by the Flinders Ports Consortium during the year and received support from State and Federal Governments. Financial backing for the port is likely to become clearer once the magnetite projects in South Australia move into the resource definition drilling stage.

Targets for 2010

• Complete scoping studies.
• Sale of equity to a suitable project partner.
• Commence resource drilling.
• Initial drill tests of Hicks Hill.

Tenement Maps Key Projects

• Tarcoola Iron Ore EL 4167/ELA 2009/70, South Australia.
• Heemskirk Tin RL 5/1997, Tasmania.
• Uranium EL4242/3978, South Australia.

South Australia and New South Wales Tenement Map Tasmania Tenement Map

Heemskirk Tin Project (Stellar 60%)

Review of 2009

• Targets for the project in 2009 were predicated on a successful IPO of Columbus Metals (a wholly owned subsidiary that holds Stellar's 60% interest in the Heemskirk Tin Project). The IPO was deferred due to poor equity market conditions and targets were deferred through to 2010.
• Consideration was given to moving the initial focus from all deposits to the Queen Hill deposit located closest to the surface – on the basis that it has potential to support a low cost development strategy.

Key Features

The Heemskirk Tin Project comprises the Queen Hill, Severn and Montana deposits which are located on the one retention licence adjacent to the township of Zeehan on Tasmania's west coast.

Drilling by Aberfoyle Limited in the mid 1980s identified an historic pre-JORC resource of 3.6 million tonnes grading 1.2% or 43,700 tonnes of contained tin. This is comparable with the resources at the nearby Renison Bell tin mine and concentrator owned by MetalsX Limited (which has recently concluded a deal with the Chinese group Yunnan Tin Group).

Geologically the Heemskirk tin deposits owe their genesis to similar processes that formed the Rension Bell deposits, implying that mineralisation is likely to continue at depth below the 400 metre limit of historic drilling at Heemskirk. Tin mineralisation is known to depths of 1,000 metres at Renison.

Queen Hill accounts for 30% of the Aberfoyle resource estimate, has an average grade of 1.39% and crops out at the surface. For these reasons it represents an ideal target for a low cost development.

The Mt Lyell, Rosebery, Renison Bell and Avebury mines are all located within 30 kilometres of Zeehan resulting in a high level of mining and engineering services within the region.

Competitively priced power, good roads and the west coast train line to the port of Burnie on Tasmanian's north coast highlight the infrastructure advantages of operating in Zeehan.

Targets for 2010

• Assess the potential for a JORC resource for the Queen Hill deposit.
• Determine a low cost development plan for Queen Hill.
• Identify targets for additional resources.

Uranium Assets

Review of 2009

• Stellar's 11% shareholding in UraniumSA Limited significantly increased in value due to its Blackbush discovery.
• Stellar's exploration properties EL4242 and EL3978 are highly prospective for sedimentary uranium.
• Stellar has resumed full ownership of the Warrior uranium deposit which is under technical review.

Key Features

In May 2009, UraniumSA announced a JORC inferred resource of 12 million tonnes grading 224 parts per million U3O8 for 2,700 tonnes of contained U3O8 for its Blackbush roll-front sedimentary uranium deposit located 20 kilometres south of Whyalla in Pirie Basin Tertiary lignitic sands.

Subsequent regional traverse drilling by UraniumSA showed that roll front uranium mineralisation of potential ore grade extended southward over a 32 kilometre strike length which UraniumSA suggests "…the area must now rank as a new district rather than a single deposit."

Some of the better drilling results reported by UraniumSA are located immediately to the north of Stellar's EL4242 (in which UraniumSA is earning a 70% interest) including drill-hole MRM098 which returned 580 parts per million eU3O8 over 5 metres. UraniumSA has indicated that it believes the mineralisation continues southward into the joint venture ground of EL4242.

Pirie Basin sediments containing a similar sequence to that drilled by UraniumSA are inferred to continue southward and comprise a significant area within Stellar's 100% owned EL3978.

Stellar has previously reported uranium mineralisation within basement intrusive rocks in the eastern portion of EL3978. The best assays were 155 parts per million uranium over 28 metres, and 108 parts per million uranium over 3 metres. However, the cover sequence was not tested for roll-front uranium.

The Warrior uranium project was returned to Stellar during the year by joint venture partner Toro Energy Limited which is pursuing more advanced projects within its portfolio. Stellar is in the process of evaluating the work completed to date to determine the resource potential with a view to continuing exploration in its own right or through a new joint venture. Initial assessments indicate that Toro's drill sampling may have significantly understated uranium grades.

Targets for 2010

• Undertake a sedimentary uranium exploration program on EL3978.
• Evaluate the Warrior uranium deposit.

Exploration – Copper Gold

Alpine (Stellar 100%) Tasmania

20 drill holes over a strike length of 1,000 metres intersected a zone of copper mineralisation grading 0.2% to 0.5% copper over an average true thickness of 30 metres. The best result was AP004 with an intersection of 22.25 metres grading 1.23% copper. The mineralisation occurs as stratabound late stage veins within a banded pyrite-magnetite-silica schist. Exploration potential exists for higher grade copper mineralisation along strike within the Bowry Formation metasediments to the west of Alpine.

Pernatty (Stellar 100%) South Australia

The target is iron-ore-copper-gold-uranium (IOCGU) mineralisation at the base of the Gawler Range Volcanics. Two targets are defined by magnetic highs with associated off-set gravity highs along a northwest trending lineament. The first target was drilled in 2008 and intersected low level copper and silver. The second target remains to be tested.

Coober Pedy Ridge (Stellar 100%) South Australia

ELs 3752 and 3753 contain an east-west trending arc of lower Proterozoic basement buried beneath 100 metres of younger cover. Regional magnetics define a number of IOCGU targets within this terrain.

Sunshine (Stellar 100%) South Australia

The Bulgunnia shear zone, regarded as a possible source of gold in calcrete anomalism, was targeted with a 1,500 metre aircore drilling program in 2009. Assay results indicated little evidence of extensive gold mineralisation within the shear zone. The project is now being considered for joint venture.

Panama Hat (Stellar 100%, Carpentaria Exploration earning 51%) New South Wales

Carpentaria sampled the Williams Prospect during 2009 and reported a number of high grade rock chip assays ranging from 7g/t to 30g/t along a northeast trending outcrop. Carpentaria believes that the opportunity for this prospect lies to the northeast where the outcrop is covered by recent sediments.

• Red Metal Limited completed its exploration program and withdrew from the Robins Rise

• joint venture. • Western Plains Resources Limited acquired an option to buy the Robins Rise properties.
  • UraniumSA Limited entered a joint venture over EL4242 near Cowell in South Australia.
  • Dundas EL21/2004 in Tasmania was sold to Creat Resource Holdings Limited.
  • Relinquishments included EL4125 West Wirrida and EL3850 Carriewerloo in South Australia and EL50/2004 Corinna, EL21/2006 Hangman's Creek and EL50/2004 Ewart in Tasmania.

Targets for 2010

• Drill test electro-magnetic anomalies on the Ramsay River EL in Tasmania.
• Joint venture the Alpine, Pernatty and Sunshine properties.

Exploration – Other Metals

Ramsay (Stellar 100%) Tasmania - Nickel

Three discrete electro-magnetic anomalies within a north-south trending magnetic high on the eastern side of EL1/2004 define nickel exploration targets.

Goldfinger (Stellar 80%) New South Wales - Zinc

Stellar is in the process of restructuring the joint venture. A number of partly tested zinc and copper anomalies in EL4632 require further work.

Exploration

Strategy

• Rank areas in terms of prospectivity and potential size of prize – either large or high grade.
• Focus on areas of known mineralisation and high ranking drill targets rather than greenfield prospects.
• Acquire properties that add to existing targets or are sufficiently attractive in their own right.
• Properties that do not fit these criteria are subject to joint venture or disposal.

Outcomes in 2009

• A modest drilling program was conducted at the Sunshine gold prospect in South Australia.
• Lidds Pty Ltd sampled the Perseverance mining lease at Tarcoola under a joint venture with Stellar.
• Carpentaria Exploration Limited explored the Panama Hat gold joint venture in NSW.

Directors and Executives

Chairman

Thomas J Burrowes B.Ec (Hons), MBA (Melb) Mr Burrowes has extensive experience in all facets of Australian exploration and mining over the past sixteen years. After an initial career in funds management, he has held numerous directorships in ASX listed exploration and mining companies.

Directors

Christopher G Anderson B.Sc (Hons), Fellow AusIMM

Mr Anderson is an exploration consultant with 30 years of experience in mineral exploration programs both in Australia and overseas. He is a graduate of Adelaide University, with an Honours degree in geophysics and geology. He has managed a contract geological and geophysical consultancy service company with particular expertise in the cost effective application of geophysics.

David J Isles B.Sc (Hons), PhD, SEG, ASEG, AIG, MAusIMM

Dr Isles is a geophysicist and recognised expert in aeromagnetic interpretation. He has worked in operational exploration with BHP Minerals and in the area of exploration technology development with World Geoscience Corporation.

Chief Executive Officer

Peter G Blight BSc (Hons) (Adelaide), MSc (USA)

Mr Blight has been involved in the exploration, mining and finance industries for the past twenty eight years. Prior to joining Stellar Resources, he was Director of Research at Russian aluminium giant UC Rusal where he was responsible for market analysis and business development in China and India. He also had a 14 year career with investment bank, UBS, as Executive Director of commodity analysis in London and prior to that as a mining company analyst in Melbourne. Mr Blight's wide range of experience from exploration to business development places him in a strong position to guide the commercialisation of Stellar's advanced projects.

Company Secretary

Melvyn J Drummond BA, B.Com, FCIS

Mr Drummond worked and resided in four countries prior to permanently relocating to Australia in 1985. He has held senior finance and administrative positions (including directorships) in both private and public companies in various business sectors, including resources.

Corporate Directory

Directors

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

Company Secretary

Melvyn J Drummond

Chief Executive Officer

Peter G Blight

Registered Office

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

Registers of unlisted employee and other options held at this address

Adelaide Office

63 King William Street Kent Town SA 5067

Telephone: (08) 8363 1589

Legal Advisor

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

Auditor

Deloitte Touche Tohmatsu 550 Bourke Street Melbourne VIC 3000

Bankers

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

Home Stock Exchange

Australian Securities Exchange Level 45, 525 Collins Street Melbourne VIC 3000

ASX code for shares: SRZ

Share Registry

Registries Limited Level 7, 207 Kent Street Sydney NSW 2000

Register of listed ordinary shares held at this address

Stellar Resources Limited

ABN 96 108 758 961

Level 7 Exchange Tower, 530 Lt. Collins Street Melbourne Victoria 3000 Australia T/ +61 3 9909 7618 F/ +61 3 9909 7621 www.stellarresources.com.au