STELLAR RESOURCES LIMITED — Interim / Quarterly Report 2005

Oct 27, 2005

$\bf \Phi$ (၇ $\overline{\mathbb{C}}$

28 October 2005

ASX Code: SRZ

ABN 96 108 758 961 Suite 713 Exchange Tower 530 Little Collins Street Melbourne Victoria 3000 Australia

Telephone +61 3 9909 7618 Facsimile +61 3 9909 7621

www.stellarresources.com.au srzinfo@stellarresources.com.au

Quarterly Report for the period ended 30 September 2005

HIGHLIGHTS

Exploration

• Diamond Drilling of the Goldfinger base metal target at Broken Hill commenced late in the quarter. Lode sequence, Broken Hill style rocks, with evidence of zinc sulphides have been encountered in the target position. Drilling is continuing to the planned depth. Based on these encouraging results, a further drillhole to test an adjacent IP anomaly will commence.
• EL 3372, encompassing the majority of the Warrior palaeochannel hosted uranium prospect, was acquired as part of a major initiative for uranium exploration in the Tarcoola region. An airborne electromagnetic survey, principally to map palaeochannel distributions in the Warrior and Tarcoola tenement areas, will be conducted during the December quarter prior to drilling.
• Drilling at the Sovuz prospect outlined an extensive area of gold mineralisation and drilling at the Shudda prospect confirmed a thick zone of copper-gold anomalism.
• Detailed gravity surveys completed in the Robins Rise (Coober Pedy) area, defining four targets prospective for IOCG style mineralisation.
• An RC drilling program was conducted to test gravity targets in the $\bullet$ Coolybring, Wiltabbie and Wilgena Hill areas. Preliminary geological information indicates an extension of high grade magnetite material at shallower depth on the Coolybring target but limited presence of haematite.
• RC drilling defined high grade, shallow gold mineralisation targets in $\bullet$ the Wondergraph prospect area, Tarcoola.
• $\bullet$ Petrology and preliminary assay results for diamond drill core from the Padthaway Kiki project outline a previously unknown zone of altered ultramafic rocks, with elevated nickel geochemistry.

Corporate

Strong cash position of \$4.6 million (9.3 cents per share) as at 30 September.

CORPORATE

During the quarter, the Company completed a program enabling shareholders with unmarketable-parcels to sell their shares. Some 571,000 shares were sold, which reduced the number of shareholders by 1,478. Nearly 300 (unmarketable parcel) shareholders elected to retain their holdings.

Mr Bill Michaelidis, Company Secretary and CFO, was issued with 250,000 options (August 2009 at 30 cents) in accordance with the shareholder approved Employee Option Plan.

EXPLORATION

BASE METALS

Goldfinger (Stellar earning 60%)

Diamond drilling on the interpreted centre of the Goldfinger gravity anomaly commenced in late September. As at 28 October, hole GFDDH03 is in progress at 595 metres down hole depth, having entered the target gravity zone at approximately 460 metres. A 70 metre plus zone of strongly altered, garnetiferous, pyrrhotite bearing "lode" style psammo-pelite is coincident with the northern portion of the gravity target. Sphalerite (zinc sulphide) mineralisation has been observed in the interval from 521m to 528m down hole.

Drilling is continuing to a maximum planned down hole depth of 650 metres, subject to review of mineralisation levels. The results will be assessed once detailed logging and analysis are complete.

The Company is encouraged by the technical results from this hole and is now mobilising the drilling rig to immediately test an Induced Polarisation (IP) target zone, immediately south-west and up-dip from the gravity zone. Based on results from both drillholes a decision to prepare the hole for future downhole EM survey will then be made.

Shudda (Stellar 100%)

Assay results for the recently completed RAB/RAB Hammer drilling program have continued to define an extensive zone of strongly anomalous copper mineralisation, immediately south of the Shudda aeromagnetic anomaly. Holes from the current program returned:

Hole	From $(m)$	To(m)	Length $(m)$	Grade $(\%$ Cu)
SH074		40 (EOH)	36	$0.22\,$
SH075			24	0.18
SH085		49 (EOH)	49	0.19
incl				0.55

A NW trending zone of mineralisation within weathered basement is now defined by 10 RAB holes over an area of 200 metres by 60 metres, which is open to the east.

Deeper RC drilling to test beneath the near surface zone of partial weathering is scheduled for the December quarter.

Cedric Bore (Stellar option to acquire 100%)

Assay results were received from the RAB drilling program across selected gravity and magnetic IOCG targets in the Robins Rise area, north of Tarcoola. No elevated geochemical levels have been returned, indicating that pervasive IOCG style alteration is unlikely to be present in the project area. Continuing with the option agreement on the project is under review.

Robins Rise (Stellar 100%)

Detailed gravity coverage of five selected areas targeted for Prominent Hill style IOCG mineralisation was completed during the quarter – a number of gravity features adjacent to zones of low order magnetic relief have been delineated and will be assessed for drilling.

Robins Rise Magnetics

Padthaway (Stellar option to acquire 100%)

Stellar has an option to earn 100% in three EL's lying along the Padthaway Ridge, including the "Kiki" project where Stellar has drilled two holes into targets under cover. Both holes have confirmed the presence of the interpreted mafic to ultramafic lithologies, with low levels of sulphide mineralisation and alteration.

Petrological descriptions and assay results for selected samples from these holes have confirmed the presence of previously unknown ultramafic intrusives in the area, with nickel assays of up to 1100ppm. More comprehensive assaying of one hole is currently in progress.

Tasmania (Stellar 100%)

Permits to drill on two areas in the Heemskirk licence were previously obtained and negotiations are at an advanced stage to obtain a suitable rig for drilling to commence in the December quarter.

A further review of the geophysical data from the airborne EM and magnetic data from the MRT 2002 regional aerial survey was carried out, in preparation for the coming summer field season. Ground assessment is being planned on several targets on the Ramsay licence.

URANIUM (Stellar 100%)

Agreement was reached on 21 September 2005 to purchase Hillment Pty Ltd. Hillment's sole asset is Exploration Licence No. 3372, containing the major portion of the Warrior uranium occurrence, located approximately 40 kilometres west of Tarcoola.

The Warrior palaeochannel was explored by PNC Exploration Australia Pty Ltd (PNC) in the 1970s. Uranium mineralisation has been defined in 8 discrete zones over a total strike length of approximately 15 kilometres and is the largest known palaeochannel hosted uranium occurrence within the Gawler Craton. Although no economic resource has been delineated by existing drilling. Stellar believes that the geometry and uranium distribution within the channel has not been fully assessed and holds a high expectation that additional drilling will extend known zones.

Stellar's assessment of existing drilling indicates that a number of the Warrior uranium zones are open along the channel axis. There is also significant scope for development of additional channels within the licence area, where no drilling has been undertaken. A program of airborne electro-magnetic surveying is planned within the next month, to better define the geometry of the channel and controls on distribution of roll-front pranium mineralisation

Extensive development of prospective palaeochannels occurs within Stellar's other Tarcoola licenses (see below), and the evaluation of the Warrior mineralisation will be an integral part of the Company's approach to assessing the regional opportunities. Compilation of the extensive Warrior drilling data base into a digital format has commenced.

Stellar Resources - Uranium Prospective Tenements

IRON ORE (Stellar 100%)

Reverse Circulation (RC) drilling of the Coolybring, Wiltabbie and Southwest Wilgena Hill geophysical target areas was completed during the quarter. Assay results are expected in early November.

A program of 8 RC holes for a total of 1007 metres was completed at the Coolybring Prospect to test for extensions to known magnetite mineralisation and for further mineralisation associated with both gravity and magnetic targets. Drilling in the central parts of the prospect intersected magnetite-rich lithologies approximately 270 metres south of previous drillholes, with an intersection of 82 metres in WILRC009 from 76 metres downhole and 66 metres in WILRC008 from 108 metres to end of hole (EOH) at 174 metres.

Significantly the zone of shallow magnetite intersected previously in hole WILRC01 has been established to extend for at least 270 metres to the south to WILRC009.

Gravity features tested for potential haematite development appear to be caused by a volcanic unit in the Tarcoola Formation, rather than haematite within the older basement. Whilst some targets in the area remain untested due to drill rig constraints, the potential for haematite development is considered to have diminished

Coolybring drill hole locations on magnetic image

GOLD

Sovuz (Stellar 100%)

Assay results received for the RAB/ RAB Hammer drilling program (71 holes totaling 2840 metres) at Soyuz have defined anomalous gold intersections within an area of approximately 1200 metres by 200 metres. Better intervals from the program include:

Hole	From $(m)$	To(m)	Length $(m)$	Grade $(g \text{ Au/t})$
SZAC81	24	32		0.33
SZAC54	24.	40 (EOH)	ιv	0.53
SZAC44	I O	28		0.18
SZAC31	28	36		0.34
SZAC24	LO.	28		2.30
SZAC14	28	つつ		0.30

Gold mineralised intervals are associated with zones of silicification and quartz veining within granite and granite gneiss.

Follow-up Reverse Circulation drilling is planned to test both the geochemical zones and the geophysical targets (magnetics and gravity) utilising the PIRSA 'PACE' subsidy program, when an appropriate rig becomes available.

Tarcoola Goldfield - Wondergraph (Stellar 100%)

Potential to expand near surface, high grade gold resources at the Wondergraph prospect were identified following an internal review of existing drilling, and consideration of development options for gold resources in the immediate vicinity of Tarcoola. Two target areas were tested by 4 RC drill holes totaling 280 metres. Samples from this drilling program are currently being assayed. An additional geophysical target zone approximately 500 metres south-west of Wondergraph was also tested with a fence of 4 holes, totaling 400 metres.

Locality of Wondergraph gold project within Tarcoola Goldfield

North Bendigo JV (Stellar 50%)

No field exploration was conducted on the JV area during the quarter.

A planned short round of drilling to test the suitability of a more powerful air core rig is scheduled for the summer field season, to be followed by drill testing targets delineated by the 2004 FALCON® survey.

OIL AND GAS

Drilling of two targets in VIC P47 has now been completed. The offshore Gilbert-1A well reported hydrocarbon shows, but was water bearing, however, fluorescence shows were encountered over the Gurnard Formation interval 624 to 636 metres and elevated gas readings were encountered in several zones through the Gurnard, Latrobe and Strzelecki Formations.

The Company has a 3% - 9% free carried interest up to production casing in several onshore and offshore blocks in the Gippsland Basin, as well as an option holding in the listed company. Gippsland Offshore Petroleum Limited (GOP).

OUTLOOK

Stellar Resources continues to actively explore its broad portfolio of commodity targets, a number of which have been generated or enhanced by the FALCON® surveys.

In the December quarter diamond drilling will continue on the Goldfinger gravity target and will be followed by a hole on the adjacent IP target.

In the Gawler Craton, SA, a scout aircore drilling program at the Warrior Uranium occurrence and the postulated southern extension of this palaeochannel at Carnding is scheduled, along with drilling on the Partridge palaeochannel system northeast of Tarcoola.

Drilling in Tasmania and North Bendigo is scheduled in the quarter subject to availability of suitable drilling rigs.

The drill results reported herein insofar as they relate to mineralisation are based on and accurately reflect information compiled by Mr C.G. Anderson (Fellow of the Australasian Institute of Mining and Metallurgy), a full-time consultant to the Company with more than 20 years' experience in the field of activity being reported. Mr Anderson is qualified as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves" and has consented to the inclusion in the report of the matters based on his information in the form and context in which it appears. It should be noted that the abovementioned exploration results are preliminary and do not imply that a mineral resource has or will be defined.

For further details please contact:

Tom Burrowes (Chairman) Tel (03) 9909 7618 Bill Michaelidis (Company Secretary) Tel: (03) 9909 7618 David Sasson (Investor Relations Manager) Mob: 0411 468 966 E-mail: tom.burrowes@stellarresources.com.au bill.michaelidis@stellarresources.com.au david.sasson@stellarresources.com.au or visit our Website at: www.stellarresources.com.au

Appendix 5B

$Rule 5.3$

Mining exploration entity quarterly report

Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001.

Name of entity

STELLAR RESOURCES LIMITED

Current quarter

\$A'000

ABN

96 108 758 961

Quarter ended ("current quarter")

30 SEPTEMBER 2005

Year to date

(3 months)

Consolidated statement of cash flows

Cash flows related to operating activities

				\$A'000
1.1	Receipts from product sales and related debtors
1.2	Payments for	(a) exploration and evaluation (b) development	(434)	(434)
		(c) production (d) administration	(157)	(157)
1.3	Dividends received
1.4	Interest and other items of a similar nature received		84	84
1.5	Interest and other costs of finance paid
1.6	Income taxes paid
1.7	Other (provide details if material)
	Net Operating Cash Flows		(507)	(507)
1.8	Cash flows related to investing activities Payment for purchases of: (a) prospects		(15)	(15)
		$(b)$ equity
		investments
		(c) other fixed	(12)	(12)
		assets
1.9	Proceeds from sale of:	(a) prospects
		$(b)$ equity
		investments
		(c) other fixed assets
1.10	Loans to other entities
1.11	Loans repaid by other entities
1.12	Other (provide details if material)
	Net investing cash flows		(27)	(27)
1.13	Total operating and investing cash flows (carried forward)		(534)	(534)

$\div$ See chapter 19 for defined terms.

1.13	Total operating and investing cash flows (brought forward)	(534)	(534)
1.14 1.15 1.16 1.17 1.18 1.19	Cash flows related to financing activities Proceeds from issues of shares, options, etc. Proceeds from sale of forfeited shares Proceeds from borrowings Repayment of borrowings Dividends paid Other (provide details if material)
	Net financing cash flows
	Net increase (decrease) in cash held	(534)	(534)
1.20 1.21	Cash at beginning of quarter/year to date Exchange rate adjustments to item 1.20	5,226	5,226
1.22	Cash at end of quarter	4,692	4,692

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

	Current quarter \$A'000
Aggregate amount of payments to the parties included in item 1.2 1.23	! 10
Aggregate amount of loans to the parties included in item 1.10 1.24	۰

1.25 Explanation necessary for an understanding of the transactions

Non-cash financing and investing activities

$2.1$ Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows

$2.2$ Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest

Financing facilities available

Add notes as necessary for an understanding of the position.

Amount available	Amount used
$\vert$ \$A'000	$\vert$ \$A'000

⁺ See chapter 19 for defined terms.

-3.1	Loan facilities
3.2	Credit standby arrangements

Estimated cash outflows for next quarter

4.1	Exploration and evaluation	\$A'000 480
4.2	Development	$\overline{\phantom{a}}$
	Total	480

Reconciliation of cash

Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.		Current quarter \$A'000	Previous quarter \$A'000
5.1	Cash on hand and at bank	52	375
5.2	Deposits at call	4.640	4.851
5.3	Bank overdraft
5.4	Other (provide details)
	Total: cash at end of quarter (item 1.22)	4.692	5.226

Changes in interests in mining tenements

		Tenement reference	Nature of interest (note (2))	Interest at beginning of quarter	Interest at end of quarter
6.1	Interests in mining tenements relinquished, reduced or lapsed
6.2	Interests in mining tenements acquired or increased	EL 3369	Exploration Licence	Nil	100%

⁺ See chapter 19 for defined terms.

Issued and quoted securities at end of current quarter
Description includes rate of interest and any redemption or conversion rights together with prices and dates.

		Total number	Number quoted	Issue price per security (see note $3)$ (cents)	Amount paid up per security (see note 3) (cents)
7.1	Preference
	i securities
	(description)
7.2	Changes during
	quarter
	(a) Increases through issues
	(b) Decreases
	through returns
	of capital, buy-
	backs,
7.3	redemptions + Ordinary
	securities	49,238,168	47,800,944
7.4	Changes during
	quarter
	(a) Increases
	through issues (b) Decreases
	through returns
	of capital, buy-
	backs
7.5	+ Convertible debt securities
	(description)
7.6	Changes during
	quarter
	(a) Increases
	through issues (b) Decreases
	through
	securities
	matured,
	converted
7.7	Options Director	3,500,000	N H	Exercise price 30 cents	Expiry date 10 December 2008
	Executive	250,000	NiI	30 cents	19 August 2009
7.8	Issued during	250,000	N 1	30 cents	19 August 2009
	quarter
7.9	Exercised during
7.10	quarter Expired during
	quarter
7.11	Debentures
	(totals only)
7.12	Unsecured notes (totals
	only)

$\div$ See chapter 19 for defined terms.

Compliance statement

• $\mathbf{1}$ This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 4).
• $\overline{2}$ This statement does give a true and fair view of the matters disclosed.

............. Date: 28 October 2005 (Company secretary)

Sign here: •

Print name: Bill Michaelidis

Notes

• $\mathbf{1}$ The quarterly report provides a basis for informing the market how the entity's activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.
• The "Nature of interest" (items 6.1 and 6.2) includes options in respect of interests in $\overline{\mathcal{L}}$ mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.
• 3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities.
• $\overline{4}$ The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: Statement of Cash Flows apply to this report.
• Accounting Standards ASX will accept, for example, the use of International 5 Accounting Standards for foreign entities. If the standards used do not address a topic. the Australian standard on that topic (if any) must be complied with.

---

⁺ See chapter 19 for defined terms.