STELLAR RESOURCES LIMITED — Interim / Quarterly Report 2006

Jul 20, 2006

Quarterly Report for the period ended 30 June 2006

HIGHLIGHTS

Exploration

• At Warrior uranium palaeochannel project, aircore drilling and geochemical assaying confirmed the widespread extent of uranium within the palaeochannel system. Warrior northern Zone "A" offers immediate potential for delineation of further, higher grade material.
• Basement drill samples from Warrior have elevated the 'Fossil' prospect into a "Prominent Hill" style Iron Oxide Copper Gold Uranium (IOCGU) basement target.
• Drilling at the Alpine copper project on west coast Tasmania Holes AP6 and AP7 have intersected sulphide resumed. mineralisation over substantial widths. Assays are awaited. The North Alpine copper target is scoped for an initial drill test.
• At the North Bendigo JV, a 27 hole aircore drilling program was completed in shallower ground. Assays are awaited. One diamond hole was stopped short of basement target.
• Extensive technical review of Goldfinger drilling data and geophysics - An expanded Induced Polarisation program is planned.
• RC Drilling program planned to test Copper Blow line of shallow copper workings adjacent to Goldfinger, Broken Hill.
• Arthur Dam, Tasmania drill testing base metals targets in the September quarter.

Corporate

• Stellar placed 7.5m new shares $\omega$ 45c to raise $3.375m before costs.
• Stellar holds some $5.7m cash as at 30 June 2006.
• The Company is reviewing Joint Venture offers on some of its projects. No decisions have yet been finalised/entered into.

Drilling Diary for September Quarter 2006

• Alpine and North Alpine, Tasmania 5 holes in progress.
• Arthur Dam, Tasmania 4 or 5 holes, July/August.
• Copper Blow $-2,000$ m RC program commencing late July.
• Robins Rise IOCGU targets, RC possible late in the quarter.
• Goldfinger IP survey then possible drilling in December quarter. ٠
• Warrior Further drilling of "Zone A" and "Fossil" planned.

21 July 2006

ASX Code: SRZ

ARN 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.stelfarresources.com.au srzinfo@stellarresources.com.au

CORPORATE

In May, Stellar placed 7.5 million new fully paid ordinary shares at $0.45 per share to raise $3.375 million, before costs, to clients of Bell Potter Securities Limited. As at 30 June 2006, the Company had a strong net cash position of $5.7 million. This raising enables Stellar to continue with its aggressive exploration activities – with the objective of making value adding discoveries.

During the quarter, Stellar received a number of approaches to Joint Venture into various exploration projects within the Company's portfolio. The Board is carefully assessing each submission in order to maximise the potential value creation for shareholders with respect to risk/return scenarios. Announcements of any JV which the Company may enter into will be reported to the market as they are concluded.

EXPLORATION

TASMANIA (Stellar 100%)

Alpine Copper

Alpine was elevated in priority after a downhole intersection of $22m$ @ 1.23% copper was returned in AP4 in April. This intercept was contained within a much wider zone of $95m \omega$ 0.45% Cu, which ended in copper mineralisation. Assay results from drillhole AP3 were received, which showed anomalous zinc and copper over several zones, within a wider sulphide bearing zone.

In June, the drilling of 3 new diamond drill holes for some 600m commenced.

Diamond drill hole AP6 was collared some 120m east of AP4, testing the magnetic response to the east of the known mineralisation. Visible sulphides were observed over a 60m interval from approx 40m to 100m downhole. Ouartz veining was observed below this depth and the drill hole was continued to its final depth of 155m.

Diamond drill hole AP7 was collared some 120m to the south of AP4 and is testing the southern extension of the mineralisation in AP4. AP7 was completed at 173m and sulphides were observed from approx 50m to over 150m downhole.

Diamond drill hole AP8 was collared some 100m to the west of AP4 and is testing the western extension of the mineralisation in AP4. Sulphide mineralisation was also reported from approx 40m downhole.

Geophysical modelling of the aeromagnetic anomaly implies a strike dimension of approximately 500m for the main inferred magnetite bearing zone at Alpine.

Petrology is indicating hydrothermally introduced fluids, with possibly two mineralising events. One may be a pyrite (iron sulphide) event only, whilst a separate event indicates the introduction of copper sulphide mineralisation. The consulting geologist is noting brecciation and quartz carbonate veining as being more closely associated with the (visible) copper chalcopyrite mineralisation.

Core is cut progressively with samples despatched to the laboratory in Burnie. Assay results are expected to take several weeks to be received, compiled and interpreted.

North Alpine

The magnetic image at North Alpine indicates a slightly greater strike length, but narrower width, than at Alpine itself. There is some geochemical support for this target.

Two diamond drill holes are planned to test North Alpine once the Alpine program is complete. North Alpine has not before been subject to drill testing.

West Alpine, which also has a promising aeromagnetic signature, has not yet been targeted. Further analysis of the data should allow an exploration program to be generated (likely drilling) to test this exciting geophysical anomaly.

Stellar holds a 100% interest in the 193km2 Heemskirk EL46/2003. A small block of 8 units is proceeding to grant and will be added to Heemskirk EL46/2003.

Alpine Region - Magnetics

East Granville Tin

Limited work was carried out on the Heemskirk licence tin targets. Magnetic targets along strike will be assessed for potential summer drilling.

Gourlays Creek geophysical interpretation work was carried on during the period re-interpreting magnetic survey data which was generated from two previous 200m and 50m line centre aeromagnetic surveys. A detailed helimag survey is being considered to cover a large magnetic anomaly which is apparent from these data. Prior drilling indicates a tin/copper target.

Ramsay

On the Ramsay EL1/2004, work was concentrated on bringing the Arthur Dam prospect into focus for drill testing, following assessment of zinc intersections in previous drilling. Set in Cambrian age rocks, Arthur Dam hosts some significant prior intercepts which include 12m $\omega$ 5% Zn and 0.6g Au/t in hole AD2. Hole AD4 intersected 3m $\omega$ 2.4% Zn and 2.25% Pb above AD2. Some 600m to the north east, hole AD1 hit $21m$ @ 0.16% Cu and 7m @ 0.6% Cu.

The nickel concept at Ramsay may be partly tested by one or two planned holes, contingent on the results obtained and progress from Arthur Dam drilling.

Stellar holds some 12 strike kilometres of magnetic highs which are interpreted to indicate an ultramafic belt, the eastern part of which which lies under basalt cover. Detailed geological mapping has been conducted over part of the exposed western ultramafic belt. Mapping also points to magnetic highs partly representing the metamorphic aureole of the Meredith granite.

Ramsay EL - Arthur Dam project

NEW SOUTH WALES

Goldfinger (Stellar earning 51%, option to 60%)

Hole GFDDH05 was sited to test an aeromagnetic anomaly immediately south of the Goldfinger gravity Hole GFDDH06, sited mid-way between GFDDH02 and GFDDH03 on the main gravity feature. anomaly, was completed in the March 2006 quarter. Both holes intercepted mineralised lode sequence rocks similar to that present in earlier holes. GFDDH05 returned 99m (135m to 234m downhole) carrying 0.22% combined $Pb + Zn$ , including $2m (223m - 225m)$ at 0.84% Zn and 0.39% Pb. GFDDH06 returned 96m (121m to 217m downhole) at 0.11% combined $Pb + Zn$ including 12m (193m – 205m) at 0.24% Zn and 0.13% Pb. This level of geochemical anomalism continues to confirm that Goldfinger represents a major mineralised system.

The gravity anomaly has to date been partially tested over only some 600m of the 3km strike length. In particular, the western extent of the anomaly has not been drill tested. A detailed review of Goldfinger with Stellar's potential project partner, BHP Billiton, was held in Broken Hill during the quarter. The existing core was examined and details of the latest BHP Billiton advanced inversion modelling studied. This work raised the profile of the western portion of the Goldfinger gravity anomaly which currently has no deep drill test. A comprehensive IP survey over the entire 3km strike length of the project is planned prior to the next program drilling.

Goldfinger Copper Blow summary – Gravity contours and drillhole locations on aeromagnetic image

Copper Blow (Stellar earning 51%, option to 60%)

The Copper Blow project area is located immediately east of Goldfinger, and is defined by a linear NE trending line of historic copper workings, over a strike length of approximately 500m. The known copper workings coincide with the south western end of an aeromagnetic trend of approximately 2km strike length, which appears to "curve" into the Goldfinger gravity anomaly.

Historical exploration drilling along this trend has returned narrow high grade copper and gold intercepts at depth, with only very limited drill testing of the main mineralised zone, particularly near surface. A detailed RC drilling program of some 25 holes to an average depth of 100m to systematically test the trend of historic shallow copper workings is scheduled to commence in July.

Panama Hat (Stellar 100%)

This prospect is located adjacent and to the east of Goldfinger. A ground-based gravity survey was completed during the quarter. Initial data over the Goldfinger area shows good correlation/confirmation of $FALCON^{\circledR}$ data. A significant gravity anomaly (4 mGals) has been defined immediately west of the Panama gold workings - hosted within Broken Hill metasediments, which may indicate a Broken Hill style of target comparable to Goldfinger and Galena Hill. A field mapping and soil sampling program is being planned to evaluate the geochemical signatures within the area of the gravity response.

SOUTH AUSTRALIA

Robins Rise (Stellar 100%)

Drilling was scheduled to commence in the June quarter but has been postponed into the September quarter due to the lack of suitable drilling rigs. However, notification of PIRSA "PACE" funding subsidy was received in the quarter, for drill testing of five targets. The first will target the "Lonesome" prospect which is interpreted to lie at a depth of some 170m. Slightly shallower target depths have been interpreted for geophysical targets in the "Woorong", "Robins" and "Georges" target areas.

Two Exploration License Applications (ELAs) were lodged immediately north of the Robins Rise IOCGU project area. Following an assessment of historical exploration drilling data, it is expected that target areas will be delineated for detailed gravity coverage, to define targets for IOCGU style mineralisation, comparable to the Prominent Hill deposit or Cairn Hill prospect hematite-magnetite-Cu-Au mineralisation.

Robins Rise magnetics

Pernatty (Stellar 100%)

The Pernatty ELA, located near the Carapateena IOCGU prospect in the Stuart Shelf region, south-east of Olympic Dam, was granted during the quarter. Detailed ground gravity surveys to cover selected IOCGU target areas within the licence are planned for early in the September quarter.

Tarcoola Basin Zinc (Stellar 100%)

The "PACE" funded drilling program to test for Proterozoic sediment hosted base metal mineralisation in the vicinity of the "Ella" zinc prospect is scheduled to be carried out in the December quarter.

URANIUM

Warrior Uranium (Stellar 100%)

Results of the company's first aircore drilling program on the Warrior palaeochannel uranium project were released in detail to the ASX on 14 July 2006. An aircore drilling program of 46 holes for $2,600$ m was carried out in EL3372 and EL3369, to test for extensions of known uranium mineralised zones. Five regional traverses of aircore holes at a nominal 200m spacing along approximately 9km of strike of the interpreted main Warrior palaeochannel was carried out. Sampling quality above water table provided excellent material for analysis with reasonable samples provided from below the water table.

The aircore drilling and geochemical assaying program has confirmed the widespread extent of uranium within the Warrior palaeochannel system, with the northern Zone 'A' offering immediate potential for delineation of further, higher-grade material.

Furthermore, the presence of strongly anomalous rare earth element (REE) geochemistry in proximity to a large, and as yet untested magnetic anomaly, provides encouragement for the potential of a buried IOCGU target of the Prominent Hill style

Intersections of uranium mineralisation were returned from geochemical assaying of 2m samples from the aircore holes, with best results reported from the northernmost traverse across PNC Zone 'A' and extensions to the east. Holes WAAC040 to WAAC046 on this section returned the following significant assay intervals:

Hole No.	Easting	Northing		Down Hole Depth (m)	Interval	Grade
			From	To	(0.1)	$($ %U3Og)
WAAC040	405095	6622764	28	32		0.013
WAAC041	405304	6622686	28	30		0.013
WAAC042	405473	6622667	26	30		0.024
WAAC043	405731	6622629	28	30		$72$ (ppm)
WAAC044	404799	6622718	28	32		0.016
WAAC046	404894	6622783	28	32		0.019

The uranium mineralisation has been intercepted at relatively shallow depths, and averages some 30m depth in Zone 'A' and at 6m depth in drill line 26.

Comparison with radioactivity levels as measured by downhole gamma logging in earlier drilling by PNC has shown a good correlation with the acid digestion and ICP assaying technique used in this drilling program. This is encouraging as it has added confidence in using the historic PNC data in estimating the potential size of the uranium deposits which may be determined at Warrior.

Warrior - Gold and Rare Earth Element (REE) Mineralisation

Samples of the palaeochannel sediments and selected basement samples were analysed for gold content, and selected basement samples were also tested for a suite of base metal and rare earth elements.

The maximum gold values (to 109ppb Au) were recorded from WAAC034, on the southern traverse within EL3369. This hole is located immediately north of a strong basement magnetic anomaly, identified as a potential IOCGU target by Stellar's predecessor Grenfell Resources in 2001 and designated the 'Fossil' prospect. Fossil represents an excellent IOCGU target having both gravity and aeromagnetic signatures.

Importantly, basement sampling from hole WAAC004, on the southernmost traverse within EL3372 returned strongly anomalous rare earth element (REE) geochemistry, with combined cerium, lanthanum and yttrium in excess of 500ppm. REE mineralisation is commonly associated with IOCGU style mineralisation.

This recent work provides strong encouragement for the Company to pursue the extension of the palaeochannel system into EL3369 and to assess the other 2,500km2 of Stellar tenements, up to 30% of which contain prospective palaeochannels.

Tarcoola Region (Stellar 100%)

Iron Ore – An independent consultant has been engaged to review the possibilities for upgrading the economic aspects of the Coolybring/Wilgena Hill magnetite occurrences. Upon consideration of this report, Stellar will review the forward exploration activity.

Tarcoola Gold – At the Perseverance deposit, a modest 12,000oz gold resource has been estimated but with substantial upside. The company is considering the possibility of treating a bulk sample through nearby treatment facilities.

Soyuz (Stellar 100%)

Review of the geological and geophysical data for the Soyuz project area continued during the quarter. A complete review of the gold prospectivity of the Tarcoola region, including Soyuz, is in progress.

Uno (Stellar option to acquire 100%)

Stellar completed aircore drilling to test three geochemical targets within the Uno prospect. A total of 56 holes for 4,012m of drilling tested these anomalies. The results from this drill program indicate that a large geochemical cell is present in the Uno project area. During the quarter, a PIRSA funded gravity survey covering the licence area at 2km centres was carried out. Results from this survey will be reviewed to further evaluate the potential presence of any direct gravity targets.

VICTORIA

North Bendigo JV (Stellar 50%)

One diamond hole was drilled in April on a gravity anomaly located east of the inferred Sebastian Fault under cover. This angled hole was designed to test the depth to the basement and stratigraphy some 50kms NNW postulated to be along strike of Bendigo under cover. The hole was stopped short of the target (Ordovician basement) due to drilling issues, but remains partly cased and open for re-entry after winter.

An aircore drilling program on shallower southern ground (27 holes for some 2,400m) was carried out during the quarter. Assays are awaited.

OUTLOOK

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

In the September quarter exploration activity is scheduled for the following areas:

• Drilling at Alpine and North Alpine, Tasmania 5 holes July/August;
• Drilling at Arthur Dam, Tasmania 4 or 5 holes, July/August;
• Drilling at Copper Blow 2,500m RC program in July/August;
• Robins Rise IOCGU targets, RC drill in the September quarter;
• Goldfinger IP survey then possible drilling in the December quarter;
• Warrior further drilling, particularly in the area of "Zone A" and the Fossil basement IOCGU target will be undertaken, once clearances are obtained and drill sites selected.

The drill and exploration results reported herein, insofar as they relate to mineralisation, are based on information compiled by Mr. C.G. Anderson (Fellow of the Australasian Institute of Mining and Metallurgy) who is a Director of the Company with more than twenty years experience in the field of activity being reported. Mr. Anderson consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

For further details please contact:

Tom Burrowes	Tel:	$(03)$ 9909 7618		Email: tom.burrowes@stellarresources.com.au
Chris Anderson	Tel: -	$(08)$ 8363 1589		Email: chris.anderson@stellarresources.com.au
David Sasson	Mob: -	0411 468 966		Email: david.sasson@stellarresources.com.au
or visit our Website at: http://www.stellarresources.com.au

$Rule 5.3$

Appendix 5B

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

ABN

96 108 758 961

Quarter ended ("current quarter")

30 JUNE 2006

Consolidated statement of cash flows

	Cash flows related to operating activities	Current quarter$A'000	Year to date$(12$ months)$A'000
1.1	Receipts from product sales and related debtors
1.2	Payments for(a) exploration and evaluation	(618)	(2, 287)
	(b) development
	(c) production
	(d) administration	(145)	(628)
1.3	Dividends received
1.4	Interest and other items of a similar nature received	60	244
1.5	Interest and other costs of finance paid
1.6	Income taxes paid
1.7	Other $-$
	Net Operating Cash Flows	(703)	(2,671)
	Cash flows related to investing activities
1.8	Payment for purchases of:(a) prospects
	(b) equity investments		(612)
	(c) other fixed assets	(56)	(68)
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:	(1)	34
	Net investing cash flows	(57)	(646)
1.13	Totaloperatingflowsandinvestingcash(carried forward)	(760)	(3, 317)

$\div$ See chapter 19 for defined terms.

1.13	investingTotaloperatingandflowscash(brought forward)	(760)	(3,317)
	Cash flows related to financing activities
1.14	Proceeds from issues of shares, options, etc.	3,375	3,887
1.15	Proceeds from sale of forfeited shares
1.16	Proceeds from borrowings
1.17	Repayment of borrowings
1.18	Dividends paid
1.19	Other – cost of issue	(183)	(183)
	Net financing cash flows	3,192	3,704
	Net increase (decrease) in cash held	2,432	387
1.20	Cash at beginning of quarter/year to date	3,181	5,226
1.21	Exchange rate adjustments to item 1.20
1.22	Cash at end of quarter	5,613	5,613

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

• 1.23 Aggregate amount of payments to the parties included in item 1.2
• 1.24 Aggregate amount of loans to the parties included in item 1.10
• 1.25 Explanation necessary for an understanding of the transactions

Remuneration and directors fees for the quarter

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

Current quarter $A'000

110

$\div$ See chapter 19 for defined terms.

Financing facilities available

Add notes as necessary for an understanding of the position.

		Amount available	Amount used
		$A'000	$A'000
3.1	Loan facilities
3.2	Credit standby arrangements

Estimated cash outflows for next quarter

	Total	500
4.2	Development
4.1	Exploration and evaluation	500
		$A'000

Reconciliation of cash

	Reconciliation of cash at the end of the quarter (as shown inthe consolidated statement of cash flows) to the related itemsin the accounts is as follows.	Current quarter$A'000	Previous quarter$A'000
5.1	Cash on hand and at bank	243	91
5.2	Deposits at call	5,370	3,090
5.3	Bank overdraft
Other5.4
	Total: cash at end of quarter (item 1.22)	5,613	3,181

Changes in interests in mining tenements

6.1	Interests in mining
	tenements relinquished,
	reduced or lapsed

6.2	Interests in mining
	tenements acquired or
	increased

Tenementreference	Nature of interest(note (2))	Interest atbeginning ofquarter	Interest atend ofquarter
EL6101	EL Yanco Glen	100%	Níl
EL 6556EL 3583	EL PanamaEL Pernatty	NilNil	100%100%

$\div$ 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 persecurity (see note 3)(cents)	Amount paid up persecurity (see note 3)(cents)
7.1	Preference+ securities(description)
7.2	Changes duringquarter(a) Increasesthrough issues
	(b) Decreasesthrough returns ofcapital, buy-backs,redemptions
7.3	+Ordinarysecurities	58,338,168	56,900,944
7.4	Changes duringquarter
	(a) Increasesthrough issues	7,500,000	7,500,000
	(b) Decreasesthrough returns ofcapital, buy-backs
7.5	+ Convertible debtsecurities(description)
7.6	Changes duringquarter(a) Increasesthrough issues(b) Decreasesthrough securitiesmatured, converted
7.7	Options			Exercise price	Expiry date
	DirectorsExecutive	3,500,000625,000	NilNil	30 cents30 cents	10 December 200819 August 2009
7.8	Issued duringquarter
7.9	Exercised duringquarter
7.10	Expired duringquarter
7.11	Debentures
	(totals only)
7.12	Unsecured notes(totals only)

$\div$ See chapter 19 for defined terms.

Compliance statement

Ĩ This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Law or other standards acceptable to ASX (see note 4).

This statement does give a true and fair view of the matters disclosed. $\overline{2}$ Sign here: ..... Date: 15 July 2006 (Company Secretary)

Print name:

Bill Michaelidis

Notes

• $\mathbf{I}$ 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.
• $\overline{2}$ The "Nature of interest" (items 6.1 and 6.2) includes options in respect of interests in 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.
• 4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: Statement of Cash Flows apply to this report.
• 5 Accounting Standards ASX will accept, for example, the use of International 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.