STELLAR RESOURCES LIMITED — Interim / Quarterly Report 2006

Jan 30, 2006

Quarterly Report for the period ended 31 December 2005

HIGHLIGHTS

Exploration

• Drilling results at the Goldfinger prospect highlight the existence of an extensive zone of elevated zinc mineralisation, garnetiferous lode coincident with the target gravity anomaly. Further work including the next drill program is planned:
• South Australian Department of Primary Industry and Resources $\bullet$ (PIRSA) "PACE" funding totalling in excess of \$155,000 has been approved to assist Stellar with drilling costs in the search for zinc and iron oxide copper gold (IOCG) deposits in SA;
• Warrior/Tarcoola Palaeochannel Uranium airborne EM survey ("Hoistem") completed across the Warrior uranium deposits and across Tarcoola license area inferred channel positions. Warrior data shows clear delineation of palaeochannel geometry and have defined immediate drilling positions for extensions of established uranium mineralised zones:
• Exploration License Application lodged in the Pernatty area of historical copper mining, west of the recent Carrapateena IOCG discovery, in the Stuart Shelf region, SA;
• Drilling to start in February on the Heemskirk licence in Tasmania, for tin and copper mineralisation; and also
• In Tasmania on the Ramsay licence, detailed geological mapping is $\bullet$ scheduled to refine nickel targets on the inferred ultramafic belt;
• Planning and approvals completed for RAB drilling test of gold geochemical targets in the Uno project area, northern Eyre Peninsula, SA. Drilling should commence during this quarter.

Corporate

Stellar holds a cash balance of some \$3.8 million as at 31 December $\bullet$ 2005, sufficient to maintain a healthy exploration program.

elease

31 January 2006

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

DETAILS

EXPLORATION

BASE METALS

Goldfinger (Stellar earning 51% with option to earn 60%)

Diamond drilling on the interpreted centre of the Goldfinger gravity anomaly commenced in late September 2005. A zinc rich intersection of 3.5m $\omega$ 3.17% Zn was intersected within an overall interval of 7.5m $\omega$ 1.78% zinc in GFDDH03 from 521m downhole. The hole was located 600 metres west of a similar mineralised lode sequence intersected in GFDDH02. This intersection is within a broad zone of strongly altered garnetiferous pyrrhotite bearing lode style psammo-pelite. Hole GFDDH04, sited on a nearby IP anomaly, was completed at 427m, but without observing any significant sulphide mineralisation. Subsequent downhole electro-magnetic surveys (EM) were completed on both holes but no conductive targets were delineated.

The Company is encouraged by the technical results from these diamond drill holes and is now formulating plans for further drill testing of this large target.

Panama Hat (Stellar 100%)

An EL Application has been lodged over the "Panama" area, south-west of Broken Hill, for Iron Oxide Copper Gold Uranium (IOCGU) style targets (see Figure 1). The ELA area includes the "Panama Hat" and "Huonville" gold occurrences and is immediately east of the "Copper Blow" Cu-Au trend. Regional geology of the area is comparable to the host sequences in the White Dam $(Au)$ , Mutooroo $(Cu/Au)$ and Radium Hill (U) prospects in South Australia, and is therefore considered prospective for IOCGU style targets as there are numerous occurrences of Au, Cu and U in the region. Field exploration work will commence when the EL is granted.

Figure 1 – Regional Geology and Copper-Gold-Uranium Prospects for "Panama" ELA

Robins Rise (Stellar 100%)

Detailed gravity coverage of five selected areas targeted for Prominent Hill style IOCG mineralisation was completed during the September quarter and a number of gravity features adjacent to zones of low order magnetic relief were delineated. These anomalies were of sufficient interest for the South Australian Government under its PIRSA "PACE" funding scheme to grant \$88,500 for drilling costs associated with RC drill testing of four gravity targets. Drilling is scheduled to commence towards the end of the March quarter.

Figure 2 – Robins Rise Magnetics

Tarcoola Basin Zinc (Stellar 100%)

Notification of PIRSA "PACE" funding has also been received for diamond drill testing of two targets for Proterozoic sediment hosted base metal mineralisation, west of the Ella prospect. This funding will contribute up to \$70,000 towards Stellar's direct drilling costs. Drilling is scheduled to start once a suitable rig can be sourced.

Pernatty (Stellar 100%)

To advance Stellar's holdings in a prime South Australian copper zone, an EL application was lodged in the Pernatty area of historical copper mining, west of the recent Carrapateena discovery. Field exploration work to confirm gravity and/or aeromagnetic targets for drill testing will commence when the EL is granted.

Padthaway & Cedric Bore (Stellar option to acquire $100\%$ – now lapsed)

After a review of work at the Padthaway and Cedric Bore areas, Stellar has elected to not proceed with its options to acquire these areas.

Shudda (Stellar 100%)

RAB drilling completed in 2005 defined an extensive zone of strongly anomalous copper mineralisation, immediately south of the Shudda aeromagnetic anomaly. A NW trending zone of mineralisation within weathered basement was defined by 10 RAB holes over an area of 200 metres by 60 metres, open to the east. Deeper Reverse Circulation drilling completed during December however has not returned any improvement in copper grades at depth and the potential for an economic resource has diminished. No activity is presently being considered.

Tasmania (Stellar 100%)

On the Heemskirk licence an initial drill program is planned in two areas identified by Geopeko and CRAE, prospective for tin and copper. The area near a sealed highway, is within easy trucking distance of the concentrator at Renison. Drilling is planned to start in February, 2006.

The Alpine copper project has been elevated to a priority drill target and a Work Plan lodged with MRT to permit the drilling of three holes. Previous work by CRA Exploration (CRAE) outlined anomalous copper mineralization within a geophysical target zone of 1km length, with additional strike potential to the west across an inferred fault. Previous shallow drilling by CRAE intersected $27m$ @ 0.53% Cu in AP2. This target has favourable access provided from a nearby bitumen road. Drilling is planned to commence once the necessary permits are in place.

At the Ramsay licence area, further interpretation of the magnetics and geochemistry was undertaken. Detailed geological mapping is planned for this quarter to confirm the extent of the western ultramafic belt, prior to designing an initial drilling program on nickel targets. Geophysical targets on the east, where ultramafics are inferred to lie under shallow cover of Tertiary basalt, are being prioritised for drill testing.

Historic zinc intersections from the Arthur Dam area are being assessed as drill targets. Previous intersections by Pasminco include 3m @ 2.4% Zn and 2.25% Pb in AD4. At the nearby Butler's Road Prospect, the single previous hole DHB1 (BHP) intersected 8.5m $\omega$ 1.65% Zn, 0.27% Pb and 29 g/t Ag.

URANIUM (Stellar 100%)

An airborne EM survey ("Hoistem") was completed during December on 500 metre spaced lines across the Warrior EL3372, approximately 40 kilometres west of Tarcoola. "Hoistem" reconnaissance lines were also conducted on selected inferred channel positions across the Tarcoola license area. The Warrior data show clear delineation of palaeochannel geometry and have defined immediate drilling positions for extensions of established roll-front uranium mineralised zones. These have been defined in 8 discrete zones over a total strike length of approximately 15 kilometres (Figure 4). The Warrior system is the largest known palaeochannel hosted uranium occurrence within the Gawler Craton.

Extensive development of prospective palaeochannels occurs within Stellar's other Tarcoola licenses (see Figure 5).

Aircore drilling is planned in the March quarter and co-operative agreements and scheduling have been made with other uranium explorers in the surrounding prospective region to facilitate access to drilling rigs in a timely manner.

Figure 4 - Warrior Uranium Channel - interpretation of channel extent from airborne EM data, showing locations and uranium intercepts for historical drillholes

Figure 5 – Stellar Tarcoola Tenements, including Warrior EL 3372

IRON ORE (Stellar 100%)

Reverse Circulation (RC) drilling of the Coolybring, Wiltabbie and Southwest Wilgena Hill geophysical target areas was completed during the September quarter of 2005. Drilling results confirmed a thick sequence of magnetite mineralisation within jaspilite, with consistent levels of Fe indicated. Initial assessment of the processing characteristics suggests reduced potential for a stand-alone magnetite project, but the three main magnetite bodies may lend themselves to integration with other potential magnetite projects in the region. The Company is investigating such possibilities.

GOLD

Soyuz (Stellar 100%)

Previously reported RAB drilling defined an area of approximately 1,200 metres by 200 metres anomalous in gold. 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. This drill-testing is scheduled late in the March quarter when an appropriate rig is expected to become available.

Uno (Stellar option to acquire 100%)

Planning and approvals have been completed for RAB drilling test of gold geochemical targets in the Uno project area, northern Eyre Peninsula. A drilling program of 65 holes for 4,000 metres is planned to start in late February.

North Bendigo JV (Stellar 50%)

Interpretation and review of the targets generated by the FALCON® airborne gravity survey continued. This work confirms that several of the gravity "highs" - postulated as Ordovician basement highs represent first order targets. A diamond drilling rig is being sourced for initial target testing to provide valuable structural information.

Figure 6 – North Bendigo – Prospective targets on gravity image

Tarcoola Goldfield - Wondergraph (Stellar 100%)

Potential to expand near surface, high grade gold resources at the Wondergraph prospect were downgraded following limited drill testing on two target areas in the last quarter. Further opportunities are being assessed for this project and other gold occurrences documented in the Tarcoola Goldfield.

The Perseverance deposit retains a modest known gold resource.

OIL AND GAS

Gippsland Offshore Petroleum Limited (GOP) has now earned its 51% interest in the onshore Gippsland Basin block of PEP-155 and continues in its 51% farmin on the adjacent near shore block VIC-P-40. Following the farmin, Stellar will hold a 3% and 9.8% contributing interest in PEP-155 and VIC-P-40 respectively, as well as an unlisted option holding of 6.67 million in 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 innovative FALCON® surveys.

In the March quarter, drilling is planned for the following areas:

In the Gawler Craton, SA:

• a scout aircore drilling program at the Warrior Uranium occurrence and the postulated southern $\bullet$ extension of this palaeochannel at Carnding is scheduled, along with drilling on the Partridge palaeochannel system northeast of Tarcoola;
• an aircore program is planned for gold mineralisation at Uno;
• at Robins Rise, a PIRSA funded drilling program is planned to start searching for IOCG style deposits; also

In Victoria, in the North Bendigo region, a drilling program is scheduled when suitable rigs become available; and

In Tasmania, diamond drilling is scheduled on projects in the Heemskirk licence.

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 (Exec. Chairman)	Tel:	$(03)$ 9909 7618
	Chris Anderson (Exec. Director)	Tel:	(08) 8636 1414
	Bill Michaelidis (Company Secretary)	Tel:	$(03)$ 9909 7618
	David Sasson (Investor Relations Manager)	Mob:	0411 468 966
E-mail:	tom.burrowes@stellarresources.com.au
	chris.anderson@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

ABN

96 108 758 961

Quarter ended ("current quarter")

Current quarter

\$A'000

31 DECEMBER 2005

Year to date

$(6$ months)

Consolidated statement of cash flows

Cash flows related to operating activities

			SA 000
1.1	Receipts from product sales and related debtors
1.2	Payments for (a) exploration & evaluation (b) development (c) production	(716)	(1,150)
	(d) administration	(148)	(305)
1.3 1.4	Dividends received Interest and other items of a similar nature
	received	40	124
1.5	Interest and other costs of finance paid
1.6 1.7	Income taxes paid Other (provide details if material)
	Net Operating Cash Flows	(824)	(1,331)
	Cash flows related to investing activities
1.8	Payment for purchases of:
	(a) prospects
	(b) equity investments (c) other fixed assets	(597)	(612) (12)
1.9	Proceeds from sale of:
	(a) prospects
	(b) equity investments (c) other fixed assets
1.10	Loans to other entities
1.11 1.12	Loans repaid by other entities	39	39.
	Other (provide details if material)
	Net investing cash flows	(558)	(585)
1.13	Total operating and investing cash flows (carried forward)	(1,382)	(1,916)

⁺ See chapter 19 for defined terms.

1.13	Total operating and investing cash flows (brought forward)	(1, 382)	(1,916)
Cash flows related to financing activities Proceeds from issues of shares, options, etc. 1.14 Proceeds from sale of forfeited shares 1.15 1.16 Proceeds from borrowings Repayment of borrowings 1.17 Dividends paid 1.18 Other (cost of issue) 1.19		512	512
	Net financing cash flows	512	512
	Net increase (decrease) in cash held	(870)	(1, 404)
1.20 1.21	Cash at beginning of quarter/year to date Exchange rate adjustments to item 1.20	4,692	5,226
1.22	Cash at end of quarter	3,822	3,822

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 SA'000
1.23	Aggregate amount of payments to the parties included in item 1.2	124
1.24	Aggregate amount of loans to the parties included in item 1.10
1.25	Explanation necessary for an understanding of the transactions

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

Financing facilities available

Add notes as necessary for an understanding of the position.

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

⁺ See chapter 19 for defined terms.

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 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	182	52
5.2	Deposits at call	3.640	4,640
5.3	Bank overdraft
5.4	Other (provide details)
	Total: cash at end of quarter (item 1.22)	3,822	4.692

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	EL 2911 EL 2838 EL 3293 EL 3295	Option - Cedric Bore Option - Sherlock Option - Tintinara Option - Kiki	100% 100% 100% 100%	Nil Nil Nil Nil
6.2	Interests in mining tenements acquired or increased	EL 3372 EL 3436	Exploration Licence Exploration Licence	Nii Nil	100% 100%

$\overline{\text{+ See chapter 19}}$ 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 r securities (description)
7.2	Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy- backs, redemptions
7.3	i Ordinary securities	50,838,168	49,400,944
7.4	Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy- backs	1,600,000	1,600,000	32 cents	32 cents
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 Executive	3,500,000 250,000	Nil Nil	Exercise price 30 cents 30 cents	Expiry date 10 December 2008 19 August 2009
7.8	Issued during quarter
7.9	Exercised during quarter
7.10	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 /does not* (delete one) give a true and fair view of the matters disclosed.

....... Date: 31 January 2006 (Company Secretary)

Sign here:

Print name: Bill Michaelidis

Notes

• The quarterly report provides a basis for informing the market how the entity's $\mathbf{1}$ 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.
• $\overline{3}$ 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.
• 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.

$\frac{1}{2}$

⁺ See chapter 19 for defined terms.