STELLAR RESOURCES LIMITED — Interim / Quarterly Report 2006

Jan 24, 2007

Quarterly Report For the period ended 31 December 2006

HIGHLIGHTS

Exploration

• Alpine Copper drilling returns copper mineralisation over a wider area, indicating potential for a much broader mineralised system.
• Goldfinger MIMDAS IP survey defines strong chargeability anomaly coincident with untested western half of gravity zone.
• Pernatty gravity survey completed two drilling targets defined.
• Devises drilling on a tin/nickel target adjacent to the Avebury mine lease commenced in January.

Corporate

• Agreement signed in October with Red Metal Limited and Phelps Dodge Australasia, Inc. for exploration farm-out on Robins Rise.
• Agreement signed with Avoca Resources Limited for farm-in on Cowell JV over IOCGU style targets on the Eyre Peninsula, SA.
• Cash $3.8 million as at 31 December 2006.

Activities Diary for March Quarter 2007

A very busy quarter is programmed including drill testing of uranium targets, Alpine and at Goldfinger.

• Alpine, Tasmania 4 to 6 hole drill program, February.
• Devises, Tasmania drilling on nickel/tin target. ٠
• Goldfinger, NSW diamond drill western lobe IP target. ٠
• Panama, NSW RAB drilling of target gravity, February.
• Warrior Uranium Toro Energy; aircore drilling, March quarter.
• Kingoonya Palaeochannel UraniumSA, extensive AEM survey. $\bullet$
• Pernatty, SA interpretation of gravity targets and land access for scheduled drilling in June quarter.
• Cowell JV land access for drilling, Glensea IOCGU prospect.

25 January 2007

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

DETAIL

CORPORATE

In October 2006, Stellar concluded an exploration farm-out agreement with Red Metal Limited and Phelps Dodge Australasia, Inc. over some 1,700km2 of the Robins Rise tenements. Stellar may retain $40%$ .

Following the successful IPO of UraniumSA, Stellar was issued with 10 million fully paid shares in UraniumSA Limited (USA). These shares are held in an escrow account until 18 October 2008.

The Company continues to hold 6.667 million options in Gippsland Offshore Petroleum Limited.

The Company had $3.87 million in cash and near-term securities as at 31 December 2006. Further to our Joint Ventures, Stellar is potentially free carried for over $10m of exploration/development expenditure, whilst retaining significant exposure $-$ (30% and 40%) – to the upside.

EXPLORATION

TASMANIA (Stellar 100%)

Alpine Copper

Drilling continues to encounter a significant copper mineralised zone at the Alpine Copper prospect on the west coast of Tasmania. Two additional diamond drill holes were completed during the quarter and the results were reported on 17 January 2007.

Drillhole	AMG-	$AMG -$		From	$\mathbf{T_0}$		Interval	Grade
	Easting	Northing		(m)	(m)		(m)	Cu (%)
$AP02*$	341200	5376661		44.50	56.20		11.70	0.63
				58.60	66.65		8.05	0.72
				69.65	71.40		1.75	0.44
$AP04*$	341200	5376646		57.70	152.80	(EOH)	95.10	0.46
			(incl)	64.65	86.90		22.25	1.23
$AP06*$	341333	5376692		42.00	91.00		49.00	0.39
$AP07*$	341273	5376509		62.00	148.00		86.00	0.50
			(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	0.86
AP12A	341348	5376768		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
			(and)	213.00	215.00		2.00	0.70

Table 1 - Copper intercepts. * reported prior quarters; ^Drilled by CRAE
--------------------------------------------------------------------------	--	--	--

During 2006 Alpine was tested with eight diamond drill holes. Copper mineralisation was intersected in six of these holes over substantial widths and commencing at relatively shallow depths. The copper mineralisation has so far been demonstrated over more than 200m both in a north-south and an eastwesterly direction. Significantly, the average width of mineralisation appears to be in excess of 50m. Importantly, holes AP11 and AP12A have extended the copper-bearing zone substantially to the north and to the edge of (or beyond) the higher magnetic zone while AP12A returned a very wide, lower grade intersection.

Holes AP11 and AP12A contain copper in an area of near zero magnetic susceptibility where the copper mineralisation appears to be in a different host rock – and containing some intense silicification. Geological interpretation at Alpine is proving more complex and these latest holes demonstrate that the copper mineralisation is not as restricted to the magnetic rocks as was previously thought. Whilst the large magnetic anomaly has biased recent interpretation, the two new recent mineralised holes require the model to be reviewed. Alpine continues to be rated highly.

Assay results for gold are awaited from both holes. Preliminary metallurgical testwork is planned.

The geometry and tenor of the Alpine copper mineralised zone will be further defined once drilling resumes - scheduled for mid February.

Alpine - Drill collars on RTP aeromagnetic image

Alpine Prospect - Magnetics

Corinna - new licence

Stellar has applied for exploration tenure over a substantial tract of ground north and north-west of Alpine, where regional magnetic images show trends/structures of interest. Geochemical surveys carried out by previous explorers support the copper prospectivity of this area.

Magnetic image of Corinna EL application area, relative to the Alpine copper prospect

Tin Targets

At the Devises area in the south-east corner of the Heemskirk licence, a diamond drill hole was commenced in January to test a magnetic anomaly located on the margin of the Heemskirk Granite and adjacent to the Avebury nickel mining lease. The hole is currently near 100m and appears to be in a magnetite bearing skarn showing intense hydrothermal alteration, with some visible sulphides.

At East Granville, magnetic targets along strike of the open pit tin mine (subject of a recent ASX listing) are being reviewed for drilling, which may occur after the acquisition of detailed aeromagnetic coverage. Two of these targets have already been permitted. At St Dizier, drill holes have also been permitted.

The Gourlays Creek project area is characterised by a large magnetic signature supported by prior GeoPeko drilling which intersected anomalous tin. Acquisition of more detailed aeromagnetic data is planned over this and other north Heemskirk areas. Drill holes have been designed based on a preexisting UTEM (ground EM) survey and permits obtained.

Dundas - Nickel

In November 2006, terms were agreed with Discovery Nickel Limited to purchase its Dundas nickel project, held on EL 21/2004, situated some 7km east of Zeehan in Western Tasmania.

The Dundas exploration licence comprises an area of $12km^2$ . It covers a discrete and high intensity magnetic anomaly, with strong similarities to the magnetic feature associated with the nickel mineralisation at the Avebury nickel deposit, which lies some 15km west of the Dundas EL.

Discovery Nickel will receive 300,000 Stellar shares and will be granted a 2% net smelter return royalty over any production sourced from the Dundas EL, in consideration for the purchase.

Previous exploration in the area has not targeted nickel and the acquisition of this project represents an excellent opportunity for Stellar to expand its already vigorous exploration activities in Tasmania.

The magnetic anomaly in the Dundas EL coincides with a large body of serpentinite in an area of more classic Ag, Pb, Zn vein-style deposits and tin mineralisation related to fluids from an underlying Devonian granite. This area is considered to bear strong similarities to the Zeehan mineral field adjacent to the Avebury deposit. At Avebury, nickel mineralisation is related to hydrothermal fluids interacting with mafic/ultramafic rocks close to Devonian granitoids and accumulating nickel at boundaries between the serpentinised ultramatics and overlying stratigraphy.

Following completion of the formal sale and purchase agreement Stellar expects to proceed to define targets for drill testing during the March quarter 2007, subject to permits and rig availability.

Location of the Dundas EL

Ramsay

Work was confined to drilling at the Arthur Dam base metals prospect located some 10km west of Waratah. Arthur Dam is favorably located geologically being within 5km of three important historic mines – Mt Bischoff (tin), Cleveland (tin, copper) and Magnet (silver, lead, zinc).

Hole AD07 was drilled from the Arthur Dam car park to test the historic copper intersections and to test for a possible strike extension of outcropping ultramafic rock. Weak veining with low copper values were encountered at intervals between 210m to 300m. Although no ultramafic rock was encountered in this hole, the down dip extension to mineralisation was confirmed.

Mapping is continuing on potential nickel targets adjacent to the Meredith granite.

NEW SOUTH WALES

Goldfinger (Stellar 51%; option to 60%)

Systematic coverage of the entire strike length of the Goldfinger gravity target and the southern Galena Hill prospect area with the deep penetrating "MIMDAS" Induced Polarisation technique was completed. The survey, funded by BHP Billiton, has identified a strongly chargeable and conductive zone coincident with the western half of the Goldfinger trend, untested by existing drilling. A rig has been booked to drill two holes to 350m and 500m depth through the strongest response section on section 545000E.

Drilling is scheduled to commence in February.

Goldfinger – Long section outline of chargeable and conductive target regions, west of existing drillholes (GFD series drilled by Stellar, NM historic)

Copper Blow (Stellar 51%; option to $60%$ )

Assessment of RC drilling results indicates little potential for significant near surface oxide copper mineralisation within the drilled area and no further work is currently planned.

Panama Hat (Stellar 100%)

Panama EL 6556 is located immediately to the east of the Goldfinger and Copper Blow prospect areas. A gravity survey completed in 2006 has defined a number of significant positive gravity features including a major anomaly (4mGals) immediately west of the historic Panama gold workings. Although it is considered likely that these anomalies are hosted within Broken Hill metasediments, regional geology of the Panama licence area is poorly understood. RAB drilling coverage of these target gravity features is planned for this quarter.

SOUTH AUSTRALIA

Robins Rise (Stellar 100%)

In early October 2006, Stellar concluded an exploration farm-out agreement with Australian explorer Red Metal Limited and Phelps Dodge Australasia, Inc., together known as "the Alliance".

The agreement with the Alliance covers some 1,700km2 of ELs 3336 and 3436 and is located 100km northwest of the Prominent Hill copper-gold deposit within the Gawler Craton.

As operators of the Joint Venture, Red Metal reported:

"A regionally extensive gravity survey and five drill holes targeting Olympic Dam style copper-golduranium mineralisation were completed during the auarter. Weak copper sulphide mineralisation associated with magnetite was intersected on one target.

Processing of the expanded gravity survey data highlighted several anomalies which are considered prospective for copper-gold mineralisation.

The work program for 2007 covers the following activities: Native title access clearances over proposed follow-up targets, followed by drill testing of targets when a suitable drilling rig becomes available."

Coober Pedy Ridge

Two ELAs, totalling some 1,500km2, are now proceeding to grant. These are located in the Coober Pedy Ridge magnetic province immediately north of the Robins Rise IOCGU project area.

Pernatty (Stellar 100%)

The Pernatty EL 3583 is located to the west and south of the historic Mt Gunson copper mining area. The Carapateena IOCG prospect, held by RMG Services Pty Ltd/Teck Cominco Limited, occurs some 30km -40km to the east.

Detailed gravity surveys, to confirm anomalies and to cover remaining portions of the licence areas, were completed during the quarter. Two priority residual gravity targets have been delineated in close proximity to local aeromagnetic features, consistent with the Carrapateena model.

Cowell Joint Venture (Stellar able to earn 75%)

Review of existing data for the Cowell Joint Venture area, Eyre Peninsula, has confirmed the high prospectivity of the project area for IOCGU style mineralisation, under relatively shallow cover (100m). In the "Glensea" prospect area, the existing 3 holes completed by Avoca Resources have returned highly encouraging levels of copper, rare earth and uranium mineralisation, and an evaluation drilling program within this region is being scoped.

HOLE ID	NORTHING	EASTING	FROM	TO	RESULT
COD 1	6281000	706350	115.6	116.5	0.9m @ 3.26% Cu, 0.24 g/t Au
					and $2.4$ g/t Ag
			130.0	130.6	0.6m @ 0.32% Cu, 0.08 g/t Au
			143.5	151.9	8.4m @ 203 ppm REE
			166.8	167.1	0.3m @ 0.57% Cu
			236.1	237.1	1.0m @ 18.5 g/t Ag
COD 2	6285105	710096	86.9	114 S	28m @ 246 ppm REE and 155 ppm U
			216.6	216.9	0.3m @ 0.2% Cu
			236.5	236.7	0.2m @ 0.26% Cu
			262.8	263.1	0.3m @ 0.3% Cu
COD 3	6280761	706781	157.D	169.3	12.3 @ 270 ppm REE
			176.8	213.0	36.2m @ 264 ppm REE
			183.6	184.0	0.4m @ 3.5% Cu, 0.95 g/t Au
					and 2.0 g/t Ag
			189.1	189.6	0.5m @ 0.33% Cu

Cowell JV- Glensea Prospect Drill Collars on Magnetic image and significant assay intervals

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 commenced during the quarter. Unfortunately, the rig proved unable to complete the proposed program. A more suitable rig will be sourced to carry out the drill program, possibly in the June quarter.

URANIUM

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

Toro Energy Limited has advised that Native Title and PIRSA requirements to commence drill testing of the Warrior channel in ELs 3372 and 3369W are nearing completion, and a drill program is scheduled to commence in this quarter.

Toro may spend more than $3 million in a staged farm-in over the next four years on parts of the highly prospective Warrior Project.

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

UraniumSA Limited has advised that an extensive airborne EM survey is scheduled for February 2007. Results from this program will define reconnaissance drilling traverse positions to be scheduled mid-year.

Tarcoola Region, Iron Ore (Stellar 100%)

Review of the economic aspects of the Coolybring/Wilgena Hill magnetite occurrences by "Hematite Consultants Pty Ltd" recommended further test work on core samples of magnetite material from the Coolybring area, to check on product quality with finer grind sizes. Samples have been submitted to Amdel Laboratories in Adelaide for this assessment. Subject to this report, Stellar will review the merits of any further on ground activity.

Tarcoola Gold (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 Dominion Mining Limited's "Challenger" mine, approximately 120km to the west. Previous drilling at Sunshine returned significant 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 and samples submitted for assay. Further sampling is planned for early 2007.

Uno (Stellar option discontinued)

Following an in-house review of the relative merit of this project, this option was lapsed.

VICTORIA

North Bendigo JV (Stellar 50%)

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 60m.

OUTLOOK

Stellar Resources continues to actively explore its portfolio of commodity targets.

In the March 2007 quarter, exploration activity is scheduled for the following areas:

• Alpine, Tasmania drilling to resume February 2007;
• Devises, Tasmania drilling on nickel/tin target;
• Goldfinger diamond drilling in February; $\bullet$
• Panama RAB drilling of gravity target; $\bullet$
• Warrior Uranium Toro JV; aircore drilling;
• Kingoonya Palaeochannel USA; extensive air-borne EM survey.

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. It should be noted that the abovementioned exploration results are preliminary.

For further details please contact:

Chris Anderson	Tel:	(08) 8363 1589		Email: chris.anderson@stellarresources.com.au
Bill Michaelidis	Tel:	$(03)$ 9909 7618		Email: bill.michaelidis@stellarresources.com.au
David Sasson	Moh: -	0411 468 966		Email: david.sasson@stellarresources.com.au
Tom Burrowes	Tel:	$(03)$ 9909 7618		Email: $tom.burrows@stellarresources.com.au$
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

Г

ABN

96 108 758 961

Quarter ended ("current quarter")

31 DECEMBER 2006

Consolidated statement of cash flows

	Cash flows related to operating activities	Current quarter	Year to date(6 months)
		$A'000	$A'000
1.1	Receipts from product sales and related debtors
1.2	Payments for(a) exploration and evaluation	(842)	(1,526)
	(b) development
	(c) production
	(d) administration	(369)	(515)
1.3	Dividends received
1.4	Interest and other items of a similar nature received	74	157
1.5	Interest and other costs of finance paid
1.6	Income taxes paid	164	164
1.7	Other $-$
	Net Operating Cash Flows	(973)	(1,720)
	Cash flows related to investing activities
1.8	Payment for purchases of:(a) prospects
	(b) equity investments
	(c) other fixed assets	(15)	(21)
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)
	Net investing cash flows	(15)	(22)
1.13	operatingTotalandinvestingflowscash(carried forward)	(988)	(1,742)

$+$ See chapter 19 for defined terms.

1.13	investingoperatingflowsTotalandcash(brought forward)	(988)	(1,742)
	Cash flows related to financing activities
1.14	Proceeds from issues of shares, options, etc.
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
	Net financing cash flows
	Net increase (decrease) in cash held	(988)	(1,742)
1.20	Cash at beginning of quarter/year to date	4,859	5,613
1.21	Exchange rate adjustments to item 1.20
1.22	Cash at end of quarter	3,871	3,871

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

129

$\overline{\phantom{0}}$

+ See chapter 19 for defined terms.

Financing facilities available

Add notes as necessary for an understanding of the position.

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

Estimated cash outflows for next quarter

4.2Development
Exploration and evaluation4.1600
$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	48	89
52	Deposits at call	3,823	4,770
5.3	Bank overdraft
5.4	Other
	Total: cash at end of quarter (item 1.22)	3,871	4,859

Changes in interests in mining tenements

		Tenementreference	Nature of interest(note (2))	Interest atbeginning ofquarter	Interest atend ofquarter
6.1	Interests in miningtenements relinquished,reduced or lapsed	See AttachmentΑ
6.2	Interests in miningtenements acquired orincreased	See AttachmentВ

+ 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
	(b) Decreasesthrough returns of
	capital, buy-backs
7.5	+Convertible debtsecurities(description)
7.6	Changes duringquarter
	(a) Increasesthrough issues
	(b) Decreasesthrough securities
	matured, converted
7.7	Options			Exercise Price	Expiry date
	DirectorsExecutives	3,500,000625,000	NilΝiΙ	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)

+ See chapter 19 for defined terms.

Compliance statement

• $\begin{array}{c} \hline \end{array}$ 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. $\overline{2}$

........ Date: 25 January 2007

Sign here:

(Company Secretary)

Bill Michaelidis Print name:

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.
• Issued and quoted securities The issue price and amount paid up is not required in items 3 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.
• $\mathfrak{s}$ 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.

Attachment A

		Tenementreference	Nature of interest(note $(2)$ )	Interest atbeginning ofquarter	Interest at end of quarter
6.1	Interests in miningtenements relinquished,	EL 3336	Joint Venture	100%	Note 1
	reduced or lapsed	EL 3436	Joint Venture	100%	Note 1

Farm-out to Red Metal Limited/Phelps Dodge whereby they can earn 60% interest by Note 1 spending $8m.

+ See chapter 19 for defined terms.

Attachment B

$6.2$ Interests in mining tenements acquired or increased

EL 21/2006	Hangman tenementgranted	100%
EL 21/2004	Dundas tenement acquired	Note 2
EL 3016	Joint Venture - AvocaResources	Note 3
EL 3148	Joint Venture - AvocaResources	Note 3Note 3
EL 3418	Joint Venture - AvocaResources

Note 2 Agreement reached with Discovery Nickel Limited to acquire 100%.

Note 3 Farm-in agreement whereby Stellar can earn 75% by spending $0.5m.

+ See chapter 19 for defined terms.