STELLAR RESOURCES LIMITED — Interim / Quarterly Report 2009

Oct 28, 2009

srzinfo@stellarresources.com.au ASX ReleaseQuarterly Report

29 October 2009

For the period ending 30 September 2009

Highlights

Iron Ore Project (SA)

• Hicks Hills licence was awarded to Stellar, adding a surface magnetite deposit to the Tarcoola Iron Ore Project and raising the exploration target to at least 700 million tonnes of magnetite banded iron.
• Hicks Hill surface sampling assay results are encouraging with an average grade of 31% iron and a sample high of 38%.
• Aquaterra's water study confirms targets for groundwater exploration in the Tarcoola area.
• Promet's metallurgical testwork demonstrated that a 68% iron magnetite concentrate could be produced from Coolybring banded iron formation.

Exploration

• Sunshine Gold Prospect drilling traverses across the Bulgunnia shear zone provided low level gold anomalism that requires further review.
• Midgee (EL4242) uranium exploration by joint venture partner UraniumSA Limited was deferred to complete clearance work.
• Heemskirk Tin review of historical drilling data continued.

Corporate

• $1.0 million was raised for uranium exploration through the sale of 4.8 million UraniumSA shares to institutional investors.
• Annual General Meeting to be held on Thursday, 26 November at the registered office.

Targets for December Quarter 2009

• Tarcoola (Iron Ore) SA to complete clearance, conduct ground magnetic and gravity surveys and design a drilling program for Hicks Hill.
• Pirie Basin (Uranium) SA to complete an airborne electromagnetic survey and define early drill targets on wholly owned tenements.
• Warrior (Uranium) SA to complete review of previous drilling results and determine resource potential.

ASX Code: SRZ

ABN 96 108 758 961 Level 7 Exchange Tower 530 Little Collins Street Melbourne Victoria 3000 Australia

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

www.stellarresources.com.au

PROJECTS

Tarcoola Iron Ore Project (Stellar 100%)

Hicks Hill

Stellar has secured the outcropping Hicks Hill magnetite banded iron deposit located 40 kilometres to the southeast of the Coolybring deposit and just 10 kilometres to the north of the Trans-Australian railway line. Like Coolybring, the Hicks Hill magnetite deposit lies outside of the Woomera Prohibited Area and does not require special access arrangements with the Defence Department.

Figure 1 – Tarcoola Iron Ore Project locality relative to the Woomera Prohibited Area

The Coolybring and Hicks Hill magnetite deposits are the closest of the central South Australian deposits to the open access Trans-Australian Railway (10 kilometres) which could connect them to the proposed bulk commodity terminal at Port Bonython. The exploration target for near surface deposits, determined from analysis of total magnetic intensity and limited drilling, is at least 700 million tonnes. The near surface deposits have the potential to support a mine life in excess of 30 years at an annual production rate of 13 million tonnes of ore and 5 million tonnes of magnetite concentrate.

Figure 2 – Total Magnetic Intensity - Hicks Hill anomaly similar in magnitude to Coolybring

The magnetic image of Hicks Hill defines a body that is up to 2 kilometres in strike length and 300 metres in width with a close to vertical dip. These dimensions are similar to the near-surface extent of the Coolybring deposit. The deposit is accessible at surface for 800 metres along its southern edge – an area representing just 20% of the total magnetic body.

Ten rock chip samples were taken from Hicks Hill and assayed for iron and silica. The highest iron grade was 38% with the average being 31%. The surface samples taken from Hicks Hill are similar in appearance to the core samples obtained at Coolybring suggesting a common origin for the two deposits.

The next step is to undertake a clearance survey and conduct ground gravity and magnetic surveys across Hicks Hill to better define drilling targets. This program should be complete in the December quarter.

Coolybring

Water: Aqua Terra completed a desk-top study of groundwater availability in the Tarcoola area to supply a magnetite processing plant treating 13 million tonnes of ore per year for the annual production of 5 million tonnes of magnetite concentrate. The study concluded that "it should be feasible to develop a saline groundwater supply of up to 17 megalitres per day for Coolybring" – the target set for the project. The report also highlighted the fact that a borefield with the capacity to produce 26 megalitres per day had been established in similar terrain for the Prominent Hill mine, located 150 kilometres to the northeast of Tarcoola. In addition, the report concluded that the proposed Coolybring pit would be effectively dry as the evaporation rate exceeds the likely water seepage rate.

Metallurgy: Promet Engineers completed metallurgical testwork on chip and core samples of magnetite banded iron from the Coolybring deposit. The report concluded that a process of fine grinding followed by flotation would produce a magnetite concentrate grading 68% iron and 4.5% silica that is suitable as blast furnace feed. In addition, flotation test work showed that saline groundwater from Coolybring could be used in the process with no impact on concentrate quality. The report compared the Coolybring ore-type to the Taconites that have been profitably mined for decades near Lake Michigan in the United States.

Heemskirk Tin Project (Stellar 60%)

Compilation of historic drilling data, assays and mapping continued during the quarter.

The Heemskirk Tin Project is located immediately to the north of Zeehan on Tasmania's west coast and represents Australia's highest grade undeveloped tin deposit.

EXPLORATION

Uranium

Pirie Basin South SA (EL3978 Stellar 100%; EL4242 Stellar 100%, with UraniumSA earning 73%) The Pirie Basin is a trough of Tertiary aged sediments that are highly prospective for sedimentary uranium and lie along the east coast of South Australia's Eyre Peninsula to the north of Cowell (see Figure 3). Following the success of UraniumSA in the northern part of the basin with the discovery of the Blackbush sedimentary uranium deposit Stellar has recommended active exploration for uranium in the southern part of the basin on EL3978.

Figure 3 – Pirie Basin uranium trend (Red Line)

Prior work on the western side of EL3978 by CRA in the late 1970s (see holes 7, 12 and 13 in Figure 4) identified anomalous uranium in sedimentary roll-fronts within the Eocene sand. However, this work did not test the potential for roll front development to the east of hole 7 – the target for Stellar's current program. In addition, prior drilling by Stellar on basement targets identified the presence of uraniferous granite source rocks with COD02 yielding a 28 metre intersection averaging 155ppm uranium (see Figure 4).

Exploration by Stellar in the December Quarter will use airborne electromagnetics to identify basin topography and the possible location of the palaeo-shoreline for the potentially uranium bearing Eocene sand shown in Figure 4. Drilling is likely to follow in the March Quarter 2010.

Figure 4 – Schematic geological section across the Southern Pirie Basin within EL3978

Warrior SA (Stellar 100%)

Stellar Resources has resumed 100% ownership and management of this project, located to the west of Tarcoola, in the Gawler Craton province of South Australia. Stellar is conducting a review of prior work at Warrior, which was initially defined by substantial drilling in the 1970s by Japanese utility company PowerNuclearCorporation (PNC). Two areas were followed up with recent, more detailed drilling by former joint venture partner Toro Energy Limited.

Stellar's initial plan is to review Toro's sampling quality and assay results, relative to results from in-situ logging of natural gamma radioactivity levels, and compare these results with the earlier PNC drilling .

Warrior is the largest known palaeochannel uranium resource in the Gawler Craton, and also retains considerable exploration potential within the region surrounding the areas of detailed drilling.

COPPER/GOLD

Sunshine Gold (SA) (Stellar 100%)

Five traverses of aircore drilling totalling 1,196 metres were completed across the Bulgunnia shear zone over areas of coincident gold in calcrete anomalism. The best assay results were 6m at 0.2g/t from 29m in SUNRC002 and 7m at 0.2g/t from 24m in SUNAC024.

The drilling results discounted the Bulgunnia shear and the granitic rocks within the shear as a likely source of high grade gold. Further work is required to consider alternative explanations for gold in calcrete anomalism.

LEAD/ZINC

Goldfinger (NSW) (Stellar 80%) No exploration was conducted at Goldfinger during the quarter.

Corporate

Financial Position

As at 30 September 2009, the company held cash and near term securities of $1.58 million. Stellar also held financial assets comprising 9.3 million shares in UraniumSA during the quarter. Subsequent to quarter end, Stellar raised $1.0 million through the sale of 4.8 million UraniumSA shares. The company still holds 4.5 million UraniumSA shares valued at $1.0 million.

Option Agreement

The company entered an option agreement on 8 September in which Western Plains Resources Limited paid Stellar $100,000 for the right to explore the Robins Rise tenements (ELs 3336 and 3436) for 12 months. On option expiry, Western Plains Resources can pay an additional $250,000 to take ownership of the leases or withdraw from the agreement leaving the tenements in good standing. In the event that Western Plains Resources exercises its option, Stellar retains a royalty of 60 cents per tonne on any iron ore or coal produced from the tenements. Stellar also has a right to buy back a 49% interest in any noniron ore or coal resources identified on the tenement.

Sale of Dundas Licence

Stellar has agreed to sell the Dundas EL21/2004 on Tasmania's west coast to Creat Resources Holdings Limited for $250,000. The sale is conditional on ministerial approval and should be complete in the December quarter.

Markets

Iron Ore

Spot iron ore prices are trading around US$82.50/t cash and freight for 62% iron at Chinese ports. The market has stabilised at this level following a price rally earlier in the quarter in response to a 36% increase in iron ore imports into China over the first 9 months of 2009. Assuming a $10/t freight charge from Australia implies a free on board spot price of $72.50/t which represents a 21% premium to the Asian benchmark price set by Rio Tinto Limited earlier in the year.

Uranium

The spot uranium price has recovered in recent weeks from a low of US$42/lb to US$50/lb. Disrupted production at Olympic Dam and declaration by BHP Billiton of force majeure on some uranium sales contracts led to the perception of shortage and higher prices.

Tin

LME tin prices have remained steady at US$15,000/t for the September quarter reflecting modest growth in demand.

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. Mr. Anderson has sufficient experience relevant to the style of mineralisation and type of deposits being considered to qualify as a Competent Person as defined by the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code, 2004 Edition). 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:

Peter Blight CEO Tel: 03 9909 7618 Email: peter.blight@stellarresources.com.au Chris Anderson Director Tel: 08 8363 1589 Email: chris.anderson@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 Quarter ended ("current quarter")

Current quarter

96 108 758 961 30 September 2009

Year to date

Consolidated statement of cash flows

1.1Receipts from product sales and related debtors–	–
1.2Payments for(a) exploration and evaluation(274)	(274)
–(b) development	–
–(c) production	–
(158)(d) administration	(158)
1.3Dividends received–	–
1.4Interest and other items of a similar nature received11	11
1.5Interest and other costs of finance paid–	–
1.6GST (paid)/recovered18	18
1.7Other ––	–
Net Operating Cash Flows(403)	(403)
Cash flows related to investing activities1.8Payment for purchases of:(a) prospects–	–
–(b) investments	–
–(c) other fixed assets	–
1.9Proceeds from sale of:(a) prospects128	128
–(b) investments	–
30(c)other fixed assets	30
1.10Loans to other entities–	–
1.11Loans repaid by other entities–	–
1.12Other:–	–
–
Net investing cash flows158	158
1.13Total operating and investing cash flows(carried forward)(245)	(245)

+ See chapter 19 for defined terms. 090114SRL

1.13	Total operating and investing cash flows(brought forward)	(245)	(245)
	Cash flows related to financing activities
1.14	Proceeds from issues of shares, options, etc.	–	–
1.15	Proceeds from capital raising (Share Purchase Plan)	–	–
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	(245)	(245)
1.20	Cash at beginning of quarter/year to date	1,827	1,827
1.21	Exchange rate adjustments to item 1.20	–	–
1.22	Cash at end of quarter	1,582	1,582

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 59
• 1.24 Aggregate amount of loans to the parties included in item 1.10 –
• 1.25 Explanation necessary for an understanding of the transactions

Directors fees and remuneration $49k, rent/office support paid to Euro Exploration Services $4k, rent/office support paid to Mineral Deposits Limited $6k

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

+ See chapter 19 for defined terms. 090114SRL.doc

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	242
4.2	Development	–
4.1	Exploration and evaluation	242
		$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	112	65
5.2	Deposits at call	1,470	1,762
5.3	Bank overdraft	–	–
5.4	Other	–	–
	Total: cash at end of quarter (item 1.22)	1,582	1,827

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	EL 21/2006	Exploration Licence Hangman'sCreek, TAS, relinquished	100%	Nil
6.2Interests in miningtenements acquired orincreased		EL 4301 (SA)	Exploration Licence Pinding,renewal granted (previouslyEL3205)	Nil	100%
		ELA 2009/00070	Exploration Licence ApplicationHicks Hill, SA, granted	Nil	100%

+ See chapter 19 for defined terms. 090114SRL

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	94,821,858	94,821,858
7.4	Changes duringquarter
	(a) Increasesthrough issues
	(b) Decreasesthrough returns ofcapital, buy-backs
7.5	+Convertible debtsecurities(description)
7.6	Changes duringquarter(a) Increasesthrough issues(b) Decreasesthrough securitiesmatured, converted
7.7	OptionsDirectors	–	–	Exercise Price–	Expiry Date–
	Exec & EmployeesExec & Employees	1,075,000	Nil	30 cents	SRZAO 30/11/2010
7.8	Issued duringquarter	500,000–	Nil–	25 cents–	SRZAA 31/01/2011–
7.9	Exercised duringquarter	–	–	–	–
7.10	Expired/cancelledduring quarter	–	–	–	–
7.11	Debentures(totals only)
7.12	Unsecured notes(totals only)

+ See chapter 19 for defined terms. 090114SRL.doc

Compliance statement

• 1 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).
• 2 This statement does give a true and fair view of the matters disclosed.

Notes

• 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.
• 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 6: Accounting for Extractive Industries and AASB 107: 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.

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+ See chapter 19 for defined terms. 090114SRL