STELLAR RESOURCES LIMITED — Interim / Quarterly Report 2009

Jul 26, 2009

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27 July 2009

Quarterly Report For the period ending 30 June 2009

Highlights

Corporate

• Stellar supported the UraniumSA Limited (ASX: USA) rights issue and now holds 11% of the company’s issued capital.

Iron Ore Project (SA)

• Markets are firming in response to restocking by steel mills. Spot iron ore prices rose by 33% in recent weeks to US$73/t (fob).

• A conceptual mining study was completed for the Coolybring magnetite deposit showing an overall waste to ore ratio of 1.44 to 1.00 and an acceptable cost structure for overburden removal and mining.

• Interest in the Tarcoola project from Chinese steel mills continues. One particular group completed metallurgical tests and confirmed that a satisfactory product can be produced from the mineralisation.

Exploration

• Drilling of the Sunshine gold prospect will now focus on the Bulgunnia shear zone to identify high grade “Challenger style” mineralisation.

• Joint Venture partner UraniumSA Limited plans to extend its announced successful uranium drilling program south onto Stellar’s EL 4242.

Targets for September Quarter 2009

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 srzinfo@stellarresources.com.au

• Tarcoola (Iron Ore) SA – metallurgical test work and a water availability study to be completed.

• Sunshine (Gold) SA – aircore drilling program to be completed.

• Heemskirk (Tin) TAS – shallow drill targets at Queen Hill to be identified.

• Midgee (Uranium) SA – USA to complete drill traverses across EL 4242.

• Warrior (Uranium) SA – quantification of mineralised zones and identification of exploration potential to be completed.

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CORPORATE

Financial Position

As at 30 June 2009, the company held cash and near term securities of $1.83 million. Stellar also holds financial assets comprising 9.3 million shares in UraniumSA Limited valued at some $0.88 million at the date of this release.

UraniumSA rights issue supported

Stellar supported the UraniumSA rights issue by taking up its full entitlement of 3.4 million shares at a cost of $244,000. The investment was funded and $119,000 added to working capital through the sale of 4.4 million UraniumSA shares. Following these transactions Stellar holds 9.3 million shares in UraniumSA representing 11.0% of the company’s issued capital.

MARKETS

Iron Ore

Contract prices for iron ore fines for the 12 months to April 2010 were settled at US$60/t fob (free on board) between Australian suppliers and Japanese steel mills in late May 2009. The price reduction of 33% was a better outcome than the trade press had expected. Since the end of June, Macquarie Research has reported an increase in the spot iron ore price to US$73/t (fob), a 22% premium to the contract price, reflecting increased steel production rates in China and some rebuilding of stocks ahead of increased steel production by steel mills in other countries.

Tin

The LME tin price is currently US$14,750/t representing a 22% increase over the quarter. The price rise has drawn stock into the LME with the current level at 18,280 tonnes, the highest since 2003. Further sustainable tin price recovery may require a reduction in LME inventories.

Metals X Limited (ASX: MLX) announced on 24 July that Yunnan Tin Group had signed a heads of agreement to acquire up to a 60% interest in the Renison Bell tin mine and associated assets. The appearance of Yunnan Tin Group, the world’s largest integrated tin producer, in Tasmania for the first time is a very positive statement for the long-term production of tin in the region. The momentum generated by this deal should in time have positive consequences for Stellar’s Heemskirk Tin Project.

Uranium

Spot prices have recovered strongly over the quarter from US$41/lb in April to US$49/lb in late July. Prices should continue to improve with spot volume running at the highest level since 1996.

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PROJECTS

Tarcoola Iron Ore Project (Stellar 100%)

Coolybring

Work continued on a number of independent scoping studies designed to better understand the Coolybring magnetite deposit.

Preliminary results from the conceptual mining study are positive. Overburden removal can be minimised to 64 million tonnes by developing an initial pit over the shallower southern end of the deposit. Excluding overburden removal in the first year, the ratio of waste to ore for the next four years of production would be 0.85 to 1.00. Over the 36 year potential life envisaged for a conceptual pit developed to a depth of 425 metres, the waste to ore ratio should average 1.44 to 1.00. This ratio compares well with other more advanced magnetite open pit projects and implies that acceptable mining costs should be achievable.

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N
1.5 km
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Figure 1 – Conceptual pit design for the Coolybring magnetite deposit

Studies of water availability in the Tarcoola area and metallurgical performance of the magnetite mineralisation drill sampled to date are underway but are insufficiently advanced to provide any meaningful conclusions at this stage.

Interest in the project from Chinese steel mills continues. Representatives from one steel mill visited the project during the quarter and completed metallurgical test work in China on core samples provided by Stellar. The results confirmed both the DTR assays previously reported to the ASX and the potential to produce a satisfactory magnetite concentrate. Discussions between Stellar and potential partners are continuing.

Hicks Hill

As previously reported, Stellar has applied for an exploration licence over Hicks Hill. The magnetite banded iron formation that forms Hicks Hill is located 30 kilometres to the east of the Coolybring deposit and 10 kilometres from the TransAustralian railway. It has the potential to add significantly to the company’s magnetite inventory.

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TIN

Heemskirk Tin Project (Stellar 60%) Re-evaluation of historic drilling records continued during the quarter. The objective is to define nearsurface zones of interest in the Queen Hill area that were not adequately tested by past drilling programs.

Yunnan Tin Group’s planned investment in the nearby Renison Bell tin mine brings a tin company with significant financial and technical resources into the area. Such investments require a long-term vision of production by YTG and underpin opportunities for neighbouring projects such as Stellar’s Heemskirk Tin Project, located 18 kilometres from the Renison Bell mine, to play a role in this vision.

EXPLORATION

COPPER/GOLD

Sunshine Gold (SA) (Stellar 100%)

Stellar has reviewed previous drilling results and undertaken further rock chip sampling at Sunshine in order to refine and focus the next stage of drilling.

Previous work tested gold in calcrete anomalism south of the Bulgunnia shear zone over an area shown in Figure 2 as basement subcrop. The drilling results showed that gold in calcrete appeared to be laterally transported rather than sourced from bedrock below the calcrete anomalies. This observation, combined with a bedrock assay of 2 metres grading 6.7g/t from an earlier drilling program, has re-directed the exploration effort to the Bulgunnia shear zone.

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Figure 2 – Gold in calcrete anomalism in relation to the Bulgunnia shear zone

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During the September quarter, Stellar is planning to drill a number of aircore traverses across the shear zone as shown in Figure 2. Traverses across the northeastern end should be of particular interest given the lack of previous drilling in this area and the fact that sand cover dilutes what could be higher grade gold in calcrete anomalies. Stellar has already obtained a number of clearances for the drilling campaign including heritage clearance and will commence the program as soon as the final clearance is granted.

Panama Hat Gold (NSW) (Stellar 100%: Carpentaria Exploration earning 51%) No additional results from Carpentaria in the June quarter.

URANIUM

Warrior (SA) (Stellar 100%)

During the quarter, Toro Energy (TOE) withdrew from the Warrior Joint Venture in South Australia in which it was exploring for extensions of palaeochannel uranium mineralisation associated with the Warrior prospect. Stellar is pleased to be regaining 100% unencumbered ownership of EL 3369W Carnding and EL 3372 Warrior both of which were maintained in good standing by Toro.

In outlining its shift in focus to higher priority targets in Western Australia and elsewhere as the key reason for withdrawing from the joint venture, Toro commented that with respect to Warrior “the mineralised area is still open to the south along a well defined channel.”

Stellar will now review the data base created and provided by Toro and consider the alternatives for moving the Warrior project forward. Uranium mineralisation at Warrior was originally identified by Power Nuclear Corp (PNC) in the 1970s. Subsequent geophysical work by Stellar outlined the likely extent of the Warrior palaeochannel over a strike length in excess of 25 kilometres (see Figure 3). Detailed drilling by Toro has established significant zones of uranium mineralisation in Areas “A” and “B” – Stellar regards the potential for discovery of further mineralisation within the extent of the palaeochannel as very high.

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Figure 3 – Warrior palaeochannel trace and Area A and B uranium occurrences

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Midgee (SA) (Stellar 100% UraniumSA able to earn 70%)

UraniumSA (ASX: USA) has interpreted the results of its airborne electromagnetic survey and concluded that the western boundary of uraniferous Eocene sands passes through the northwestern corner of Stellar’s EL 4242 (see Figure 4). The western boundary proved to be an important marker in the identification of USA’s Blackbush uranium deposit which lies within Eocene sands and immediately to the east of this line. Stellar’s EL 4242 lies approximately 8 kilometres to the south of Blackbush.

USA indicated in its June quarter report that it intends to follow the Eocene boundary south with eastwest regional drilling traverses spaced 800 metres to 1,000 metres apart. As a part of this program, USA plans to drill traverses across EL 4242 during the September quarter.

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SRZ JV
EL 4242
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Source: UraniumSA Limited

Figure 4 – UraniumSA interpretation of the western boundary of uraniferous Eocene sands (red line) from AEM survey data and location of Stellar JV EL 4242

Stellar also owns 100% of EL 3978 immediately to the south of EL 4242 and encountered anomalous uranium within crystalline basement during a drilling campaign in 2007. Whilst the overlying Eocene sands provided no radiometric signature in the vicinity of the drill hole, USA’s success to the north highlights potential along the western edge of the sand horizon.

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LEAD/ZINC

Goldfinger (NSW) (Stellar 80%)

Exploration potential within the Goldfinger EL was reviewed during the June quarter with a focus on near-surface mineralisation. Further work is required to take the study through to a drilling proposal.

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 Chris Anderson CEO Director Tel: 03 9909 7618 Tel: 08 8363 1589 Email: peter.blight@stellarresources.com.au Email: chris.anderson@stellarresources.com.au

or visit our Website at: http://www.stellarresources.com.au

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Appendix 5B Mining exploration entity quarterly report

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”) 96 108 758 961 30 June 2009

Consolidated statement of cash flows

Cash flows related to operating activities 1.1 Receipts from product sales and related debtors 1.2 Payments for (a)exploration and evaluation (b) development (c) production (d) administration 1.3 Dividends received 1.4 Interest and other items of a similar nature received 1.5 Interest and other costs of finance paid 1.6 GST (paid)/recovered 1.7 Other – Net Operating Cash Flows	Current quarter $A’000	Year to date (12 months) $A’000
	– (189) – – (178) – 15 – 23 –	– (1,436) – – (707) – 130 – 169 –
	(329)	(1,844)
Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects (b) investments (c) other fixed assets 1.9 Proceeds from sale of: (a) prospects (b) investments (c)other fixed assets 1.10 Loans to other entities 1.11 Loans repaid by other entities 1.12 Other: – Net investing cash flows 1.13 Total operating and investing cash flows (carried forward)	– (240) – – 358 – – – –	– (240) (1) – 358 – – – –
	118	117
	(211)	(1,727)

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Appendix 5B Mining exploration entity quarterly report

1.13 Total operating and investing cash flows (brought forward)	(211)	(1,727)
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	392 (387) – – – (12)	1,392 – – – – (13)
	(7)	1,379
Net increase (decrease) in cash held 1.20 Cash at beginning of quarter/year to date 1.21 Exchange rate adjustments to item 1.20 1.22 Cash at end of quarter	(218) 2,045 –	(348) 2,175 –
	1,827	1,827

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 1.24	Aggregate amount of payments to the parties included in item 1.2 Aggregate amount of loans to the parties included in item 1.10	Current quarter $A'000
		64
		–
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 $11k

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

–

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Appendix 5B Mining exploration entity quarterly report

Financing facilities available

Add notes as necessary for an understanding of the position.

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

Estimated cash outflows for next quarter

4.1 Exploration and evaluation 4.2 Development	$A’000
	155
	–
Total	155

Reconciliation of cash

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 5.2 Deposits at call 5.3 Bank overdraft 5.4 Other	65	475
	1,762	1,570
	–	–
	–	–
Total: cash at end of quarter(item 1.22)	1,827	2,045

Changes in interests in mining tenements

Tenement reference	Nature of interest (note (2))	Interest at beginning of quarter	Interest at end of quarter
	See Attachment A
	See Attachment A

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• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity quarterly report

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 +securities (description) 7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy-backs, redemptions
7.3 +Ordinary securities 7.4 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy-backs	94,821,858	94,821,858
	9,787,500	9,787,500	4 cents	4 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 Directors Employees Exec & Employees Exec & Employees 7.8 Issued during quarter 7.9 Exercised during quarter 7.10 Expired/cancelled during quarter	– 375,000 1,175,000 500,000	– Nil Nil Nil	Exercise Price – 30 cents 30 cents 25 cents	Expiry Date – SRZAM 19/08/2009 SRZAO 30/11/2010 SRZAA 31/01/2011
	–	–	–	–
	–	–	–	–
	–	–	–	–
7.11 Debentures (totals only)
7.12 Unsecured notes (totals only)

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Appendix 5B Mining exploration entity quarterly report

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.

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Sign here: ............................................................ Date: 27 July 2009 (Company Secretary) Print name: M J S Drummond

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 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.

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• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity quarterly report

Attachment A

6.1 Interests in mining tenements relinquished, reduced or lapsed 6.2 Interests in mining tenements acquired or increased	Tenement reference	Nature of interest (note (2))	Interest at beginning of quarter	Interest at end of quarter
	EL 44/2006 (TAS) EL 3205 (SA) EL 3850 (SA) EL 4125 (SA)	Exploration Licence Corinna, TAS, relinquished Exploration Licence Pinding, SA, expired (application for renewal pending) Exploration Licence Carriewerloo, SA, relinquished Exploration Licence East Wirrida, SA, relinquished	100% 100% 100% 100%	Nil Nil Nil Nil
	EL 49/2004 (TAS)	Exploration Licence Rayne, TAS area returned to 28km2 (application to reduce by 61% cancelled)	100%	100%

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