STELLAR RESOURCES LIMITED — Interim / Quarterly Report 2009

Jan 29, 2009

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Quarterly Report For the period ended 31 December 2008

Highlights

Iron Ore (SA)

• A 1,445m RC drilling program at the Tarcoola Iron Ore Project increased the width of magnetite mineralisation to 300m and the tonnage potential to 500 million tonnes.

• Assay and DTR results confirm that a concentrate grading 65% iron can be produced with low levels of phosphorus and alumina.

• 3.6% zinc over 3.5 metres within Tarcoola Formation breccias along the western side of the iron mineralisation highlights the potential for base metals to the west of Coolybring.

Exploration

• Carpentaria Exploration Limited (ASX: CAP) completed a soil sampling program at the Panama Hat gold joint venture in NSW and assay results are awaited.

30 January 2009

• Following the withdrawl of Red Metal Limited (ASX: RDM) from the Robins Rise joint venture, Stellar plans to review the project.

• LIDDS Pty Ltd has advised their intention to proceed with bulk sampling of the Perseverance gold project at Tarcoola. SRZ maintains a sliding scale production royalty.

Activities Diary for March 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 – review of metallurgical test work and planning for future drilling.

• Panama Hat (Gold) NSW – Subject to receipt of assay results, Carpentaria has advised that further soil geochemistry is planned.

• Joint Ventures (Uranium) SA:

• UraniumSA Limited (ASX: USA) expect to complete airborne EM coverage of the Cowell JV area, on EL3148.

• Toro Energy Limited (ASX: TOE) expect to commence drilling on the southern Warrior channel, on EL3369.

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CORPORATE

Financial Position

As at the 31[st] December 2008, the Company held cash and near term securities of $2.05 million. Stellar also holds financial assets of 10.26 million shares in UraniumSA Limited (ASX: USA) valued at some $0.4 million and 6.667 million options in Gippsland Offshore Petroleum Limited (ASX: GOP) exercisable at 20 cents.

MARKETS

Iron Ore

According to Macquarie Equities, spot seaborne traded iron ore prices bottomed in October 2008 at US$55/t CFR China and have since recovered to US$75/t. Re-stocking by smaller steel mills in China following a significant reduction in domestic production appears to be the driving force for this short-term price recovery. Spot prices are unlikely to rise further until a market base is established by contract price settlements for 2009.

Tin

The LME tin price declined early in the December quarter, before recovering to the current price of US$11,700/t or A$18,000/t. Tin production cutbacks in China and Indonesia and suggestions that the Chinese government was looking to buy metal for its strategic stockpile led the price recovery.

PROJECTS

Tarcoola Iron Ore Project (Stellar 100%)

During the quarter, a six hole, 1,445m, RC drilling program was completed to identify and sample the western edge of the Coolybring iron ore deposit. Also as a part of the program, an existing RC hole was deepened to provide an intercept between the eastern edge of the deposit and the footwall quartzite.

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Figure 1 – Magnetic image of the Coolybring deposit with gravity contours and drill collar locations

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The location of drill holes is shown in Figure 1. Holes 19 and 21 were drilled along section in the north of the deposit and holes 17, 18 and 20 were drilled along section 6609770N in the south. Hole 22 provided the most southerly intersection of the iron mineralisation and hole 15 was deepened to 150 metres as mentioned.

The drilling program identified the western edge of the iron mineralisation to be a steeply dipping, possibly fault controlled, unconformable contact with flat-lying Tarcoola Formation sediments. The width of iron mineralisation along the southern section was increased to 300 metres suggesting a tonnage potential of 500 million tonnes, to a 400 metre vertical depth and over a 1,500 metre strike. More drilling will be required to confirm this potential.

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Figure 2 – Interpretative geology, southern section, Coolybring

In the northern section, the iron mineralisation is inferred from magnetics and drilling to be wider again at 350 metres possibly due to structural thickening. The eastern and western boundaries of the deposit along this section remain untested to date.

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Figure 3 – Interpretative geology, northern section, Coolybring

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Magnetite mineralisation along the western boundary of the deposit appeared to be more massive than it is in the east according to geological logs. Davis Tube Recovery results confirmed that holes 17 and 19 encountered a more iron rich variant of the mineralisation with lower levels of silica (see Table 1).

Table 1 – Iron ore assay results from the northern and southern sections

Hole	From	To	Interval	Head	Mass	Fe			Concentrate	Concentrate
Number	m	m	m	Fe %	**Recovery **	%Recovery %	Fe %	**SiO2 **	%	Al2O3 %	P %	LOI %
WIL019RC	122	239	117	35.7	34.7	64.9	66.8	6.5		0.1	0.0	-2.9
WIL007RD	86	219	133	33.5	36.8	71.6	65.0	8.8		0.1	0.0	-2.3
WIL017RC	153	248	95	37.7	46.9	80.5	64.7	7.4		0.1	0.0	-2.1
WIL021RC	146	196	50	32.0	43.9	86.0	62.7	8.5		0.1	0.0	-1.2
WIL015RC	100	144	44	28.7	36.6	79.6	62.5	11.1		0.2	0.0	-1.6
Average				34.3	39.2	74.2	64.9	8.1		0.1	0.0	-2.2

DTR sample grind to greater than 97% passing 38 micron

Overall, the XRF assays and DTR results shown in Table 1 are pleasing with an average head grade of 34% iron, a mass recovery of 39%, a concentrate grade of 65% iron and low levels of alumina and phosphorus. The head and concentrate grades are typical for high quality banded iron deposits with overall iron recovery of 74% above average. Given the high iron recovery, iron concentrate grade could be improved further by reducing silica levels.

Zinc mineralisation

Hole 18, as shown in Figure 2, intersected an unusual breccia zone at the contact between Tarcoola Formation sediments and basement iron formation, 223 metres down hole. Pyrrhotite (iron sulphide) has replaced much of the breccia matrix over a ten metre interval, indicating an important post-depositional mineralising event. Figure 4 shows a section of breccia where pyrrhotite flooding is well developed.

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Figure 4 – Contact breccia with pyrrhotite matrix – 230 metres down hole 18

Assay results for hole 18 returned an interval of 3.5 metres from 228.5 metres at 3.6% zinc and 4.3g/t silver within a 10.1 metre interval grading 1.6% zinc and 2.1g/t silver. As Table 2 shows, zinc, lead and silver anomalism is reasonably common at Coolybring often occurring in fractures in the iron mineralisation near the unconformable contact with Tarcoola Formation. However, hole 18 has lifted the tenor of this anomalism and focused attention on the brecciated contact.

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Table 2 – Significant zinc intervals

Hole	From	To	Interval	Zinc	Lead	Silver
Number	m	m	m	%	%	ppm
WIL018PD	223.0	233.1	10.1	1.58		2.1
incl	228.5	232.0	3.5	3.59		4.3
WIL019RC	126	128	2	1.76	0.19	12.6
WILDD005	118	122	4	1.21	0.44	3.7
WIL007PD	95	99	4	0.73	0.29	47.0
WIL021RC	172	184	12	0.54	0.32	3.4
WILRC008	126	132	6	0.43
WIL015RC	128	136	8	0.36	0.13	2.2
WIL017RC	150	152	2	0.21	0.10	1.0
WILDD004	112	114	2	0.21	0.33	17.0
WILRC006	122	124	2	0.18	0.23	9.0

This style of zinc mineralisation is comparable to breccia hosted mineralisation recorded from similar structural settings adjacent to major Proterozoic shale hosted deposits in northern Australia (HYC deposit at McArthur River, NT and the Century and Dugald River deposits in western QLD). Potential for this style of deposit within the Proterozoic Tarcoola Basin has previously been recognised by PIRSA, and represents a significant target for further drilling within the Coolybring project area.

Stellar’s primary goal is to continue drilling the iron mineralisation at Coolybring. However, investigation of the zinc potential will be undertaken where drilling both targets can be accommodated.

EXPLORATION UPDATE

COPPER/GOLD

Panama Hat Gold (NSW) (Stellar 100%; Carpentaria Exploration earning 51%)

At the Williams Prospect, a total of 92 soil samples were taken using a power auger. The samples were taken on a 10m interval along grid lines shown in Figure 5 designed to explore the covered eastern strike extent of the highly Au anomalous vein previously sampled by CAP which returned results including 30 g/t, 19.05 g/t, 7.06 g/t and 3.68 g/t gold . The auger samples have been submitted to the laboratory and results are awaited.

Figure 5 – Williams Prospect (EL6556) power auger grid

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Robins Rise JV (SA) (Stellar 100%)

Red Metal Limited (ASX: RDM) on behalf of the Red Metal, Phelps Dodge Alliance has withdrawn from the joint venture over EL’s 3336 and 3436. The Alliance met its option period commitment by spending $960,000 between 2 October 2006 and 31 December 2008. During this time, the Alliance conducted detailed gravity surveying and drilled 15 separate gravity targets without encountering significant IOCGU mineralisation.

Perseverance Gold ( LIDDS Pty Ltd right to earn up to 90%)

LIDDS Pty Ltd has evaluated the Perseverance gold prospect near Tarcoola under a one year license agreement. It has advised that, having met the terms of the initial expenditure requirement, it wishes to proceed to the next stage evaluation, including bulk sampling of the gold zone to assess gold recovery and processing options. Under the terms of the agreement, Stellar will receive a sliding scale royalty on any gold produced – up to a maximum 10% for production in excess of 15,000 ounces Au.

URANIUM

Kingoonya Palaeochannel (SA) (Stellar 100%; UraniumSA able to earn 70%) No fieldwork was conducted during the quarter. Data analysis and interpretation is continuing.

Cowell (SA) (Stellar 100%; Uranium SA able to earn 70%)

Documentation for the joint venture agreement which covers the north-eastern section of EL3148 was completed during the quarter. Field work is expected to commence in the March quarter, comprising an initial airborne EM survey followed by reconnaissance rotary drilling traverses.

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

Toro Energy plans to commence exploration on EL3369W which contains the southerly extension of the Warrior palaeochannel during the March quarter. Airborne EM data have outlined the likely continuation of the Warrior palaeochannel, which will be tested with up to 5 traverses of rotary drilling. Deeper drill testing of the “Fossil” gravity and magnetic target for IOCGU style mineralisation is also planned, subject to availability of a suitable drill rig.

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 31 December 2008

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 (6 months) $A’000
	– (358) – – (208) – 33 – 50 –	– (895) – – (408) – 70 – 113 –
	(483)	(1,120)
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)	– – – – – – – – –	– – (1) – – – – – –
	–	(1)
	(483)	(1,121)

• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity quarterly report

1.13 Total operating and investing cash flows (brought forward)	(483)	(1,121)
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	– – – – – –	1,000 – – – – (2)
	–	998
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	(483) 2,535 –	(123) 2,175 –
	2,052	2,052

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
		100
		–
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 –

• See chapter 19 for defined terms.

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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
	320
	–
Total	320

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	81	55
	1,971	2,480
	–	–
	–	–
Total: cash at end of quarter(item 1.22)	2,052	2,535

Changes in interests in mining tenements

Tenement reference	Nature of interest (note (2))	Interest at beginning of quarter	Interest at end of quarter
–	–	–	–
–	–	–	–

• 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	85,034,358	85,034,358
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
	–	–	–	–
	–	–	–	–
	3,500,000	Nil	30 cents	SRZAK 10/12/2008
7.11 Debentures (totals only)
7.12 Unsecured notes (totals only)

• See chapter 19 for defined terms.

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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.

Sign here: ............................................................ Date: 19 January 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.

== == == == ==

• See chapter 19 for defined terms.

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