STELLAR RESOURCES LIMITED — Interim / Quarterly Report 2011

Oct 26, 2010

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Quarterly Report For the period ended 30 September 2010

Highlights

Heemskirk Tin Project (TAS)

• Diamond drilling confirmed the continuity of near‐surface high grade tin mineralisation

• Assays are consistent with historical results and will allow estimation of a JORC compliant resource

Iron Ore Project (SA)

• Information Memorandum on the Tarcoola Iron Ore Project prepared and presented to potential investors

Exploration

• AngloGold Ashanti subsidiary to spend $5 million over 6 years to earn a 75% interest in copper/gold targets on four EL’s in South Australia

Corporate

• Stellar held cash of $1.8 million at 30 September 2010

27 October 2010

Targets for December Quarter 2010

• Metallurgical test results from Heemskirk Tin drilling.

• Review of tin resource estimates.

• Gold drilling results from Panama Hat JV project.

• Uranium drilling results from Pirie Basin JV project.

• Drilling to commence on Gourlays Creek copper/tin target.

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

About Stellar:

Stellar Resources (SRZ) is focusing on the development of its iron ore and tin projects and advancement of uranium and base metal exploration properties. The company holds a portfolio of tenements located in South Australia, Tasmania and New South Wales that have excellent development potential. Key projects include: Tarcoola Iron Ore located in central South Australia, Heemskirk Tin located near Zeehan in Tasmania, Pirie Basin Uranium located north of Cowell in South Australia and Warrior Uranium located west of Tarcoola in South Australia. The company aims to create shareholder value by identifying and developing mature exploration properties.

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PROJECTS

Heemskirk Tin (Stellar 60%)

The Heemskirk Tin Project is located north of Zeehan on Tasmania’s west coast. The location is ideal for mining given that the area is well serviced by power, water, transport, other infrastructure and mining services. Stellar holds a 60% interest in the Heemskirk Tin Project with joint venture partner Gippsland Limited and can increase its holding to 70% by completing a feasibility study.

Drilling by Aberfoyle during the early 1980s identified three tin deposits, Queen Hill, Severn and Montana. Queen Hill is the focus of the current phase of exploration as it out‐crops, has not been fully drilled‐out close to the surface, nor has it been fully tested for metallurgical performance.

Stellar completed a six hole diamond drilling program during the quarter which delivered the excellent results summarised in Table 1.

Table 1: Assay results *

Hole No	From	To	Interval**	Sn	Acid Sol Sn	Cu	Pb	Zn	Ag	Comment
	m	m	m	%	%	%	%	%	g/t
ZQ93	75.7	80.0	4.3	0.92	0.00					Tin Lode
ZQ94	44.0	45.0	1.0	0.09	0.02	0.03	3.2	7.4		Clarkes Lode Lead/Silver
	64.0	70.0	6.0	1.30	0.02					Tin Lode
including	69.0	70.0	1.0	2.20	0.03					Tin Lode
ZQ95	62.0	62.7	0.7	0.60	0.00					Tin Lode
ZQ96	68.0	76.0	8.0	0.71	0.44	0.5	3.1	0.7	161	Clarkes Lode Lead/Silver
	**85.8 **	107.0	21.2	0.82	0.01					Tin Lode
including	90.0	91.0	1.0	3.78	0.01					Tin Lode
ZQ97	57.0	58.2	1.2	0.70	0.00					Tin Lode
ZQ98	**95.0 **	100.0	5.0	1.56	0.02					Tin Lode
including	95.0	96.0	1.0	1.81	0.02					Tin Lode

• XRF using fused beads; **reported interval is down hole.

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Figure 1: Core sample from interval 90‐91m grading 3.8% tin – hole ZQ96

All holes intersected ore grade mineralisation over good widths apart from ZQ95 and ZQ97 where grade was consistent with other holes but width narrowed as the mineralisation approached the surface. Importantly, the results provide consistency with the historical database confirming its relevance in any review of resource estimates.

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The best result was provided in ZQ98 with 5m grading 1.56% tin from 95 metres down the hole or 90m from the surface. ZQ96 also provided a high‐grade intersection with 21 metres grading 0.82% tin from 86 metres including 1.0 metre grading 3.8% tin.

Consistently across all holes, the Tin Lode mineralisation contains negligible amounts of acid soluble tin suggesting that cassiterite rather than the more difficult to treat stannite is the tin mineral present. Some stannite is present in Clarkes lode, however, this mineralisation is quite distinct from the Tin Lode and over‐shadowed in importance by the lead and silver content of Clarkes Lode.

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Figure 2: Schematic long‐section showing mineralised drill hole pierce points and high grade zone

In Figure 2, a schematic long section shows pierce points and assays in bold for current drilling results (ZQ93‐ZQ98) and shaded for historical results.

ZQ96 and ZQ98 confirm the down‐dip continuity of high grade mineralisation encountered in historical drill holes ZQ1, ZQ3 and ZQ4. In addition, ZQ93 and ZQ94 show that good ore grade mineralisation trends toward the surface in a southwest direction adding to the potential for open pit mining.

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Figure 3: Schematic drill section 3020 – Queen Hill

Mineralisation in the Queen Hill Tin Lode occurs as a fracture zone filling of pyrite and silica with cassiterite contained within the sulphides and silicates. The fracture zone occurs within a volcanoclastic unit, close to the contact with the overlying black shale unit. Pyrite is the only iron sulphide close to the surface. However, chemically more reactive pyrrhotite occurs in minor concentrations with pyrite at depth.

Clarkes Lode, shown within the footwall black shale in Figure 3, represents a late stage emplacement of sulphides and appears to be a separate phase of mineralisation to the Tin Lode. Historic mining near the surface targeted Clarkes Lode but does not appear to follow it down at depth. As ZQ96 shows, Clarkes Lode can be quite rich with an 8m down‐hole intersection assaying 3.1% lead and 161g/t silver within which occurs a 2m zone of 1.7% tin, 2.0% copper and 350g/t silver. The immediate Zeehan area has produced some 26 million ounces of silver.

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Table 2: Drill collar orientation data

Hole No	Northing	Easting	Relative Level	Collar	Depth	Recovery
	Collar	Collar	m	Dip/Azimuth	m	%
ZQ093	5361911	360771	248	70/279	94.8	97
ZQ094	5361911	360770	248	50/283	75.6	91
ZQ095	5361933	360780	248	50/283	78.9	92
ZQ096	5361947	360787	247	79/281	124.0	98
ZQ097	5361948	360785	247	50/277	80.3	88
ZQ098	5361972	360821	258	70/280	131.0	93

Collar Co‐ordinates: MGA; Collar Azimuth: Magnetic

Stellar is currently undertaking a program of metallurgical test‐work using samples from the recent round of drilling. The test work will use a conventional sulphide flotation and gravity separation approach similar to that employed by the near‐by Renison Bell tin mine. Results from this program should be known in late November.

Stellar is also undertaking a third party review of the historical database in order to provide a JORC compliant resource estimate by year‐end.

Together, these results will allow the commencement of scoping studies that will advance the project toward development.

Tarcoola Iron Ore Project (Stellar 100%)

The Tarcoola Iron Ore project is located 8 kilometres from the town of Tarcoola in central South Australia and within 10 kilometres of the Trans‐Australian railway which links the project to the proposed bulk commodity export terminal at Port Bonython. The Coolybring and Hicks Hill magnetic anomalies comprise Stellar’s Tarcoola Iron Ore Project.

Stellar has prepared an information memorandum and is discussing the project with potential investors.

Negotiation with native title claimants for greater access to Hicks Hill is continuing.

EXPLORATION

Uranium

EL 4242 (SA) (Stellar 100%)

No work was conducted on EL 4242 by joint venture partner, UraniumSA Limited (USA) during the quarter. However, USA informed Stellar that it had met the conditions of the option period and has elected to proceed with the joint venture. Under the terms of the agreement, USA has two years from the date of election in which to nominate 40% of the tenement as the continuing project and must drill up a JORC compliant resource in order to earn a 73% interest.

USA has advised its intention to return to EL 4242 for in‐fill drilling during the December quarter.

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EL 3978 (SA) (Stellar 100%)

Stellar is in the process of negotiating a joint venture on this property.

EL 4570 (SA) Warrior (Stellar 100%)

No work was conducted during the quarter.

Copper/Gold

AngloGold Ashanti Joint Venture

AngloGold Ashanti, through a wholly owned subsidiary, has agreed to joint venture into four Stellar exploration licences (ELs 3752, 3753, 3655 and 4573) in the Gawler Craton in South Australia to explore for copper gold mineralisation. Under the terms of the joint venture, AngloGold Ashanti has committed to:

• Minimum expenditure of $500,000 including 1,000 metres of drilling in the first two years;

• Expenditure of $5 million within the six year joint venture period to earn a 75% interest in the tenements.

EL 3752 and EL 3753 are located to the south of Coober Pedy and contain a number of shallow untested magnetic anomalies. The shallowly buried basement rocks covered by these licences host the Cairn Hill magnetite/copper deposit to the east and the Prominent Hill copper/gold mine to the southeast.

EL 3655 and EL 4573 cover a large but relatively shallow magnetic high south of Kingoonya in South Australia which has not previously been drill tested. The geophysical target is considered to be similar to that over the Carrapateena copper gold deposit.

EL 6556 (NSW) Panama Hat (Stellar 100%)

In early October, a seven hole drilling program commenced on the Williams gold prospect and Panama Hat gold mine located 30 kilometres to the south of Broken Hill, NSW.

Joint venture partner, Carpentaria Exploration Limited is conducting a 750 metre reverse circulation drilling program to test the depth extent of mineralisation below high grade rock chip samples shown in Figure 4. Two of the seven holes will be drilled at Panama Hat and five at Williams Prospect.

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----- Start of picture text -----

Williams Prospect
30.0 g/t Au
19.1 g/t Au
Panama Hat Mine
18.9 g/t Au
Rock Chip results
Proposed Holes
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Source: Carpentaria Exploration Limited

Figure 4: Surface Image Showing Proposed Drilling

Under the joint venture agreement, Carpentaria Exploration Limited agreed to spend $1.0 million by 30 October 2012, in order to earn a 51% interest.

Gourlays (TAS) (Stellar 100%)

Application for permission to drill copper/tin targets lodged with Mineral Resources Tasmania. Drilling is planned to commence in the December quarter.

Lead/Zinc

Goldfinger (NSW) (Stellar 60%)

Site visit and review of previous drilling planned for December Quarter.

CORPORATE

As at 30 September 2010, the company held cash and term deposits of $1.8 million. Sale of the Robins Rise tenements added $250,000 to Stellar’s cash position during the quarter. Stellar also holds 4.5 million UraniumSA shares that are presently valued in the market at $1.2 million.

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MARKETS

Tin

LME tin prices increased 37% from US$19,300/t in late July to US$26,400/t in late October. The price increase reflects a 22% reduction in LME stocks to 12,600 tonnes following a short‐fall in tin production from Indonesia. Structural change in the Indonesian tin industry is likely to see further reductions in supply, sustained tight conditions for the tin market and higher prices.

Stellar’s tin project is potentially well placed to meet some of the supply shortfall.

Iron Ore

Spot prices for 62% iron ore delivered to China have increased marginally over the quarter from US$130/t in late July to US$148/t in late October. However, the outlook is for prices to remain at current levels, as Chinese steel production remains constrained by energy conservation measures imposed by the central government.

Uranium

The uranium spot price has risen from US$43.50/lb to US$48.25/lb over the last quarter despite increased production from Kazakhstan. According to Macquarie Research, an increase in Chinese imports to build stocks ahead of nuclear reactor commissioning and spot purchases by ERA to cover a production shortfall are the main factors supporting the price increase. Chinese purchases are expected to remain high for the remainder of the year.

The drill and exploration results reported herein, insofar as they relate to mineralisation, are based on information compiled by Mr R K Hazeldene (Member of the Australasian Institute of Mining and Metallurgy and Member of the Australian Institute of Geoscientists) who is a Consultant of the Company. Mr Hazeldene 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 Hazeldene 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

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, 1/6/2010.

Name of entity

STELLAR RESOURCES LIMITED

ABN

Quarter ended (“current quarter”)

96 108 758 961 30 September 2010

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 Income taxes paid 1.7 Other – GST (paid)/recovered Net Operating Cash Flows	Current quarter $A’000	Year to date (3 months) $A’000
	– (467) – – (47) – 27 – – 22	– (467) – – (47) – 27 – – 22
	(465)	(465)
Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects (b) equity investments (c) other fixed assets 1.9 Proceeds from sale/deposit 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: Proceeds from release of security deposits on prospects Net investing cash flows 1.13 Total operating and investing cash flows (carried forward)	– – – 250 – – – – 52	– – – 250 – – – – 52
	302	302
	(163)	(163)

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Appendix 5B Mining exploration entity quarterly report

1.13 Total operating and investing cash flows (brought forward)	(163)	(163)
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 Net financing cash flows	– – – – – –	– – – – – –
	–	–
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	(163) 1,934 –	(163) 1,934 –
	1,771	1,771

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
		44
		–
1.25	Explanation necessary for an understanding of the transactions
	Directors fees and remuneration $35k; rent/office support, Melbourne, paid to Mineral Deposits Limited $9k

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 4.3 Production 4.4 Administration	$A’000
	450
	–
	–
	120
Total	570

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	71	47
	1,700	1,887
	–	–
	–	–
Total: cash at end of quarter(item 1.22)	1,771	1,934

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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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
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 Exec & Employees Exec & Employees 7.8 Issued during quarter 7.9 Exercised during quarter 7.10 Expired/cancelled during quarter	– 1,075,000 500,000	– Nil Nil	Exercise Price – 30 cents 25 cents	Expiry Date – 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.

Sign here: ............................................................ Date: 20 October 2010 (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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Appendix 5B Mining exploration entity quarterly report

Attachment A

Changes in interests in mining tenements

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 4525	Exploration Licence Robin Rise, SA, tenement sold, transfer pending	100%	Nil
	EL 3655 EL 4573 ELA 2009/00339 EL 4570	Exploration Licence Kingoonya, SA, transfer completed Exploration Licence Stony Top Hill (Lake Gairdner), SA, application granted Exploration Licence Application Lake Woorong, SA, application pending Exploration Licence Warrior, SA renewal granted (previously EL 3372)	Nil Nil Nil 100%	100% 100% Nil 100%

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