STELLAR RESOURCES LIMITED — Interim / Quarterly Report 2015

Apr 27, 2015

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28 April 2015

Report for the quarter ended 31 March 2015

Highlights

As at 31 March 2015

Market cap: A$10.8m (3.6c) Cash (31 Mar): A$2.7m Shares: 300,227,775

• WorleyParsons metallurgical optimisation study increased global recoveries by 4.5% to 72.8%

• Results increased the Heemskirk PFS valuation by 34.2% to A$82.3m

• Heemskirk pre-development work progresses with the receipt of the EPA guidelines for its Development Proposal and Environmental Management Plan

Main Shareholders

European Investors 26.0% Capetown SA 20.8% Resource Capital Fund 12.0%

• Expansion of the Heemskirk project footprint with two additional tenements successfully granted ; EL 6/2014 to test the southern extension of Heemskirk geology, and ML 2M/2014 secured over tailings dam site

Corporate

Board & Management Phillip G Harman Non-Executive Chairman

Peter G Blight Managing Director

Miguel Lopez de Letona Non-Executive Director

Markus Elsasser Non-Executive Director

Thomas H Whiting Non-Executive Director Christina R Kemp Company Secretary

• Cash balance of A$2.7m as at 31 March 2015

• March quarter total cash expenditure of A$520,000

• Cash rebate received from the Australian Taxation Office of A$241,824 under the Research and Development tax incentive

Targets for June Quarter 2015

• Ongoing review of PFS capital and operating costs

• Finalisation of Teale & Associates geological study

• Review of the geological study to confirm DFS drilling priorities

• Completion of St Dizier scoping study

ASX Code: SRZ

ABN 96 108 758 961 Level 17, 530 Collins Street Melbourne Victoria 3000 Australia

Telephone +61 3 9618 2540 Facsimile +61 3 9649 7200

Managing Director Peter Blight said: “ This has been a very productive quarter in progressing Heemskirk towards DFS. Our metallurgical optimisation study, produced by WorleyParsons, increased our global recoveries by 4.5% and most importantly our PFS valuation by 34.2% to A$82.3m. This is a significant milestone and measures up against the neighbouring Renison Bell (Metals X) tin processing plant when it was in its prime. Our clear focus for the June quarter is to announce and review our geological optimisation study and confirm our DFS drilling priorities.”

www.stellarresources.com.au

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HEEMSKIRK TIN PROJECT (100% Owned)

Overview

The Heemskirk Project is the highest grade undeveloped tin project on the ASX. It is a world-class development project located in Tasmania, Australia with ample infrastructure and close to Metals X’s Renison Bell tin operation. It was named as 1 of only 7 global tin projects (out of 157 known tin projects globally) that BGR Germany estimate will commence production by 2020.

Stellar Resources Limited (ASX: SRZ, “Stellar” or the “Company”) is the 100% owner of the Heemskirk Project which has a JORC Resource of 6.3Mt at 1.14% Sn.

Stellar released its Preliminary Feasibility Study (“PFS”) for the Heemskirk Project in July 2013. The PFS has since been optimised by WorleyParsons through its metallurgical study released 24 March 2015 (refer to the Stellar announcement “ Metallurgy optimisation upgrades Heemskirk NPV ”). The optimisation study provided significant gains particularly with regard to metallurgical results for the Severn deposit which lifted tin recovery by 7.4% and the PFS valuation by 34.2% to A$82.4m.

WorleyParsons metallurgy optimisation upgrades Heemskirk PFS valuation

The program was conducted in conjunction with ALS Metallurgical in Burnie and delivered extremely positive results for the Heemskirk Project which add significant value to the development economics.

Increasing Severn tin recovery by 7.4% to 79.5% (refer to Table 1) increased the PFS valuation by 34.2% to A$82.3m. Further gains are likely as Stellar applies the findings from the Severn optimisation study to the other deposits at the Heemskirk project. In addition, forecast annual tin production increased by 4.5% to 4,520t which greatly enhances the project’s leverage to rising tin prices.

Table 1: Severn tin recovery comparison

Process	PFS1	Optimisation2
Head grade (HG): % Sn	1.06	1.00
Gravity: % HG Sn	63.9	69.1
Flotation: % HG Sn	8.5	10.4
Total Sn recovered: %	72.4	79.5

Notes:

1 PFS completed in July 2013

2 Optimisation of PFS flow sheet completed in March 2015

Key advances from the metallurgical optimisation include:

• Elimination of heavy media separation and coarsening the grind size

• Increased tin recovery through the lower cost gravity circuit from 63.9% to 69.1%

• Reduction of tin losses in the sulphide float circuit from 10.1% to 2.6%

• Improved recovery and added to the performance of the gravity circuit

• Optimisation of the tin float circuit

• Increased tin recovery in this circuit from 8.5% to 10.4% and improved the quality of the tin float concentrate

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Optimising the net smelter return has meant a reduction in concentrate grade from 48% to 45% tin but with improved concentrate quality. Major and trace element analysis shows that all elements are within smelter tolerance limits and penalty elements are low.

The benchmark for the Severn results is the Renison Bell tin mine and its processing plant which has operated since 1966. The most appropriate period for comparison is 1979 to 1989 as Renison was processing ore of similar grade to Severn, was only 13 years old and had a much larger gravity circuit than it does today. As Figure 1 shows, Severn compares extremely well with Renison - its higher recovery reflects optimum laboratory conditions against a processing plant that did not have the process controls and technology that are available today.

Figure 1: Severn grade and recovery compared to Renison Bell (1979-1989)

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

Recovery (%) Grade (%)
100 1.5
80 1.2
60 0.9
40 0.6
20 0.3
- -
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989
Renison recovery (%) LHS Severn recovery (%) LHS
Renison grade (%) RHS Severn grade (%) RHS
----- End of picture text -----

Geological Review

The geological review is continuing and has extended beyond the March quarter to accommodate structural re-logging of additional drill holes from outside of the Severn deposit and re-interpretation of surface mapping.

During the March quarter, microscope work classified a number of mineralised structures and mineral associations. Work is now moving on to the order of ore forming events (paragenesis) which will combine with earlier work on structure to identify drill targets for potential extensions of mineralisation and higher grade.

New Tenement EL6/2014

The granting of a new tenement to the south of the Heemskirk Tin project RL5/1997 during the quarter allows Stellar to apply the findings of its geology review to a new area that is prospective for tin. As Figure 2 shows, the attractions of EL6/2014 when compared to Heemskirk are:

• The large volume of highly deformed Oonah shales, quartzites and dolomites - Host rocks for tin at Heemskirk

• Major north-west trending faults that are mineralised with lead, silver and zinc

• The presence of a large magnetic target within the Stonehenge “tin target zone”

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Figure 2: Geology plan of Heemskirk RL5/1997 and new Stonehenge EL6/2014

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EPA Guidelines

In response to a Notice of Intent (NOI) for the Heemskirk Project, the Tasmanian Environment Protection Authority (EPA) has replied with guidelines for the preparation of a Development Proposal and Environmental Management Plan (DPEMP). Importantly, no new potential impacts were identified in the guidelines beyond those contained in the Company’s NOI. Stellar plans to work through a program of impact assessments over the course of 2015.

Tailings Dam

Stellar was recently awarded Mining Lease 2M/2014 over a 278 hectare area covering the preferred tailings dam site for the Heemskirk Project. The site occurs on crown land to the east of Zeehan where there is no competing land use and ridges form a natural containment area.

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Preliminary geological assessment of the site by Baynes Geologic concluded that it presented a suitable area for tailings storage with “no fatal flaws of a geological nature”. Access to the site was recently completed to enable water sampling and monitoring and flora and fauna surveys.

The site should provide life of mine tailings storage with only moderate earth works required to form the containment area. Detailed engineering studies of the site will be undertaken during the DFS.

St Dizier

Metallurgical test work is continuing and was delayed by the need to complete the Severn work first. The initial work program assumed that the moderate level of sulphides present in ore would not require a primary sulphide float. However, subsequent testing of the tin float circuit showed the initial assumption to be wrong and highlighted the need to reduce sulphide levels in the tin float feed. As a result the work program has continued into the June quarter.

EXPLORATION

Tin EL1/2004 Ramsay (TAS) (Stellar 100%)

Soil sampling during the quarter has largely closed off a zone that is 600m in length and 300m wide along the northern edge of the Meredith Granite. The red squares in Figure 3 show the distribution of tin in soil assays above 300ppm within the target zone. Several of these samples have assays in excess of 1,000ppm suggesting potential for shallow mineralisation.

The zone of interest is largely underlain by quartz-tourmaline altered granite porphyry. The porphyry is surrounded by un-mineralised fine grained hornfelsed sediments and volcano-clastics to the north, east and west and unaltered Meredith Granite to the south.

Geological interpretation suggests that the mineralised zone is a greisenised cupola at the top of a granite stock. The low-sulphur mineralising fluids appear to have been confined to the cupola by the impervious nature of the surrounding sediments (see Figure 3).

The next stage of work will consider the best way to drill test the tin in soil zone and the timing of such a test.

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Figure 3: Ramsay prospect geological interpretation and tin in soil assays

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Copper/Gold

EL’s 5125 and 5126 (SA) (Stellar 100%)

Stellar is seeking a joint venture partner to explore the iron oxide copper gold potential of these central Gawler Range tenements. Four targets have been identified with only one partly drilled to date.

Uranium

EL 5426 Midgee (SA) (Stellar 100%)

UraniumSA Limited has the right to earn a 73% interest in 40% of the tenement by identifying a JORC compliant resource. No exploration was undertaken during the quarter due to an outstanding land access issue.

EL 5307 Cowell (SA) (Stellar 100%)

This tenement is prospective for sedimentary uranium, copper-gold and graphite. No exploration was conducted during the period.

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CORPORATE

Cash Position

As at 31 March 2015, Stellar Resources held cash and term deposits of A$2.7m. Expenditure during the quarter was maintained at A$520,000.

R&D Tax Incentive Scheme

Stellar received A$241,824 (after interest but before costs) from the Australian Taxation Office in respect to an R&D Tax Incentive Claim for the 2013/14 financial year.

The funds were applied to working capital and covered close to 50% of expenditure during the quarter.

TIN MARKET

The tin price has come under steady selling pressure during the quarter, declining from US$19,500/t to a low of US$14,765/t on 17 April 2015.

• Excess Chinese imports of unprocessed tin from Myanmar causing a short term market imbalance

• Imports from Myanmar expected to peak in 2015

• China’s tin market imbalance to correct as concentrate imports peak and demand recovers

• LME stocks edge lower indicating no significant imbalance outside of China (refer Figure 4)

Figure 4: London Metal Exchange tin spot price and stocks

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Figure 5: Indonesian refined tin exports – monthly from March 2014 to March 2015

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• At the current spot tin price, 50% of the industry is not making a return on investment and 25% is losing money

• A strong supply-side response has emerged

• Indonesia accounts for 25% of global production and is the first country to respond so far with the largest independent smelter Refined Banka Tin announcing an immediate reduction in smelter output

• State owned PT Timah is also planning to reduce exports

• Impact of these actions should be apparent in the May and June monthly export numbers (refer to Figure 5)

TENEMENT REGISTER

Project	Licence Number	Tenement	Location	Interest held (%)
Heemskirk Tin	RL5/1997 Zeehan Tasmania 100% EL46/2003 Heemskirk Tasmania 100% ML2M/2014 Tailings Dam Tasmania 100%
Exploration Tin Uranium Iron Ore Copper/Gold	EL1/2004 Ramsay River Tasmania 100% EL6/2014 Stonehenge Tasmania 100%
	EL5307 Cowell South Australia 100% EL4242 Midgee South Australia 100%1
	EL5355 Tarcoola South Australia 100%
	EL40/2010 Heazlewood Hill Tasmania 100% EL4882 Kingoonya South Australia 100% EL5125 Cleanskin Swamp South Australia 100% EL5126 LongCreek South Australia 100%

Note:

• 1 JV with UraniumSA Limited earning 73% in uranium interest

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MINERAL RESOURCE STATEMENTS

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Competent Person Statement

The information in this report that relates to Exploration Results is compiled by Mr R K Hazeldene who is a Member of the Australasian Institute of Mining and Metallurgy and a Member of the Australian Institute of Geoscientists and 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 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code, 2012 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 in this report.

The information in this report that relates to Heemskirk Tin Mineral Resources was last reported on 24[th] July 2013 in an ASX release titled “Pre-feasibility Study Advances Heemskirk Tin”. The information was prepared in accordance with the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ by Tim Callaghan of Resource and Exploration Geology. The information in this report that relates to the St Dizier Mineral Resource was announced on 12 March 2014 in an ASX release titled “Heemskirk Tin Project: New Open Pittable Resource at St Dizier”. The information was prepared in accordance with the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ (JORC Code) by Tim Callaghan of Resource and Exploration Geology. Tim Callaghan is a Member of The Australasian Institute of Mining and Metallurgy (“AusIMM”), has a minimum of five years experience in the estimation and assessment and evaluation of Mineral Resources of this style and is the Competent Person as defined in the JORC Code. This report accurately summarises and fairly reports his estimations and he has consented to the resource report in the form and context in which it appears.

Stellar Resources confirms that it is not aware of any new information or data that materially affects the information included in the Mineral Resource estimates reported on 24[th] July 2013 and 12 March 2014, Stellar confirms that all material assumptions and technical parameters underpinning the estimates continue to apply and have not materially changed. In addition, Stellar Resources confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified.

Forward Looking Statements

This report contains a number of forward looking statements with respect to the company’s plans for mineral development. Known and unknown risks and uncertainties and factors outside of the company’s control may cause the actual results, performance and achievements of the company to differ materially from those expressed or implied in this report. To the maximum extent permitted by law and stock exchange rules, the company does not warrant the accuracy, currency or completeness of the information in this report, nor the future performance of the company and will not be responsible for any loss or damage arising from use of the information.

For further details please contact:

Peter Blight Managing Director Tel: 03 9618 2540 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 and oil and gas exploration entity quarterly report

Rule 5.5

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10, 01/05/2013

Name of entity

STELLAR RESOURCES LIMITED

ABN 96 108 758 961	Quarter ended (“current quarter”)
96 108 758 961	31 March 2015

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 & evaluation (b) development (c) production (d) administration (e) goods & services tax 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 – R & D concessional tax refund NetOperating Cash Flows	Current quarter $A’000	Year to date (9 months) $A’000
	– (471) – – (67) 31 – 28 – – 240	– (1,368) – – (492) 113 – 89 – – 240
	(239)	(1,418)
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 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 (provide details if material) Net investing cash flows 1.13 Total operating and investing cash flows (carried forward)	– – (2) – – – – – (9)	– – (2) – – – – – (10)
	(11)	(12)
	(250)	(1,430)

• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

1.13 Total operating and investing cash flows (brought forward)	(250)	(1,430)
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 (provide details if material) 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 ofquarter	(250) 3,000 –	(1,430) 4,180 –
	2,750	2,750

Payments to directors of the entity, associates of the directors, 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
		110
		–
1.25	Explanation necessaryfor an understandingof the transactions
	Directors fees and remuneration $96k; rent & outgoings, Melbourne, paid to $14k	Mineral Deposits Limited

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.

Appendix 5B Page 2

01/05/2013

Appendix 5B Mining exploration entity and oil and gas 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
	514
	–
	–
	136
Total	650

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 (provide details)	210	120
	2,540	2,880
	–	–
	–	–
Total: cash at end of quarter(item 1.22)	2,750	3,000

Changes in interests in mining tenements and petroleum tenements

Tenement reference and location	Nature of interest (note (2))	Interest at beginning ofquarter	Interest at end of quarter
EL4389	Exploration Licence Hicks Hill, SA lapsed.	100%	0%
ML2M/2014	Mining Lease Zeehan, Tasmania granted.	0%	100%

• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity and oil and gas 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	300,227,775	300,227,775
7.5 +Convertible debt securities (description) 7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted
7.7 Options 7.8 Issued during quarter 7.9 Exercised during quarter 7.10 Expired during quarter	25,000,000 17,500,000	Nil Nil	Exercise Price 8 cents Various Prices	Expiry Date SRZAI 26/02/2017 SRZAA 20/11/2019
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 and oil and gas 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 Act or other standards acceptable to ASX (see note 5).

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

Sign here: ............................................................ Date: 27 April 2015 (Company secretary)

Print name: Christina R Kemp

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 and petroleum 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 or petroleum 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: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report.

• 5 Accounting Standards ASX will accept, for example, the use of International Financial Reporting 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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