STELLAR RESOURCES LIMITED — Interim / Quarterly Report 2016

Apr 28, 2016

Stellar Resources (SRZ) is an exploration and development company with assets in Tasmania and South Australia. The company is rapidly advancing its high-grade Heemskirk Tin Project, located near Zeehan in Tasmania, and plans to become Australia's second largest producer of tin.

As at 31 Mar 2016

Market cap: A$6.3m (2.1c) Cash (31 Mar): $1.7 million Shares: 300,227,775

Main Shareholders

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

Board & Management Phillip G Harman Non-Executive Chairman Peter G Blight Managing Director Miguel Lopez de Letona Non-Executive Director Thomas H Whiting Non-Executive Director Christina R Kemp

ASX Code: SRZ

Company Secretary

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

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

www.stellarresources.com.au

29 April 2016

Report for the quarter ended 31 March 2016

Highlights

• Heemskirk Tin Fast Start Scoping Study underway contractors appointed
• DPEMP flora and fauna environmental studies completed over planned mine site
• 33% tin price rally since mid-January 2016

Corporate

• Cash balance of A$1.7m as at 31 March 2016
• Office rental and employee costs reduced in March 2016
• March quarter expenditure of A$153,129
• Investments in UraniumSA Limited (ASX:USA) and Renascor Resources Limited (ASX:RNU) to benefit from their positive announcements

Targets for June Quarter 2016

• Complete Fast Start Scoping Study
• Advance Fast Start processing options
• Progress DPEMP environmental studies

Managing Director Peter Blight said: "It is pleasing to see that the environment for new tin mine development has markedly improved with a 33% increase in the LME tin price since its mid-January low. Stellar is positioning the Heemskirk tin project to take advantage of the tin price recovery by undertaking a Fast Start Scoping Study. Quicker access into the high-grade Lower Queen Hill deposit could provide low cost entry to the tin market for Stellar and serve as a stepping stone for development of the much larger Severn resource."

Overview

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% tin (see Mineral Resource Statement for detail). The Heemskirk Project is the highest grade undeveloped tin project listed on the ASX.

Heemskirk is a world class tin project located near Zeehan in the prolific mining district of northwest Tasmania (see Figure 1). It is located within 18 kilometres of Australia's oldest and largest tin mine Rension Bell and has access to excellent infrastructure. 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.

Figure 1: Location of Heemskirk tin project relative to other mines, northwest Tasmania

In September 2015, Stellar completed a cost review of the Heemskirk tin project resulting in an optimised preliminary feasibility study (OPFS) that delivered a 62% increase in value and a 13% reduction of pre-production capital expenditure to A$110.3m.

The success of the OPFS also showed that there may be lower capital cost and lower development risk options to the base case which sought to maximise underground mine production at 600,000tpa. In December 2015 quarter, it was decided to embark on a Fast Start Scoping Study to consider these options. The study was progressed in the March quarter 2016 with the appointment of consultants to complete specific aspects of the study.

Long lead environmental studies in support of a Development Proposal and Environmental Management Plan (DPEMP) included a flora and fauna survey in the proposed mine area during the quarter.

Fast Start Scoping Study

The aim of the Fast Start Scoping Study is to determine the economics of developing the Lower Queen Hill deposit as the first step in a staged development of the entire Heemskirk tin project. The benefits of a staged approach relative to the OPFS outcome proposed in 2015 include:

• Significant reduction in time and cost of a DFS
• Significantly lower capital cost
• Reduced processing risk
• Faster access to ore production
• Greater flexibility in meeting the tin price cycle
• Self-funding drill-out of the Severn deposit from underground

Lower Queen Hill was chosen over the other deposits as the target for a Fast Start Scoping Study because:

• It is the closest deposit to the preferred portal location
• It is largely drilled to Indicated Resource status and would require little additional drilling to generate an ore reserve
• It is higher grade (1.36% versus 1.19% tin) and larger in size (1.09mt versus 0.51mt) than Upper Queen Hill (see Table 1)
• Cassiterite grain size is coarser and metallurgical recovery should be better than Upper Queen Hill

Queen Hill	Tonnes	Sn	Contained Sn	Cu	Pb	Zn	Ag
	millions	%	tonnes	%	%	%	ppm
Upper (above 1100m RL)	0.51	1.19	6,056	0.10	1.20	0.77	46
Lower (below 1100m RL)	1.09	1.36	14,824	0.03	0.16	0.17	7
Total Queen Hill	1.60	1.31	20,880	0.06	0.50	0.36	19
Indicated	1.41	1.26	17,790
Inferred	0.19	1.63	3,090
Total Queen Hill1.601.3120,880
1. estimates prepared in accordance with 2004 edition of JORC Code

Table 1: Upper and Lower Queen Hill Mineral Resource

1. block cut-off grade of 0.6% tin

2. tonnes rounded to reflect uncertainty of estimate

3. estimates prepared by Resource and Exploration Geology

The Fast Start Scoping Study is based on an annual run of mine production rate of 200,000 tpa for the first 5 years of operation from Lower Queen Hill (see Figure 2). Drilling and development of the Severn deposit during this time will determine whether the mine continues to operate at the 200,000 tpa rate for another 16 years or whether it should be scaled up to a higher production rate.

Figure 2: Lower Queen Hill mine layout and surface infrastructure

Contractors have been engaged to undertake scoping work on the mine plan, surface infrastructure, flow sheet, equipment sizing, procurement, construction cost and operating cost estimates. The recent sourcing of input prices for the OPFS should be an advantage for the Fast Start Scoping Study.

In addition to the aims identified earlier, the study will focus on opportunities to identify lower cost and more productive mining methods and an ore production schedule that maximizes higher grade production in the early years. Modularisation of the processing plant should provide cost advantages and preserve expansion opportunities.

Environmental Studies

During the quarter, follow-up flora and fauna survey work focused on the area to be disturbed by Stellar's proposed mining activities on the northwest side of Queen Hill. This work identified no evidence of endangered flora and fauna in the area. Remote sensing of fauna activity is now underway.

EXPLORATION

Tin

EL6/2014 Stonehenge (TAS) (Stellar 100%)

The Stonehenge EL lies immediately to the south of the Heemskirk deposits and contains similar geology and structure. A review of historical diamond drilling records show that low grade tin mineralisation along with lead and zinc was intersected in narrow veins associated with faults near the Spray mine on the northeast edge of the licence. The veins occur in Oonah formation sediments and appear to be distal from the main mineralising system.

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

Soil sampling has closed off a 600m by 300m zone containing tin in soil assays in excess of 300ppm. The tin in soil target occurs over a quartz-tourmaline altered granite porphyry which occurs on the northern edge of the Meredith Granite. Stellar is looking for a joint venture partner to drill this prospect.

Copper/Gold

EL 5125 Cleanskin Swamp and EL 5126 long Creek (SA) (Stellar 100%)

Stellar is seeking a joint venture partner to explore the iron sulphide 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 uranium resource. No exploration was undertaken during the quarter.

EL 5307 Cowell (SA) (Stellar 100%)

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

CORPORATE

Cash Position

As at 31 March 2016, Stellar Resources held cash and term deposits of A$1.7 million. Expenditure during the quarter was $153,129.

Cost Management

Further reductions in office rent and employee costs were implemented in early March 2016. This recent round of cost reductions means that cash resources can fund the Company's activities throughout 2016.

UraniumSA Limited

Stellar holds 3,888,238 shares in UraniumSA Limited (ASX: USA). USA announced a corporate restructuring that will preserve its uranium assets in an unlisted public company, Samphire Uranium Limited, and allow the listed entity, UraniumSA Limited, to pursue other business opportunities outside of uranium exploration. Subject to USA shareholder approval and post-restructuring, Stellar will hold the same number of USA shares and receive a pro-rata in-specie distribution of shares in Samphire Uranium Limited.

Renascor Resources Limited

Stellar holds 1,500,000 sharesin Renascor Resources Limited (ASX: RNU). During the quarter, Renascor announced a maiden JORC-compliant Mineral Resource for its Siviour graphite deposit. Siviour is part of the company's Arno Graphite Project on thje east coast of South Australia's Eyre Peninsula. The Indicated and Inferred Mineral Resource is 16.4Mt at 7.8% TGC with a high-grade zone of 5.9Mt at 10.0% TGC. Renascor believes that its resource is the largest identified in Australia. Other positive attributes of Siviour are that it is a flat-lying, easy digging situation with coarse graphite flake size.

TIN MARKET

The tin price has rallied by 33% from an 18 January 2016 low of US$13,250/t to 24 March 2016 high of US$17,625/t – it has since settled at US$17,100/t. The International Tin Research Institute (ITRI) believes that a number of announcements relating to the curtailment of tin production by several producers are the reason for the price recovery in 2016.

• In January 2016, China's tin smelters announced a 12% reduction in annual production
• Minsur also indicated in January 2016 that production from its San Rafael mine, the largest underground tin mine in the world, was down 15% in 2015
• LME tin stocks remain at a 6 year low at 4,810 tonnes (see Figure 3)
• Indonesia exported 6,991 tonnes of refined tin in the first two months of 2016, a 45% reduction on year ago levels (refer Figure 4)
• Indonesia's second largest tin smelter announced plans to close production
• Imports of tin ore and concentrates from Myanmar into China plummeted in February 2016 to 8,641 tonnes from 72,436 tonnes in January 2016 (refer Figure 5)
• ITRI are also expecting strong growth in new uses of tin particularly in the energy related sector – with use in lead-acid batteries being the best example to date

More news on tin industry announcements and ITRI's latest presentation on the growth potential for tin consumption in energy applications can be found on Stellar's home page. www.stellarresources.com.au.

Figure 3: London Metal Exchange tin spot price and stocks - daily

Figure 4: Indonesian refined tin exports – monthly

Figure 5: Chinese imports of tin ore and concentrates – monthly

TENEMENT REGISTER

Project	Licence Number	Tenement	Location	Interest held (%)
Heemskirk Tin	RL5/1997ML 2M/2014	ZeehanTailings Dam	TasmaniaTasmania	100%100%
	EL46/2003	Heemskirk	Tasmania	100%
Exploration
Tin	EL1/2004	Ramsay River	Tasmania	100%
	EL6/2014	Stonehenge	Tasmania	100%
Uranium	EL5307	Cowell	South Australia	100%
	EL5426	Midgee	South Australia	100%1
Copper/Gold	EL5125	Cleanskin Swamp	South Australia	100%
	EL5126	Long Creek	South Australia	100%

1 JV with UraniumSA Limited earning 73% in uranium interest

MINERAL RESOURCE STATEMENTS

Heemskirk Mineral Resource

Classification	Deposit	Tonnes	Grade	Contained Tin
		millions	% tin	tonnes
Indicated	All	1.41	1.26	17,790
Inferred	All	4.87	1.10	53,710
Total		6.28	1.14	71,500
Indicated	Queen Hill	1.41	1.26	17,790
Inferred	Queen Hill	0.19	1.63	3,090
	Severn	4.17	0.98	40,900
	Montana	0.51	1.91	9,710
Total		6.28	1.14	71,500

1. block cut-off grade of 0.6% tin

2. tonnes rounded to reflect uncertainty of estimate

3. estimates prepared by Resource and Exploration Geology

St Dizier Mineral Resource

Classification	Deposit	Tonnes	Grade		Contained Tin
		millions	% tin	% iron	tonnes
Indicated	St Dizier	1.20	0.69	23.70	8,280
Inferred	St Dizier	1.06	0.52	22.22	5,512
Total Resource		2.26	0.61	23.00	13,792

1. block cut-off grade of 0.3% Sn

2. tonnes rounded to reflect uncertainty of estimate

3. estimate prepared by Resource and Exploration Geology

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 24th 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 24th 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

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

Current quarter

ABN Quarter ended ("current quarter")

96 108 758 961 31 March 2016

Year to date

Consolidated statement of cash flows

	Cash flows related to operating activities		(9 months)
		$A'000	$A'000
1.1	Receipts from product sales and related debtors	–	–
1.2	Payments for(a) exploration & evaluation	(73)	(534)
	(b) development	–	–
	(c) production	–	–
	(d) administration	(99)	(389)
	(e) goods & services tax	6	48
1.3	Dividends received	–	–
1.4	Interest and other items of a similar nature	13	45
	received
1.5	Interest and other costs of finance paid	–	–
1.6	Income taxes paid	–	–
1.7	Other – R & D concessional tax refund	–	353
	Net Operating Cash Flows	(153)	(477)
	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)	(153)	(477)

Rule 5.5

+ See chapter 19 for defined terms.

Total operating and investing cash flows (brought
forward)	(153)	(477)
Cash flows related to financing activities
Proceeds from issues of shares, options, etc.	–	–
Proceeds from sale of forfeited shares	–	–
Proceeds from borrowings	–	–
Repayment of borrowings	–	–
Dividends paid	–	–
Other (provide details if material)	–	–
Net financing cash flows	–	–
Net increase (decrease) in cash held	(153)	(477)
		2,217
		–
		1,740
	Cash at beginning of quarter/year to dateExchange rate adjustments to item 1.20Cash at end of quarter	1,893–1,740

Payments to directors of the entity, associates of the directors, related entities of the entity and associates of the related entities

		Current quarter$A'000
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 $51k; rent & outgoings, Melbourne, paid to Mineral Deposits Limited $8k

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.

Financing facilities available

Add notes as necessary for an understanding of the position.

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

Estimated cash outflows for next quarter

		$A'000
4.1	Exploration and evaluation	140
4.2	Development	–
4.3	Production	–
4.4	Administration	75
	Total	215

Reconciliation of cash

Reconciliation of cash at the end of the quarter (as shownin the consolidated statement of cash flows) to the relateditems in the accounts is as follows.		Current quarter$A'000	Previous quarter$A'000
5.1	Cash on hand and at bank	60	103
5.2	Deposits at call	1,680	1,790
5.3	Bank overdraft	–	–
5.4	Other (provide details)	–	–
	Total: cash at end of quarter (item 1.22)	1,740	1,893

Changes in interests in mining tenements and petroleum tenements

		Tenementreferenceand location	Nature of interest(note (2))	Interest atbeginningof quarter	Interestat end ofquarter
6.1	Interests in miningtenements andpetroleum tenementsrelinquished, reducedor lapsed	–	–	–	–
6.2	Interests in miningtenements andpetroleum tenementsacquired or increased	–	–	–	–

+ See chapter 19 for defined terms.

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	Amount paid up per
				security (see note	security (see note 3)
				3) (cents)	(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	300,227,775	300,227,775
7.4	Changes during
	quarter
	(a) Increases
	through issues
	(b) Decreases
	through returns
	of capital, buy
	backs
7.5	+Convertible
	debt securities
	(description)
7.6	Changes during
	quarter
	(a) Increases
	through issues(b) Decreases
	through
	securities
	matured,
	converted
7.7	Options			Exercise Price	Expiry Date
		25,000,000	Nil	8 cents	SRZAI 26/02/2017
		17,500,000	Nil	Various Prices	SRZAA 20/11/2019
7.8	Issued during
	quarter
7.9	Exercised during
	quarter
7.10	Expired during
	quarter
7.11	Debentures
	(totals only)
7.12	Unsecured
	notes (totals
	only)

+ See chapter 19 for defined terms.

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: 28 April 2016

(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.