STELLAR RESOURCES LIMITED — Interim / Quarterly Report 2015

Jan 20, 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 December 2015

Market cap: A$5.1m (1.7c) Cash (30 June): $1.9 million Shares: 300,227,775

Main Shareholders

European Investors	25.6%
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 Markus Elsasser Non-Executive Director Thomas H Whiting Non-Executive Director Christina R Kemp Company Secretary

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

www.stellarresources.com.au

21 January 2016

Report for the quarter ended 31 December 2015

Highlights

• Drilling plan developed for Definitive Feasibility Study
• Flora and fauna survey completed over tailings dam site
• Scoping study for lower-cost staged start-up of Heemskirk Tin Project commenced

Corporate

• Cash balance of A$1.9m as at 31 December 2015
• December quarter expenditure of A$323,805
• Existing funds will cover activities through 2016

Targets for March Quarter 2016

• Progress DPEMP studies for tailings dam and mine sites
• Progress scoping study for staged start-up of Heemskirk Tin Project

Managing Director Peter Blight said: "Heemskirk tin is a project that continues to deliver valuation up-grades and remains in the top three potential new hard-rock tin mine developments in the world. Global tin mine supply is restructuring in response to the cyclical low in tin prices with high-cost mines closing. This natural evolution will provide the opportunity for new mine development once the demand cycle turns up. Stellar is preparing for this scenario by scoping opportunities for lower-cost, faster and staged start-up of Heemskirk tin in addition to prosecuting the optimised PFS plan."

Summary

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. The Heemskirk project is the highest grade undeveloped tin project on the ASX.

Heemskirk is a world class tin project located near Zeehan in the prolific mining district of northwest Tasmania. It is located within 18 kilometres of Australia's oldest and largest tin mine Rension Bell and has accessto 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.

Results of the optimised PFS, demonstrating a value uplift of 62% to A$99m, were summarised in the September Quarter report to the ASX (27 October 2015). The study assumed a reduced capital expenditure of A$110m to build a 600,000 tpa underground mine and processing plant.

In the December quarter, the focus has remained on the optimised PFS base case with a detailed drilling program planned to facilitate an upgrade of the Mineral Resource to an Ore Reserve. Many of the additional holes can be drilled from existing sites minimising environmental and social impacts.

In addition, a flora and fauna study was conducted over the tailings dam site within ML 2M/2014 as part of a number of surveys that will be undertaken in order to meet the guidelines for preparation of a Development Plan and Environmental Management Proposal.

Looking beyond the optimised PFS, scoping has begun on a plan for staged mine development starting with fast track development of the near-surface Lower Queen Hill deposit. Such a plan should reduce the time to first ore production, lower the pre-production capital requirement and by extending the decline allow infill drilling and geotech studies of the Severn deposit for a DFS.

DFS Drilling Program

Conversion of the Optimised 2013 PFS to a DFS requires an upgrade of the Heemskirk Inferred Mineral Resource to the Indicated Category. The upgrade would allow an Ore Reserve to be defined in accordance with the 2012 edition of the JORC Code. In addition, the program would provide an opportunity to test structural influences on tin grade distribution, particularly in the Severn deposit.

Resource and Exploration Geology has recommended a 55 diamond drill hole infill program amounting to 22,000m to achieve the upgrade. Severn, the largest of the three deposits, requires 15,000m of drilling and accounts for 68% of the total program (see Figure 1). Montana and Queen Hill each account for 16% of the drilling program.

As Figure 1 shows, many of the drill pads required for the drilling program are already in place from earlier programs minimising social and environmental impacts and the cost of access.

Figure 1: Plan of proposed drill holes for DFS

Tailings Storage Facility ("TFS")

A flora and fauna habitat field survey was completed over the TFS site during the quarter. There were no threatened flora species identified under the Threatened Species Protection Act of 1995 or the Commonwealth EPBC Act 1999. In addition, no species of threatened fauna or their habitats were observed during the survey. The next stage of work will require a more extensive survey of the tailings fill zone to confirm the absence of threatened fauna habitats or species.

Three small areas of threatened vegetation communities were identified near the access road to the TSF and around the dam wall site. The survey concluded that the vegetation communities are located in positions that will allow minimum impact during TSF construction and operation.

Fast-start scoping study

Considering the three Heemskirk tin deposits (Queen Hill, Montana and Severn), Queen Hill is the obvious target for a fast start study because it is the only deposit exposed at surface and located close to the preferred portal site. It is also largely drilled to Indicated Resource status and would require little additional drilling to generate an ore reserve.

Based on variations in chemistry and mineralogy, Queen Hill can be divided into two distinct sections, Upper and Lower. Lower has higher tin grade and lower copper, silver, lead and zinc grades than Upper (see Table 1). Cassiterite grain size is also coarser for the Lower deposit. At this stage the geological boundary between the two at the 1100m RL is thought to be gradational.

		Table 1: Upper and Lower Queen Hill Mineral Resource

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 Hill	1.60	1.31	20,880
1. estimates prepared in accordance with 2004 edition of JORC Code

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

Lower Queen Hill has been chosen for the fast start study because:

• at 1.36% tin it has higher grade than Upper Queen Hill (1.19% tin) (see Table 1);
• at 1.09mt it is considerably larger than Upper Queen Hill (0.51mt); and
• preliminary metallurgical results show better performance for Lower when compared with Upper Queen Hill.

Apart from providing fast start production from Lower Queen Hill, a decline could be extended to Severn for infill drilling and geotech work for a DFS and subsequent scale-up of the mine to full production capacity of 600,000 annual tonnes of ore.

Lower Queen Hill is comprised of two parallel bodies that plunge to the northeast and dip steeply to the east. These bodies have considerable lateral and vertical continuity and were block modelled and scheduled for long-hole open stoping in the 2013 PFS.

The scoping study will focus on Lower Queen Hill between 1100m RL and 950m RL (as shown in Figure 2), the limit of the Indicated Resource. However as Figure 3 demonstrates, the mineralisation continues at least 100m below the 950m RL providing an opportunity to explore for additional ore to extend mine life as mining progresses.

Figure 3: Queen Hill zoned deposit continues below 950m RL

160005SRL.docx

EXPLORATION

Tin

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

A review of historical workings on the licence shows that in most cases fault-related lead/zinc mineralisation was the target. Historical exploration has focused on similar targets and the potential of lead/zinc replacement mineralisation in Oonah Formation carbonates. Logging and sampling of selected historical diamond drill holes is required to fully assess the tin potential of the licence.

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 on the northern edge of the tin bearing Meredith Granite. The target zone lies equidistant between the historical Cleveland and Mt Bischoff tin mines and has had no previous drilling. Stellar has designed two relatively shallow diamond drill holes to test this target.

Copper/Gold

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

Stellar has identified four gravity targets adjacent to magnetic highs that are considered prospective for IOCGU mineralisation. All four targets occur below shallow cover sediments (50m to 100m thickness). Reconnaissance drilling on one of the four targets identified prospective geology without explaining the source of the gravity target. The other three targets remain undrilled.

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%)

The eastern portion of the licence is prospective for IOCGU mineralisation where Hiltaba Granite equivalents intrude Proterozoic metasediments. The presence of uranium in the overlying Tertiary sands is both an indicator of mineralisation in the basement rocks and an exploration target in its own right. The northwest portion of the licence covers Proterozoic metasediments that contain untested graphite exploration targets. The EM targets are along-strike from Archer Exploration's neighbouring Wiklow graphite occurrence.

CORPORATE

Cash Position

As at 31 December 2015, Stellar Resources held cash and term deposits of A$1.9 million.

Expenditure during the quarter was $323,805 following the implementation of cost containment measures in mid-2015. The company remains focused on cost control and expects to sustain its work program for 2016 from its current cash resources.

TIN MARKET

The tin price has followed other metal prices down in recent weeks in response to poor demand indicators from China. The London Metal Exchange spot price for tin is US$13,370/t, its lowest level since early 2009, and is now below cash breakeven cost for 40% of global tin mine production (according to ITRI cost curve analysis). The industry is adjusting to the price decline by cost cutting, closing high cost production, and minimising re-investment. These actions should support a tin price recovery once stronger demand growth emerges.

• LME tin stocks have risen 1,500t over the quarter but remain low compared to historical levels at 6,155t (see Figure 4)
• Indonesia, the world's largest tin exporter, reduced exports by 7.6% to 70,155 tonnes in 2015, the third consecutive year of decline (refer Figure 5)
• China's imports of tin concentrates (98% from Myanmar) increased by 61% to 247,503 tonnes (37,125 tonnes of tin) in the 11 months to November 2015 (refer Figure 6)
• China's domestic tin production declined during 2015 with the closure of several small mines. Many Chinese smelters are now dependent on imports of ore from Myanmar
• China's tin fabricators are carrying low stock levels moving into a seasonally stronger period.

Figure 5: Indonesian refined tin exports – monthly

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%

TENEMENT REGISTER

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 December 2015

Year to date

Consolidated statement of cash flows

	Cash flows related to operating activities		(6 months)
		$A'000	$A'000
1.1	Receipts from product sales and related debtors	–	–
1.2	Payments for(a) exploration & evaluation	(219)	(461)
	(b) development	–	–
	(c) production	–	–
	(d) administration	(97)	(290)
	(e) goods & services tax	16	42
1.3	Dividends received	–	–
1.4	Interest and other items of a similar nature	13	32
	received
1.5	Interest and other costs of finance paid	–	–
1.6	Income taxes paid	–	–
1.7	Other – R & D concessional tax refund	353	353
	Net Operating Cash Flows	66	(324)
	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)	66	(324)

Rule 5.5

+ See chapter 19 for defined terms.

1.13	Total operating and investing cash flows (brought
	forward)	66	(324)
	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	66	(324)
1.20	Cash at beginning of quarter/year to date	1,827	2,217
1.21	Exchange rate adjustments to item 1.20	–	–
1.22	Cash at end of quarter	1,893	1,893

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	76
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 $62k; rent & outgoings, Melbourne, paid to Mineral Deposits Limited $14k

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
4.1Exploration and evaluation	197
4.2Development	–
4.3Production	–
4.4Administration	53
Total	250

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	103	77
5.2	Deposits at call	1,790	1,750
5.3	Bank overdraft	–	–
5.4	Other (provide details)	–	–
	Total: cash at end of quarter (item 1.22)	1,893	1,827

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 lapsedInterests in miningtenements andpetroleum tenementsacquired or increased	–	–	–	–
6.2		–	–	–	–

+ 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	300,227,775	300,227,775
	securities
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
7.11	quarterDebentures
	(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: 21 January 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.