Quarterly Report For the period ended 31 March 2008
Highlights
Iron Ore (SA) • Coolybring and Wilgena Hill magnetite prospects elevated in status to become the “Tarcoola Iron Ore Project” in recognition of the impending scoping study. • Iron ore contract price settlements of 65% and higher for 2008 continue to set records adding value to the Tarcoola Iron Ore Project.
• $1 million of new capital raised through a share placement to finance initial drilling for the scoping study. • Discussions continued during the quarter in an effort to secure a suitable partner to fund the Tarcoola Iron Ore Project.
Tin (TAS) • Acquired a 60% interest in Zeehan Tin joint venture (with Gippsland ASX Release Limited) from Western Metals for $1.178 million in cash and shares.
• Zeehan Tin contains an historic resource of 7.3 million tonnes @
0.69% tin and includes significant potential for extension at depth.
18 April 2008 • Planned Columbus IPO will now include Zeehan Tin as its key asset.
Exploration • Pernatty (SA) assays confirm the presence of anomalous copper and silver values in Gawler Range Volcanics from 992m to 1,058m. • Cowell (SA) drilling confirmed the presence of weak copper anomalism associated with magnetic highs – assays pending.
• Cowell (SA) drilling also showed that gravity lows are associated with channels in the basement rather than uraniferous granites. • Sunshine (SA) drilling partly explained gold in calcrete anomalism. ASX Code: SRZ
ABN 96 108 758 961 Activities Diary for June Quarter 2008 Level 7 Exchange Tower 530 Little Collins Street • Tarcoola (Iron Ore) SA. Scoping study drilling in June quarter.
Melbourne Victoria 3000 For personal use only use personal For Australia • Tasmania (copper, nickel and tin) VTEM survey flown over Dundas, Ewart and northern Heemskirk leases – to identify conductive targets. Telephone +61 3 9909 7618 Facsimile +61 3 9909 7621 • Cowell SA assay results from February drilling will be available. www.stellarresources.com.au [email protected] • Tarcoola (Uranium) SA UraniumSA is continuing its drilling program
• Assessment of market conditions for Columbus IPO.
080040SRL.doc
CORPORATE
Financial Position As at 31 March 2008, the Company had cash and near term securities of $3.7 million. Stellar also holds financial assets of 10.26 million shares in UraniumSA Limited (ASX: USA) and 5.13 million options (in escrow until 18 October 2008) and 6.667 million options in Gippsland Offshore Petroleum Limited (ASX: GOP) exercisable at 20 cents.
Staff Mr Peter Blight, previously General Manager Business Development, was promoted to Chief Executive Officer. He will continue to focus on commercialising the company’s iron ore and tin assets in addition to broadening of his responsibilities across all areas of the company’s activities.
Funding In early March, the Company completed a placement of 5 million new ordinary fully paid shares to investors associated with Chinese steel interests. The shares were placed at 20 cents, a 33% premium to the share price and raised $1.0 million of new capital.
The majority of the funds raised will be applied to further assessment of the Tarcoola Iron Ore Project, located in central South Australia.
NEW AGREEMENTS
Panama (NSW) In early April, the Company reached a JV agreement with Carpentaria Exploration Limited (ASX: CAP) whereby Carpentaria will have the right to explore for gold on the Panama Hat Exploration Licence 6556, located approximately 20km south of Broken Hill. The agreement requires Carpentaria to initially spend $80,000 in 18 months to gain the right to earn 51% in the licence area after spending a further $1.0 million. Details of the agreement were announced to the ASX by Carpentaria on April 8th.
Cowell (SA) In April, Stellar entered an agreement in principle that allows UraniumSA to earn a 70% interest in any uranium discovered in Tertiary sediments covering Stellar’s Cowell tenements. The agreement is subject to Stellar completing the acquisition of 100% of these tenements from Rex Minerals.
PACE Funding In mid February, the Company was advised that it had been awarded a PACE grant (Plan for Accelerating Exploration) by the South Australian Government agency PIRSA for a drilling proposal on EL 3978 in the Cowell area. The PACE grant, for a maximum amount of $89,000, covers 50% of direct drilling costs arising from testing a uranium target within Stellar’s IOCGU program.
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Iron Ore Strong contract price settlements continue, with Brazil's Vale securing an 86.7% rise in iron ore pellet prices for 2008 with its client ArcelorMittal, the world's largest steel maker. Earlier, Vale negotiated a 65% price increase for iron ore fines while Rio Tinto and BHP Billiton have decided to hold out for greater price increases.
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Tin The price of tin continued to perform strongly during the quarter breaching $20,700 per tonne at one stage in response to falling LME stockpiles. Indonesia, the world’s largest tin exporter has increased production in response to high prices. However, continued government action against illegal mining should limit the extent of growth in Indonesia.
PROJECTS
Tarcoola Iron Ore Project (Stellar 100%) The Coolybring and Wilgena Hill iron ore prospects were elevated to project status during the quarter and together represent the Tarcoola Iron Ore Project. The upgrade in status recognises the decision to undertake a scoping study on the Coolybring banded iron deposit in 2008.
Much of the activity during the quarter related to identifying sources of financing for the scoping study and subsequent stages of economic evaluation. Management is encouraged by the high level of interest shown in the project by Chinese steel producers and steel industry related companies. As indicated earlier, $1.0 million was raised through a placement to Chinese interests to initiate scoping study drilling. Discussions are continuing in an effort to secure a partner that will fund the project through to completion of a feasibility study.
Management had preliminary discussions with the South Australian Government department PIRSA and various study consultants in order to prepare for scoping study activities. Promet, a specialist engineering firm was contracted to complete a desktop study of the project. In addition, a copy of a management presentation on the project to institutional investors at the recent UBS Iron Ore Conference can be found on the Stellar website.
Scoping study drilling is expected to commence at Coolybring during April.
Zeehan Tin Project (Stellar 60%) In mid March, the Company announced that it had signed an agreement to acquire a 60% interest in the Zeehan Tin Project from Western Metals Limited. The project is contained within Retention Licence 5/1997, located near the mining town of Zeehan in northwest Tasmania. The remaining 40% interest is held by ASX and LSE-AIM listed Gippsland Limited. The purchase consideration for the acquisition is $1.178m, to be satisfied by cash and additional shares in Stellar.
The Zeehan Tin Project comprises the Queen Hill, Montana and Severn tin deposits defined by Aberfoyle and Gippsland over 25 years ago prior to the collapse of the tin price which halted further evaluation of the deposits. Currently, these deposits represent the largest known undeveloped tin resource in Australia. The historic mineral resource (as defined by the December 2007 JORC release) is: • 7.3 million tonnes @ 0.69% Sn for 50,370 tonnes of contained tin, but importantly, • 3.6 million tonnes @ 1.2% Sn for 43,000 tonnes of contained tin was estimated in the higher
grade portions of the deposits. For personal use only use personal For
According to consultants that worked on the Zeehan Tin project at the time of discovery, there is considerable potential to add to the historic mineral resource at depth and along strike. In addition, most of the tin occurs in the form of cassiterite, a mineral that should support levels of recovery comparable with historic performance at the nearby Renison Bell mine.
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Under the joint venture terms, Stellar has the right to increase its interest from 60% to 70% by completing a feasibility study to a banking stage. The Zeehan Tin project is being acquired in Stellar’s 100% owned subsidiary company Columbus Metals Limited significantly adding to the company’s existing assets which include the St Dizier tin deposit and tin exploration properties along the northern edge of the Heemskirk granite.
During the quarter, the Board resolved to complete the preparation of a Prospectus to support the foreshadowed IPO of Columbus Metals Limited with a view to confirming the decision to seek an ASX listing for Columbus when market conditions allow. The float of Columbus will raise funds for further drilling and scoping studies at Zeehan Tin.
DRILLING/ASSAY RESULTS
Pernatty – Copper/Gold (Stellar 100%) During the quarter, preliminary assay results were received for diamond drill-hole MGDDH01 completed in December 2007, on the “T1” IOCGU target within Pernatty EL 3583 (see Figure 1). As previously reported, the hole successfully identified a 200m sequence of hematite altered Gawler Range Volcanics between 877m and the bottom of the hole at 1,072m as the source of coincident IOCGU style magnetic and gravity anomalies.
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Figure 1 – Pernatty EL 3583 location and known copper prospects
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The assay results summarised in Figure 2, confirm the presence of anomalous copper and silver values associated with hematite alteration within the GRV sequence – particularly below 992m. The best result was 5m from 1,042m to 1,047m grading 0.21% copper and 25ppm silver. These encouraging results confirm the possible presence of an IOCGU mineralising system possibly along the northwest trending structure connecting “T1” with the untested “T2” target. Using induced polarisation to refine the identification of sulphide mineralisation along this trend and in the vicinity of “T2” is under consideration following successful use of this tool by Gunson Resources Limited (ASX: GUN) in the Chianti area to the east of T2 (see Figure 1)
Figure 2 – Summary of copper and silver assays, 870m to 1,072m MGDDH01
Tarcoola Region SA – Sunshine Gold Project (Stellar 100%) Six RC drill traverses, amounting to 27 holes drilled to a depth of 50m, were completed in the quarter to test a number of gold in calcrete anomalies (see Figure 3). The best result of 3m grading 0.3g/t gold occurred for the central traverse in the “boot” shaped calcrete anomaly at the bottom left of Figure 3. This anomaly has proven to be the most significant over the two drilling campaigns in the area so far. It alsoonly use personal For lies on the northeast trending Bulgunnia shear zone a major NNE lineament that traverses the northern Gawler Craton. Other results were generally lower grade than expected and showed little evidence of continuity of gold mineralisation.
RC drilling only partly explained the gold in calcrete anomalism generally and the grade of the “boot” shaped anomaly in particular. Further evaluation of the nature of calcrete formation in addition to the application of electrical geophysical methods may provide greater discrimination for further exploration. The widespread nature of the anomalism alone justifies a greater exploration effort in the Sunshine area. Page 5
Figure 3 – Sunshine calcrete gold anomalies and drill hole locations.
Cowell IOCGU (Stellar earning 100%) Four diamond drill holes were completed in the Glensea area to the northeast of the Cowell township during the quarter. The holes were logged and samples submitted for assay with no results to report as yet.
COD011, drilled to a depth of 276m, successfully tested the target magnetic position in the basement. It intersected numerous zones of weak to moderately altered intrusive granite and pegmatoid, with occasional mineralised veins within more strongly altered host rocks (see Figure 4). The hole was sited 235m southwest of COD003 (which returned a result of 0.4m of 3.5% copper from 183.6m) and confirmed the presence of a mineralised system worthy of follow-up exploration.
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Figure 4 – COD011 Altered pegmatiodal granite with pyrite, chalcopyrite and magnetite veining
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COD012, 013 and 014 targeted gravity lows based on previous drilling in which low density alaskitic granite host intrusive rocks returned anomalous levels of uranium and rare earth mineralisation. Unfortunately, the current holes failed to confirm the exploration model, showing the gravity lows to reflect palaeochannels in the basement containing deep sequences of Tertiary limestone and lignitic sands. Holes COD012 and 014 intersected altered magnetite gneiss and granite in the basement, with low levels of copper mineralisation in veinlets.
Cowell Iron Ore (Stellar earning 100%) A single diamond drill hole POD001 targeted a linear magnetic high inferred to represent a buried banded iron formation (BIF) of the Middleback Range Group which hosts the hematite and magnetite ore-bodies of the Middleback ranges some 50km to 70km to the north. The target magnetic anomaly is 8km southwest along strike from the Bungalow BIF prospect currently being evaluated by Centrex Metals Limited (ASX: CXM). POD001 intersected a magnetite rich, layered metasediment from 25m to the end of the hole at 127m but did not intersect any typical Middleback Range BIF. The metasediment showed little variation throughout the hole apart from occasional veins of feldspar and carbonate that in some cases included signs of weak copper mineralisation.
The magnetite grade is likely to be too low to be of economic interest. However, the association of copper with magnetite suggests that there is potential for IOCGU mineralisation to be associated with the magnetic high. Once assay results and petrological studies are available, a plan for the next stage of exploration will be developed.
EXPLORATION UPDATE
VTEM SURVEY
In April, Geotech Airborne Pty Ltd will conduct a helicopter-borne versatile time-domain electromagnetic (VTEM) survey over the Dundas, northern Heemskirk and Ewart leases in Tasmania. In total, the survey will provide data over 500 line kilometres and identify conductive anomalies over ground prospective for copper, nickel and tin. The particular benefit of this system is that it has greater vertical depth of penetration than any system used in this region in the past.
NICKEL
Dundas (TAS) (Stellar 100%) On the Dundas EL, all available data was compiled into a 3D model to assist with visualisation of the spatial relationships between geophysical features, existing drill information and known mineralisation. Field inspection of the old workings at Razorback and Grand Prize was also undertaken and some access tracks upgraded. Stellar is continuing to compile historic drilling data ahead of defining drill targets for tin and nickel.
Ramsay (TAS) (Stellar 100%) Historiconly use personal For geochemical data was assembled around known electromagnetic and magnetic anomalies on the eastern side of the lease. These anomalies are being assessed in terms of their prospectivity for nickel.
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COPPER - GOLD
Robins Rise JV (SA) (Stellar 100%; Red Metal Limited able to earn 60%) Red Metal (ASX: RDM) have finalised drill details for up to 8 targets and a provisional rig booking is in place for June quarter.
Wirrida ELA (SA) (Stellar 100%) A new exploration licence application in the Wirrida area immediately to the east of the Robins Rise JV tenements was recommended for grant and accepted by Stellar during the quarter. Review of target areas for Prominent Hill style IOCGU mineralisation will proceed after acquisition of detailed gravity data.
Tarcoola Ridge (SA) (Stellar 100%) Stellar has signed a license agreement with private company LIDDS Pty Ltd whereby it will carry out further metallurgical and resource definition drilling prior to a decision to establish a small open-pit gold operation. The terms of the agreement are such that Stellar will be entitled to 10% of all the gold produced after an initial 15,000oz.
Panama (NSW) (Stellar 60%) In early April, the Company reached a JV agreement with Carpentaria Exploration Limited (ASX: CAP) whereby Carpentaria will have the right to explore on the Panama Hat Exploration Licence 6556, approximately 20km south of Broken Hill.
The agreement requires Carpentaria to initially spend $80,000 in 18 months to gain the right to earn 51% in the licence area by subsequently spending a further $1.0 million. Stellar may then elect to contribute at that stage. If Stellar elects not to contribute at that point, Carpentaria can earn to 70% by spending a further $1.0 million. Should Carpentaria earn to 70% equity, Stellar may elect to contribute or convert its equity to a 9% free carried interest to completion of a bankable feasibility study.
Stellar is satisfied that the terms of the JV agreement are such that shareholders will benefit substantially from any exploration success whilst minimising the exploration risk and costs.
URANIUM
Kingoonya Palaeochannel (SA) (Stellar 100%; UraniumSA Limited to earn 70%) UraniumSA (ASX: USA) commenced drilling in the Tarcoola area in late February within small areas where Stellar had pre-existing Native Title clearances. The new Native Title Mining Agreement for Exploration (NTMA) with the Antakirinja Matu-Yankunytjatjara Native Title Claim Group will now enable UraniumSA to work across the major portion of the Kingoonya palaeo-drainage system within the joint venture tenements. The USA-owned rig is scheduled to continue drilling within the area until late May.
Field reconnaissance of the Peela Swamp prospect by UraniumSA confirmed the presence of carnotite mineralisation within siliceous materials across the surface of the drainage system. The occurrence is technicallyonly use personal For important as it confirms that uranium is present and mobile in this part of the Kingoonya drainage system.
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Warrior (SA) (Stellar 100%; Toro Energy Limited able to earn 70%) During March, Toro Energy (ASX: TOE) undertook its Stage 4 exploration drill program at Warrior on EL 3372. The program included the drilling and gamma logging of 83 aircore holes for 4,198m (see Figure 5). Where elevated (>250cps) down hole gamma log responses were recorded, one metre drill cutting samples were obtained for assay. The maximum gamma response was in the order of 500cps. Assay results are pending.
Figure 5 – Location of Toro Energy’s Stage 4 drilling program
Cowell (SA) (UraniumSA to earn 70%) Stellar has an agreement in principle allowing UraniumSA to earn a 70% beneficial interest over any uranium mineralisation that it finds in the Tertiary cover sediments on Stellar’s Cowell tenements (EL 3148 and 3978). The agreement is subject to Stellar completing its acquisition of a 100% interest in these tenements from Rex Minerals.
ZINC
Goldfinger (NSW) (Stellar 60%)
Stellar is awaiting a response from joint venture partner CBH Resources/AngloAshanti Australasia on its For personal use only use personal For contribution to the Joint Venture. Limited ground reconnaissance work was carried out during the period investigating the access possibilities for drill targets and the southern Galena Hill geochemical anomalies.
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Magnet (TAS) (Stellar 100%) Historic drilling data from previous exploration at the Magnet zinc/lead/silver mine was assessed during the quarter and a site visit completed. As a result of this work, it was decided that more geological reconnaissance was needed before drilling targets could be identified.
The drill and exploration results reported herein, insofar as they relate to mineralisation, are based on information compiled by Mr. C.G. Anderson (Fellow of the Australasian Institute of Mining and Metallurgy) who is a Director of the Company with more than twenty years experience in the field of activity being reported. Mr. Anderson consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. It should be noted that the abovementioned exploration results are preliminary.
For further details please contact:
Tom Burrowes Tel: (03) 9909 7618 Email: [email protected] Peter Blight Tel: (03) 9909 7618 Email: [email protected] or visit our Website at: http://www.stellarresources.com.au
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Page 10 Appendix 5B Mining exploration entity quarterly report
Rule 5.3 Appendix 5B Mining exploration entity quarterly report
Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001.
Name of entity STELLAR RESOURCES LIMITED
ABN Quarter ended (“current quarter”) 96 108 758 961 31 March 2008
Consolidated statement of cash flows
Current quarter Year to date 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 and evaluation (804) (2,212) (b) development – – (c) production – – (d) administration (287) (730) 1.3 Dividends received – – 1.4 Interest and other items of a similar nature received 90 219 1.5 Interest and other costs of finance paid – – 1.6 Income taxes (paid)/recovered 139 284 1.7 Other – – –
Net Operating Cash Flows (862) (2,439)
Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects (110) (110) (b) investments – – (c) other fixed assets (44) (53) 1.9 Proceeds from sale of: (a) prospects – – (b) investments – – (c)other fixed assets – – 1.10 Loans to other entities – – 1.11 Loans repaid by other entities – – 1.12 Other: –
For personal use only use personal For Net investing cash flows (154) (163) 1.13 Total operating and investing cash flows (carried forward) (1,016) (2,602)
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Appendix 5B Mining exploration entity quarterly report
1.13 Total operating and investing cash flows (brought forward) (1,016) (2,602)
Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc. 1,000 1,000 1.15 Proceeds from sale of forfeited shares – – 1.16 Proceeds from borrowings – – 1.17 Repayment of borrowings – – 1.18 Dividends paid – – 1.19 Other – cost of issue – (1)
Net financing cash flows 1,000 999
Net increase (decrease) in cash held (16) (1,603)
1.20 Cash at beginning of quarter/year to date 3,585 5,172 1.21 Exchange rate adjustments to item 1.20 – – 1.22 Cash at end of quarter 3,569 3,569 Payments to directors of the entity and associates of the directors Payments to 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 1.2 110
1.24 Aggregate amount of loans to the parties included in item 1.10 –
1.25 Explanation necessary for an understanding of the transactions
Remuneration and directors fees for the quarter
Non-cash financing and investing activities 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows
–
2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest
–
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Appendix 5B Page 2 30/9/2001 Appendix 5B Mining exploration entity quarterly report
Financing facilities available Add notes as necessary for an understanding of the position.
Amount available Amount used $A’000 $A’000 3.1 Loan facilities – –
3.2 Credit standby arrangements – –
Estimated cash outflows for next quarter $A’000 4.1 Exploration and evaluation 600
4.2 Development –
Total 600
Reconciliation of cash Reconciliation of cash at the end of the quarter (as shown in Current quarter Previous quarter the consolidated statement of cash flows) to the related items $A’000 $A’000 in the accounts is as follows. 5.1 Cash on hand and at bank 463 485
5.2 Deposits at call 3,106 3,100
5.3 Bank overdraft – –
5.4 Other – –
Total: cash at end of quarter (item 1.22) 3,569 3,585
Changes in interests in mining tenements
Tenement Nature of interest Interest at Interest at reference (note (2)) beginning of end of quarter quarter 6.1 Interests in mining tenements relinquished, reduced or lapsed 6.2 Interests in mining ELA 2007/379 Exploration Licence Application, Nil 100% tenements acquired or East Wirrida, SA - Granted
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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 Amount paid up per security (see note 3) security (see note 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 72,038,168 72,038,168 securities 7.4 Changes during quarter (a) Increases 5,000,000 5,000,000 20 cents 20 cents 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 Directors 3,500,000 Nil 30 cents SRZAK 10/12/2008 Employees 375,000 Nil 30 cents SRZAM 19/08/2009 Exec & Employees 1,175,000 Nil 30 cents SRZAO 30/11/2010 Exec & Employees 500,000 Nil 25 cents SRZAA 31/01/2011 7.8 Issued during quarter 500,000 Nil 25 cents SRZAA 31/01/2011 7.9 Exercised during quarter 7.10 Expired/cancelled during quarter 50,000 Nil 30 cents SRZAO
7.11 Debentures For personal use only use personal For (totals only) 7.12 Unsecured notes (totals only)
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Appendix 5B Page 4 30/9/2001 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: 18 April 2008 (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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30/9/2001 Appendix 5B Page 5