ASX Release Limited) from Western Metals for $1.178 Million in Cash and Shares

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ASX Release Limited) from Western Metals for $1.178 Million in Cash and Shares 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 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. MARKETSFor personal use only 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. Page 2 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 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. Page 3 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. For personal use only Figure 1 – Pernatty EL 3583 location and known copper prospects Page 4 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
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