SUNSTONE METALS LTD — Capital/Financing Update 2009

Dec 16, 2009

Rule 2.7, 3.10.3, 3.10.4, 3.10.5

Appendix 3B

New issue announcement, application for quotation of additional securities and agreement

Information or documents not available now must be given to ASX as soon as available. Information and documents given to ASX become ASX's property and may be made public.

Introduced 1/7/96. Origin: Appendix 5. Amended 1/7/98, 1/9/99, 1/7/2000, 30/9/2001, 11/3/2002, 1/1/2003, 24/10/2005.

Name of entity

Avalon Minerals Limited

ABN

68 123 184 412

We (the entity) give ASX the following information.

Part 1 - All issues

You must complete the relevant sections (attach sheets if there is not enough space).

1 +Class of +securities issued or to be issued

Ordinary shares

• 2 Number of +securities issued or to be issued (if known) or maximum number which may be issued
• 3 Principal terms of the +securities (eg, if options, exercise price and expiry date; if partly paid +securities, the amount outstanding and due dates for payment; if +convertible securities, the conversion price and dates for conversion)
• (1) Placement shares 15,074,000 (2) Rights issue shares 16,509,619

Ordinary fully paid shares

+ See chapter 19 for defined terms.

4	Do the +securitiesrank equally inallrespectsfromthedateofallotment with an existing +classof quoted +securities?	Yes
	If the additional securities do notrank equally, please state:the date from which they dotheextenttowhichtheyparticipateforthenextdividend,(inthecaseofatrust, distribution) or interestpaymentthe extent to which they donot rank equally, other than inrelation to the next dividend,distributionorinterestpayment
5	Issue price or consideration	21 cents
6	Purpose of the issue(If issued as consideration for theacquisitionofassets,clearlyidentify those assets)	Advancementofregionalcapital	explorationatViscaria,explorationandworking
7	+securitiesDatesofenteringinto uncertificated holdings ordespatch of certificates	(1)16 December 2009(2) 15 February 2009
8	+classNumberandofall+securitiesquotedonASX	Number132,076,952	+ClassOrdinary
	(includingthesecuritiesin

clause 2 if applicable)

+ See chapter 19 for defined terms.

		Number	+Class
9	+classNumberandofall	3,900,000	Optionsexercisableat20
	+securitiesnot quoted on ASX		centsandexpiring10
	(includingthesecuritiesinclause 2 if applicable)		February 2010
		800,000	Optionsexercisableat20
			cents and expiring 31 January
			2010
		125,000	Optionsexercisableat25
			cents and expiring 31 January
			2010
		1,075,000	Optionsexercisableat40
			cents and expiring 31 January2010
		300,000	Optionsexercisableat30
			centsandexpiring31July
			2011
		100,000	Optionsexercisableat20
			centsandexpiring31July
			2011

10 Dividend policy (in the case of a trust, distribution policy) on the increased capital (interests)

Part 2 - Bonus issue or pro rata issue

11	Issecurityholderapprovalrequired?	No
12	Is the issue renounceable or non‐renounceable?	Non‐renounceable
13	+securitiesRatioinwhichthewill be offered	1:7
14	+Classof +securitiesto which theoffer relates	Ordinary shares
15	+Recorddatetodetermineentitlements	30 December 2009
16	Willholdingsondifferentregisters(orsubregisters)beaggregatedforcalculatingentitlements?	No

+ See chapter 19 for defined terms.

17	Policy for deciding entitlementsin relation to fractions	Rounded down
18	Names of countries in which theentity has +securityholders whowillnotbesentnewissuedocuments	Limited to shareholders with addresses inAustralia or New Zealand
	Note: Security holders must be told how theirentitlements are to be dealt with.Cross reference: rule 7.7.
19	Closingdateforreceiptofacceptances or renunciations	5 February 2010
20	Names of any underwriters	N/A
21	Amount of any underwriting feeor commission	N/A
22	Namesofanybrokerstotheissue	Indian Ocean Capital
23	Feeorcommissionpayabletothe broker to the issue	$25,000
24	Amountofanyhandlingfeepayabletobrokerswholodgeacceptances or renunciations onbehalf of +securityholders	None
25	Iftheissueiscontingenton+securityholders' approval, thedate of the meeting	N/A
26	Date entitlement and acceptanceform and prospectus or ProductDisclosure Statement will be sentto persons entitled	5 January 2010
27	If the entity has issued options,andthetermsentitleoptionholderstoparticipateonexercise,thedateonwhichnotices will be sent to optionholders	17 December 2009
28	Date rights trading will begin (ifapplicable)	No rights trading

+ See chapter 19 for defined terms.

29	Date rights trading will end (ifapplicable)	N/A
30	+securityHowdoholdersselltheir entitlements in full througha broker?	N/A
31	+securityHowdoholderssellpartoftheirentitlementsthrough a broker and accept forthe balance?	N/A

+ See chapter 19 for defined terms.

32 How do +security holders dispose of their entitlements (except by sale through a broker)? N/A

33 +Despatch date 15 February 2010

	15 February 2010
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Part 3 - Quotation of securities

You need only complete this section if you are applying for quotation of securities

• 34 Type of securities (tick one)
• (a) Securities described in Part 1
• (b) All other securities

Example: restricted securities at the end of the escrowed period, partly paid securities that become fully paid, employee incentive share securities when restriction ends, securities issued on expiry or conversion of convertible securities

Entities that have ticked box 34(a)

Additional securities forming a new class of securities

			Tick to indicate you are providing the information or
documents

• 35 If the +securities are +equity securities, the names of the 20 largest holders of the additional +securities, and the number and percentage of additional +securities held by those holders
• 36 If the +securities are +equity securities, a distribution schedule of the additional +securities setting out the number of holders in the categories 1 ‐ 1,000 1,001 ‐ 5,000 5,001 ‐ 10,000 10,001 ‐ 100,000
  • 100,001 and over

37 A copy of any trust deed for the additional +securities

+ See chapter 19 for defined terms.

Entities that have ticked box 34(b)

• 38 Number of securities for which +quotation is sought 39 Class of +securities for which quotation is sought 40 Do the +securities rank equally in all respects from the date of allotment with an existing +class of quoted +securities? If the additional securities do not rank equally, please state: the date from which they do the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment 41 Reason for request for quotation now Example: In the case of restricted securities, end of restriction period (if issued upon conversion of another security, clearly identify that other security) Number +Class
• 42 Number and +class of all +securities quoted on ASX (including the securities in clause 38)

Number	+Class

+ See chapter 19 for defined terms.

Quotation agreement

• 1 +Quotation of our additional +securities is in ASX's absolute discretion. ASX may quote the +securities on any conditions it decides.
• 2 We warrant the following to ASX.
  • The issue of the +securities to be quoted complies with the law and is not for an illegal purpose.
  • There is no reason why those +securities should not be granted +quotation.
  • An offer of the + securities for sale within 12 months after their issue will not require disclosure under section 707(3) or section 1012C(6) of the Corporations Act.

Note: An entity may need to obtain appropriate warranties from subscribers for the securities in order to be able to give this warranty

• Section 724 or section 1016E of the Corporations Act does not apply to any applications received by us in relation to any +securities to be quoted and that no‐one has any right to return any +securities to be quoted under sections 737, 738 or 1016F of the Corporations Act at the time that we request that the +securities be quoted.
• If we are a trust, we warrant that no person has the right to return the +securities to be quoted under section 1019B of the Corporations Act at the time that we request that the +securities be quoted.
• 3 We will indemnify ASX to the fullest extent permitted by law in respect of any claim, action or expense arising from or connected with any breach of the warranties in this agreement.
• 4 We give ASX the information and documents required by this form. If any information or document not available now, will give it to ASX before +quotation of the +securities begins. We acknowledge that ASX is relying on the information and documents. We warrant that they are (will be) true and complete.

Sign here:	Date: 17 December 2009
	(Director/Company secretary)

Print name: Desmond Kelly

== == == == ==

+ See chapter 19 for defined terms.