SUNSTONE METALS LTD — Capital/Financing Update 2010

Sep 21, 2010

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).

$\mathbf{1}$ *Class of *securities issued or to | Ordinary shares be issued

$\overline{2}$ Number of *securities issued or to be issued (if known) or maximum number which may be issued

20,000,000

Principal terms of the ⁺securities 3 (eg, if options, exercise price and expiry date; if partly paid ⁺securities, the amount outstanding and due dates for +convertible payment; if securities, the conversion price and dates for conversion)

Ordinary fully paid shares

• See chapter 19 for defined terms.

4	Do the + securities rank equally in all respects from the date of allotment with an existing + class of quoted *securities?	Yes
	If the additional securities do not rank equally, please state: the date from which they do the extent to which they the participate for next dividend, (in the case of a trust, distribution) or interest payment the extent to which they do ٠ not rank equally, other than in relation to the next dividend, distribution interest or payment
5	Issue price or consideration	16 cents
6	Purpose of the issue (If issued as consideration for the acquisition of assets, clearly identify those assets)	of exploration Advancement and development work at Viscaria copper and iron project in Sweden and working capital requirements.
7	Dates of entering + securities into uncertificated holdings or despatch of certificates	22 September 2010
8	Number and + class of all *securities quoted on ASX (including the securities in clause 2 if applicable)	Number 152,276,952	+ Class Ordinary

		Number	+ Class
9	Number and + class of all	300,000	Options exercisable at 30
	*securities not quoted on ASX		cents and expiring 31 July
	(including the securities in		2011
	clause 2 if applicable)	100,000	Options exercisable at 20
			cents and expiring 31 July
			2011
		500,000	Options exercisable at 30
			cents and expiring 31 January
			2013
		1,000,000	Options exercisable at 40
			cents and expiring 31 January
			2014
10	Dividend policy (in the case of a trust, distribution policy) on the	No change.

Part 2 - Bonus issue or pro rata issue

increased capital (interests)

11	Is security holder approval required?
12	Is the issue renounceable or non- renounceable?
13	Ratio in which the + securities will be offered
14	+ Class of + securities to which the offer relates
15	to determine + Record date entitlements
16	on different Will holdings registers (or subregisters) be for calculating aggregated entitlements?
17	Policy for deciding entitlements in relation to fractions

Appendix 3B New issue announcement

18 Names of countries in which the entity has *security holders who will not be sent new issue documents Note: Security holders must be told how their entitlements are to be dealt with. Cross reference: rule 7.7. Closing date for receipt of 19 acceptances or renunciations Names of any underwriters 20 Amount of any underwriting fee $21$ or commission Names of any brokers to the $22$ issue Fee or commission payable to $23$ the broker to the issue Amount of any handling fee $24$ payable to brokers who lodge acceptances or renunciations on behalf of ⁺security holders If the issue is contingent on $25$ *security holders' approval, the date of the meeting Date entitlement and acceptance 26 form and prospectus or Product Disclosure Statement will be sent to persons entitled If the entity has issued options, 27 and the terms entitle option holders to participate on exercise, the date on which notices will be sent to option holders Date rights trading will begin (if 28 applicable) Date rights trading will end (if 29 applicable)

⁺ See chapter 19 for defined terms.

• How do 'security holders sell 30 their entitlements in full through a broker?
• How do *security holders sell 31 part of their entitlements through a broker and accept for the balance?
• How do ⁺security holders dispose 32 of their entitlements (except by sale through a broker)?
• ⁺Despatch date 33

Part 3 - Quotation of securities

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

• Type of securities 34 (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

• 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

35

A copy of any trust deed for the additional *securities

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 $\bullet$ the extent to which they $\bullet$ the participate for next dividend, (in the case of a trust, distribution) or interest payment the extent to which they do $\bullet$ not rank equally, other than in relation to the next dividend, distribution interest $\Omega$ 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)
42	Number and + class of all quoted *securities ASX on (including the securities in clause 38)	Number	+ Class

Quotation agreement

• ⁺Quotation of our additional ⁺securities is in ASX's absolute discretion. ASX $\mathbf{I}$ may quote the *securities on any conditions it decides.
• We warrant the following to ASX. $\overline{2}$
• 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.
• We will indemnify ASX to the fullest extent permitted by law in respect of any 3 claim, action or expense arising from or connected with any breach of the warranties in this agreement.
• We give ASX the information and documents required by this form. If any $\overline{4}$ 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. // $\mathbb{I}$ $\sim$

$\equiv$ $\equiv$ $\equiv$ $\equiv$ $\equiv$ $\equiv$ $\equiv$

Sign here:	Date: 22 September 2010
(Directory Company secretary)
Desmond Kelly Print name:

⁺ See chapter 19 for defined terms.

Unit 2, 2 Richardson St West Perth WA 6005 PO Box 165 West Pertn, WA 6872 Tel $+61893222752$ $Fax - 61 8 9322 2827$

22 September 2010

Company Announcements Australian Securities Exchange

Dear Sirs

Notice under Section 708A of the Corporations Act 2001

On 22 September 2010 Avalon Minerals Ltd ("Company") issued 20,000,000 fully paid ordinary shares ("Shares") under a share placement.

The Company gives notice under section 708A(5)(e) of the Corporations Act 2001 (Cth) ("Act") that:

• $\mathbf{1}$ the Company issued the Shares without disclosure to investors under Part 6D.2 of the Act;
• 2 as at the date of this notice, the Company has complied with:
• the provisions of Chapter 2M of the Act as they apply to the Company; and $(a)$
• section 674 of the Act; and $(b)$
• as at the date of this notice, there is no information to be disclosed which is excluded information (as defined 3 in section 708A(7) of the Act) that is reasonable for investors and their professional advisers to expect to find in a disclosure document.

Yjburs faithfully Desmońd V Kelly Company Secretary For/and on behalf of Avalon Minerals Ltd