SUNSTONE METALS LTD — Capital/Financing Update 2013

Oct 27, 2013

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28 October 2013
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Avalon Minerals Limited (ASX:AVI) ("Avalon" or "Company")

Avalon advises that ASX Limited ( ASX ) has approved the Company's application for a waiver from ASX Listing Rule 7.1 to the extent necessary to issue securities to a substitute underwriter (or underwriters) under a new underwriting agreement (or agreements) within 15 business days from the closing date of the Company’s reopened 1 for 1 non-renounceable pro rata rights issue ( Rights Issue ) on the terms set out in Annexure 1.

As announced on 23 October 2013, Avalon has agreed terms with CPS Capital Group Pty Limited ( CPS ) for the partial underwriting of the Rights Issue. The full terms of the underwriting agreement with CPS are set out in Annexure 2.

Avalon notes the announcement made by Phoenix Copper Limited.

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For further information please visit www.avalonminerals.com.au

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28 October 2013
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Annexure 1

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ASX Compliance Pty Limited ABN 26 087 780 489 Level 8 Exchange Plaza 2 The Esplanade PERTH WA 6000

GPO Box D187 PERTH WA 6840

Telephone 61 8 9224 0000 Facsimile 61 8 9221 2020 www.asx.com.au

25 October 2013

Mr Khilen Devani Senior Associate Allens Riverside Centre 123 Eagle Street Brisbane QLD 4000

By Email : Khilen.Devani@allens.com.au

Dear Khilen,

Avalon Minerals Limited (“the Company”)

I refer to the application made on behalf of the Company, for a waiver from listing rule 7.1. Set out below is the final decision of ASX Limited.

DECISION

1. Based solely on the information provided, ASX Limited (“ASX”) grants Avalon Minerals Limited (“the Company”) a waiver from listing rule 7.1 to the extent necessary to issue securities to a substitute underwriter (or underwriters) (together, the “Substitute Underwriter”) under a new underwriting agreement (or agreements) (together, the “Substitute Underwriting Agreement”) within 15 business days from the closing date of the Company’s reopened 1 for 1 non-renounceable pro rata rights issue (the “Rights Issue”), following final orders made by the Takeovers Panel (the “Panel”) on 14 October 2013, on the following conditions:

2. 1.1 The Panel approves the appointment of the Substitute Underwriter.

3. 1.2 The full terms of the Substitute Underwriting Agreement are disclosed to the market.

4. 1.3 The revised Rights Issue timetable is acceptable to ASX.

5. 1.4 The terms of this waiver are released to the market immediately.

6. ASX has considered listing rule 7.1 only and makes no statement as to the Company's compliance with other listing rules.

BASIS FOR DECISION

LISTING RULE 7.1

Underlying Policy

1. Listing rule 7.1 protects a listed entity's security holders against dilution of their voting and economic interests in the listed entity by imposing a limit on the number of equity securities that may be issued by the entity without prior security holder approval. The actual number of equity securities that a listed entity may issue without prior ordinary security holder approval is calculated by reference to a formula in listing rule 7.1, and is approximately, 15% of the number of fully paid ordinary securities on issue 12 months earlier. (The formula is more complex than this description indicates, and is set out in full in listing rule 7.1) A number of exceptions from the requirement to limit the number of equity securities that may be issued without prior ordinary security holder approval are permitted under listing rule 7.2 including exception 3 being an issue to make up the shortfall on a pro rata issue to holders of ordinary securities, provided conditions are met including that the issue is made within 3 months of the close of the offer.

Facts and Reasons for Granting the Waiver

1. The Company is undertaking a 1 for 1 non renounceable pro rata rights issue of shares. Under listing rule 7.2 exception 2, an issue under an underwriting agreement to an underwriter of a pro rata issue is to take place within 15 business days after the close of the offer. On the same day that the Company’s Offer closed, the Takeovers Panel, on application of a shareholder of the Company, made orders postponing the commencement of deferred settlement of rights issue shares and restricting the issue of rights issue shares without Panel approval. The 15 day period lapsed on 30 September 2013 with the Offer still “frozen” due to the Takeovers Panel orders. On 14 October 2013, the Takeovers Panel has ordered that the rights issue be reopened. The Takeovers Panel has also ordered that the original underwriter must not complete his obligations to acquire the underwritten shares under the underwriting agreement. The Company is seeking an extension of 15 business days from the closing date of the reopened rights issue to issue shares to the Substitute Underwriter. The proposed issue to the Substitute Underwriter is consistent with the principle of listing rule 7.2 exception 2. The extension of time sought is not unreasonable in circumstances and effectively provides a 15 business day period for the issue of shares to the new underwriter.

Yours sincerely

[Sent electronically without signature]

Kerrie Papamihail Assistant Manager, Listings Compliance (Perth)

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Annexure 2

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