SUNSTONE METALS LTD — Capital/Financing Update 2013

May 1, 2013

2 MAY 2013

D ZONE COPPER-IRON GRADES IMPROVING SIGNIFICANTLY AT DEPTH

HIGHLIGHTS

• Latest assay results from D Zone confirm all four drill holes intersecting broad and high grade zones of copper and iron mineralisation;

• Best intersections include:

• VDD0166: 13.0m @ 2.1% CuEq and 5.9m @ 2.1% CuEq, within a larger mineralisation zone of 82.0m @ 0.9% CuEq*;

• VDD0169: 6.1m @ 2.3% CuEq and 7.0m @ 1.7% CuEq, within a larger mineralisation zone of 77.1m @ 0.8% CuEq*;

• VDD0163: 3.8m @ 2.3% CuEq and 9.0m @ 1.5% CuEq, within a larger mineralisation zone of 55.0m @ 1.1% CuEq*;

• VDD0167: 5.8m @ 1.8% CuEq and 5.0m @ 1.5% CuEq, within a larger mineralisation zone of 15.8m @ 1.2% CuEq*;

• These intersections have extended the two thick, high grade copperiron plunging zones defined by previous drilling by up to 150m down dip and at least 100m down plunge;

• Drilling results continue to indicate improved economics for both open pit and underground mining for the D Zone Mineral Resource.

Australian resources company Avalon Minerals Limited (‘ Avalon ’ or ‘ Company ’) ( ASX: AVI ) is pleased to announce assay results for the next four drill holes of the drill program from the D Zone Prospect on the Viscaria Project (‘ Viscaria ’), in northern Sweden (Figure 1).

All four drill holes intersected thick, high grade copper-iron mineralisation that has extended the area of known mineralisation by up to 150 metres down dip and 100 metres down plunge.

The objective of the drilling is to extend the known Mineral Resources at the A and D Zone prospects and deliver on the potential increases to the project Net Present Value outlined in the 2012 Scoping Study (see ASX announcement 11 October 2012).

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The Company’s Managing Director Mr Jeremy Read said, “The results from these next four drill holes at D Zone are very positive as they confirm that the two thick, high grade copper-iron plunging zones at D Zone are improving significantly with depth. The copper-iron mineralisation is up to 80 metres thick, grading approximately 1% CuEq, with numerous high grade zones in excess of 2% CuEq.”

“Our drilling at D Zone has been very successful as the two thick zones of copper-iron mineralisation intersected, along with the higher grade material, suggests there is excellent potential for the D Zone Mineral Resource to be significantly extended at depth. This should improve the economics of the D Zone Mineral Resource by allowing more mineralisation to be extracted in an open pit, while suggesting that underground mining should be economic by concentrating mining on the higher grade copper-iron mineralisation.” he added.

D Zone Mineral Resource Extension Drill Program

VDD0166 and VDD0169 were drilled in the northeast of the D Zone Prospect and VDD0163 was drilled in the southwest. As discussed in previous announcements, these drill holes were designed to follow up on excellent drill intersections that appear to delineate two southwest plunging, relatively thick, high grade copper-iron mineralisation in these areas.

The success of VDD0166 and VDD0169 follows the success of the previously announced drill holes VDD0128, VDD0129, VDD0138, VDD0147, VDD0156 and VDD0157 in the northeast of the D Zone Prospect. These drill holes further delineate a relatively thick, up to 82 metres, moderately plunging, high grade copper-iron mineralisation zone by extending it at least 100 metres further down plunge. At this stage, there is no indication that the D zone Cu-Fe mineralisation is diminishing at depth. In fact, the mineralisation is increasing in copper grade with depth.

The success of VDD0163 follows the success of previously announced drill holes VDD0152, VDD0155 and VDD0161 in the southwest of the D Zone Prospect. This drill hole indicates that the second relatively thick, moderately plunging, high grade copper-iron mineralisation zone also extends at least 100 metres further down plunge. As for the northeast high grade plunging zone, the recent drilling indicates that the southwest high grade zone is also increasing in copper grade at depth.

Drill hole VDD0167 was drilled into the central part of the D Zone Prospect in between the two high grade plunging, zones of copper-iron mineralisation. The purpose of this drill hole was to test the down plunge extent of previously intersected copper-iron mineralisation of moderate thickness and grade (16-18 metres thick down hole at approximately 1% CuEq) encountered in drill holes VDD0150 and VDD0151. Mineralisation in this area also appears to be significantly increasing in grade with depth. The deeper drill hole VDD0167 intersected 15.8m @ 1.2%CuEq, compared with the up plunge drill hole VDD0150, which intersected 15.4m @ 1% CuEq*.

The details of the geochemical assay data for these drill holes are shown in Table 1, with the location of each hole outlined in Figure 2.

VDD0169: Northeast D Zone (Figure 3)

Drill hole VDD0169 intersected 77.1m @ 0.8% CuEq from 357.0m down hole, including two high grade intervals of 7.0m @ 1.7% CuEq and 6.1m @ 2.3% CuEq*. This drill hole was completed more than 150 metres down dip of VDD0141 and over 50 metres down plunge from VDD0157. Therefore, the success of VDD0169 could potentially result in a significant increase of the D Zone Mineral Resource.

The results of the previously announced Viscaria Project Scoping Study indicate that the mineralised intersections from VDD0169, especially the two high grade intervals of 7.0m @ 1.7% CuEq and 6.1m @ 2.3% CuEq, have the potential to increase the tonnes of mineralisation which could be extractable using underground mining methods at D Zone (Development Case C).

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VDD0166: Northeast D Zone (Figure 3)

Drill hole VDD0166 intersected 82.0m @ 0.9% CuEq from 384.0m down hole, including two high grade intervals of 5.9m @ 2.1% CuEq and 13.0m @ 2.1% CuEq*. This drill hole was completed more than 150 metres down dip of VDD0141 and over 50 metres down plunge from VDD0169. Therefore, the success of VDD0166 could potentially result in a significant increase to the D Zone Mineral Resource.

The results of the previously announced Viscaria Project Scoping Study indicate that the mineralised intersections from VDD0166, especially the two high grade intervals of 5.9m @ 2.1% CuEq and 13.0m @ 2.1% CuEq, have the potential to increase the tonnes of mineralisation which could be extractable using underground mining methods at D Zone (Development Case C).

VDD0163: Southwest D Zone (Figure 4)

Drill hole VDD0163 intersected 55.0m @ 1.1% CuEq from 351m down hole, including two high grade intervals of 5.0m @ 1.6% CuEq and 9.0m @ 1.5% CuEq*. It was drilled over 50 metres down dip of drill hole VDD0161 and over 70 metres along strike from drill hole VDD0155. Therefore, VDD0164 could potentially result in a significant increase of the D Zone Mineral Resource.

The results of the previously announced Viscaria Project Scoping Study indicate that the mineralised intersections from VDD0163, especially the two high grade intervals of 5.0m @ 1.6% CuEq and 9.0m @ 1.5% CuEq, have the potential to increase the tonnes of mineralisation which could be extractable using underground mining methods at D Zone (Development Case C).

VDD0167: Central D Zone (Figure 5)

Drill hole VDD0167 intersected 15.8m @ 1.2% CuEq from 207.2m down hole including two high grade intervals of 5.8m @ 1.8% CuEq and 5.0m @ 1.5% CuEq*. It was drilled over 100 metres down dip of drill hole VDD0046 and over 70 metres down plunge from drill hole VDD0151. Therefore, VDD0167 could potentially result in a significant increase of the D Zone Mineral Resource.

The results of the previously announced Viscaria Project Scoping Study indicate that the mineralised intersections from VDD0167,especially the two high grade intervals of 5.8m @ 1.8% CuEq and 5.0m @ 1.5% CuEq, have the potential to increase the tonnes of mineralisation which could be extractable using underground mining methods at D Zone (Development Case C).

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Table 1: Drill hole details and assays results

	Hole	Easting (RT90 m)	Northing (RT90 m)	Azi. (°)	Dip (°)	From (down hole	To (down	Interval Width (down hole	% Cu	% Fe	% CuEq	End of Hole(m)
		,	,			m)	hole m)	m)
						351.00	406.00	55.00	0.5	23.0	1.1	414.00
								including
						351.00	356.00	5.00	1.1	28.3	1.6
	VDD0163	1,680,176	7,536,967	134	‐56			also including
						397.00	406.00	9.00	1.1	25.7	1.5
								including
						399.19	403.00	3.81	1.8	29.9	2.3
	VDD0166	1680662	7537462	133	‐56	384.00	466.00	82.00	0.5	22.7	0.9	471
								including
						384.00	390.30	6.30	0.8	37.0	1.4
								also including
						425.08	431.00	5.92	1.5	42.3	2.1
								also including
						447.00	460.00	13.00	1.6	29.9	2.1
						207.2	223	15.8	0.8	21.5	1.2	282.00
								Including
	VDD0167	1,680,513	7,537,196	133	‐58.7	207.2	213	5.8	1.3	28.9	1.8
								and
						218	223	5	1.1	27.1	1.5
	VDD0169	1680696	7537487	135	‐55	357.00	434.10	77.10	0.5	19.1	0.8	480
								including
						357.00	364.00	7.00	1.2	27.7	1.7
								also including:
						395.00	405.00	10.00	0.8	26.4	1.2
								also including:
						428.00	434.10	6.10	1.6	45.8	2.3

*Copper Equivalent Formula

% CuEq = % Cu + ((%Fe x Fe price US$/tonne x Fe recovery)/(Cu price US$/tonne x Cu recovery)) Cu price US$/tonne = $7,163.00 (US$3.25/lb)

Cu Recovery = 90%

Fe price US$/tonne = $144.93 (calculated from US$100 Net Price per tonne of magnetite concentrate containing 69% Fe)

Fe Recovery = 70%

Results from extensive metallurgical test work completed by Avalon Minerals Limited indicate that both copper (Cu) and iron (Fe) have a reasonable potential to be recovered from the D Zone mineral resource contained within the Viscaria Project.

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Table 2: Currently Defined Mineral Resources on the Viscaria Project

		Resource Name	Resource Name	Classification	Classification	Tonnes (t)	Tonnes (t)	Cu Grade (%)	Cu Grade (%)	Cu Metal (t)	Cu Metal (t)
		A Zone*		Measured		14,439,000			1.7	240,000
				Indicated		4,690,000			1.2	57,000
				Inferred		2,480,000			1.0	26,000
				Subtotal		21,609,000			1.5	323,000
				Measured		123,000			1.3	2,000
		B Zone*		Indicated		4,118,000			0.7	30,000
				Inferred		15,410,000			0.8	118,000
				Subtotal		19,651,000			0.8	150,000
		D Zone Cu Resource		Indicated**		5,200,000			0.9	48,000
				Inferred**		2,700,000			0.8	23,000
				Subtotal		7,900,000			0.9	71,000
		Overall Cu		Total		49,160,000			1.1	544,000
	Resource Name		Classification		Tonnes (t)		Fe Grade (%)		Fe Mass Recovery (%)		Fe Metal (t)
			***
	D Zone FeResource		Indicated		12,100,000		27.3		31.3		4,000,000
			Inferred***		6,800,000		25.6		31.6		2,200,000
	Overall Fe		Total		18,900,000		26.9		32.6		6,200,000

• 2011 Mineral Resources for A Zone and B Zone are reported above a cut-off grade of 0.4% Cu.

• ** 2013 Copper Mineral Resource for D Zone above a cut-off grade of 0.4% Cu.

* 2013 Iron Mineral Resource for D Zone above a cut-off grade of 15% Fe Mass Recovery.

Note that the total Indicated and Inferred Mineral Resource reported for the Copper (Table 1) and for above 15% Fe Mass Recovery are not mutually exclusive; the Mineral Resource for above 15% Fe Mass Recovery excludes 1.8 million tonnes at 0.8% Cu above a cut-off grade of 0.4% Cu.

ABOUT AVALON

Avalon is an ASX listed mineral exploration company with high quality assets in Sweden, one of the leading metal producing countries in the European Union.

Avalon’s flagship asset is the Viscaria Copper-Iron Project located 1,200km north of Stockholm where the Company has delineated a global resource of 49.2 million tonnes of copper mineralisation at 1.1% Cu, containing 544,000 tonnes of copper and 18.9 million tonnes of iron mineralisation at 26.9% Fe, containing 6.2 million tonnes of iron.

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The Viscaria Project is surrounded by established infrastructure, lying immediately adjacent to LKAB’s Kirunavaara Iron Ore operation and in close proximity to high-capacity rail and ports.

ABOUT SWEDEN

Sweden has a 1,000 year mining history, is the largest producer of iron ore in the European Union and is a leading producer of base metals (copper, zinc, lead) and precious metals (gold and silver).

There are excellent discovery opportunities, with much of the country underexplored by modern standards. Furthermore, Sweden possesses a world-class geological database and favourable minerals legislation, is politically and economically stable and has mining know-how, highly trained personnel and excellent infrastructure.

For further information please visit www.avalonminerals.com.au or contact:

Mr Jeremy Read - Managing Director Mr James Harris Avalon Minerals Limited Professional Public Relations Tel: 07 3368 9888 Tel: 08 9388 0944 Em: jeremy.read@avalonminerals.com.au Em: james.harris@ppr.com.au www.twitter.com/avalonminerals

Competent Persons Statement

The information in this report that relates to Mineral Resources and Exploration Targets is based upon information reviewed by Mr Jeremy Read BSc (Hons) who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Read is a full time employee of Avalon Minerals Ltd and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Read consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

The Mineral Resource estimate for the D Zone Prospect was compiled and prepared by Matthew Readford (MAusIMM) of Xstract Mining Consultants who is a Competent Person as defined by the Australasian Code for the reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code) 2004 Edition and who consents to the inclusion in this report of the matters based on the information in the form and context in which it appears.

The Scoping Study results were compiled and prepared by Tim Horsley (MAusIMM) of Xstract Mining Consultants who is a Competent Person as defined by the Australasian Code for the reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code) 2004 Edition and who consents to the inclusion in this report of the matters based on the information in the form and context in which it appears.

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Figure 1 – Project Location

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1680500 1681000
7538000 7538000
7537500 7537500
D ZONE
7.9 Mt @ 0.9% Cu and
18.9 Mt @ 26.9% Fe
7537000 7537000
A ZONE
21.4 Mt @ 1.5% Cu
7536500 7536500
1680500 1681000
VISCARIA Exploration Permit
0 100 200 300 m Exploitation Concession
NORWAY Resource Zone boundary
FINLAND Transverse Mercator ProjectionRT90 gon vast 2.5 (standard) (surface projection)Drill hole 65 Park RoadMilton QLD 4064
Tel +61 7 3368 9888
Helsinki Fax +61 7 3368 9899
Oslo
Stockholm D ZONE PROSPECT - VISCARIA PROJECT, SWEDEN PreRevised: 29.04.2013pared: QH Date: 03.03.2013Drwg: AV-028
LOCATION OF DRILL HOLES FIGURE 2
VDD0164VDD0164VDD0159VDD0159 VDD0145VDD0145
VDD0134VDD0134
VDD0147VDD0147VDD0156VDD0156 VDD0137VDD0137
VDD0136VDD0136
VDD0139VDD0139
VDD0138VDD0138
VDD0130VDD0130
VDD0165VDD0165VDD0153VDD0153
VDD0151VDD0151
VDD0167VDD0167
VDD0146VDD0146
VDD0133VDD0133
VDD0155VDD0155 VDD0140VDD0140
VDD0152VDD0152
VDD0163VDD0163
VDD0168VDD0168 VDD0161VDD0161
VDD0149VDD0149
VDD0142VDD0142
VDD0169VDD0169VDD0157VDD0157
VDD0166VDD0166
VDD0141VDD0141
VDD0160VDD0160
VDD0150VDD0150
VDD0144VDD0144
VDD0132VDD0132
N
E
D
E
W
S
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SOUTHEAST

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NORTHWEST
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Depth (m)
VDD0169 VDD0018
VDD0166 (off-section) VDD0141 VDD0016 VDD0014
VDD0079
5.0 m @ 1.0% CuEq
(0.6% Cu, 25.9% Fe)
50
28.53 m @ 2.2% CuEq
(1.7% Cu, 29.2% Fe)
Hanging wall
100 Basalt
10.71 m @ 0.6% CuEq
(0.2% Cu, 23.8% Fe)
7.08 m @ 1.1% CuEq
(0.7% Cu, 23.0% Fe) 6.0 m @ 0.6% CuEq
(0.4% Cu, 14.2% Fe)
150 34.0 m @ 0.9% CuEq
3.15 m @ 0.6% CuEq
(0.5% Cu, 22.8% Fe)
(0.4% Cu, 13.3% Fe)
incl. 6.0 m @ 2.2% CuEq
(1.7% Cu, 31.1% Fe)
Foot wall
200 Tuff
250
77.0 m @ 0.8% CuEq
(0.5% Cu, 19.1% Fe)
incl. 7.0 m @ 1.7% CuEq
(1.2% Cu, 27.7% Fe)
300 and 10.0 m @ 1.2% CuEq
(0.8% Cu, 26.4% Fe)
and 6.1 m @ 2.3% CuEq
(1.6% Cu, 45.8% Fe)
82.0 m @ 0.9% CuEq
350 (0.5% Cu, 22.7% Fe)
incl. 6.3 m @ 1.4% CuEq
(0.8% Cu, 37.0% Fe)
and 5.92 m @ 2.1% CuEq
(1.5% Cu, 42.3% Fe)
and 13.0 m @ 2.1% CuEq
(1.6% Cu, 29.9% Fe)
VISCARIA Drill hole showing
mineralised intersection Hanging wall basalt
V
H [= 1]
0 20 40 m assayed interval Mineralised zone
65 Park Road
Foot wall tuff MiltonTel +61 7 3368 9888QLD 4064
Fax +61 7 3368 9899
Prepared: QH Date: 28.04.2013
D ZONE PROSPECT - VISCARIA PROJECT, SWEDEN Revised: Drawing: AV-019a
SCHEMATIC CROSS-SECTION SHOWING VDD0166 & VDD0169
FIGURE 3
50
100
50
100
150
50
100
50
100
150
200
250
300
350
400
450
50
100
150
200
50
100
150
200
250
300
350
400
450
50
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NORTHWEST SOUTHEAST
Depth (m)
VDD0163 VDD0161 VDD0142 VDD0100 VPP0147
23.0 m @ 1.1% CuEq
(0.4% Cu, 43.7% Fe)
50
41.6 m @ 0.9% CuEq
(0.4% Cu, 31.3% Fe)
100 Hanging wall
Basalt
150
33.0 m @ 0.6% CuEq
(0.2% Cu, 24.8% Fe)
incl. 2.0 m @ 2.6% CuEq
(2.0% Cu, 38.5% Fe)
200
Foot wall
Tuff
250
26.0 m @ 0.9% CuEq
(0.5% Cu, 27.0% Fe)
incl. 7.0 m @ 1.8% CuEq
(1.3% Cu, 30.3% Fe)
300
55.0 m @ 1.1% CuEq
(0.5% Cu, 23.0% Fe)
incl. 5.0 m @ 1.6% CuEq
(1.1% Cu, 28.3% Fe)
and 9.0 m @ 1.5% CuEq
(1.1% Cu, 25.7% Fe)
incl. 3.81 m @ 2.3% CuEq
(1.8% Cu, 29.9% Fe)
350
VISCARIA Drill hole showing
mineralised intersection Hanging wall basalt
V
H [= 1]
0 20 40 m assayed interval Mineralised zone
65 Park Road
Foot wall tuff MiltonTel +61 7 3368 9888QLD 4064
Fax +61 7 3368 9899
Prepared: QH Date: 24.04.2013
D ZONE PROSPECT - VISCARIA PROJECT, SWEDEN Revised: Drawing: AV-034a
SCHEMATIC CROSS-SECTION SHOWING VDD0163
FIGURE 4
50
100
50 50
100
150
200
250
300
50
100
150
200
250
300
350
400
50
100
150
200
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NORTHWEST SOUTHEAST
Depth (m)
VDD0167 VDD0046 VDD0035
16.7 m @ 1.0% CuEq
(0.6% Cu, 23.7% Fe)
incl. 9.6 m @ 1.4% CuEq
50 (1.0% Cu, 22.6% Fe)
Hanging wall
Basalt
11.3 m @ 0.7% CuEq
(0.5% Cu, 13.3% Fe)
100 incl. 3.45 m @ 1.3% CuEq
(0.9% Cu, 25.5% Fe)
Foot wall
Tuff
150
15.8 m @ 1.2% CuEq
(0.8% Cu, 21.5% Fe)
incl. 5.8 m @ 1.8% CuEq
(1.3% Cu, 28.9% Fe)
and 5.0 m @ 1.5% CuEq
(1.1% Cu, 27.1% Fe)
200
250
50
100
150
200
250
50 50
100
150
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VISCARIA Drill hole showing
mineralised intersection Hanging wall basalt
V
H [= 1]
0 20 40 m assayed interval Mineralised zone
65 Park Road
Foot wall tuff MiltonTel +61 7 3368 9888QLD 4064
Fax +61 7 3368 9899
Prepared: QH Date: 25.04.2013
D ZONE PROSPECT - VISCARIA PROJECT, SWEDEN Revised: 28.04.2013 Drawing: AV-038
SCHEMATIC CROSS-SECTION SHOWING VDD0167
FIGURE 5
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