SUNSTONE METALS LTD — Capital/Financing Update 2014

Aug 4, 2014

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 01/07/96 Origin: Appendix 5 Amended 01/07/98, 01/09/99, 01/07/00, 30/09/01, 11/03/02, 01/01/03, 24/10/05, 01/08/12, 04/03/13

Name of entity

Avalon Minerals Ltd

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 233,750,000 3 Principal terms of the +securities (e.g. 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 Fully paid ordinary shares

conversion)

+ See chapter 19 for defined terms.

4	Do the +securities rank equally inall respects from the +issue datewith an existing +class of quoted+securities?If the additional +securities do notrank equally, please state:the date from which they dotheextenttowhichtheyparticipateforthenextdividend, (in the case of a trust,distribution)orinterestpaymentthe extent to which they do notrank equally, other than inrelation to the next dividend,distribution or interest payment	Ordinary shares – Yes
5	Issue price or consideration	$0.008
6	Purpose of the issue(If issued as consideration for theacquisitionofassets,clearlyidentify those assets)	Placement to progress the Company's ViscariaCopper-Iron Project in Sweden and for workingcapital
6a	Is the entity an +eligible entity thathasobtainedsecurityholderapproval under rule 7.1A?If Yes, complete sections 6b – 6hin relation to the +securities thesubject of this Appendix 3B, andcomply with section 6i	Yes
6b	Thedatethesecurityholderresolution under rule 7.1A waspassed	29 November 2013
6c	+securitiesNumberofissuedwithout security holder approvalunder rule 7.1	113,389,511
6d	Number of +securities issued withsecurity holder approval under rule7.1A	120,360,489

+ See chapter 19 for defined terms.

• 6e Number of +securities issued with security holder approval under rule 7.3, or another specific security holder approval (specify date of meeting) N/A
• 6f Number of +securities issued under an exception in rule 7.2
• 6g If +securities issued under rule 7.1A, was issue price at least 75% of 15 day VWAP as calculated under rule 7.1A.3? Include the +issue date and both values. Include the source of the VWAP calculation.
• 6h If +securities were issued under rule 7.1A for non-cash consideration, state date on which valuation of consideration was released to ASX Market Announcements
• 6i Calculate the entity's remaining issue capacity under rule 7.1 and rule 7.1A – complete Annexure 1 and release to ASX Market Announcements
• 7 +Issue dates

Note: The issue date may be prescribed by ASX (refer to the definition of issue date in rule 19.12). For example, the issue date for a pro rata entitlement issue must comply with the applicable timetable in Appendix 7A.

Cross reference: item 33 of Appendix 3B.

		Number	+Class
8	+classNumberandofall+securitiesquotedonASX+securities(includingtheinsection 2 if applicable)	1,437,354,886	Fullypaidordinaryshares

N/A

Yes Issue date 5 August 2014 15 day VWAP calculated as $0.00957 75% = $0.00717 Source: Morgans Stockbroking

N/A

67,151,222 shares - Listing Rule 7.1 Nil - Listing Rule 7.1A (refer Annexure 1)

5 August 2014

+ See chapter 19 for defined terms.

Appendix 3B New issue announcement

		Number	+Class
9	+classNumberandofall+securities not quoted on ASX	500,000	Options exercisable at30 cents and expiring
	+securities(includingtheinsection 2 if applicable)		1 July 2014
		26,000,000	Options exercisable at5 cents and expiring
			30 September 2015
		4,450,000	Tranche 1 – vest uponthe closing price of the
			Shares being $.12 ormorefor10
			consecutiveASXtrading days
		6,675,000	Tranche 3 – vest upon
			the closing price of theShares being $0.30 or
			morefor10consecutiveASX
			trading days
10	Dividend policy (in the case of a	No change

trust, distribution policy) on the increased capital (interests)

Part 2 - Pro rata issue

11IssecurityholderapprovalN/A
required?
12Is the issue renounceable or nonN/Arenounceable?
Ratio in which the +securities will13N/Abe offered
+Class of +securities to which the14N/Aoffer relates
+Record15datetodetermineN/Aentitlements
16Will holdings on different registersN/A(or subregisters) be aggregated forcalculating entitlements?
17Policy for deciding entitlements inN/Arelation to fractions

+ See chapter 19 for defined terms.

18	Names of countries in which theentity has security holders who willnot be sent new offer documents	N/A
	Note: Security holders must be told how theirentitlements are to be dealt with.
	Cross reference: rule 7.7.
19	Closingdateforreceiptofacceptances or renunciations	N/A
20	Names of any underwriters	N/A
21	Amount of any underwriting fee orcommission	N/A
22	Names of any brokers to the issue	N/A
23	Fee or commission payable to thebroker to the issue	N/A
24	Amountofanyhandlingfeepayabletobrokerswholodgeacceptances or renunciations onbehalf of security holders	N/A
25	If the issue is contingent on securityholders' approval, the date of themeeting	N/A
26	Date entitlement and acceptanceform and offer documents will besent to persons entitled	N/A
27	If the entity has issued options, and
	the terms entitle option holders toparticipate on exercise, the date onwhich notices will be sent to optionholders	N/A
28	Date rights trading will begin (ifapplicable)	N/A
29	Date rights trading will end (ifapplicable)	N/A
30	How do security holders sell theirentitlementsinfullthroughabroker?	N/A

+ See chapter 19 for defined terms.

31	How do security holders sell part oftheir entitlements through a brokerand accept for the balance?	N/A
32	How do security holders dispose oftheir entitlements (except by salethrough a broker)?	N/A
33	+Issue date	N/A

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

N/A

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	N/A
39	+Class+securitiesofforwhichquotation is sought	N/A
40	Do the +securities rank equally in allrespects from the +issue date with anexisting +class of quoted +securities?If the additional +securities do notrank equally, please state:the date from which they dotheextenttowhichtheyparticipate for the next dividend,(inthecaseofatrust,distribution) or interest paymentthe extent to which they do notrankequally,otherthaninrelation to the next dividend,distribution or interest payment	N/A
41	Reason for request for quotationnowExample: In the case of restricted securities, end ofrestriction period(ifissueduponconversionofanother +security, clearly identifythat other +security)	N/A
42	Number and +class of all +securitiesquotedonASX(includingthe+securities in clause 38)	NumberN/A	+ClassN/A

+ 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 is not available now, we 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: 5 August 2014 (Company secretary)

Print name: Roslynn Shand

== == == == ==

+ See chapter 19 for defined terms.

Appendix 3B – Annexure 1

Calculation of placement capacity under rule 7.1 and rule 7.1A for eligible entities

Introduced 01/08/12 Amended 04/03/13

Part 1

Rule 7.1 – Issues exceeding 15% of capitalStep 1: Calculate "A", the base figure from which the placementcapacity is calculated
Add the following:
Number of fully paid +ordinary securities•issued in that 12 month period under anexception in rule 7.2	212,303,648 (1 October 2013)376,236,975 (18 November 2013)
Number of fully paid +ordinary securities•issued in that 12 month period withshareholder approval	26,523,616 (19 August 2013)26,523,640 (5 September 2013)
Number of partly paid +ordinary•securities that became fully paid in that12 month period	-
Note:•Include only ordinary securities here –other classes of equity securities cannotbe added•Include here (if applicable) thesecurities the subject of the Appendix3B to which this form is annexed•It may be useful to set out issues ofsecurities on different dates as separateline items
Subtract the number of fully paid +ordinarysecurities cancelled during that 12 monthperiod	Nil
"A"	1,203,604,886

+ See chapter 19 for defined terms.

Step 2: Calculate 15% of "A"
"B"	0.15
	[Note: this value cannot be changed]
Multiply "A" by 0.15	180,540,733
Step 3: Calculate "C", the amount of placement capacity under rule7.1 that has already been used
Insert number of +equity securities issuedor agreed to be issued in that 12 monthperiod not counting those issued:
•Under an exception in rule 7.2	-
•Under rule 7.1A	-
•With security holder approval under rule7.1 or rule 7.4	113,389,511
Note:•This applies to equity securities, unlessspecifically excluded – not just ordinarysecurities•Include here (if applicable) thesecurities the subject of the Appendix3B to which this form is annexed•It may be useful to set out issues ofsecurities on different dates as separateline items
"C"	113,389,511
Step 4: Subtract "C" from ["A" x "B"] to calculate remainingplacement capacity under rule 7.1
"A" x 0.15	180,540,733
Note: number must be same as shown inStep 2
Subtract "C"	113,389,511
Note: number must be same as shown inStep 3
Total ["A" x 0.15] – "C"	67,151,222
	[Note: this is the remaining placementcapacity under rule 7.1]

+ See chapter 19 for defined terms.

Part 2

Rule 7.1A – Additional placement capacity for eligible entities
Step 1: Calculate "A", the base figure from which the placementcapacity is calculated
"A"	1,203,604,886
Note: number must be same as shown inStep 1 of Part 1
Step 2: Calculate 10% of "A"
"D"	0.10
	Note: this value cannot be changed
Multiply "A" by 0.10	120,360,488
Step 3: Calculate "E", the amount of placement capacity under rule7.1A that has already been used
Insert number of +equity securities issuedor agreed to be issued in that 12 monthperiod under rule 7.1A	120,360,488 (5 August 2014)
Notes:•This applies to equity securities – notjust ordinary securities•Include here – if applicable – thesecurities the subject of the Appendix3B to which this form is annexed•Do not include equity securities issuedunder rule 7.1 (they must be dealt within Part 1), or for which specific securityholder approval has been obtained•It may be useful to set out issues ofsecurities on different dates as separateline items
"E"	120,360,488

+ See chapter 19 for defined terms.

Step 4: Subtract "E" from ["A" x "D"] to calculate remainingplacement capacity under rule 7.1A
"A" x 0.10	120,360,488
Note: number must be same as shown inStep 2
Subtract "E"	120,360,488
Note: number must be same as shown inStep 3
Total ["A" x 0.10] – "E"	Nil
	Note: this is the remaining placementcapacity under rule 7.1A

+ See chapter 19 for defined terms.