SUNSTONE METALS LTD — Capital/Financing Update 2017

Apr 6, 2017

7 April 2017

Southern Finland Gold Project - Update

Highlights

• A large Induced Polarisation (IP) geophysical survey across areas of known gold mineralisation has been completed at the Satulinmäki gold prospect, and processed results are expected in mid-April
• Several highly rated local and regional targets have been identified for follow-up, including some with very significant historical rock chip assays of up to 77g/t gold in addition to assays up to 6.5 g/t gold identified southeast of Satulinmäki
• Next phase of drilling is planned and will be further refined once processing and interpretation of IP data is finalised.

The Directors of Avalon Minerals Limited ("Avalon" or "Company") (ASX:AVI) are pleased to provide an update on progress at the Southern Finland Gold Project.

The compilation of regional, prospect and deposit scale results indicates a large gold mineralised system is present that has largely been untested to date.

Prospect Scale Targeting - IP Survey

The large Induced Polarisation (IP) geophysical survey at the Satulinmäki prospect is now complete with processing expected to be completed by mid-April. The survey covers an area of 1.5 x 1.1kms (Figure 2) and is designed to cover gold mineralisation identified from historical government drilling and recent Avalon drilling. Drilling to date has only covered an area of approximately 300m x 300m and outside this area, known altered outcrops are considered favourable for gold mineralisation. The recent IP survey can assist in mapping the extent of this mineralised system.

Preliminary results from the IP survey suggest that anomalous domains are present, extensive and extend to at least 250m deep. It is interpreted that these anomalous domains are mapping a sulphide envelope to gold mineralisation.

Interpretation of historical data has also shown additional gold mineralised rock approximately 1.5km to the southeast where rock chip samples have returned up to 6.5 g/t Au (Figure 2). The alteration system, as mapped by the distribution of arsenopyrite, also extends to the northwest. This is a very significant development and expands the target area of gold mineralisation at Satulinmäki to nearly 3.5km long and 1 km wide.

7 April 2017

Deposit Scale

Additional intervals from historical government drill holes at Satulinmäki that were not previously assayed have been identified for assay. These will cover areas between known gold lodes, and may identify additional mineralised areas.

Drilling Plans

The next phase of drilling will target definition of high grade zones in the shallow parts of the Satulinmäki gold system (see ASX announcements dated 22 Feb 2017, 14 Nov 2016, and 17 Oct 2016) and will include drilling:

• on the north-western most vein set which has returned results of 1m at 19.5 g/t Au and 2m at 10.5g/t Au correlating along strike for at least 60m.
• on the shallower portions of the main vein (Figure 4), where intervals up to 3m at 5.9g/t Au and 10m at 4.5 g/t Au correlate with deeper intervals of 9.2m at 7.3g/t Au delivering at least a 100m vertical extent.
• on an interpreted third vein set where historical drilling has delivered 1m at 17.8g/t Au and 3m at 5.9g/t Au.

Regional Targeting Results

Ongoing regional targeting and assessments of all available data has identified several priority targets (Figure 3), including some with very significant historical rock chip assays of up to 77g/t Au, and some that correlate with the identification of regional structures. These areas will be the subject of follow-up programs to define prospect-scale targets.

Gold mineralisation appears to be controlled by a combination of northwest trending structures and arcuate east-west structures, with local splay faults. Alignment of areas of very significant anomalous gold values in rock chips and boulder samples along these structures provides a strong targeting regime. Several areas of gold anomalism have been identified associated with regional structures that incorporate the Satulinmäki system, and occur along a strike length of 16km (Figure 3).

Updates on progress at Satulinmäki will be provided during April with processed geophysical IP data and drill planning.

Figure 1: Location of the Southern Finland Gold Project, and Satulinmäki prospect.

Figure 2: Satulinmäki Prospect showing area of the completed IP geophysical survey within the large gold-bearing alteration area that extends along a strike extent of 3km, and the location of the cross section shown in Figure 4.

Figure 3: Regional geological interpretation showing significant boulder rock chip assays from GTK boulder analyses, and the interpreted controlling structures in this area, including Satulinmäki. See Figure 1 for details of Avalon Exploration Reservations.

Figure 4: Satulinmäki Gold Prospect cross section through the main vein sets. The yellow areas are interpreted gold mineralised vein sets and breccia zones shown dipping and plunging to the northwest (see ASX announcements on 17th Oct 2016 and 14th Nov 2016).

About Avalon

Avalon has an advanced portfolio of exploration and development projects in Scandinavia. The portfolio comprises:

• 1. The Viscaria Copper Project in northern Sweden has a completed Scoping Study (see ASX announcements dated 16th December 2015 and 5th April 2016) and is moving towards PFS and permitting to allow for mine development. The project has a mineral resource estimate of 52.4 Mt at 1.2% Cu (see Table 1 below). Considerable exploration upside exists and low technical risk extensional drill targets have been defined.
• 1. The Southern Finland Gold Project, which includes the Satulinmäki and Riukka gold prospects. These prospects have received shallow diamond drilling by the Geological Survey of Finland (GTK) and Avalon Minerals has now completed a 7-hole diamond drilling program. Intersections from GTK include 18m @ 4.1g/t Au from 50m downhole, including 3m @ 9.3g/t Au, and 4m @ 10.3g/t Au in drill hole R391 at Satulinmäki. Intersections by Avalon include 23.5m at 3.3g/t in SMDD007 and 2m at 10.5g/t in SMDD005. The Satulinmäki and Riukka gold prospects are part of an earn-in JV with Canadian company Nortec Minerals, where Avalon can earn up to an 80% interest (see ASX announcement dated 19th May 2016). Avalon has already earned a 51% interest, and has also acquired a significant land position in its own right in the district.
• 1. The Kietyönmäki Lithium Pegmatite Project in southern Finland where Avalon has completed a 6-hole drilling program and channel sampling over outcropping spodumene-bearing pegmatites. The project is part of the earn-in JV with Canadian company Nortec Minerals. Historical drilling by GTK in the mid 1980's identified a high grade lithium pegmatite deposit including diamond drill intersections of up to 18m at 1.8% Li2O. Drilling by Avalon has returned 24.2m at 1.44% Li2O (see ASX announcement dated 12th September 2016).

Resource Area	Classification	Tonnes(Mt)	Cu Grade(%)	Contained Cu(kt)
	Measured	14.44	1.7	240.0
	Indicated	4.69	1.2	57.2
A Zone	Inferred	2.48	1.0	25.5
	Subtotal	21.61	1.5	322.7
	Measured	0.12	1.3	1.6
	Indicated	4.12	0.7	29.7
B Zone	Inferred	15.41	0.8	118.7
	Subtotal	19.65	0.8	149.0
	Indicated	3.11	0.81	25.2
	Inferred	0.01	0.32	0.02
	Subtotal	3.11	0.81	25.2
D Zone	Indicated	7.26	1.37	99.8
	Inferred	0.78	1.57	12.2
	Subtotal	8.03	1.39	111.9
Overall Cu	Total	52.4	1.2	608.9

Table 1 Total combined resource figure for A Zone, B Zone and D Zone at Viscaria

Note: D Zone subtotals represent open pit at an average grade of 0.81% copper, and underground at an average grade of 1.39% copper.

Refer to Annual Report released 16 August 2016 for the Competent Persons Statement in relation to the estimates of mineral resources. The Company confirms that it is not aware of any new information or data that materially affects the information and all material assumptions and technical parameters underpinning the estimates continue to apply and have not materially changed.

Competent Persons Statement

The information in this report that relates to exploration results is based upon information reviewed by Dr Bruce Rohrlach who is a Member of the Australasian Institute of Mining and Metallurgy. Dr Rohrlach 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 2012 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Dr Rohrlach consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

For further information, please visit www.avalonminerals.com.au Mr Malcolm Norris Managing Director Avalon Minerals Ltd Tel: 07 3368 9888 Email: malcolm.norris@avalonminerals.com.au

APPENDIX 1

The following Table and Sections are provided to ensure compliance with the JORC Code (2012 Edition)

Criteria	JORC Code explanation	Commentary
Samplingtechniques	•Nature and quality of sampling(e.g. cut channels, random chips, orspecific specialised industry standard measurement toolsappropriate to the minerals under investigation, such as downholegamma sondes, or handheld XRF instruments, etc.). These examplesshould not be taken as limiting the broad meaning of sampling.	•The results announced herein "Regional targeting results" and shown inFigure 3are from historical boulder rock chipsamples compiled from reportssourced throughthe Geological Survey of Finland (GTK).
	•Include reference to measures taken to ensure sample representivityand the appropriate calibration of any measurement tools orsystems used.	•Samples collected from boulders at surface.
	•Aspects of the determination of mineralisation that are Material tothe Public Report. In cases where 'industry standard' work hasbeen done this would be relatively simple (e.g. 'reverse circulationdrilling was used to obtain 1 m samples from which 3 kg waspulverised to produce a 30 g charge for fire assay'). In other casesmore explanation may be required, such as where there is coarsegold that has inherent sampling problems. Unusual commodities ormineralisation types (e.g. submarine nodules) may warrantdisclosure of detailed information.	•Rock chip samples were collectedfrom boulders and outcropsand analysedby GTK.
Drillingtechniques	•Drill type (eg core, reverse circulation, open-hole hammer, rotaryair blast, auger, Bangka, sonic, etc) and details (e.g. core diameter,triple or standard tube, depth of diamond tails, face-sampling bit orother type, whether core is oriented and if so, by what method, etc).	•Results do not refer to drilling samples.•The drilling information pertaining to Figure 4has been previously reportedAppendix 1 of ASX announcements on the 17th October 2016 and 14th Novin2016.
Drill samplerecovery	•Method of recording and assessing core and chip sample recoveriesand results assessed.	•Results do not refer to drilling samples.
	•Measures taken to maximise sample recovery and ensurerepresentative nature of the samples.	•Results do not refer to drilling samples.
	•Whether a relationship exists between sample recovery and gradeand whether sample bias may have occurred due to preferentialloss/gain of fine/coarse material.	•No relationship between sample recovery and grade has been established.

TABLE 1 – Section 1: Sampling Techniques and Data

Criteria	JORC Code explanation	Commentary
Logging	•Whether core and chip samples have been geologically andgeotechnically logged to a level of detail to support appropriateMineral Resource estimation, mining studies and metallurgicalstudies.	•Results do not refer to drilling samples and therefore not to drill corelogging.
	•Whether logging is qualitative or quantitative in nature. Core (orcostean, channel, etc.) photography.	•Results do not refer to drilling samples and therefore not to drill corelogging.
	•The total length and percentage of the relevant intersections logged.	•Results do not refer to drilling samples and therefore not to drill corelogging.
Sub-samplingtechniquesand sample	•If core, whether cut or sawn and whether quarter, half or all coretaken.	•Not core samples.•The drilling information pertaining to Figure 4has been previously reportedAppendix 1 of ASX announcements on the 17th October 2016 and 14thinNov 2016.
preparation	•If non-core, whether riffled, tube sampled, rotary split, etc. andwhether sampled wet or dry.	•Rock chip samples assumed to be whole sample with no splitting.
	•For all sample types, the nature, quality and appropriateness of thesample preparation technique.	•Sample preparation was undertaken at the GTKlaboratory in Finland and isconsidered appropriate for assessing a gold mineralised system.Extensivesampling and preparation by GTK is undertaken in this manner.
	•Quality control procedures adopted for all sub-sampling stages tomaximise representivity of samples.	•GTK manage QAQC procedures which are considered adequate to provide aguide to anomalous gold mineralised areas.
	•Measures taken to ensure that the sampling is representative of thein situ material collected, including for instance results for fieldduplicate/second-half sampling.	•No record of these procedures.
	•Whether sample sizes are appropriate to the grain size of thematerial being sampled.	•Sample sizes are considered to be appropriate and correctly represent thestyle and type of mineralisation.
Quality ofassay data andlaboratorytests	•The nature, quality and appropriateness of the assaying andlaboratory procedures used and whether the technique isconsidered partial or total.	•Au was assayed byGTK method 521U-K (Au, Pd, Te) -Alkuainemääritykset GFAAS-tekniikalla -Elemental determinationsbyGraphite Furnace Atomic Absorption Spectroscopytechnique
	•For geophysical tools, spectrometers, handheld XRF instruments,etc., the parameters used in determining the analysis includinginstrument make and model, reading times, calibrations factorsapplied and their derivation, etc.	•No handheld XRF measurements were taken as part of this sampling.
	•Nature of quality control procedures adopted (e.g. standards,blanks, duplicates, external laboratory checks) and whetheracceptable levels of accuracy (i.e. lack of bias) and precision havebeen established.	•The Geological Survey of Finland (GTK)standard internal QAQCprocedures which are considered adequateat this stage and scale of mineralexploration.

Criteria	JORC Code explanation	Commentary
Verification ofsampling and	•The verification of significant intersections by either independent oralternative company personnel.	•Therehas been no independent verification of these GTK results byAvalon.Such work will be undertaken as part of the next phase of exploration byAvalon.
assaying	•The use of twinned holes.	•No twinning ofholes.
	•Documentation of primary data, data entry procedures, dataverification, data storage (physical and electronic) protocols.	•The Finnish Geological Survey (GTK) data have been sighted in availabledatabases.
	•Discuss any adjustment to assay data.	•Assay data was not adjusted.Reported numbers have been standardised to g/t(ppm).
Location ofdata points	•Accuracy and quality of surveys used to locate drill holes (collarand down-hole surveys), trenches, mine workings and otherlocations used in Mineral Resource estimation.	•Historical hole locations are shown on detailed maps from GTKreports andhave been digitised by Avalon.
	•Specification of the grid system used.	•The current projection used for map preparation in Finland is ETRSTM35FIN, with Datum EUREF89.
	•Quality and adequacy of topographic control.	•Detailed topographic dataand digital mapsare available and have been usedto apply topographic control.
Data spacing	•Data spacing for reporting of Exploration Results.	•Data spacing is random and is dictated by boulder and outcrop locations.
anddistribution	•Whether the data spacing and distribution is sufficient to establishthe degree of geological and grade continuity appropriate for theMineral Resource and Ore Reserve estimation procedure(s) andclassifications applied.	•No JORC 2012 mineral resource has yet been estimatedfor the SatulinmäkiGold Project, or other regional gold occurrences.
	•Whether sample compositing has been applied.	•No sample compositing was done.
Orientation ofdata in	•Whether the orientation of sampling achieves unbiased sampling ofpossible structures and the extent to which this is known,considering the deposit type.	•Sampling points have random orientations and so are appropriate for regionalscale assessment for potential mineralised districts.
relation togeologicalstructure	•If the relationship between the drilling orientation and theorientation of key mineralised structures is considered to haveintroduced a sampling bias, this should be assessed and reported ifmaterial.	•Results do not refer to drilling samples.•The company does not believe that any sample bias had been introducedwhich could have a material effect.
Samplesecurity	•The measures taken to ensure sample security.	•GTK's sampling procedures indicate individual samples were given dueattention.
Audits orreviews	•The results of any audits or reviews of sampling techniques anddata.	•No audits were completed.

Criteria	JORC Code explanation	Commentary
Mineraltenement andland tenurestatus	•Type, reference name/number, location and ownership includingagreements or material issues with third parties such as jointventures, partnerships, overriding royalties, native title interests,historical sites, wilderness or national park and environmentalsettings.	•The Satulinmäki gold occurrence is covered by approved explorationclaims, under the Finnish Mining Act. Regional areas are covered bygranted Exploration Reservations.
	•The security of the tenure held at the time of reporting along withany known impediments to obtaining a licence to operate in the area.	•Exploration claims are valid and are held by Nortec Minerals Corp. Avalonhas a joint venture with Nortec to explore the claimsand has earned a 51%interest.The Exploration Reservations are held 100% by Avalon for thepurpose of gold exploration.
Explorationdone by otherparties	•Acknowledgment and appraisal of exploration by other parties.	•The historic drilling at Satulinmäki was undertaken by the FinnishGeological Survey in 2001-2005, and was re-logged and re-sampled byNortec Minerals Corp. in 2010 and Avalon in 2016.•GTK has undertaken several phases of regional scale exploration includinggeological mapping, sampling and analysis of samples presented by thirdparties.
Geology	•Deposit type, geological setting and style of mineralisation.	•The Satulinmäki gold occurrence is interpreted to be an orogenic goldsystem hosted by a series of quartz veins.
Drill holeInformation	•A summary of all information material to the understanding of theexploration results including a tabulation of the followinginformation for all Material drill holes:a.easting and northing of the drill hole collarb.elevation or RL (Reduced Level –elevation above sea level inmetres) of the drill hole collarc.dip and azimuth of the holed.down hole length and interception depthe.hole length.	•No drilling completed. Assay results relate to regional boulder and outcroprock chip samples only.•The drilling information pertaining to Figure 4has been previously reportedAppendix 1 of ASX announcements on the 17th October 2016 and 14thinNov 2016.
	•If the exclusion of this information is justified on the basis that theinformation is not Material and this exclusion does not detract fromthe understanding of the report, the Competent Person shouldclearly explain why this is the case.	•Assay results reported do not relate to drilling samples.
Dataaggregationmethods	•In reporting Exploration Results, weighting averaging techniques,maximum and/or minimum grade truncations (e.g. cutting of highgrades) and cut-off grades are usually Material and should bestated.	•Results reported are as received from the assay laboratory. No gradetruncations have been applied.

TABLE 1 – Section 2: Exploration Results

Criteria	JORC Code explanation	Commentary
	•Where aggregate intercepts incorporate short lengths of high graderesults and longer lengths of low grade results, the procedure usedfor such aggregation should be stated and some typical examples ofsuch aggregations should be shown in detail.	•No aggregations applied.
	•The assumptions used for any reporting of metal equivalent valuesshould be clearly stated.	•Metal Equivalents have not been applied.
Relationshipbetween	•If the geometry of the mineralisation with respect to the drill-holeangle is known, its nature should be reported.	•The orientations of the mineralised areasare interpreted to be sub-verticalbased on geological mapping.
mineralisationwidths andinterceptlengths	•If it is not known and only the down hole lengths are reported, thereshould be a clear statement to this effect (e.g. 'down hole length, truewidth not known').	•No drilling completed to date.
Diagrams	•Appropriate maps and sections (with scales) and tabulations ofintercepts should be included for any significant discovery beingreported. These should include, but not be limited to a plan view ofdrill hole collar locations and appropriate sectional views.	•See main announcement for appropriate diagrams and tabulations.
Balancedreporting	•Where comprehensive reporting of all Exploration Results is notpracticable, representative reporting of both low and high gradesand/or widths should be practiced to avoid misleading reporting ofExploration Results.	•Both recent and historical results are included in this announcement.
Othersubstantiveexplorationdata	•Other exploration data, if meaningful and material, should bereported) including (but not limited to): geological observations;geophysical survey results; geochemical survey results; bulk samples–size and method of treatment; metallurgical test results; bulkdensity, groundwater, geotechnical and rock characteristics;potential deleterious or contaminating substances.	•No other significant geological data has been reviewed at this stage.
Further work	•The nature and scale of planned further work (e.g. tests for lateralextensions or depth extensions or large-scale step-out drilling).	•Follow-up explorationis expected and will be planned during 2017.•Comprehensive data compilation is ongoing. The GTK have extensive openfile data available. Field work is ongoing during 2017.
	•Diagrams clearly highlighting the areas of possible extensions,including the main geological interpretations and future drillingareas, provided this information is not commercially sensitive.	•See main announcement for appropriate diagrams which show potentialareas of additional gold mineralisation.