SUNSTONE METALS LTD — Interim / Quarterly Report 2007

Oct 29, 2007

Appendix 5B

Rule 5.3

Mining exploration entity quarterly report

Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001.

Name of entity

AVALON MINERALS LTD

68 123 184 412 September 2007

ABN Quarter ended ("current quarter")

(

Year to date

.3.....months)

Current quarter $A'000

Consolidated statement of cash flows

Cash flows related to operating activities

					$A'000
1.1	Receipts from product sales and related debtors
1.2	Payments for(a)evaluation	exploration	and	(244)	(244)
		(b) development
		(c) production
		(d) administration		(249)	(249)
1.3	Dividends received
1.4	Interest and other items of a similar naturereceived			44	44
1.5	Interest and other costs of finance paid
1.6	Income taxes paid
1.7	Other (provide details if material)
	Net Operating Cash Flows			(449)	(449)
	Cash flows related to investing activities
1.8	Payment for purchases of:	(a)prospects		(100)	(100)
		(b)equity
	investments
		(c)other	fixed	(61)	(61)
	assets
1.9	Proceeds from sale of:	(a)prospects(b)equity
	investments
		(c)other	fixed
	assets
1.10	Loans to other entities
1.11	Loans repaid by other entities
1.12	Other (provide details if material)			(11)	(11)
	Net investing cash flows			(172)	(172)
1.13	Totaloperatingand	investingcash	flows	(621)	(621)
	(carried forward)

+ See chapter 19 for defined terms.

1.13	Totaloperatingandinvestingcashflows(brought forward)	(621)	(621)
1.141.151.161.171.181.19	Cash flows related to financing activitiesProceeds from issues of shares, options, etc.Proceeds from sale of forfeited sharesProceeds from borrowingsRepayment of borrowingsDividends paidOther (provide details if material)
	Net financing cash flows
	Net increase (decrease) in cash held	(621)	(621)
1.201.21	Cash at beginning of quarter/year to dateExchange rate adjustments to item 1.20	3,144	3,144
1.22	Cash at end of quarter	2,523	2,523

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

		Current quarter$A'000
1.23	Aggregate amount of payments to the parties included in item 1.2	112
1.24	Aggregate amount of loans to the parties included in item 1.10

1.25 Explanation necessary for an understanding of the transactions Directors fees and superannuation

Non-cash financing and investing activities

2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows

4,000,000 Shares issued for purchase of Resource Properties Pty Ltd & tenement package.

2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest

Financing facilities available

Add notes as necessary for an understanding of the position.

Amount available $A'000 Amount used $A'000

+ See chapter 19 for defined terms.

3.1	Loan facilities
3.2	Credit standby arrangements

Estimated cash outflows for next quarter

		$A'000
4.1	Exploration and evaluation	270
4.2	Development
	Total	270

Reconciliation of cash

Reconciliation of cash at the end of the quarter (asshown in the consolidated statement of cash flows) tothe related items in the accounts is as follows.		Current quarter$A'000	Previous quarter$A'000
5.1	Cash on hand and at bank	2,523	3,144
5.2	Deposits at call
5.3	Bank overdraft
5.4	Other (provide details)
	Total: cash at end of quarter (item 1.22)	2,523	3,144

Changes in interests in mining tenements

		Tenementreference	Nature of interest(note (2))	Interest atbeginningof quarter	Interest atend ofquarter
6.1	Interests in miningtenements relinquished,reduced or lapsed
6.2	Interests in miningtenements acquired orincreased	EPM15416E80/3627E80/3628E80/3629E80/3630E80/3631E80/3632E80/3633E80/3634E80/3635	Application grantedApplication grantedApplication grantedApplication grantedApplication grantedApplication grantedApplication grantedApplication grantedApplication grantedApplication granted		100%100%100%100%100%100%100%100%100%100%

+ See chapter 19 for defined terms.

Issued and quoted securities at end of current quarter

Description includes rate of interest and any redemption or conversion rights together with prices and dates.

		Total number	Number quoted	Issuepriceper	Amount paid up per
				security (see note	security (see note 3)
7.1	Preference			3) (cents)	(cents)
	+securities
	(description)
7.2	Changes during
	quarter(a) Increases
	through issues
	(b) Decreases
	through returns
	of capital, buy
	backs,redemptions
7.3	+Ordinary	44,000,000	24,225,000
	securities
7.4	Changes during
	quarter(a) Increases	4,000,000	4,000,000	-	-
	through issues
	(b) Decreases	-	-	-	-
	through returns
	of capital, buy
7.5	backs+Convertible
	debt securities
	(description)
7.6	Changes during
	quarter
	(a) Increasesthrough issues
	(b) Decreases
	through
	securities
	matured,
7.7	convertedOptions			Exercise price	Expiry date
	(description and	5,400,000		20 cents	31/01/2010
	conversion	5,600,000		40 cents	31/01/2009
	factor)
7.8	Issued during
	quarter
7.9	Exercised duringquarter
7.10	Expired during
	quarter
7.11	Debentures
	(totals only)
7.12	Unsecured
	notes (totalsonly)

+ See chapter 19 for defined terms.

Compliance statement

• 1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 4).
• 2 This statement does /does not* (delete one) give a true and fair view of the matters disclosed.

Sign here: ............................................................ Date: .. 30/10/07 
         (Director/Company secretary)

Print name: Desmond Kelly

Notes

• 1 The quarterly report provides a basis for informing the market how the entity's activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.
• 2 The "Nature of interest" (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.
• 3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities*.*
• 4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: Statement of Cash Flows apply to this report.
• 5 Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

== == == == ==

+ See chapter 19 for defined terms.