SUNSTONE METALS LTD — Interim / Quarterly Report 2015

Apr 23, 2015

24 April 2015

AVALON MINERALS LTD MARCH 2015 QUARTERLY REPORT

Viscaria Copper Project, Sweden (Avalon - 100%)

• Diamond drilling commenced at Viscaria D Zone;
• Copper anomaly identified through bedrock auger sampling over the 900m x 300m Nihka magnetic target;
• Copper anomalism at Nihka is open along strike and currently has been defined over >600m;
• Environmental and Social Impact Assessment (ESIA) process on track.

Corporate Highlights

• A$1.54 million net Research & Development tax incentive received;
• Placement to existing major shareholders and new, professional investors to raise a total of AUD$2 million at $0.025 per share:
  • o 33.5M shares issued under the Company's available capacity under the ASX Listing Rules to raise $0.84 million;
  • o a further 46.4 million shares to be issued on receipt of shareholder approval to raise $1.16M;
  • o General Meeting to be held 28 April 2015;
• Half Year Report to 31 Dec 2014 released;
• Change of registered office;
• Cash at bank of $3.4 million;
• Release of Breakaway Research Report, 'Dirt Cheap Dirt". Speculative Buy recommendation.

Exploration and Development Activities

Field activities are well underway on the company's flagship Viscaria Copper Project. Initial drilling results beneath D Zone extend the known mineralisation at depth, and geochemical surveys over the new Nihka target have generated a significant copper anomaly that requires drill testing (Figure 2).

Nihka Target

The Nihka target is defined by a 900m x 300m magnetic anomaly approximately 3km south of D Zone, and 2 km south of A Zone (Figure 3). The anomaly displays similarities to the magnetic response of the Viscaria D Zone copper-magnetite deposit, but is significantly larger (Figure 3).

A 42 hole auger drilling program was completed in February to sample the base of till and the uppermost bedrock. The drilling demonstrated that copper anomalism and alteration extends over at least 600m of strike extent and is open to the east and west (Figure 4). Four of the holes intersected trace visible chalcopyrite (a copper bearing sulphide mineral). The copper bedrock anomalism overlaps the northern margin of the magnetic anomaly. The host rocks are mafic volcanic rocks, with local areas of gabbroic and other intrusive rocks. The domains of magnetite and copper anomalism correlate with areas of enhanced epidote and potassium feldspar alteration.

Ongoing magnetic modelling is underway which will allow for the definition of diamond drill hole targets and drilling is expected to commence in the current quarter.

Viscaria D Zone drilling

Diamond drill hole VDD183 (Figure 2) was drilled to target high grade copper mineralisation approximately 120m down plunge from the previously drilled hole VDD166, which intersected 5.9m at 1.5% Cu and 13m at 1.6% Cu. Hole VDD183 was completed after the quarter end and assay results are expected to be returned in early May. Preliminary results were announced to the market on 20th April and reported variable amounts of chalcopyrite within ironstone from 530m to 600m downhole.

Further drilling is being undertaken at D Zone. Hole VDD 184 was collared 230m south of VDD 183, but was abandoned at 73m due to buckled casing. Hole VDD 185 has commenced and is located adjacent to VDD 184 (Figure 2).

Once drilling is completed at D Zone the drill rig will move to A Zone targeting high grade mineralisation in the southern area. Specifically, a shallow zone where historical drill holes have returned intersections including 4.7m at 3.5% Cu in D-7843 and 3.4m at 2.9% Cu in D-6114, and in the deeper main down plunge domain where structural interpretation suggests a shallowing of the plunge orientation, and adjacent historical holes have intersected up to 6.5m at 3.4% Cu in hole VDD127.

The drilling program is aimed at further definition of high grade copper zones to support an updated resource estimate on a high grade copper only development scenario at Viscaria, to be delivered later in 2015, followed by an updated Scoping Study.

Discovery Zone

Following submittal of the amended application for the Exploitation Concession at Discovery Zone, Avalon has focussed on stakeholder engagement activities. A social impact assessment is currently being finalised through a consulting group.

Development Studies at Viscaria

Further development studies are underway and are assessing lower capital expenditure, higher grade copper development opportunities for Viscaria. These development scenarios will be advanced during 2015. Preliminary results are very encouraging and the current drilling program at Viscaria is targeted on delivering copper mineralised intersections that will support a resource estimate update.

Environmental and Social Impact Assessment (ESIA)

The Viscaria ESIA process has commenced. These activities will deliver the necessary documents for application for a Permit to Mine from the Swedish Land and Environmental Court. The process is focussed on the immediate Viscaria area and supports planning for mine development within the granted Exploitation Concessions K3, K4, and K7.

Corporate

Cash Resources - a Research & Development tax incentive of net A$1.54 million was received in March 2015 for eligible Research & Development expenditure for the 2012-13 financial year.

The Company's unaudited cash position for March 31, 2015 is A$3.4 million.

Subject to shareholder approval at the General Meeting on April 28 2015, an additional A$1.16 million will be received.

Director to Retire

Mr Paul Niardone has informed the Company of his intention to retire as a non-executive director of Avalon, effective from the close of the General Meeting to be held on 28 April 2015.

The Board thanks Mr Niardone for his commitment and contribution to the Company over the past three years and wishes him success in his future endeavours.

General Meeting

On 25 March 2015, the Company announced the dispatch of a Notice of General Meeting to all shareholders. The General Meeting will be held at 2.00pm on Tuesday, 28 April 2015 at the company's registered office at 9 Gardner Close Milton, Queensland. Shareholder approval will be sought for the ratification of the prior issues of shares and options, approval for participation in the placement for Malcolm Norris and Graham Ascough, and the approval to issue up to 50M new shares.

Capital Raising

On 2 March 2015, Avalon announced a placement to raise up to AUD$2 million (before costs). The funds raised from the placement to existing shareholders and new, professional investors in Australia and Europe will be used to progress the company's Viscaria Copper Project in northern Sweden and for working capital. Viaticus Capital LLC (New York), the Company's corporate advisors, assisted with the placement.

The issue and allotment of the initial 33,583,902 shares, which is within the Company's available capacity under the ASX Listing Rules, was completed on 9 March 2015.

Half Year Report to 31 December 2014

The Company released its Half Year Financial Report during the quarter.

Change of Registered Office

Effective 25 February 2015, the Company's registered office and principal place of business will be located at 9 Gardner Close, Milton, Qld 4064.

The Company's postal address and office contact information remains unchanged.

Research report

On 18 February 2015, Avalon announced that Breakaway Research had completed a commissioned research report on the Company. The report titled 'Dirt Cheap Dirt' included a Speculative Buy recommendation.

To view a copy of the report, please visit our website: www.avalonminerals.com.au. The report is located under Investors/Brokers research

Shareholder Information

As at 31 March 2015, the Company had 178,319,478 fully paid ordinary shares on issue and approximately 927 shareholders.

Notes Specific – March 2015 Quarter ASX Announcements

The following announcements were lodged with the ASX during the Quarter. Further details (including JORC 2012 Code Reporting Tables, where applicable) for the results summarised above can be found in the announcements:

Drilling and Corporate Update	31 Mar 2015
Notice of General Meeting	25 Mar 2015
ASX Query and Response Appendix 3Y	16 Mar 2015
Form 604 Substantial Holder Change	13 Mar 2015
AVI Half Year Report to 31 Dec 2014	12 Mar 2015
Form 605 Ceasing to be substantial shareholder	12 Mar 2015
Form 604 Substantial Holder Change	11 Mar 2015
Disclosure LR 3.10.5A	11 Mar 2015
Cleansing Notice	11 Mar 2015
Appendix 3B (issue of shares and options)	11 Mar 2015
Change of Director's Interest Notice	03 Mar 2015
Avalon Minerals to Complete $2M Placement	02 Mar 2015
Trading Halt	26 Feb 2015
Change of registered office	26 Feb 2015
Research Report AVI	18 Feb 2015
Investor Presentation January 2015	02 Feb 2015
Quarterly Activities and Cashflow Reports to 31 Dec 2014	28 Jan 2015
Drilling confirms new Footwall Copper Zone	12 Jan 2015
Drilling and Corporate Update	06 Jan 2015

Figure 1: Project Location

Figure 2: Location of VDD 183 (completed) and VDD 185 (in progress) at the Viscaria Copper Project, D Zone

Figure 3: Location of the Nihka target relative to the Viscaria A, B and D Zone deposits. Background image is TMI magnetics

Figure 4: Nihka target – backdrop image is TMI magnetics. Auger holes shown on 4 x 200m spaced traverses. Colour coding represents copper anomalism. Stars indicate samples with visible trace chalcopyrite.

TENEMENT SCHEDULE

At the end of the quarter, the Company holds the following tenements:

Tenement Holder	Tenement Name	Location	Status	Ownership
Avalon Minerals Viscaria AB	Viscaria No 1	Norrbotten, Sweden	Granted	100%
Avalon Minerals Viscaria AB	Viscaria No 2	Norrbotten, Sweden	Granted	100%
Avalon Minerals Viscaria AB	Viscaria No 3	Norrbotten, Sweden	Granted	100%
Avalon Minerals Viscaria AB	Viscaria No 101	Norrbotten, Sweden	Granted	100%
Avalon Minerals Viscaria AB	Viscaria No 107	Norrbotten, Sweden	Granted	100%
Avalon Minerals Viscaria AB	Viscaria No 108	Norrbotten, Sweden	Granted	100%
Avalon Minerals Viscaria AB	Viscaria No 112	Norrbotten, Sweden	Granted	100%
Avalon Minerals Viscaria AB	Viscaria No 113	Norrbotten, Sweden	Granted	100%
Avalon Minerals Viscaria AB	Huornas No 1	Norrbotten, Sweden	Granted	100%
Avalon Minerals Viscaria AB	Huornas No 2	Norrbotten, Sweden	Granted (New)	100%
Avalon Minerals Viscaria AB	Viscaria K No 3	Norrbotten, Sweden	Granted	100%
Avalon Minerals Viscaria AB	Viscaria K No 4	Norrbotten, Sweden	Granted	100%
Avalon Minerals Viscaria AB	Viscaria K No 7	Norrbotten, Sweden	Granted	100%
Avalon Minerals Adak AB	Rakkurijärvi No 1	Norrbotten, Sweden	Granted	100% over the areacovered by the HNR*acquisition agreement
Avalon Minerals Adak AB	Rakkurijärvi K No 1	Norrbotten, Sweden	Application	100% (upon grant andonce acquisition fromHNR* complete)

*****HNR – Hannans Reward Ltd (ASX:HNR)

Competent Persons Statement

The information in this report that relates to exploration results is based upon information reviewed by Mr Malcolm Norris who is a Fellow of the Australasian Institute of Mining and Metallurgy. Mr Norris is a fulltime 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". Mr Norris consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

DIRECTORY

AVALON MINERALS LIMITED ABN 68 123 184 412

Stock Exchange Listing

Australian Stock Exchange ASX Code: AVI

Web site: www.avalonminerals.com.au Email: info@avalonminerals.com.au

Investor Information Contacts:

Ms Roslynn Shand - Company Secretary Avalon Minerals Limited Tel: 07 3368 9888 Mob: 0407 413 666 Email: ros.shand@avalonminerals.com.au

Shareholder Enquiries: Registered Office:

Share registry matters should be directed to:

Computershare Investor Services Milton Queensland 4064 Phone: 1300 850 505 Phone: 07 3368 9888 Website: www.computershare.com.au Fax: 07 3368 9899

Issued capital:

Ordinary shares: 178,319,478 (AVI) (at 31 March 2015)

Directors: Company Secretary:

9 Gardner Close

Graham Ascough – Chairman Roslynn Shand Malcolm Norris – CEO/Managing Director Crispin Henderson – Non-Executive Director Don Hyma - Non-Executive Director Paul Niardone - Non-Executive Director

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

Avalon Minerals Limited T: 07 3368 9888 E: info@avalonminerals.com.au www.avalonminerals.com.au

Appendix 5B

Rule 5.3

Mining exploration entity quarterly report

Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10

Name of entity

Avalon Minerals Limited

68 123 184 412 31 March 2015

ABN Quarter ended ("current quarter")

Current quarter $A'000

Year to date (9 months)

Consolidated statement of cash flows

Cash flows related to operating activities

			$A'000
1.1	Receipts from product sales and related debtors	-	79
1.2	Payments for(a) exploration & evaluation(b) development(c) production	(567)--	(1,719)--
	(d) administration	(416)	(1,478)
1.3	Dividends received	-	-
1.4	Interest and other items of a similar naturereceived	51	93
1.5	Interest and other costs of finance paid	-	-
1.6	Income taxes received	1,708	3,075
	(gross amount - R&D tax rebate)
1.7	Other (provide details if material)	-	-
	Net Operating Cash Flows	775	50
1.8	Cash flows related to investing activitiesPayment for purchases of:
	(a) prospects	-	-
	(b) equity investments	-	-
	(c) other fixed 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)	-	-
	Net investing cash flows	-	-
1.13	Total operating and investing cash flows
	(carried forward)	775	50

+ See chapter 19 for defined terms.

1.13	Total operating and investing cash flows (broughtforward)	775	50
	Cash flows related to financing activities
1.14	Proceeds from issues of shares, options, etc.	840	2,752
1.15	Proceeds from sale of forfeited shares	-	-
1.16	Proceeds from borrowings	-	-
1.17	Repayment of borrowings	-	-
1.18	Dividends paid	-	-
1.19	Capital raising costs	(22)	(103)
	Net financing cash flows	817	2,649
	Net increase (decrease) in cash held	1,592	2,699
1.20	Cash at beginning of quarter/year to date	1,802	684
1.21	Exchange rate adjustments to item 1.20	14	25
1.22	Cash at end of quarter	3,408	3,408

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	76
1.24	Aggregate amount of loans to the parties included in item 1.10	-

1.25 Explanation necessary for an understanding of the transactions Director's remuneration. 76

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
• 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

Nil

Nil

+ See chapter 19 for defined terms.

Financing facilities available

Add notes as necessary for an understanding of the position.

		Amount available	Amount used
		$A'000	$A'000
3.1	Loan facilities	-	-
3.2	Credit standby arrangements	-	-

Estimated cash outflows for next quarter

	Total	1,795
4.4	Administration	330
4.3	Production	-
4.2	Development	-
4.1	Exploration and evaluation	1,465
		$A'000

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	489	170
5.2	Deposits at call	2,918	1,632
5.3	Bank overdraft	-	-
5.4	Other (provide details)	-	-
	Total: cash at end of quarter (item 1.22)	3,408	1,802

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	Nil
6.2	Interests in miningtenements acquired orincreased	Nil

+ 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	Issue price persecurity (see note3) (cents)	Amount paid upper security (seenote 3) (cents)
7.1	Preference+securities(description)	-	-	-	-
7.2	Changes duringquarter	-	-	-	-
7.3	+Ordinarysecurities	178,319,478	178,319,478
7.4	Changes duringquarter(a)Increases- Placementparticipation	33,583,870	33,583,870	$0.025	$0.025
	approved(b) Decreasesthrough returns ofcapital, buy-backs	-	-	-	-
7.5	+Convertible debtsecurities	-	-	-	-
	(description)
7.6	Changes duringquarter	-	-	-	-
7.7	Options			Exercise price	Expiry date
	(description andconversion factor)	2,600,0002,100,000	NilNil	50 cents6 cents	30/09/201503/11/2017
		1,000,000	Nil	8 cents	12/01/2018
		2,500,000	Nil	6 cents	03/11/2019
		1,000,000	Nil	8 cents	12/01/2020
	PerformanceRights	662,500		Nil
7.8	Issued duringquarter	Options1,000,000	Nil	Exercise price6 cents	Expiry date12/01/2018
		1,000,000	Nil	8 cents	12/01/2020
7.9	Exercised duringquarter	-	-	-	-
7.10	Expired duringquarterOptions	-	-	-	-
	Performance Rights	325,000	-	-	-
7.11	Debentures(totals only)	-	-
7.12	Unsecured notes(totals only)	-	-

+ 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 5).
• 2 This statement does give a true and fair view of the matters disclosed.

(Company Secretary)

Sign here: ............................................................ Date: 24 April 2015

Print name: ROSLYNN SHAND

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 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report.
• 5 Accounting Standards ASX will accept, for example, the use of International Financial Reporting 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.