25 OCTOBER 2018

SEPTEMBER 2018 QUARTERLY ACTIVITIES REPORT

Bramaderos Gold-Copper Project, Ecuador (Sunstone earning up to 80%)

Scout (reconnaissance) drilling initiative announced by the Ecuadorian Ministry of Oil, Mining and Energy (MERNNR). This will allow drilling from up to 40 platforms within a Mineral Concession during the Initial Exploration Phase. Implementation subject to coordination with the Ministry of Environment. Preparation for drilling at Bramaderos is complete with a drilling contractor engaged, access tracks established for the first 9 holes and an exploration camp and core processing facilities ready for use
Drilling is ready to commence on earlier of receipt of an environmental permit based on the Bramaderos EIA (submitted in late 2017) or the implementation of the scout drilling initiative

Viscaria Copper Project, Sweden (Sunstone - 100%)

Letter of Intent (LOI) and subsequent binding Share Sale and Purchase Agreement (SPA) signed for the sale of Sunstone's wholly owned subsidiary and holder of the Viscaria Copper Project to Copperstone Resources AB (Copperstone), a copper focused exploration company based in Sweden and listed on the Nasdaq First North (Stockholm)
Transaction is subject to shareholder approval at Sunstone's AGM as well as approval by Copperstone shareholders
Sunstone Metals to become the largest shareholder in Copperstone with an approximate 30% shareholding
The Copperstone shareholding will provide ongoing exposure to the upside at Viscaria as well as to Copperstone's existing exploration projects in Sweden.

Corporate Highlights

• A$1.9 million in cash at 30 September 2018

EXPLORATION AND DEVELOPMENT ACTIVITIES

Bramaderos Gold-Copper Project

The Bramaderos Project is located in southern Ecuador and is the subject of an earn-in JV with Cornerstone Capital Resources Inc. ("Cornerstone") (TSXV-CGP) through its subsidiary La Plata Minerales S.A. ("PLAMIN"). Sunstone has the right to earn a majority interest in the 4,949 hectare Bramaderos concession (figure 1) subject to the satisfaction of certain conditions (see ASX announcement dated 10th April 2017).

The project area has easy access provided by the sealed Pan American Highway that crosses the western part of the concession, has nearby available hydro-power, and gentle topography with an average elevation of around 1,100m above sea level. Mineralisation, based on historical exploration and drilling, occurs at surface.

The Sunstone team has worked previously with Cornerstone on other projects in Ecuador which have led to significant discoveries and shareholder value growth, and the Sunstone team will work towards repeating that success at Bramaderos.

Work completed in the current quarter includes further trenching at Limon (figures 2 & 3; Trench LM-03), rock chip sampling at Playas and Porotillo, further geological mapping at Playas, completion of soil sampling in the southern part of the concession (Yeso area), drill pad and drill access preparations at Bramaderos Main, Limon and West Zone, and preparation for drilling including finalisation of logistical supplies to support the planned drilling program plus building of a core processing facility. Additional work included surface inspection followup of soil anomalies, age dating of samples from the Bramaderos Main and Limon prospects, and petrographic work on samples from Bramaderos Main (figures 4, 5 & 6).

Environmental Permitting for Drilling

Sunstone's joint venture partner Cornerstone Capital Resources ("Cornerstone") is managing the environmental permitting process to allow for commencement of drilling, through review by the Ecuadorian Ministry of Environment of a comprehensive Environmental Impact Assessment (EIA; submitted in late 2017), preceding approval to commence drilling operations.

Once issued the permit will allow for drilling across the entire concession giving the Company the ability to test the numerous porphyry and epithermal gold targets it has identified, as well as providing flexibility to test additional targets on the concession in the future.

Importantly, it should be noted that Cornerstone has received the appropriate Water Permit for drilling at Bramaderos, which is a key factor required for the environmental licence.

The formal review of the Bramaderos EIA was completed by the Ministry of Environment in late September, and official comments were received at that time. Responses to their comments on the application are in progress, prior to a final review by the Ministry. No firm date is yet available for the official granting of the licence.

During the quarter the Ecuadorian Ministry of Oil, Mining and Energy (MERNNR) announced a new initiative to allow for 'scout' (reconnaissance) drilling during the Initial Exploration Phase of an Exploration Concession. The initiative allows for drilling (various angles and depths using human portable or air transportable rigs) from up to 40 platforms within a Mineral Concession. Sunstone is awaiting further details on the implementation of this initiative.

We remain very encouraged by the support of the local stakeholders at Bramaderos through numerous meetings and signed letters of support for the project and requests for the commencement of drilling operations and look forward to a positive government response on permitting in the near future.

Viscaria Copper Project

On 9 August 2018 Sunstone announced that it had entered into a non-binding Letter of Intent (LOI) with Swedish listed Copperstone Resources AB (Nasdaq First North (Stockholm) COPP B) for the sale of Sunstone's 100% owned subsidiary Avalon Minerals Viscaria AB, which owns 100% of the Viscaria Copper Project (Viscaria) in northern Sweden.

Following a due diligence period by both parties a binding Share Sale and Purchase Agreement (SPA) was signed on 2 October 2018.

The transaction will be completed in 2 stages, with the consideration in the initial stage comprising cash of 40 million Swedish Kronor (SEK) and 160 million Copperstone B-shares payable at closing (approximately A$6.2 million and A$29.5 million respectively), and the second phase, which is subject to receipt of the Environmental Permit for Viscaria, comprising cash of 20 million SEK and 46 million Copperstone B-shares (approximately A$3.1 million and A$8.5 million respectively). The estimated values may change due to share price movements of Copperstone and exchange rates between AUD and SEK.

At the exchange rates on date of signing the SPA, and the volume weighted average Copperstone share price for the period between the LOI and signing the SPA, the transaction is valued at approximately A$47.3 million.

The Transaction is subject to customary closing conditions including Copperstone raising capital for the cash component of the transaction and for ongoing working capital on Copperstone's existing projects and for Viscaria.

The transaction will be conditional upon Sunstone shareholders approving the transaction at the Company's Annual General Meeting, expected to be held in late-November 2018, as well as the approval by Copperstone shareholders at an Extraordinary General Meeting expected to be held at approximately the same time.

Subject to closing of the transaction, and through the issue of shares under the SPA, Sunstone will become the largest shareholder of Copperstone. As Sunstone's shareholding in Copperstone may exceed 30%, an application for an exemption to the Swedish Securities Council regarding a mandatory public bid on Copperstone has been made, and the exemption granted. As the largest shareholder of Copperstone, Sunstone will retain significant exposure to Viscaria as well as to Copperstone's existing copper exploration projects in Sweden, with potential synergies across the projects.

Under the terms of the SPA Sunstone will be able to appoint two directors to the Board of Copperstone.

In regard to the shares it receives in Copperstone under the Transaction, Sunstone will enter a voluntary escrow ('lock-up") agreement for a period of 18 months from closing and the Directors of Copperstone will enter a similar escrow agreement for the majority of the shares that they currently hold.

It is noted that the Copperstone share price (for the B-shares, which are the class of shares listed on Nasdaq First North (Stockholm)) has moved from SEK 1.02 per share prior to the announcement of the LOI on 8 August 2018 to SEK 1.42 as at 1 October 2018. During this period the minimum and maximum prices for Copperstone shares have been SEK 0.85 and SEK 1.50 per share respectively, with the weighted average price equating to SEK 1.1866 per share. When utilising the weighted average price, in conjunction with movements in the exchange rates, the notional value of the consideration has increased from the A$41 million referred to in the announcement of the LOI, to A$47.3 million.

Gold Portfolio

Tammela Gold Project, Finland (Sunstone 80%)

The Nortec earn-in agreement includes two known gold opportunities, Satulinmäki and Riukka, held within the claim areas. Reconnaissance scale prospecting has been completed through the belt which contains these gold deposits and interpretation of results is underway.

An Ionic leach soil sampling program has been initiated that is designed to detect pathfinder metal ions related to gold mineralisation. This survey is being conducted to identify anomalous areas that lie along the Satulinmäki to Riukka gold trend on the Tammela Gold Project. Success with this program may result in application of the technique more regionally over other target areas that the company holds in the district.

Other Gold Opportunities (Sunstone 100%)

Based on Sunstone's regional assessment of gold prospectivity in southern Finland, areas of interest are held under approved Exploration Reservations, and recently new applications have been lodged for Exploration Permits and additional Exploration Reservations covering known gold occurrences. These areas are held 100% by Sunstone and will be explored systematically.

Lithium Portfolio (Sunstone 80% and 100%)

The Nortec earn-in agreement area includes the Kietyönmäki lithium occurrence which was discovered by the Finnish Geological Survey (GTK) in the mid-1980's. There was no significant activity during the quarter. Drilling by Sunstone's wholly owned subsidiary Scandian Metals Pty Ltd (Scandian) in September 2016 returned assays of up to 24.2m at 1.44% Li2O. Scandian also holds a portfolio of other exploration permits in Finland considered prospective for lithium.

During the previous quarter an agreement was entered into for Sunstone to purchase the remaining 20% interest in subsidiary Scandian Metals in exchange for 600,000 Sunstone shares and agreeing to transfer the Swedish lithium tenements (Ladum Project) back to the former 20% shareholders. The share transfer was completed during the September quarter, and Sunstone now holds 100% of Scandian Metals.

Tenements

The K7 Exploitation Concession (figure 7), located immediately northeast of K3, and covering a small portion of the A Zone and B Zone orebodies, was granted on 26 March 2018, but subsequently appealed in early May 2018. The timing of a decision on this appeal is estimated as late 2018. The Company expects the appeal will not be successful and the concession will be granted.

The Ypäjä, Paimio and Kukonharja Exploration Reservations in Finland have expired and Exploration Permit applications have been lodged over specific areas considered prospective for gold referred to as Luutasuo and Katinhanta (gold). Exploration Permit applications previously lodged over less prospective areas named Uusikallio and Myllynkulma have been withdrawn.

Corporate

Cash Resources - The Company's unaudited cash position for 30 September 2018 was A$1.9 million.

Shareholder Information

As at 30 September 2018, the Company had 1,147,546,111 fully paid ordinary shares on issue and 1,419 shareholders.

During the quarter 5,844,072 shares were issued with 600,000 related to the purchase of 20% of Scandian Metals Pty Ltd as referred to above, and the remainder relating to vesting of shares under the Company's Employee Performance Rights Plan.

Notes Specific – September 2018 Quarter ASX Announcements

The following announcements, which relate to information in this Quarterly Report, 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:

Viscaria binding share sale and purchase agreement signed	03/10/2018
Appendix 3B and Change in Director's Interest Notice	28/09/2018
Change in Director's Interest Notice	04/09/2018
Annual Report to Shareholders and Appendix 4G	14/08/2018
Viscaria Copper Project Partnership	09/08/2018
Presentation at Noosa Mining & Exploration Conference	20/07/2018
Bramaderos – Ecuador Scout Drilling Initiative	16/07/2018
Appendix 3B and s 708A Cleansing Notice	05/07/2018

Figure 1: Bramaderos project showing the location of the gold-copper porphyry targets, and the West Zone epithermal gold system. The background image is detailed heli-magnetics on a Satellite image.

Figure 2: Diagram showing the location of trench LM-01 in the context of the greater Limon Prospect target. The extent of copper anomalism in soilsampling, and rock alteration typical of the higher levels of a porphyry gold-copper system, covers an area of 1.6km x 0.9km. Detailed modelling of heli-magnetics data has identified subtle but extensive magnetic anomalies that correspond with the target zone. Three proposed diamond drill holes are shown as black line traces. Line A-B shows the Figure 2 long section.

Figure 3: Long-section (oriented WNW-ESE; see Figure 1) through the Limon porphyry Au-Cu prospect, illustrating key geological features that suggest an extensive underlying mineralised porphyry gold-copper system below the leached clay-altered lithocap (illite). Strongly mineralised diorite outcrops as a window through an overlying and altered rhyodacite body.

Figure 4: Plan image of the Bramaderos Main prospect showing all trenching and rock chip results and distribution of veining (blue) and 'high level' alteration at Bramaderos Hill. Proposed drill hole collars are shown in red stars and expected drill traces as yellow lines.

Figure 5: Schematic interpreted plunging porphyry Au-Cu system, with the location of trench BM14.

Figure 6: Interpretation of 3-D modelled heli-magnetics, looking towards the west-southwest, and showing a SE plunging body at Bramaderos Main with a vertical extent of at least 1km.

TENEMENT SCHEDULE

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

Gold-Copper Tenements – Ecuador

Tenement Holder	Tenement Name	Location	Status	SunstoneOwnership
La Plata Minerales S.A.	Bramaderosˆ	Loja, Ecuador	Granted	0%

Copper Tenements - Sweden

Tenement Holder	Tenement Name	Location	Status	SunstoneOwnership
Avalon Minerals Viscaria AB	Viscaria No 1	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 112	Norrbotten, Sweden	Granted	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 x	Norrbotten, Sweden	Granted	100%
Avalon Minerals Viscaria AB	Nihka East	Norrbotten, Sweden	Granted	100%
Avalon Minerals Viscaria AB	Goddevarri	Norrbotten, Sweden	Granted	100%
Avalon Minerals Viscaria AB	Viscaria East	Norrbotten, Sweden	Granted	100%
Avalon Minerals Viscaria AB	Yhteinenjärvi No 1	Norrbotten, Sweden	Granted	100%

Gold Tenements - Finland

Tenement Holder	Tenement Name	Location	Status	SunstoneOwnership
Kultatie Oy	Somero 1-12*	Somero, Finland	Granted	80%
Kultatie Oy	Perämäki*	Somero, Finland	Application	80%
Scandian Metals AB	Ypäjä#	Somero, Finland	Expired	0%
Scandian Metals AB	Kukonharja#	Somero, Finland	Expired	0%
Scandian Metals AB	Paimio#	Somero, Finland	Expired	0%
Kultatie Holding Oy	Katinhanta	Somero, Finland	Application	100%
Kultatie Holding Oy	Luutasuo	Somero, Finland	Application	100%
Kultatie Holding Oy	Palikkala	Somero, Finland	Application	100%
Kultatie Holding Oy	Arolanmäki	Somero, Finland	Granted	100%
Kultatie Holding Oy	Humppila	Somero, Finland	Granted	100%

Tenement Holder	Tenement Name	Location	Status	SunstoneOwnership
Scandian Metals AB	Ladumyrberget nr 1†	Vasternorrlands, Sweden	Granted	0%
Scandian Metals AB	Ojaklacken nr 1†	Vasternorrlands, Sweden	Granted	0%
Scandian Metals AB	Fannbyasen nr 1†	Vasternorrlands, Sweden	Granted	0%
Scandian Metals AB	Fannbyasen nr 2†	Vasternorrlands, Sweden	Granted	0%
Litiumloydos Oy	Tammela 1-3*	Somero, Finland	Granted	80%
Litiumloydos Oy	Ojalankulma*	Somero, Finland	Application	80%
Scandian Metals AB	Hietahauta	Kaustinen, Finland	Granted	100%
Scandian Metals AB	Viitala	Kaustinen, Finland	Granted	100%

Lithium Tenements – Finland and Sweden

During the previous quarter an agreement was entered into for Sunstone to purchase the remaining 20% interest in Scandian Metals Pty Ltd (Scandian), which owns 100% of Scandian Metals AB, in exchange for 600,000 Sunstone shares and agreeing to transfer the Swedish lithium tenements back to the former 20% shareholders. The share transfer was completed during the September quarter, and Sunstone now holds 100% of Scandian.

ˆSunstone has a right to earn up to 80% under the terms of the earn-in agreement announced to ASX on 10 April 2017

x The K7 Exploitation Concession at Viscaria was granted on 26 March 2018, however the decision was subsequently appealed in early May 2018.

*Subject to earn-in joint venture with Nortec Minerals Corp.

Exploration Reservations expired and have been replaced by applications for smaller exploration permits within the same area.

† To be transferred to the former 20% shareholders of Scandian Metals Pty Ltd.

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 Sunstone Metals 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.

Directors: Company Secretary:

Graham Ascough – Non-Executive Chairman Gavin Leicht Malcolm Norris – CEO/Managing Director Don Hyma - Non-Executive Director Stephen Stroud - Non-Executive Director

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

Sunstone Metals Limited T: 07 3368 9888 E: [email protected] www.sunstonemetals.com.au

+Rule 5.5

Appendix 5B

Mining exploration entity and oil and gas 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, 01/05/13, 01/09/16

Name of entity

Sunstone Metals Limited

ABN Quarter ended ("current quarter")

68 123 184 412 30 September 2018

	Consolidated statement of cash flows	Current quarter$A'000	Year to date (3months)$A'000
1.	Cash flows from operating activities
1.1	Receipts from customers
1.2	Payments for
	(a)exploration & evaluation	(248)	(248)
	(b)development
	(c)production
	(d)staff costs	(353)	(353)
	(e)administration and corporate costs	(165)	(165)
1.3	Dividends received (see note 3)
1.4	Interest received	6	6
1.5	Interest and other costs of finance paid
1.6	Income taxes paid
1.7	Research and development refunds	0	0
1.8	Other (provide details if material)
1.9	Net cash from / (used in) operatingactivities	(760)	(760)

2.	Cash flows from investing activities
2.1	Payments to acquire:
	(a)property, plant and equipment	(0)	(0)
	(b)tenements (see item 10)
	(c)investments
	(d)other non-current assets

See chapter 19 for defined terms

1 September 2016 Page 1

Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

	Consolidated statement of cash flows	Current quarter$A'000	Year to date (3months)$A'000
2.2	Proceeds from the disposal of:
	(a)property, plant and equipment
	(b)tenements (see item 10)
	(c)investments
	(d)other non-current assets
2.3	Cash flows from loans to other entities
2.4	Dividends received (see note 3)
2.5	Other (provide details if material)
2.6	Net cash from / (used in) investingactivities	(0)	(0)

3.	Cash flows from financing activities
3.1	Proceeds from issues of shares	0	0
3.2	Proceeds from issue of convertible notes
3.3	Proceeds from exercise of share options
3.4	Transaction costs related to issues ofshares, convertible notes or options	(0)	(0)
3.5	Proceeds from borrowings
3.6	Repayment of borrowings
3.7	Transaction costs related to loans andborrowings
3.8	Dividends paid
3.9	Other (provide details if material)
3.10	Net cash from / (used in) financingactivities	0	0

4.	Net increase / (decrease) in cash andcash equivalents for the period
4.1	Cash and cash equivalents at beginning ofperiod	2,654	2,654
4.2	Net cash from / (used in) operatingactivities (item 1.9 above)	(760)	(760)
4.3	Net cash from / (used in) investing activities(item 2.6 above)	(0)	(0)
4.4	Net cash from / (used in) financing activities(item 3.10 above)	0	0
4.5	Effect of movement in exchange rates oncash held	(6)	(6)
4.6	Cash and cash equivalents at end ofperiod	1,888	1,888

5.	Reconciliation of cash and cashequivalentsat the end of the quarter (as shown in theconsolidated statement of cash flows) to therelated items in the accounts	Current quarter$A'000	Previous quarter$A'000
5.1	Bank balances	186	224
5.2	Call deposits	1,702	2,430
5.3	Bank overdrafts
5.4	Other (provide details)
5.5	Cash and cash equivalents at end ofquarter (should equal item 4.6 above)	1,888	2,654

6. Payments to directors of the entity and their associates Current quarter

6.1 Aggregate amount of payments to these parties included in item 1.2 116
6.2 Aggregate amount of cash flow from loans to these parties included in item 2.3
6.3 Include below any explanation necessary to understand the transactions included in items 6.1 and 6.2

Directors remuneration includes Managing Director salary.

7. Payments to related entities of the entity and their associates

7.1 Aggregate amount of payments to these parties included in item 1.2
7.2 Aggregate amount of cash flow from loans to these parties included in item 2.3
7.3 Include below any explanation necessary to understand the transactions included in items 7.1 and 7.2

N/A

$A'000

Current quarter $A'000

8.	Financingfacilities availableAdd notes as necessary for anunderstanding of the position	Total facility amountat quarter end$A'000	Amount drawn atquarter end$A'000
8.1	Loan facilities
8.2	Credit standby arrangements
8.3	Other (please specify)

8.4 Include below a description of each facility above, including the lender, interest rate and whether it is secured or unsecured. If any additional facilities have been entered into or are proposed to be entered into after quarter end, include details of those facilities as well.

N/A

9.	Estimated cash outflows for next quarter	$A'000
9.1	Exploration and evaluation	750
9.2	Development
9.3	Production
9.4	Staff costs	340
9.5	Administration and corporate costs	265
9.6	Other (provide details if material) Tax Payment
9.7	Total estimated cash outflows	1,355

10.	Changes intenements(items 2.1(b) and2.2(b) above)	Tenementreference andlocation	Nature of interest	Interest atbeginningof quarter	Interestat endofquarter
10.1	Interests inmining tenementsand petroleumtenementslapsed,relinquished orreduced	Finland:YpäjäPaimioKukonharja	ExplorationReservationsexpired,with Exploration PermitApplicationslodgedoverspecificareaswithin the reservationareasconsideredprospective for gold	100%	100%
10.2	Interests inmining tenementsand petroleumtenementsacquired orincreased

Compliance statement

1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.
2 This statement gives a true and fair view of the matters disclosed.

(Director/Company secretary)

Sign here: Date: 25 October 2018

Print name: GAVIN LEICHT

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 that wishes to disclose additional information is encouraged to do so, in a note or notes included in or attached to this report.
1. If this quarterly report has been prepared in accordance with Australian Accounting Standards, 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. If this quarterly report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standards apply to this report.
1. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

AI assistant

SUNSTONE METALS LTD Interim / Quarterly Report 2019

65870_rns_2018-10-24_19d080e8-6c82-4983-8fe5-07fe5c8bce2a.pdf

SEPTEMBER 2018 QUARTERLY ACTIVITIES REPORT

Bramaderos Gold-Copper Project, Ecuador (Sunstone earning up to 80%)

Viscaria Copper Project, Sweden (Sunstone - 100%)

Corporate Highlights

EXPLORATION AND DEVELOPMENT ACTIVITIES