SUNSTONE METALS LTD — Investor Presentation 2011

Feb 20, 2011

ViscariaCopper – Iron Ore Project

February 2011

Disclaimer

Forward Looking Statement

This Presentation contains general information about Avalon Minerals Limited (Avalon). It does not purport to contain all the information that a prospective investor may require. The Presentation should not be considered as an offer or invitation to subscribe for or purchase of any securities in Avalon and no agreement to subscribe for securities will be entered into on the basis of this Presentation.

This Presentation includes certain statements, estimates and forward looking projections that rely upon various assumptions which may or may not prove to be correct in time. Further, Avalon is in the business of exploring for minerals which is a speculative and risky venture. Some of the 'risk factors' are listed in Avalon's Rights Issue Prospectus dated 17 December 2009, which is available on the Company Announcements section of the ASX website Code AVI .

Avalon is listed on the Australian Securities Exchange (ASX) and its ASX code is AVI. As a listed company Avalon is subject to and complies with the continuous disclosure requirements of the ASX listing rules. From time to time Avalon will make public announcements on its ASX website updating information and risk factors affecting Avalon's operations and its prospects of success.

Potential investors should conduct their own investigation and analysis and should check the accuracy, reliability, and completeness of the information provided and obtain independent and specific advice from appropriate professional advisors.

To the maximum extent permitted by law, no representation, warranty or undertaking, express or implied, is made and, to the maximum extent permitted by law, no responsibility or liability is accepted by Avalon or any of its officers, employees, agents or consultants or any other person as to the adequacy, accuracy, completeness or reasonableness of this Presentation. To the maximum extent permitted by law, no responsibility for any errors or omissions from this Presentation whether arising out of negligence or otherwise is accepted.

Competent Persons Statement

The information in this report that relates to Mineral Resources and Exploration Results is based upon information reviewed by Mr Andrew Munckton BSc (Mining Geology) who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Munckton 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 2004 Edition of the "Australasian Code for reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr Munckton consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Exploration Targets

This presentation comments on and discusses Avalon's exploration in terms of target size and type. The information relating to Exploration Targets should not be misunderstood or misconstrued as an estimate of Mineral Resources or Ore Reserves. The potential quantity and quality of material discussed as Exploration Targets is conceptual in nature since there has been insufficient work completed to define them as Resources or Reserves. It is uncertain if further exploration work will result in the determination if a Mineral Resource or Ore Reserve

Corporate Snapshot

Capital Structure

Shares on issue 209.2mUnlisted options 2.6m MarketCapitalisation (26cps) $54.4m

Cash (28 Feb 2011) ~$9.0m Debt nilEnterprise Value $45.4m

Major Shareholders

dDiMttreorsananaemencg	29.3%
klldiPILttteavenvesmens	%13.6
lldGSiSiiFttaenapecauaonsun	7.4%
20Top	66.3%

Contact

Andrew Munckton MD and CEO Telephone +61 8 9322 2752 Mobile +61 (0) 435 635 598 andrew.munckton@avalonminerals.com.au

AvalonSnap Shot

• Advanced Viscaria Cu‐Fe Project in Northern Sweden
• Resources
  • 44.7Mt , 1.2% Cu ‐ A&B Zone
  • 9.0Mt, 0.6% Cu and 27% Fe ‐ D Zone
• Pre‐Feasibility Study completed
  • 5or 10 year LOM @ 3.0Mtpa
  • Fast payback
  • Solidreturns
• Production from 2013
  • Cu19,000tpa Cu metal, 41.8Mlb pa in concentrate
  • Fe725,000tpa of 69.5% Fe concentrate
• Comprehensive Exploration Program
  • Expansion of Resources
  • NewProjects

Viscaria, Kiruna and LKAB

Discovered in 70's – 4kmfrom Kiruna (pop 20,000)

• 15years historical production to 1997
• 100ktpa @ 26% Cu Concentrate
• 26,000tpa, 57M lbpa Cu metal
• Purchased 100% by Avalon
  • Phelps Dodge, 1% NSR
  • All historical data
  • ZeroLiabilities

Infrastructure

• Rail ‐ heavy haul
• Ports ‐ Narvic (Ice free), Luleu
• Power
• Facilities
  • Contractors
  • Constructors
  • Mining
• Smelters,
• Concentrators, Pellet Plants
• In the shadow of LKAB – 20mtpa Fe Iron concentrate and pellets

ViscariaCopper Resource

VMSCopper

ResourcelasfCiicaionts	MT	Cu%	Cul (Mtae'0)00t
dMeasure	6.7	2.47	165
ddInicate	4.1	1.76	73
fedInrre	33.9	0.33	280
TOTAL	44.7	1.16	518

SkarnCopper‐Iron

ResourcelasificaionCts	MT	Cu%	Fe%	l (CuMtae'0)00t	l (FeMtae'0)00t
fedInrre	9.0	0.55	26.9	94	2,415

Tailings Copper‐Zinc

ResourcefClasiicaionts	MT	%Cu	%Zn	l (CuMtae'0)00t	l (ZnMtae'0)00t
fedInrre	12.5	0.27	0.22	34	27

DFSDrilling in progress:

• DZone – Resource Upgrade
• DZone – Target 30‐50Mt @ 0.6% Cu and 30% Fe
• BZone – Geotechnical and Mining
• AZone – Geotechnical and Mining

DZone Copper and Iron Ore Products

• Open Pit – Stage 1
  • Open pit design @ US$2.50/lb Cu
  • Curich and Fe rich lodes
  • UGdrilling assessment in 2011
• Iron Ore Concentrate
  • BF and DRquality. 1.5% SiO2
  • LowAlumina and Phos
  • High MgO, CaO
  • Compatible with Kiruna
  • Pellet Testing underway
• Copper Concentrates
  • 25‐27%Cu
  • 2gpt Au, 30gpt Ag, 2% Zn
  • Lowcontaminants

CoPrdutratetncenoc	Fe%	Si2 %O	P%	l23 %OA	CaO+O %Mg	/CaO+OSiO2+l2O3MgA%
/iruSKWEKABna	0.75	1.5	0.022	0.4	0.5	0.26
/leSaBRABHP,Vamarco	67.2	1.8	0.033	0.7	0.1	0.06
/hoMaPERSrconaugang	69.8	1.6	0.015	0.4	1.0	0.50
/iscialonVSWEAvara	69.5	1.5	0.012	0.1	0.9	0.56

Processing Cu and Fe

8

ViscariaPFS Results

	BaCasese	*DloCatevepmense
inMe	A,OpiB,DPten	A,iB,D,DExPtnts
Prteocessra	3.0Mtpa	3.0Mtpa
llebleduAnSaPrtsnuaaoc	00@2%Cu18,92Cu75,755tptpaa,725,000@69.5%Fetpa	63,300@2%Cu182Cu55,5tptpaa,735,000@69.5%Fetpa
lddeDeiveGrrea	0.7%Cu20%Fe	0.6%Cu23%Fe
Recovery	90%Cu24%Fet recw	90%Cu24%Fet recw
feMinLie	5Years	10Years
$()CAPEXUSM	145	160
$()ReUSMvenues	893	1,613
$()OXUSPEM$/()UStore	45535.72	96732.24
hCICaCotss()fditetsarcre	$/US1,851Cut$/lbUS0.84Cu	$/US1,345t,$/lbUS0.61Cu
$()@NPV10%USM	46	126
IRR%	24.8	33.4
kPaBaYeycars	2.9	2.9

Expenditures, Revenues and Costs Over Life of Mine

Figures above are indicative averages over the life of mine

*DZone Extension has not been defined and is classified as an exploration target

*DZone Extension material included in the Development Case 9

ViscariaCopper – Underground

AZone Open Pit

• Above historical Viscaria Cumine
• 3‐15mwide at 1.6% Cu
• Quality concentrate
  • 28%Cu, 3% Zn, 45gpt Ag, 3gpt Au
  • A lowlevel of contaminants

300 kmfrom Boliden's Ronnskar Smelter

Adjacent to rail

AZone Deeps

• 15mt @ 1.8% Cu remains
• Drilled to 600mbelow surface
• Extractionof high grade parts
• Remnants and lower grade (<2% Cu) zones remain

30kmof development and decline

12.5mt @ 2.7% Cu historical production

VMSstyle – 5‐15m wide + 0.8% Cu

Viscaria DZone Long Section

2010

• 9Mt Inferred Resource @ 0.55% Cu and 27%Fe

• Pit design near base of Resource

• Higher grade Cu lode in centre that plunges south

• Similar geometry to A Zone

• 2011 Drilling Program

  • 90holes planned, 19 Completed
  • Commencedat "high" north end
  • Results as expected
    • 18m@ 22% Fe 1.3% Cu
    • 28m@26% Fe
    • 18m@ 0.8% Cu
  • Drilling progressing Satisfactorily
  • Deeper holes planned to assess "Down Plunge"

ViscariaExploration Drilling

• Initial 13 holes completed
  • 4 lines of RCholes
  • Best 10m@ 0.2% Cu
  • 3 kmSouth of D Zone
• Failed to intersect stratigraphic position of D Zone
  • Basalt only
  • Little or nodolomite and magnetite
  • Magnetics remain unexplained
• Reassess
• Drill fromD Zone heading south

ViscariaExploration

• Viscaria Copper
  • DZone North extensions
  • Bahpagobba
  • Ltjarn and other lodes to east of A Zone
• Viscaria Iron Ore
  • Southand Eastern Magnetite targets
  • Historical drill data
    • 40m@ 28% Fe
    • 6m@ 55% Fe
  • Lumps, fines, chips feeding Kirunavaara
  • Drilling planned as follow up when rig available

Regional Exploration

Outstanding exploration ground

• 625km² tenure, 100km of strike
• Gordon Kitchener
  • High grade Cu and Zn
  • 10kmof strike
• Kurravarra
  • Anomalous Cuand Fe
  • 20kmLong target
  • Geologically similar to Viscaria D Zone
• Vittangijarvi
  • Numerous oldCu mines and workings
  • Large ‐ 10km by 6km
  • Consistent Cugeochemical anomaly in Till
• Karkejaure
  • 50kmnorth of Viscaria
  • Large 8km by 7km granite intrusion
  • Magnetic and gravity anomaly
  • Wide alteration haloof magnetite iron
• Kallojankka
  • Anomalous Cugeochemistry
  • 5kmby 2km
  • Targeted for VMS style copper and base metals
• Focus
  • • 20mt 2%Cu VMS
  • • 100mt Fe Skarn+/‐ Cu
  • +200mt IOCG
  • Close toenabling infrastructure 14

AdakCopper / Zinc Project

• Discovered in 40's in Skelleftea Base Metals Belt
  • Over 80VMS Cu, Zn, Pb + Au/Ag
• Historical production
  • 6.3mt @ 2.0% Cu,
  • 4.7mt @ 0.9% Cu and 3.0% Zn
• Historical data being assembled
  • Paper and sepia
  • Oldcore
  • Historical drilling and production
  • 18months work
• Attractive exploration address
  • Dome structure with draped VMS deposits
  • Recent high grade discoveries (Storliden) 8% Zn and 3% Cu
• Concentrators and smelters within transport distance
  • Kristeneberg
  • Boliden

ViscariaProject Work Program

		2010		20	11			20	2013
			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2
fibiliPtre‐easy	laPDeigtnsn
	daReUptesource
llMteaurgy	DZone
	dABZoanne
iidPttermngan	ininMLegase
lApprovas	&EIAECotur
illiDFSDrng	A,B,DZone
	DZoExtnne
fiiiDtenve	dDeigCotsnans
ibilidFStteasyuy	dlesCoSatratsncan
iFnance	dsSLoLeDFnga
	laldCaiPttananp
iiMnng,	laPtn
i&CttonsronuclDteeopmenv	Mine
Cttoncenrae	Coissiommn
diPtroucon	igiDetysncapac											16

PeerComparison

PeerComparison

Avalonoffers

• CashCost advantage
• Potential for improvement as output or grade increases

Upside potential

• DZone South Exploration
• Higher grade underground opportunities
• Viscaria area exploration targets

EstimatedCash Cost * (US$/lb)

*CashCost is C1 Cash Cost net of by product credits Source: Company Reports, IRESS

Next 18Months

NEXT SIXMONTHS

• Aggressive Exploration and Drilling Program
  • Viscaria
    • DZone South, D Zone, B Zone Copper
    • Target 30‐50Mt additional Resources
  • Regional Copper and Iron Ore
    • Newmining camp
• Off take Partners (Q2 2011)
  • Negotiations commenced
  • Copper and Iron Ore separately
  • Synergies and complimentary aims
• DFS (Complete Q3 2011)
  • Engineering, design and construct
  • Mining Lease approval, EIA submission
  • BuildTeam
  • Contracts withSuppliers/Providers

12 MONTHS AFTERTHAT

• Continued Exploration Program
  • Viscaria
    • DZone South infill
    • IronOre
  • Regional Copper and Iron Ore
    • Target 1,2,3 and Adak
• Project Finance (Complete Q4 2011)
  • Debt
  • Equity
  • Customers
• Construction (Complete Q4 2012)
  • Plant
  • Infrastructure
  • BuildTeam

• • Sweden – AMining Country
• • Directors andManagement
• • PFSSensitivities
• •Copper Demand
• •Copper Supply
• • IronOre Demand
• •Project Comparison
• •Peer Comparison

Sweden – AMining Country

• Government
  • Supports mining
  • 26.3%company tax, 0.2 % royalties
  • Approvals process transparent
• Iron Ore
  • 28mtpa ‐ LKAB
  • Markets ‐ WEurope, M East, Asia
  • Pellets, Concentrates and Fines
• Copper
  • 3rdin Europe
  • Mines andsmelters ‐ Boliden
  • Imports 60% of smelter feed (S America)
  • Markets WEurope and M East
  • LMEgrade products
• First World
  • Infrastructure
  • Sovereign Risk
  • Recent exports to Asia and China

Sweden has an establishedmining and export industry

Directors andManagement

DavidMcSweeney – Executive Chairman

• • Experienced mining company executive who has worked in the resources sector for 20 years. Direct responsibilities have ranged from exploration to project management, project finance, commercial and legal structuring and corporate development.
• • Founder of Gindalbie Metals Ltd and the Managing Director from 1998 until December 2006. During his time at Gindalbie, he oversaw the discovery and commissioning of two successful gold production centres and the repositioning of the company as an emerging diversified Australian iron ore producer witha market capitalisation of ~A$340 million.
• • Chairmanof Aspire Mining Ltd and MSP Engineering Services Pty Ltd.

AndrewMunckton – Managing Director CEO

• • Most recently General Manager of Operations with the successful Australian iron ore company Gindalbie Metals Limited from 2004 to 2009. Responsible for leading the team that discovered, defined and commenced development of the world‐class Karara Magnetite Project as well as over 40 DirectShipping Ore (DSO) grade iron ore deposits.
• • Over 25 years experience in the mining industry, holding a wide range of senior positions including at various stages as General Manager of the Paddington, Kundana and Kanowna Belle Gold Operations in Western Australia for Goldfields Ltd, Aurion Gold and Placer Dome before joining Gindalbie.

TanSri Abu Sahid Mohamed – Non Executive Director

• • Group Executive Chairman of successful Malaysian conglomerate, the Maju Group of Companies, has over 30 years of experience in the Malaysian construction and steel industries. Business interests have diversified well into Property Development & Management, Engineering, Services as well as Highway Concessions.
• • Executive Chairman of Perwaja Holdings Berhad, Malaysia's leading steel producer, and Ipmuda Berhad, a building materials specialist. Both companies are listedon the Malaysian Stock Exchange.

MrStephen Stone – Non Executive Director

• • Mining geologist with more than 28 years' experience in operational, management and corporate roles in the international mining and exploration industry.
• • Professional experience includes 20 years as chief executive of a number of Australian publicly listed exploration companies. He initiated ASX‐listings for twoof these companies, including Apex Minerals NL, from which he recently retired as Executive Chairman.
• • Non‐executive chairmanof ASX‐listed West African gold explorer Azumah Resources Ltd and a director of Encore Metals NL.

Directors andManagement

• Holds a Bachelor of Commerce degree from the University of Western Australia and is a Chartered Account. Provides corporate, management and accounting advice to a number of companies involved in the resource, technology and leisure industries. Managing Director of Ascent Capital Holdings Pty Ltd.

Paul Bridson*– Chief Financial Officer and Company Secretary*

• • CharteredAccountant with 21 years accounting and finance experience including 17 years within the resources industry.
• • Previously employed as Financial Controller with Gindalbie Metals Ltd from 2001 until 2010 and prior to that appointment held finance positions with CentaurMining Ltd and National Mine Management Pty Ltd.

Grant Brock –Project Manager

• • Mining Engineer with 37 years experience in mining with a record of acquiring and successfully developing new mining projects in base metals and gold sectors inAustralia and internationally.
• • Extensive experience managing mining operations including the following: Chief Operating Officer of Apex Minerals NL, Executive Director and Chief Operating Officer of Allied Gold Limited, General Manager – Wodgina Operations, WA, Southern Cross Gold Operations, WA and Kemerton Silica Sand, WA for Sons of Gwalia Ltd and at various times General Manager of the Hellyer, Que River and Cleveland Mines in Tasmania for Aberfoyle Limited.

LouiseLindskog – Exploration Manager

• • Geologist with 9 years combined exploration and mining experience in a variety of mineral deposit styles including uranium, diamonds, base metals and gold mineralisation. Previously employed as a Senior Geologist by Bannerman Resources and has also held full time geological positions with Nifty Copper Operations, Newmont Tanami Operations and Elkedra Diamonds as well as part time positions with Pasminco Century Mines, WMC Fertilisers andCharters Towers Gold Mines while studying at James Cook University.
• •Completed her honours project on a Magnetite Apatite IOCG project (Gruvberget) located in the Kiruna region in Northern Sweden.

NicholasBryce – Principal Geologist

• • Geologist with 30 years experience in the mining/general exploration industry, two thirds of which has been working in green‐field exploration and resourceevaluation, of that 10 years in iron‐ore and more than a decade in mineral exploration and evaluations.
• •Previously employed with BHP Billiton Iron Ore in Liberia as an Exploration Project Manager and Principal Geologist.

PFSSensitivities

• Leverage to Copper
  • Base Case robust at US$2.20/lb Culong term
  • Development Case robust at US$1.80/lb Cu long term
  • Project NPV most sensitive to
    • Commodity prices
    • Exchange rates
    • Operating Cost
    • Cuproduction
• Leverage to Iron Ore
  • Base Case robust at US$80/tonne ofconcentrate
  • Development Case robust at US$50/tonne of concentrate
  • Premium quality
    • Premiumprice
    • More demandthan supply
    • Additional sources

CuPrice (US$ /lb Cu)

Leverage to Fe Prices

1 1.5 2 2.5 3 3.5

Copper Demand

• Demand strong, supporting prices, supply response limited
  • South American supply diminishing due to
    • Minematurity,
    • Discovery rate lower than extraction rate
• 2010‐2020 Rest of World demand returns and Chinese growth limited by supply
  • CAGR in China assumed 5‐6%but might be 8‐10% with sufficient supply
  • CAGREurope 1‐2%

Demandforecast to grow by 8 million tonnes over next 10 years

Copper supply

• LatinAmerican mines high grading over extended period when prices are high
• Discovery rate has crashed despite increasing expenditures...no new super giants
• Africansovereign risk
• Australianinvestment curtailed by Govt tax uncertainty

IronOre Demand

IronOre Dandem
milliontonnes	2007	200	82009E	2010F	2011f	2012f	2013f	2014f	2015f
Demand
Europe	140	134	97	111	117	123	125	125	126
Asia	585	655	790	848	932	993	1066	1143	1221
of which:
Japan	139	144	106	133	144	135	135	135	135
Korea	46	50	42	48	53	56	57	57	58
Taiwan	16	16	12	16	17	18	18	18	19
China	377	438	623	643	709	774	847	922	1000
Rest ofWorld	56	57	45	56	65	75	77	79	82
al SToteabe Dandornem	781	846	932	1015	1114	1191	1269	1347	1429
Yoyche (mt)ang	68	64	87	83	99	77	77	78	82
% Change y-o-y	9.5%	8.3%	10.2%	8.9%	9.8%	6.9%	6.5%	6.2%	6.1%
TotalEx-China	404	408	309	372	405	417	421	425	429
% Change y-o-y	2.5%	0.9%	-24.2%	20.5%	8.9%	2.9%	1.1%	0.8%	1.0%
Supply
Australia	282	327	385	419	471	533	603	667	729
Brazil	265	273	266	312	336	369	400	436	477
Canada	20	20	27	33	36	40	44	47	50
India	94	105	119	125	125	125	120	100	90
S.Africa	32	33	44	46	50	52	0	61	61
Sweden	19	18	17	22	23	23	25	22	22
Oth(incdisruption)ers	73	81	87	63	66	55	55	52	60
al Se SToteablyornupp	786	856	945	1020	1107	1197	1247	1385	1489
Impliedbalance	5	11	13	5	-7	6	-22	38	60

• Benchmark pricing is history....Quarterly Index and Spot pricing predominates
• Demandin Europe recovering, China surging
• Supply dominated by 'BIG 3' ‐ balanced by high cost Chinese domestic production
• European producers with scale can compete into the Asian and Middle East markets
• Freight advantage into Europe and niche market with worlds best quality products

Project Comparison

Projects with similar ore processing

jiPLOt,troeoaon,nerccw	Copper	IOronre
lEHAittrnesenryusraa‐()Xttsraa$()A500MIttnvesmen	72M@1.0%Ctukl50Cttttpaumeaoupu	22%Fmage1.2@67%FtmpaeCttoncenrae
lbhfSAiPtaaoraourca–(l)RiTiAAitono,ngomercan()40Years	80@0.6%CMtukl81Cttttpaumeaoupu	20%Fe2.8M@66%FtehbdOttery‐proucs
MParconaeru‐()hSHiougangerro()5Years	780M@0.1%Ctudbdttttremoveunoconcenrae	55%Fe8.2@68%FtmpaellllDRBFttpees,peeshCiCiFttoncenrae,nes,ps
dlPPPampaeongo‐eru(df)CRiTittareroaerono	93@0.%C5M1tuDFS	2%4FeDFS
iMJPtnasaeruu–(h)CiRtaroesources	30@0.%C5M7tuldlhFiittoaonaneacng	3%5Fe63%Fecon‐magsep
dViiSscaraween–(l)Avaon	66@0.9%CMtudlP19,000Cttroposepaumea	30‐0@30%ET5MFttxpargeedP725,000@69.5%Ftroposepae

Generally applies to IOCG deposits.... Cloncurry, Gawler Craton, Andean Copper Belt.

PeerComparison

• Avalon undervalued
  • Producers ranked highly...Cash flow , Earnings, Certainty.
    • Immediateimpact of commodity price change
  • Developers next
  • Explorers Lowest….. Risk and uncertainty

EV/Annual Cash Margin at US$2.50/lb