SUNSTONE METALS LTD — Investor Presentation 2016

Aug 24, 2016

Mining 2016 Resources Convention Brisbane, Australia

August 2016 June 2016

DISCLAIMER

DISCLAIMER

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.

This Presentation contains general information about Avalon Minerals Limited (Avalon) which is in the business of exploring for minerals which is a speculative and risky venture. 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. 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.

FORWARD-LOOKING STATEMENTS

This Presentation includes certain statements that may be deemed “forward-looking statements”. All statements in this Presentation, other than statements of historical facts, that address future activities and events or developments that Avalon expects, are forward looking statements.

Although Avalon believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forwardlooking statements include market prices, continued availability of capital and financing, and general economic, market or business conditions.

Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in forward-looking statements.

2

CORPORATE

TICKER ASX:AVI Frankfurt:AL9 SHARE PRICE * A$0.046 SHARES ON ISSUE 520.4 million MARKET CAP A$24M CASH[#] A$2.3M 52 WEEK TRADING A$0.012 - $0.057

As at 22.08.16 - 30 day VWAP * As at 22.08.16 - unaudited[#]

Top 10 shareholders hold 55% of shares on issue Board and management hold 3.3% and have participated in recent placements

European and UK shareholders total 43%

SUBSTANTIAL SHAREHOLDERS

NAME	%
Valbonne II	12.4%
Marilei International	8.2%
Potezna Gromadka	7.1%
Tan Sri Abu Sahid Bin Mohamed	6.5%

3

KEY POINTS

• Portfolio of lithium, gold and copper projects in Sweden and Finland

• Geographic focus in countries with a long history of mining and outstanding infrastructure

• Can explore, develop and mine all year round – no weather restrictions

• Kietyönmäki Lithium Project - a higher than average grade deposit  Historical diamond drilling returned 18m at 1.8% Li2O, including 9m at 2.6% Li2O

• Drilling in progress

• Viscaria Copper Project – an advanced stage copper development opportunity with significant upside potential

• Mineral Resource estimate 52.4Mt at 1.2% Cu

• Mining Inventory 18Mt at 1.2% Cu (supporting a mine life of 9 years at 2Mtpa)

• Scoping Study completed

• Satulinmäki Gold Project – high grade, only drilled to 70m below surface  Includes 25m at 3.17g/t and narrower high grade intersections of 3m at 9.3g/t and 4m at 10.3g/t

4

GEOGRAPHIC FOCUS, MINING COUNTRIES

==> picture [505 x 349] intentionally omitted <==

----- Start of picture text -----

Viscaria Copper Project – Scoping
Study completed; significant
exploration upside
Ladum Lithium Project
Kaustinen Lithium Project
Seinäjoki Lithium Project
–
Kietyönmäki Lithium Project (JV)
Resource estimate drilling
underway;
Satulinmäki Gold Project (JV)
----- End of picture text -----

5

TAMMELA LITHIUM & GOLD PROJECT

==> picture [591 x 425] intentionally omitted <==

----- Start of picture text -----

100km
----- End of picture text -----

6

TAMMELA LITHIUM PROJECT KIETYÖNMÄKI DEPOSIT

==> picture [584 x 401] intentionally omitted <==

Lithium pegmatite dyke swarm with significant upside to the currently drilled Main Dyke

7

TAMMELA LITHIUM PROJECT KIETYÖNMÄKI DEPOSIT

==> picture [674 x 379] intentionally omitted <==

8

TAMMELA LITHIUM PROJECT KIETYÖNMÄKI DEPOSIT

==> picture [590 x 438] intentionally omitted <==

9

TAMMELA LITHIUM PROJECT KIETYÖNMÄKI DEPOSIT

==> picture [571 x 381] intentionally omitted <==

Resource drilling underway – proposed drill holes shown here in pink

• 15 holes,

• 3,000 meters,

• 2 months work

10

TAMMELA LITHIUM PROJECT KIETYÖNMÄKI DEPOSIT

==> picture [396 x 425] intentionally omitted <==

GTK assay results

Hole ID	From (m)	To (m)	Interval (m)	Li2O %
R307	14.1	37.1	23.0	1.53
R310	11.7	14.7	3.0	1.23
R310	65.0	83.0	18.0	1.79
including	68.0	77.0	9.0	2.60
including	70.0	73.0	3.0	4.35
R311	20.3	41.9	21.6	1.42
R308	3.7	11.3	7.6	1.37
R309	3.0	10.5	7.5	1.49
R315	24.1	36.8	12.7	1.10
R316	86.0	99.0	13.0	1.66
including	86.0	95.0	9.0	1.88
and	98.0	99.0	1.0	3.9
R317	41.4	45.3	3.9	1.28

11

TAMMELA GOLD OPPORTUNITY SATULINMÄKI & RIUKKA PROSPECTS

Gold opportunities are compelling and will be advanced during 2016 with an expected Q4 drilling schedule

==> picture [423 x 294] intentionally omitted <==

12

SATULINMÄKI PROSPECT

==> picture [497 x 344] intentionally omitted <==

==> picture [266 x 473] intentionally omitted <==

13

SATULINMÄKI PROSPECT

==> picture [626 x 378] intentionally omitted <==

==> picture [133 x 211] intentionally omitted <==

----- Start of picture text -----

Drilling is planned
•
to test the
depth
extension
‘Target Zone’
•
expected to
be undertaken
during Q4,
2016
----- End of picture text -----

14

VISCARIA COPPER PROJECT

==> picture [214 x 120] intentionally omitted <==

PROJECT SITE

==> picture [217 x 115] intentionally omitted <==

KIRUNA TOWN

==> picture [216 x 117] intentionally omitted <==

==> picture [201 x 117] intentionally omitted <==

LOW COST HYDRO POWER

PUBLIC ACCESS ELECTRIC RAIL

15

KIRUNA AND VISCARIA LOCATION MAP

==> picture [763 x 424] intentionally omitted <==

----- Start of picture text -----

Viscaria
Kiruna
LKAB
Copper orebodies
shown in orange
----- End of picture text -----

16

VISCARIA COPPER: MINERAL RESOURCE ESTIMATE AND MINING INVENTORY

Mineral Resource Estimate	Tonnes(Mt)	Grade(% Cu)
Total 65% Measured and Indicated	52.4	1.2
Mining Inventory	Tonnes (Mt) 2016	Grade (% Cu) 2016
Combined A & B Zone Open Pit^ D Zone Open Pit@ D Zone Underground@^ Exploration target^ Total	8.0 1.6 5.0 3.0-4.0 18.0	0.9 0.9 1.5 1.3-1.8 1.2

• @ 2015 Scoping Study Mining Inventory

• ^ 2016 updated Mining Inventory (includes Exploration Target)

17

VISCARIA COPPER: UPDATES TO 2015 SCOPING STUDY

The 2015 Scoping Study confirmed the project description to begin ESIA process (Refer ASX Announcement 14 December 2015)

	Target Case A
Process plant size	2.0Mtpa scenario
Strip ratio (LOM)	6.0
Process	Crush, grind and copper flotation plant
Recovery rates	90.2%
Copper Production LOM Average per annum	200kt 21kt
Development capital Site Infrastructure Underground	US$115m US$15m
Cash operating cost LOM C1 LOM AISC	Targeting <US$2.00/lb
Copper price	US$3.00
NPV pre-tax (7%)	Targeting>US$150 mill
IRR pre-tax (%)	Targeting>28%
Payback period	<4 years
Capital intensity	~US$5,750

18

D ZONE: EXTREMELY CONFIDENT IT WILL BE LARGER

Clear message from 2015 – orebody is getting better as we go deeper

The northern target zone has the potential to deliver 3-5Mt of mineralised rock, at grades comparable to those seen in VDD 195 (21.5m @ 1.5% Cu)

Similarly the southern target zone has the potential to deliver 1-3Mt of mineralised rock, at grades comparable to VDD 196 (13.8m @ 1.4% Cu)

… and geophysical modelling of the host magnetite indicates that even more extensive target zones exist …….

19

D ZONE: EXTREMELY CONFIDENT IT WILL BE LARGER

N D Zone D Zone copper host is orebody; black 50-70% magnetite – dashed line simple process to model D Zone Magnetic host to deliver orebody model; green, blue, geometry yellow domains 3-D and plate modelling of magnetic data demonstrates very clearly that the orebody is larger than currently drilled VDD196 VDD195 Target Area, positive test with VDD 195, And we have extends to depth demonstrated in our 2015 results that we know where to drill Target area at southern D Zone with multiple magnetic bodies – first test VDD 196

20

VISCARIA - TIMETABLE

==> picture [407 x 29] intentionally omitted <==

----- Start of picture text -----

2015 2016 2017
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
----- End of picture text -----

STUDIES AND EXPLORATION

Exploration (discretionary) Scoping Study Updated Scoping Study Accelerate Feasibility Study

PERMITTING

ESIA Baselines ESIA Assessments and Application ESIA review to approval

==> picture [436 x 146] intentionally omitted <==

TARGET TIME FRAMES

• Scoping Study Copper Project - December 2015

• Updated Scoping Study – post next drilling phase

• Decision to Build and construction start targeted for 2018

• Copper production 2019 – correspond with forecast increase in copper price

21

KEY POINTS

• Lithium, gold and copper in Scandinavia

• Long history of mining and outstanding infrastructure

• No weather restrictions

• Kietyönmäki Lithium Project

• Higher than average grade deposit

• Drilling in progress

 Viscaria Copper Project

• Advanced stage copper development opportunity with significant upside potential

• Scoping Study completed

 Satulinmäki Gold Project

• High grade, only drilled to 70m below surface

• 25m at 3.17g/t including 3m at 9.3g/t and 4m at 10.3g/t

22

INVESTMENT PROPOSITION

• High quality team

 Advanced stage projects supported by outstanding infrastructure

• Low sovereign risk

• Geographic focus, commodity spread

• Strong shareholder base

• Low market capitalisation

23

COMPETENT PERSONS STATEMENT

Competent Persons Statement

The information in this report that relates to exploration targets and 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 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”. 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.

The information in this report that relates to the A Zone and B Zone Mineral Resources are based on the information compiled by Dr Bielin Shi who is a Member of the Institute of Mining and Metallurgy and is a full time employee of CSA Global Pty Ltd (CSA). CSA are an independent mining consultancy who have been engaged by Avalon Minerals Limited to perform geological consulting on a fee for service basis. Dr Bielin Shi has sufficient experience that is relevant to the style of mineralisation being considered and to the activity being undertaken 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 Shi consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.

The information in this report that relates to the D Zone Mineral Resource estimate is based on the information compiled by Chris Grove who is a Member of the Australasian Institute of Mining and Metallurgy and is a full time employee of Measured Group Pty Ltd. Measured Group is an independent mining consultancy who have been engaged by Avalon Minerals Limited to perform geological consulting on a fee for service basis. Mr Grove has sufficient experience that is relevant to the style of mineralisation being considered and to the activity being undertaken 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 Grove consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.

24

APPENDICES

25

A HIGH QUALITY LEADERSHIP TEAM

==> picture [128 x 133] intentionally omitted <==

==> picture [117 x 133] intentionally omitted <==

==> picture [117 x 133] intentionally omitted <==

==> picture [109 x 133] intentionally omitted <==

==> picture [127 x 137] intentionally omitted <==

Chairman Graham Ascough

Resources executive. Broad global experience with large companies and building juniors Current Musgrave, PNX Metals, Mithril; Previous Falconbridge-Noranda

CEO and Managing Director Malcolm Norris

Geologist and Business Development. Track record of discovery and growth Previously SolGold, Intrepid, WMC Resources

General Manager Studies and Technical Services Ray Robinson

Mining Engineer. Has delivered many feasibility studies Previously PanAust, Intrepid

CFO & Company Secretary Gavin Leicht

Finance professional with significant experience in copper Previously PanAust, Rio Tinto

General Manager - Geology Dr. Bruce Rohrlach

Geologist who has played a key role in several significant discoveries and feasibility studies Previously SolGold, Intrepid, WMC Resources

26

VISCARIA COPPER: MINERAL RESOURCE ESTIMATES AND MINING INVENTORY

Mineral Resource	Tonnes (Mt)	Tonnes (Mt)	Grade (% Cu)	Grade (% Cu)
A Zone# B Zone# D Zone Open Pit D Zone Underground Total 65% Measured and Indicated overall 89% M+Ind for A Zone 93% M+Ind for D Zone	21.6 19.7 3.1 8.0 52.4		1.5 0.8 0.8 1.4 1.2
Mining Inventory	Tonnes (Mt) 2015	Tonnes (Mt) 2016	Grade (% Cu) 2015	Grade (% Cu) 2016
A Zone Open Pit@ B Zone Open Pit@ Combined A & B Zone Open Pit^ D Zone Open Pit@ D Zone Underground@^ Exploration target^ Total	2.6 2.0 1.6 3.8 10.0	8.0 1.6 5.0 3.0-4.0 18.0	1.3 0.7 0.9 1.5 1.2	0.9 0.9 1.5 1.3-1.8 1.2

• 2015 JORC Mineral Resource estimate

2014 JORC Mineral Resource estimate, based on initial work completed in Nov 2011; 0.4% COG all considered to be open-pittable

@ 2015 Scoping Study Mining Inventory

^ 2016 updated Mining Inventory (includes Exploration Target)

27

VISCARIA COPPER: UPDATES TO 2015 SCOPING STUDY

The 2015 Scoping Study confirmed the project description to begin ESIA process (Refer ASX Announcement 14 December 2015)

	2015 Scoping Study	Target Case A and Expanded Case	Target Case A and Expanded Case
Process plant size	1.2Mtpa scenario	2.0Mtpa scenario	3.0Mtpa scenario
Strip ratio (LOM)	5.8	6.0	8.4
Process	Crush, grind and copper flotation plant
Recovery rates	90.2%	90.2%	90.2%
Copper Production LOM Average per annum	107kt 12kt	200kt 21kt	260kt 30kt
Mine life	Minimum eightyears, open	Minimum nineyears, open	Minimum nineyears
Development capital Site Infrastructure Underground	US$87m (A$119m) US$15m (A$20m)	US$115m US$15m	US$145m US$15m
Sustaining capital (LOM) Site Infrastructure Underground	US$10.6m (A$14m) US$20.0m (A$27m)	US$14m US$35m	US$18m US$35m
Cash operating cost LOM C1 LOM AISC	US$1.86/lb (A$2.54/lb) US$2.10/lb (A$2.87/lb)	Targeting <US$2.00/lb
Copperprice	US$3.25/lb(A$4.45/lb)	US$3.00	US$3.00
Exchange rate AUD : USD	0.73	0.73	0.73
NPVpre-tax(7%)	US$74m(A$102m)	Targeting >US$150 mill
IRRpre-tax(%)	22%	Targeting >28%
Paybackperiod	3.7years	<4years	<4years
Capital intensity	US$7,335/t cup.a.	~US$5,750	~US$5,100

28