SUNSTONE METALS LTD — Investor Presentation 2016

Jan 17, 2016

January 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.

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AVALON MINERALS – KEY POINTS

• 1. Copper development company
• 1. Single high quality asset focus
• 1. Supported by outstanding infrastructure
• 1. Low sovereign risk
• 1. Highly competent team in place to deliver project

If you believe in copper then Avalon represents a compelling investment opportunity

As energy becomes greener approx. 3 - 5 times more copper per megawatt will be required (source - Atalaya Mining Nov 2015)

While a conventional car contains 15kg of copper on average, hybrid cars contain 30-40kg, and a full electric vehicle, 60kg (source – m2m.riotinto.com)

COPPER FUNDAMENTALS – GOOD TIMING

AVALON MINERALS – CONSIDER AN INVESTMENT DECISION BASED ON RISK AND A 3-5 YEAR TIME FRAME

General Risk –Low•Sweden, low sovereign risk•Kiruna –a mining district•Viscaria Project•3approved exploitation concessions•ESIA in progress leading to environmentalpermitting•High quality team•Supportive major shareholders limitinginvestment risk	Technical Risk –Low•2015 drilling program very successful•Strong upside case for deliveryof additionalresources and mining inventory•D Zone growth potential very obvious•A & B Zone combined open pit•A Zone underground not yet pursued butknown resources•Development area exploration success•64% of current resources in M&I category
Development Risk –Low•2015 Scoping Study (SS) demonstrated viableproject•2015SS clearly shows that a 2Mtpa operationis required and that the Mining Inventorymust be increased•Road, Rail, Town, Airport, Sea Ports -allexisting	Production Risk –Low•Forecast higher copper prices at expectedtime of production•Best infrastructure support of any copperdevelopment opportunity globally•Low cost hydro power•High quality concentrate•Local equipment manufacturers andcontractor/consultant groups4

VISCARIA COPPER – 2015, DELIVERED TO GOALS

Ownership • 100% ownership retained

• Completed 8,000m of diamond drilling at D Zone in 2015
• Strongly outperformed historical results and delivered confidence
• Outstanding results such as VDD 193, 26.7m at 2.6% Cu including 6.6m at 3.5% Cu
  • Recent drilling results 'as good as A Zone' the former mine
  • Copper only Scoping Study completed in December 2015
  • Underpinned by new D Zone Mineral resource estimate delivered in November

Scoping Study and ESIA

Drilling

• Small open pits on A, B and D Zones + Underground at D Zone
• Outstanding infrastructure
• Low technical risk geology and mineralogy
• Upside and scale increase needs to be delivered in 2016 Updated Scoping Study
• ESIA underway critical path to permitting

VISCARIA COPPER – 2015 SCOPING STUDY

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

Strip ratio (LOM)	5.8
Process plant	Crush, grind and copper flotation plant,
	1.2Mtpa throughput capacity
Recovery rates	90.2%
Copper Production
LOM	107kt
Average per annum	12kt
Mine life	Minimum eight years, mineralisation is open at depth and along strike
Development capital
Site Infrastructure	US$87m (A$119m)
Underground	US$15m (A$20m)
Sustaining capital (LOM)
Site Infrastructure	US$10.6m (A$14m)
Underground	US$20.0m (A$27m)
Cash operating cost
LOM C1	US$1.86/lb (A$2.54/lb)
LOM AISC	US$2.10/lb (A$2.87/lb)
Copper price	US$3.25/lb (A$4.45/lb)
Exchange rate
AUD : USD	0.73
NPV pre-tax (7%)	US$74m (A$102m)
IRR pre-tax (%)	22%
Payback period	3.7 years
Capital intensity	US$7,335/t cu p.a. (A$10,048/t cu p.a.)

VISCARIA COPPER – WHAT HAS THE 2015 SCOPING STUDY TOLD US?

• 'Main takeaway' – increase the mining inventory from 10 mill tonnes to 18 mill tonnes to allow for a 2mtpa operation. This is in progress.
• Scoping Study metrics clearly demonstrate that the project needs to deliver:
  • Annual production rate of 2mtpa,
  • at a capital cost of between US$120 – 150 mill,
  • with an initial 9 year mine life
  • to deliver >20,000t copper in concentrate per annum
  • and have a Capital Intensity of between 5,500$/t to 7,500$/t
• On these metrics, target NPV is >US$120 mill, target IRR is >25%, target payback of < 4years, target AISC <US$2/lb
• Increasing the mining inventory through low technical risk drilling will extend the currently defined shoots at D Zone laterally and to depth – holes 195 and 196 have already delivered some of this
• Combination of the A and B Zone open pits add to inventory
• High grade A Zone underground represents significant further upside beyond the targets stated above

PUBLIC ACCESS ELECTRIC RAIL LOW COST HYDRO POWER 8

VISCARIA LOCATION

• 3 Exploitation Concessions (valid to 2037 and 2039) approved covering the main areas of mineralisation at Viscaria
• Viscaria is in an area of 'National Interest for Minerals'
• Outstanding access to, and quality of, infrastructure, and low cost hydro power
• Multiple Scandinavian smelting opportunities, including Ronnskar located 470km by rail

VISCARIA D ZONE LONG SECTION

VISCARIA CROSS SECTION

Section through main shoot - VDD 193, 193W, 195, 186 and shallower holes above 186

The widest reported intersections in each hole (red text) progressively thicken downward within the shoot. <10m > 18.1m > 21m > 37.5m > 40m > 47.5m > 101.8m.

Broadly we see consistent trend of downward-widening intersections.

There are also more intervals of >2% Cu at depth (lowermost 4 holes) compared to the holes above 300m depth.

VISCARIA – MINERAL RESOURCE ESTIMATES AND MINING INVENTORY

Mineral Resource	Tonnes (Mt)	Grade (% Cu)
A Zone#	21.6	1.5
B Zone#	19.7	0.8
D Zone Open Pit*	3.1	0.8
D Zone Underground*	8.0	1.4
Total	52.4	1.2
Mining inventory	Tonnes (Mt)	Grade (% Cu)
A Zone Open Pit @	2.6	1.3
B Zone Open Pit @	2.0	0.7
D Zone Open Pit@	1.6	0.9
D Zone Underground @	3.8	1.5
Total	10.0	1.2

* 2015 Mineral Resource estimate

2014 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

VISCARIA – DON'T UNDERESTIMATE THE VALUE OF LOCATION AND EXISTING INFRASTRUCTURE

Mining infrastructure in place adjacent to the world's largest underground magnetite mine and iron pellet manufacturing facility

• Airport
• Mining town with mining contractors
• Low cost hydro power
• Highway access
• Electric rail access

All of these facilities deliver

• Lower Capital Costs
• Lower Operating Costs
• Reduced implementation risk

D ZONE – MINE PLANNING

D Zone showing planned open pits and schematic underground mine planning scenario based on 2015 Scoping Study

D ZONE - VERY CONFIDENT IT WILL BE LARGER

D Zone is delivering very robust intersections

Geophysical modelling and structural geology is enabling the delivery of a predictive model for resource growth

DEVELOPMENT AREA - OUTSTANDING UPSIDE

STAKEHOLDER ENGAGEMENT

Proposed development area is in a window surrounded by multiple land use areas

The key issues are (1) a strong mining heritage, (2) reindeer herding (3) Natura 2000 (4) recreation

PLANNING TO DELIVER

STUDIES AND EXPLORATION

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

PERMITTING

ESIA Baselines ESIA Assessments and Application ESIA review to approval

FUNDING

Drilling to expand Resource - A$3 mill Drilling and Feasibility Studies - A$7 mill ESIA - A$2.5 mill (pre & post submittal) Exploration discretionary - A$1.5 mill Corporate - A$1 mill/year

TARGET TIME FRAMES

• Scoping Study Copper Project December 2015
• Updated Scoping Study Q4, 2016
• Decision to Build and construction start in late 2017
• Copper production, plus 18 months

CORPORATE

TICKER	ASX:AVIFrankfurt:AL9
SHARE PRICE*	$0.022
SHARES ON ISSUE	332,690,122
MARKET CAP	$7.3M
CASH#	$1.7M
52 WEEK TRADING	$0.016 -$0.035
COVERAGE	Morgans StockbrokingBreakaway Research
CORPORATE ADVISORY	Viaticus Capital

As at 06.01.16 - 30 day VWAP * As at 06.01.16 - unaudited #

Top 10 shareholders hold 72% of shares on issue

Top 10 comprise institutions and high net worth individuals

Board and management hold 3.5% and have participated in recent placements

European and UK shareholders total 50%

SUBSTANTIAL SHAREHOLDERS

NAME	%
Valbonne II	15.3%
Tan Sri Abu Sahid Bin Mohamed	10.1%
Marilei International	9.5%
WyntorcSA	6.3%
Potezna Gromadka	5.9%

APPENDICES

VISCARIA D ZONE – HIGH GRADE INTERSECTIONS

Shoot	Drill hole number	From (m)	To (m)	Interval (m)	% Cu
1	VDD 171	89.0	103.2	14.2	2.0	oxide
	VDD 149	225.0	230.7	5.7	1.7	oxide
2	VDD 163	399.2	403.0	3.8	1.8
	VDD 155	389.0	394.0	5.0	1.4
	VDD 196	559.5	564.8	5.3	2.0
3	VDD 185	425.9	428.0	2.1	2.3
	VDD 177	350.0	351.0	1.0	3.7
4	VDD 195	713.7	716.4	2.8	2.5
		737.6	740.6	3.1	2.3
		745.6	755.5	9.9	2.2
	VDD 193	564.6	591.3	26.7	2.6
		including
		565.4	572.0	6.6	3.5
		573.0	578.2	5.2	2.9
		584.4	591.3	6.9	2.6
	VDD 193W	320.0	324.5	4.5	2.0
		353.3	357.6	4.3	2.4
	VDD 186	506.7	516.1	9.4	2.0
		527.6	531.1	3.6	2.8
	VDD 192	471.7	479.1	7.4	1.9
		481.1	481.7	0.7	2.1
		483.1	484.1	1.0	1.9
	VDD183	577.2	580.7	3.5	2.2
	VDD 165	362.0	369.0	7.0	1.9
	VDD 160	272.0	277.1	5.1	2.0
5	VDD 190	536.8	545.2	8.4	1.7
	VDD189	501.0	505.6	4.6	2.0
	VDD 129	301.0	306.0	5.0	2.0
	VDD 169	428.0	432.0	4.0	1.8
	VDD 157	382.0	386.0	4.0	1.8
	VDD 187	257.4	263.6	6.2	1.7

Summary of high grade intersections taken from various ASX announcements

VISCARIA COPPER – MINERAL RESOURCES

Viscaria Copper Project Mineral Resource Estimates Summary – Nov 2015

Resource Area	Location	Classification	Tonnes (Mt)	Cu Grade (%)	Contained Cu (kt)
	Open Pit	Measured	14.44	1.7	240.0
		Indicated	4.69	1.2	57.2
A Zone		Inferred	2.48	1.0	25.5
		Subtotal	21.61	1.5	322.7
	Open Pit	Measured	0.12	1.3	1.6
B Zone		Indicated	4.12	0.7	29.7
		Inferred	15.41	0.8	118.7
		Subtotal	19.65	0.8	149.0
D Zone	Open Pit	Indicated	3.11	0.81	25.2
		Inferred	0.01	0.32	0.02
		Subtotal	3.11	0.81	25.2
	Underground	Indicated	7.26	1.37	99.8
		Inferred	0.78	1.57	12.2
		Subtotal	8.03	1.39	111.9
Overall Cu		Total	52.4	1.2	608.9

A VERY HIGH QUALITY LEADERSHIP TEAM

ChairmanGraham Ascough	Resources executive. Broad global experience with largecompanies and building juniors
CEO and Managing DirectorMalcolm Norris	Geologist and BusinessDevelopment. Track record ofdiscoveryand growth
General ManagerStudies and Technical ServicesRayRobinson	Mining Engineer.Has delivered many feasibility studies
CFO & Company SecretaryGavin Leicht	Finance professional with significant experience in copper
General Manager -GeologyDr.Bruce Rohrlach	Geologist who hasplayed a key role in several significantdiscoveries and feasibility studies
Non-Executive DirectorCrispin Henderson	Senior banking executive
Non-Executive DirectorDonHyma	Senior project management executive across multiplecommodities

KIRUNA LOCATION MAP

CHILE - TOTAL COST OF PRODUCTION, Cu USc/lb

Rule of thumb; target total cost of production should be no more than 2/3 of the long term copper price. Current metrics dictate some changes to production must prevail.

CHINA – COPPER ORE AND CONCENTRATE IMPORTS

Chinese copper ore and concentrate imports were strong during December 2015

Copper ores and concentrates imports rose to 1480Kt, up 3% m/m and 26.8% y/y. For 2015, imports rose 12.3% y/y, compared with 17.7% for 2014. For 2015, imports of ores and concentrates were up 12.3% y/y, which contrasts with the weakness in unwrought copper and semi imports (-0.3% y/y). The pattern reflects China's growing smelter and refining capacity.

Source: Barclays

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COMPETENT PERSONS STATEMENT

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 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.