Sunstone Metals Ltd · ASX:STM

Sunstone Metals — Avalon Minerals — Investor Presentation (February 2011)

29 slides from Sunstone Metals's investor presentation, February 2011

  1. Slide 1: Viscaria Copper – Iron Ore Project

    Viscaria Copper – Iron Ore Project February 2011 1

  2. Slide 2: Disclaimer

    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

  3. Slide 3: Corporate Snapshot

    Corporate Snapshot Capital Structure Shares on issue 209.2m Unlisted options 2.6m Market Capitalisation (26cps) $54.4m Cash (28 Feb 2011) ~$9.0m Debt nil Enterprise Value $45.4m Major Shareholders Directors and Management 29.3% Peakville Investments Ltd 13.6% Galena Special Situations Fund 7.4% Top

  4. Slide 4: Avalon Snap Shot

    Avalon Snap 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  5 or 10 year LOM @ 3.0Mtpa  Fast payback  Solid returns  Production from 2013  Cu 19,000tpa Cu metal, 41.8Mlb p

  5. Slide 5: Viscaria, Kiruna and LKAB

    Viscaria, Kiruna and LKAB  Discovered in 70’s – 4km from Kiruna (pop 20,000)  15 years 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  Zero Liabilities  Infrastructure  Rail ‐ he

  6. Slide 6: Viscaria Copper Resource

    Viscaria Copper Resource VMS Copper Resource Cu Metal MT Cu % Classification (‘000t) Measured 6.7 2.47 165 Indicated 4.1 1.76 73 Inferred 33.9 0.33 280 TOTAL 44.7 1.16 518 Skarn Copper‐Iron Resource Cu Metal Fe Metal MT Cu% Fe% Classification (‘000t) (‘000t) Inferred 9.0 0.55 26.9 49 2,415 Tailings

  7. Slide 7: D Zone Copper and Iron Ore Products

    D Zone Copper and Iron Ore Products  Open Pit – Stage 1  Open pit design @ US$2.50/lb Cu  Cu rich and Fe rich lodes  UG drilling assessment in 2011  Iron Ore Concentrate  BF and DR quality. 1.5% SiO2  Low Alumina and Phos  High MgO, CaO  Compatible with Kiruna  Pellet Testing underway  Co

  8. Slide 8: Processing Cu and Fe

    Processing Cu and Fe • Standard off the shelf Technology • Cu Recovery 90% • Zn Recovery 65% • Fe Recovery 85% • Wt Recovery to Fe Con 24% 8

  9. Slide 9: Viscaria PFS Results

    Viscaria PFS Results Base Case *Development Case Mine A, B, D Open Pit A, B, D, D Extn Pits Process rate 3.0Mtpa 3.0Mtpa 75,700tpa @ 25% Cu, 18,925tpa Cu 63,300tpa @ 25% Cu, 15,825tpa Cu Annual Saleable Products 725,000tpa @ 69.5% Fe 735,000tpa @ 69.5% Fe Delivered Grade 0.7% Cu 20% Fe 0.6% Cu 23% F

  10. Slide 10: Viscaria Copper – Underground

    Viscaria Copper – Underground A Zone Open Pit A Zone Deeps Above historical Viscaria Cu mine  15mt @ 1.8% Cu remains 3‐15m wide at 1.6% Cu  Drilled to 600m below surface Quality concentrate  Extraction of high grade parts 28% Cu, 3% Zn, 45gpt Ag, 3gpt Au  Remnants and lower grade (<2% Cu)

  11. Slide 11: Viscaria D Zone Long Section

    Viscaria D Zone Long Section  2010  2011 Drilling Program  9Mt Inferred Resource @ 0.55% Cu and  90 holes planned, 19 Completed 27% Fe  Commenced at “high” north end  Pit design near base of Resource  Results as expected  Higher grade Cu lode in centre that  18m @ 22% Fe 1.3% Cu  28m @26%

  12. Slide 12: Viscaria Exploration Drilling

    Viscaria Exploration Drilling  Initial 13 holes completed  4 lines of RC holes  Best 10m @ 0.2% Cu  3 km South of D Zone  Failed to intersect stratigraphic position of D Zone  Basalt only  Little or no dolomite and magnetite  Magnetics remain unexplained  Reassess  Drill from D Zone headin

  13. Slide 13: Viscaria Exploration

    Viscaria Exploration  Viscaria Copper  D Zone North extensions  Bahpagobba  Ltjarn and other lodes to east of A Zone  Viscaria Iron Ore  South and Eastern Magnetite targets  Historical drill data  40m @ 28% Fe  6m @ 55% Fe  Lumps, fines, chips feeding Kirunavaara  Drilling planned as foll

  14. Slide 14: Regional Exploration

    Regional Exploration  Outstanding exploration ground  625km² tenure, 100km of strike  Gordon Kitchener  High grade Cu and Zn  10km of strike  Kurravarra  Anomalous Cu and Fe  20km Long target  Geologically similar to Viscaria D Zone  Vittangijarvi  Numerous old Cu mines and workings  Lar

  15. Slide 15: Adak Copper / Zinc Project

    Adak Copper / Zinc Project  Discovered in 40’s in Skelleftea Base Metals Belt  Over 80 VMS 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  Old core  Historical drilling and production  18 months wor

  16. Slide 16: Viscaria Project Work Program

    Viscaria Project Work Program 2010 2011 2012 2013 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Pre‐feasibility Plant Design Resource Update Metallurgy D Zone A and B Zone Permitting and Mining Lease Approvals EIA & E Court DFS Drilling A,B,D Zone D Zone Extn Definitive Design and Cost Feasibility Study Contracts a

  17. Slide 17: Peer Comparison

    Peer Comparison 7.0 Contained Cu tonnes (Mt) Mt Contained Copper 6.0 Producer 5.0 4.0 3.0 2.0 1.0 0.0 Producer $2,000 EV / Tonne Contained Cu EV/ Tonne Contained Copper $1,600 Producer $1,200 $800 $400 $‐ Resource position only considers the copper mineralisation Source: Company Reports, IRESS 17

  18. Slide 18: Peer Comparison

    Peer Comparison Estimated Cash Cost * (US$/lb)  Avalon offers $2.00  Cash Cost advantage Producer  Potential for improvement $1.80 as output or grade increases $1.60 $1.40  Upside potential  D Zone South Exploration $1.20  Higher grade underground opportunities $1.00  Viscaria area exploratio

  19. Slide 19: Next 18 Months

    Next 18 Months NEXT SIX MONTHS 12 MONTHS AFTER THAT  Aggressive Exploration and Drilling Program  Continued Exploration Program  Viscaria  Viscaria  D Zone South, D Zone, B Zone Copper  D Zone South infill  Target 30‐50Mt additional Resources  Iron Ore  Regional Copper and Iron Ore  Region

  20. Slide 20: Appendix

    Appendix • Sweden – A Mining Country • Directors and Management • PFS Sensitivities • Copper Demand • Copper Supply • Iron Ore Demand • Project Comparison • Peer Comparison 20

  21. Slide 21: Sweden – A Mining Country

    Sweden – A Mining Country  Government  Supports mining Sweden has an  26.3% company tax, 0.2 % royalties established  Approvals process transparent mining and  Iron Ore export industry  28mtpa ‐ LKAB  Markets ‐ W Europe, M East, Asia  Pellets, Concentrates and Fines  Copper  3rd in Europe

  22. Slide 22: Directors and Management

    Directors and Management David McSweeney – 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 develo

  23. Slide 23: Directors and Management

    Directors and Management Mr Gary Steinepreis – Non‐Executive Director • 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 leis

  24. Slide 24: PFS Sensitivities

    PFS Sensitivities  Leverage to Copper Leverage to Cu Prices  Base Case robust at US$2.20/lb 240 DC 3.0 Cu long term 200 NPV10 (US$ millions)  Development Case robust at 160 BC 3.0 US$1.80/lb Cu long term 120 BC 1.5  Project NPV most sensitive to 80  Commodity prices 40  Exchange rates 0  Oper

  25. Slide 25: Copper Demand

    Copper Demand Chinese and world copper demand in the Copper Demand by Decade 8000 historical context 27500 50% 7000 China 25000 China 45% Other 6000 Total 22500 World Ex-China 40% 5000 20000 35% 4000 '000 tonnes World 17500 30% '000t copper 3000 % share 15000 China's share of world demand 25% 2000 1

  26. Slide 26: Copper supply

    Copper supply Planned Growth in Copper Mine Supply By Region, 2008-2013 Copper Mine Changes by Region 1400 Europe, 267, 7% 1200 Oceania, -27, 1% 1000 N.Am erica, 259, 7% Africa, 933, 25% 800 Europe N.America 600 Asia '000t Af rica Oceania 400 L.A merica Tot al World Asia, 297, 8% 200 0 L.Am e rica,

  27. Slide 27: Iron Ore Demand

    Iron Ore Demand Iron Ore Demand million tonnes 2007 2008 2009E 2010F 2011f 2012f 2013f 2014f 2015f Supply curve to Chinese market for iron ore fines Demand Europe 140 134 97 111 117 123 125 125 126 110 Vale Rio Tinto BHP Billiton FMG Asia 585 655 790 848 932 993 1066 1143 1221 105 Other Australia Ot

  28. Slide 28: Project Comparison

    Project Comparison  Projects with similar ore processing Project, Location, Owner Copper Iron Ore Ernest Henry ‐ Australia 72Mt @ 1.0% Cu 22% mag Fe (Xstrata) 50ktpa Cu metal output 1.2mtpa @ 67% Fe (A$500M Investment) Concentrate Palabora – South Africa 80Mt @ 0.6%Cu 20% Fe (Rio Tinto, Anglo Ameri

  29. Slide 29: Peer Comparison: EV / annual Cash Margin

    Peer Comparison  Avalon undervalued  Producers ranked highly...Cash flow , Earnings, Certainty.  Immediate impact of commodity price change  Developers next  Explorers Lowest….. Risk and uncertainty EV/Annual Cash Margin at US$2.50/lb 14.0 Producer 12.0 EV / annual Cash Margin 10.0 Producer 8.0

Avalon Minerals — Investor Presentation (February 2011) on 6ix