Avalon Minerals : March 2017 Quarterly Activities and Cashflow Report

26 April 2017

Viscaria Copper Project, Sweden (Avalon - 100%)

• Low risk copper development opportunity - will add significant value within an increasing copper price environment. The current Mineral Resource estimate is 52.4 million tonnes at 1.2% Cu;
• Considerable exploration upside exists with an Exploration Report outlining the key targets released during the March Quarter;
• Drilling is underway to test extensional targets outside of the current resource estimate, with first assay results expected in May;
• Ground magnetic surveys completed delivering better defined target areas;
• Detailed structural studies have identified additional copper targets.

  Gold Portfolio, Scandinavia

• Expenditure commitment to earn 51% of the Nortec JV tenements has been met;
• Avalon (100%) continues to build a strong land position over additional areas considered to be prospective for gold in Finland;
• Assays received from previously unsampled intervals from historical government drill holes. Highlights include:
  • 12m at 1.6g/t from 42m in R390
  • 5m at 2.3g/t from 53.4m in R396
  • 3m at 1.5g/t from surface in R341
• A large Induced Polarisation (IP) geophysical survey across areas of known gold mineralisation has been completed, and processed results are expected in late April;
• Several highly rated local and regional targets have been identified for follow-up, including some with very significant historical rock chip assays, including one area up to 77g/t gold, in addition to assays up to 6.5 g/t gold identified southeast of Satulinmäki;
• Next phase of drilling is planned and will be further refined once processing and interpretation of IP data is finalised.

26 April 2017

Lithium Portfolio, Scandinavia (Avalon's 80% subsidiary Scandian Metals Pty Ltd (Scandian) earning 80%)

• Expenditure commitment for Scandian to earn 51% has been met.

  Corporate Highlights

• Subsequent to the end of the quarter, Avalon entered an agreement to earn a majority interest in the highly prospective Bramaderos gold-copper concession, southern Ecuador;
• The partnership is with Cornerstone Capital Resources (TSXV:CGP) which also holds a minority stake in the giant Cascabel porphyry copper-gold deposit in northern Ecuador;
• A$1.6 million in cash at 31 March 2017;

Scandinavian Project Locations

Exploration and Development Activities

Viscaria Copper Project

During the quarter, Avalon released a technical report outlining the exploration target areas and opportunities at the Viscaria Copper Project in Sweden. The purpose of this report is to list and describe the multiple opportunities that exist in and around the former Viscaria copper mine in the Kiruna district of northern Sweden, and to aid in planning and prioritising future drilling programmes.

Ongoing technical work by Avalon has identified a series of 26 target environments, of which 24 are for new and extensional copper mineral resources at Viscaria, plus additional target environments with potential for gold and cobalt. Twelve of these targets represent relatively low-risk targets to existing resources. In addition, there are a further 12 targets located between 0.5 and 7 kilometres from the Viscaria deposits with the potential to produce new discoveries in the region, within trucking distance of the central Viscaria deposits.

Diamond drilling to test five priority targets is underway (Figures 1 & 2). These targets have been prioritised on the basis of geophysical anomalies with minor complementary historical drilling over some of the targets. The targets are primarily within 1.5km of the currently defined Viscaria orebodies and one target (Target 5) is located 2.5km to the southwest of the D Zone orebody. All drilling targets are outside of any existing mineral resource domain (see also ASX announcement dated 20th February 2017).

The drilling schedule, based on ready access, will progress from the old Viscaria Mine area to the target which is an interpreted northern extension of the D Zone orebody, and then test the southern shoot at D Zone.

Ground magnetic surveys have been completed and reinforce the targets which have been identified. The surveys also identify additional potentially significant targets along the D Zone horizon to the north and south. These additional target areas will be modelled and considered for drilling.

Detailed structural geology studies have been progressed and are aimed at delivering:

• a 3-D structural model that will be used to target interpreted high-grade copper zones, at the deposit scale, associated with thickened magnetite zones and potentially higher copper grade feeder zones; and

• a set of prioritised, new and existing, targets within 2.5km of the Viscaria copper deposit.

  This work has already provided significant breakthroughs in the geological understanding of Viscaria, and building a predictive exploration model at the district scale.

  Environmental and Social Impact Assessment (ESIA) and Permitting

  The Viscaria ESIA process is being progressed. These activities will deliver the necessary documents for application for a Permit to Mine from the Swedish Land and Environmental Court. The process is focussed on the immediate Viscaria area and supports planning for mine development initially within the approved Exploitation Concessions K3 and K4.

  The environmental permitting is the primary focus of activities at this stage to further de-risk the project and support ongoing studies.

  Gold Portfolio

  Tammela Gold Opportunity, Finland (Avalon earning 80% from Nortec Minerals)

  The Nortec earn-in agreement, for which Avalon has earned 51%, includes two known gold opportunities, Satulinmäki and Riukka, held within the claim areas (Figures 3 and 4). All historical drilling is shallow and has only tested to ~70m below surface. Historical assays from diamond drilling by the Finnish Geological Survey (GTK) included 22m @ 3.6 g/t Au from 50 metres (hole 391) at Satulinmäki.

  Assays have been received from several historical drill holes completed by the Finnish Geological Survey during the period 2000-2005, which were not previously sampled (Table 1 and Figure 6). The holes were reviewed by the Avalon team in the government core storage facility, with many previously unassayed intervals showing alteration. The intervals were assayed by Avalon, found to be gold bearing, and continue to support the definition of a significant gold system at Satulinmäki. Based on these results, additional intervals from historical government drill holes at Satulinmäki that were not previously assayed have been identified for sampling and assay. These intervals cover areas between known gold lodes, and may identify additional mineralised areas. Results from this sampling are expected in Q4.

  The intersection in R390 (12m @ 1.62 g/t Au) further confirms and strengthens the main lode, and in hole R396 (5m @ 2.33 g/t Au) maps the northeast continuation of the main lode. This mineralisation remains open to the northeast. Intersections in R393 and R394 are potentially mapping lodes that could develop along strike since this area is poorly drilled (refer to ASX Announcement dated 22 February 2017).

  An Induced Polarisation (IP) geophysical survey has been completed at the Satulinmäki gold prospect in southern Finland (Figure 7). Preliminary results from the IP survey suggest that anomalous domains have been mapped and that these extend to at least 250m deep. It is interpreted that these are mapping a sulphide envelope to gold mineralisation.

  Historical data have also now shown an extension of gold mineralised rock approximately 1.5km to the southeast where rock chip samples have returned up to 6.5g/t Au (refer ASX announcement dated 7 April 2017). The alteration system, as mapped by the distribution of arsenopyrite, also extends to the northwest. This is a very significant development and expands the target area of gold mineralisation to nearly 3.5km long and 1 km wide.

  The next phase of drilling will target the definition of high grade zones in the shallow parts of the Satulinmäki gold system (see ASX announcements dated 7 April 2017, 22 Feb 2017, 14 Nov 2016, and 17 Oct 2016), and will include drilling:

  • on the north-western most vein set which has returned results of 1m at 19.5 g/t Au and 2m at 10.5g/t Au correlating along strike for at least 60m.

  • on the main vein (Figure 5) below, and will be tested in its shallower zones where intervals up to 3m at 5.9g/t Au and 10m at 4.5 g/t Au correlate with deeper intervals of 9.2m at 7.3g/t Au delivering at least a 100m vertical extent.

  • On an interpreted third vein set where historical drilling has delivered 1m at 17.8g/t Au and