Project Setting

ACCESS, CLIMATE, INFRASTRUCTURE and PHYSIOGRAPHY

The El Palmar project is located in the province of Imbabura, 60 km Northwest of Quito. Access is via paved and gravel roads with the approximate travel time of 3 hours.

The community of El Paraíso is located on the southwestern edge of the concession and is made up of approximately 50 families. The community has a school, electric power service, piped water and cell phone coverage. The project concession is predominantly agricultural land with no impact on protected or native forests.

The climate in the project area is tropical and humid, with regular rain and humid forest-type vegetation. The lower and southern part of the concession is covered by farms with pastures and fruit trees. The northern part of the concession has more rugged topography with limited road access.

History

Mineral exploration by RTZ in 1992 in the region identified a stream sediment anomaly which was later followed up and a gold-bearing epithermal breccia system was identified to the west of El Palmar.

Lowell Mineral Exploration Ecuador S.A. undertook exploration comprising geological mapping and trench and pit sampling at El Palmar during 2007-2008.

Exploration activity by Lowell Mineral Exploration ceased in 2008 when the Ecuador Constituent Assembly passed a Mining Mandate which provided for the suspension of exploration until a new Mining Law was introduced.

In 2012 Chilean headquartered CODELCO undertook exploration comprising 3 diamond drill holes. The drilling was undertaken in the area of the Lowell Mineral Exploration trenching which identified gold and copper anomalous rocks exhibiting porphyry related stockwork veining. The assay results of the CODELCO drilling returned highly anomalous gold and copper in 2 drill holes, but not at sufficient levels for CODELCO to continue their exploration.

Sunstone Metals, through GOEX, commenced exploration in early 2021.

STAGED ACQUISITION AGREEMENT TERMS

Sunstone currently owns 74.5% of the project, and can acquire a 100% interest in the project, by making a final payment to the vendors of US$1.7 million on or before 1 July 2026.

The vendors of Golden Exploration Ecuador SA (the company holding the El Palmar concession), at the time of signing the Staged Acquisition Agreement, will receive a 1% net smelter royalty. Sunstone will have the right to buy back 75 per cent of the royalty (taking it to 0.25%) for US$1 million.