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ILUKA RESOURCES LIMITED Capital/Financing Update 2011

Mar 8, 2011

65116_rns_2011-03-08_3194cc8b-8f74-4628-afba-69c359d68a05.pdf

Capital/Financing Update

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ABN 57 063 977 579

ASX Release ASX code: IMA 9 March 2011

2nd Floor, 16 Ord Street West Perth WA 6005 PO Box 644 West Perth WA 6872 Telephone 08 9485 2410 Facsimile 08 9485 2840 [email protected] www.imageres.com.au

ILUKA SALE TO IMAGE COMMERCIALISATION IN NORTH PERTH BASIN

_____________

HIGHLIGHTS

  • In the context of firming heavy mineral (HM) prices, Image is seeking a Development Manager/Director to commercialise and develop its North Perth Basin HM assets.

  • In consideration for 1.2M Image shares (subject to a 1 year escrow) and $190,000 cash, Image will acquire from Iluka Resources Limited (ASX: ILU) four granted Mining Leases. Under the Mining Act a mining lease empowers the holder to mine the land.

  • Image estimates the Iluka leases will add approximately 955,000 tonnes of contained HM to Image’s resource base, which equates to a 55% increase of Dry Mining resources at Image’s Cooljarloo Project.

  • Estimated Zircon grades within the newly acquired Red Gully and Boonanarring deposits average an elevated 12% and 15% of the HM content respectively.

  • Significantly, the Boonanarring elevated zircon grade resource has already been shown by ground magnetics to have the potential to extend at least a further 7.7km to the north on existing Image tenure – the potential target remains open to the north and will be subjected to ground magnetics.

  • Resources and target zones along the Gingin Scarp under Image tenure are significant, representing a highly prospective HM target corridor some 65km in length extending through Gingin from Muchea to Cataby. The Iluka leases complete Image’s coverage of that 65 km corridor.

  • Image’s resource base is expected to be expanded following the recent drilling of the Rhea and Middle strands at Cooljarloo and current drilling at Gingin South. This drilling is expected to identify Measured Resources.

  • Image believes there is potential to significantly increase its resources in the corridor having already identified 22 km of high priority target areas using ground magnetics. Following previously reported high grade drilling results, at Gingin South, 7 km of these high priority targets are being drilled to establish Measured Resource status.

  • In addition, Image has at least 15 km of high priority magnetic targets remaining to drill tested at Cooljarloo whilst ongoing ground magnetic surveys are expected to delineate further drilling targets.

Tenement Acquisition

Image has reached agreement with Iluka Resources (ASX:ILU) to acquire four granted Mining Leases, as shown in Figure 1. Three of these tenements are surrounded by exploration licences comprising Image’s 100%-owned Gingin project, with the fourth adjacent to Image’s Cataby West and Quinns Hill projects.

This acquisition gives Image control of a 65km strike length of the Gingin Scarp. Image has recognised the Gingin Scarp as a high grade/high priority target area based on its drilling at Gingin South; the presence of the high grade 2.5km-long Gingin Mine owned by Iluka; and on detailed ground magnetic surveys carried out over the last two years by Image.

The Iluka Mining Lease resources have been analysed as part of a due diligence process and Table 1 summarises Image’s estimates of the resources at a 2.5%HM cut-off. The estimated resources at other cut-offs for three of the Mining Leases is attached in Appendix 1. The Red Gully resource was estimated by polygonal methods and the resource estimate is summarised in Appendix 2. The fact that the mining leases are granted is considered significant as it will facilitate the fast track of these resources through the permitting process to development, subject to the completion of appropriate agreements with landowners.

Table 1

New Acquisition Resource Inventory @ 2.5%HM cut

Project Ore
(Mt)
HM
(%)
HM
(kt)
Ilmenite Leuc Rutile Zircon
Gingin South 2.8 5.1 144 54.1 14.2* 5.3 7.8
Boonanarring 3.1 7.2 221 48.5 0.9 2.65 15
Gingin North 2.4 5.5 130 57.3 10.2* 3.45 5.7
Red Gully 6.0 7.7 460 65.8 8.3* 3.1 12.4
Total 14.3 6.7 955 58.9 7.7 3.4 11.3
  • Leucoxene = N/Mag Leuc + Mag Leuc

Update to Image Resource Inventory

This acquisition significantly increases Image’s Dry Mining resource inventory from 1.8Mt of HM to 2.8Mt, an increase of 55% and increases the total Dry Mining + Dredge Mining resource to 7.53 Mt of HM. The breakdown of the new Dry Mining resources is shown in Table 2.

These Resources do not include the mineralisation tested by the recent drilling at Rhea and Middle Strand or any of the drilling currently being completed at Gingin South. In addition at least 30km of high priority ground magnetic targets remain to be drilled at Gingin and Cooljarloo.

Image has already stated that it aims to have greater than 5M tonnes of contained dry mining HM within the North Perth Basin. As a guide, the Tiwest JV produces approximately 0.6M tonnes of HM per year from its Cooljarloo operations, one of the biggest mineral sand mines in the world and comprises mainly dredge and some dry mining resources.

Heavy mineral commodity price forecasts remain strong, with the price for Zircon expected to increase dramatically to at least US$1300/t, Rutile up to US$750/t and Ilmenite up to US$190/t, making the present time very favourable for development.

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Figure 1 Gingin Target Corridor and New Acquisitions

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Table 2 Updated Dry Mining Resources

DryMiningInferred ‐ 2.5% HM Cutoff
RESOURCE BCM TONNES % HM % SLIMES HM TONNES
Gingin North 580,000 1,090,000 5 14 57,000
Red Gully 1,455,000 2,570,000 7.5 10.7 192,000
Sub ‐ Total 2,035,000 3,660,000 6.8 11.7 249,000
DryMiningIndicated ‐ 2.5% HM Cutoff
RESOURCE BCM TONNES % HM % SLIMES HM TONNES
Atlas 530,000 1,100,000 3.2 19.2 35,000
Telesto 910,000 1,900,000 5.8 18.6 110,000
Helene 5,600,000 11,500,000 4.6 18.6 523,000
Hyperion 1,800,000 3,700,000 7.8 19.3 290,000
Gingin South 740,000 1,320,000 6 9 77,000
Gingin North 680,000 1,320,000 6 16 75,000
Red Gully 1,930,000 3,410,000 7.8 11.5 267,000
Sub ‐ Total 12,190,000 24,250,000 5.7 17.0 1,377,000
DryMiningMeasured ‐ 2.5% HM Cutoff
Atlas 5,470,000 11,060,000 7.8 15.7 860,000
Boonanaring 1,680,000 3,060,000 7.2 9.9 221,000
Gingin South 870,000 1,530,000 4.4 7.2 67,000
Sub ‐ Total 8,020,000 15,650,000 7.3 13.7 1,148,000
Total Dry 22,245,000 43,560,000 6.4 11.8 2,774,000

For more information on the company visit www.imageres.com.au

Please direct enquiries to:

George Sakalidis Managing Director Phone (08) 9485 2410 Mob 0411 640 337

Roger Thomson Executive Director Phone (08) 9485 2410 Mob 0419 969 183

The information in this report is based on information compiled by George Sakalidis BSc (Hons) and Paul Leandri BSc, who are members of the Australasian Institute of Mining and Metallurgy. George Sakalidis is a director of Image Resources. Paul Leandri is an employee of Image Resources. George Sakalidis and Paul Leandri have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined in the 2004 edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. George Sakalidis and Paul Leandri consent to the inclusion of this information in the form and context in which it appears in this report.

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Appendix 1 Detailed Resource Estimates

Gingin South (M70/0448)

CLASS HM CUTOFF VOL TONNES HM SLIMES HM TONNES ILM ML NML RUT ZIRCON
MEAS 5.0 306,700 541,339 6.66 7.24 36,048 49.20 7.66 8.38 6.01 7.86
MEAS 4.0 400,150 705,190 6.17 7.28 43,537 48.82 7.59 8.54 6.13 8.02
MEAS 3.0 535,750 942,986 5.42 7.44 51,086 49.72 7.46 8.29 5.87 7.90
MEAS 2.5 872,830 1,526,122 4.40 7.22 67,080 50.70 7.27 8.07 5.59 7.76
MEAS 2.0 1,068,010 1,861,385 4.02 7.07 74,855 50.91 7.21 8.02 5.50 7.71
MEAS 1.0 1,075,260 1,874,147 4.01 7.08 75,093 50.90 7.20 8.02 5.50 7.71
IND 5.0 291,300 528,320 9.91 8.45 52,376 62.68 8.10 3.63 5.15 8.30
IND 4.0 340,700 614,976 9.16 8.32 56,339 61.70 7.96 3.97 5.10 8.26
IND 3.0 464,420 836,203 7.59 8.68 63,448 59.78 7.75 4.64 5.07 8.16
IND 2.5 739,750 1,320,963 5.81 8.60 76,736 57.96 7.53 5.43 5.05 7.89
IND 2.0 928,330 1,654,256 5.10 8.67 84,448 57.50 7.48 5.61 5.04 7.91
IND 1.0 949,860 1,692,758 5.03 8.70 85,116 57.58 7.49 5.57 5.04 7.93
TOTAL 5.0 598,000 1,069,659 8.27 7.84 88,424 55.86 7.88 6.03 5.59 8.08
TOTAL 4.0 740,850 1,320,166 7.57 7.76 99,876 54.82 7.76 6.41 5.65 8.13
TOTAL 3.0 1,000,170 1,779,189 6.44 8.02 114,535 54.45 7.60 6.57 5.49 8.03
TOTAL 2.5 1,612,580 2,847,085 5.05 7.86 143,815 54.07 7.40 6.84 5.34 7.82
TOTAL 2.0 1,996,340 3,515,641 4.53 7.82 159,303 54.01 7.33 6.88 5.28 7.80
TOTAL 1.0 2,025,120 3,566,905 4.49 7.85 160,209 54.07 7.34 6.86 5.28 7.82

Gingin North (M70/1193)

CLASS HM CUTOFF VOLUME TONNES HM SLIMES HM TONNES ILM ML NML RUT ZIRCON
IND 5.0 300,625 590,860 8.27 15.92 48,871 57.29 6.53 3.03 3.24 5.45
IND 4.0 414,887 814,648 7.23 16.21 58,868 57.32 6.43 3.04 3.23 5.46
IND 3.0 593,562 1,155,068 6.12 15.87 70,696 57.36 6.29 3.06 3.20 5.48
IND 2.5 680,175 1,318,642 5.70 15.71 75,199 57.37 6.27 3.07 3.20 5.48
IND 2.0 761,600 1,474,898 5.33 15.75 78,673 57.37 6.28 3.07 3.20 5.48
IND 1.0 773,837 1,499,425 5.28 15.82 79,125 57.37 6.27 3.07 3.20 5.48
IND 0.0 773,837 1,499,425 5.28 15.82 79,125 57.37 6.27 3.07 3.20 5.48
INF 5.0 209,125 396,226 8.21 13.49 32,512 57.31 7.51 3.80 3.74 6.02
INF 4.0 310,900 586,062 7.02 13.28 41,159 57.31 7.51 3.80 3.74 6.02
INF 3.0 483,300 908,445 5.74 13.37 52,160 57.31 7.51 3.80 3.74 6.02
INF 2.5 576,812 1,089,729 5.24 14.04 57,095 57.31 7.51 3.80 3.74 6.02
INF 2.0 656,050 1,241,513 4.88 14.38 60,578 57.31 7.51 3.80 3.74 6.02
INF 1.0 687,375 1,299,480 4.74 14.41 61,600 57.31 7.51 3.80 3.74 6.02
INF 0.0 688,787 1,302,207 4.73 14.41 61,622 57.31 7.51 3.80 3.74 6.02
TOTAL 5.0 509,750 987,086 8.24 14.94 81,383 57.30 6.92 3.34 3.44 5.68
TOTAL 4.0 725,787 1,400,710 7.14 14.98 100,027 57.32 6.88 3.36 3.44 5.70
TOTAL 3.0 1,076,862 2,063,513 5.95 14.77 122,855 57.34 6.83 3.39 3.44 5.72
TOTAL 2.5 1,256,987 2,408,371 5.49 14.95 132,294 57.34 6.83 3.40 3.45 5.73
TOTAL 2.0 1,417,650 2,716,410 5.13 15.13 139,251 57.34 6.84 3.40 3.45 5.73
TOTAL 1.0 1,461,212 2,798,905 5.03 15.16 140,725 57.34 6.85 3.41 3.45 5.73
TOTAL 0.0 1,462,625 2,801,632 5.02 15.16 140,747 57.34 6.85 3.41 3.45 5.73

6

Boonanarring (M70/1194)

CLASS ZONE HM CUTOFF VOLUME TONNES HM SLIMES HM TONNES ILM1 ILM2 RUT1 ZIRCON LEUC
MEAS 5 5.0 831,878 1,509,639 9.70 8.71 146,380 39.99 11.40 2.88 17.17 0.87
MEAS 5 4.0 1,049,178 1,898,147 8.63 8.83 163,812 39.67 11.68 2.86 16.31 0.88
MEAS 5 3.0 1,283,278 2,313,573 7.71 8.86 178,324 39.31 11.79 2.84 15.59 0.88
MEAS 6 2.5 1,385,578 2,494,075 7.35 8.90 183,309 39.10 11.81 2.83 15.35 0.88
MEAS 5 2.0 1,497,300 2,689,988 6.98 8.88 187,720 38.93 11.83 2.82 15.12 0.88
MEAS 5 1.0 1,708,883 3,059,688 6.32 8.80 193,402 38.80 11.84 2.81 14.95 0.87
MEAS 5 0.0 1,790,650 3,202,891 6.07 8.80 194,367 38.77 11.85 2.81 14.95 0.87
MEAS 6 5.0 154,261 293,341 9.49 13.31 27,833 26.98 10.65 1.84 13.13 0.82
MEAS 6 4.0 196,561 372,782 8.43 13.40 31,411 26.85 10.62 1.83 13.05 0.81
MEAS 6 3.0 259,450 493,187 7.22 14.05 35,610 27.15 10.68 1.85 13.24 0.82
MEAS 7 2.5 299,300 568,562 6.63 14.25 37,678 27.31 10.70 1.86 13.32 0.83
MEAS 6 2.0 343,839 651,339 6.07 14.18 39,536 27.45 10.69 1.87 13.31 0.84
MEAS 6 1.0 432,056 817,864 5.15 14.39 42,108 28.06 10.79 1.92 13.65 0.86
MEAS 6 0.0 450,500 853,309 4.97 14.54 42,380 28.08 10.81 1.92 13.72 0.85
TOTAL 5.0 986,139 1,802,981 9.66 9.46 174,213 37.87 11.27 2.71 16.51 0.87
TOTAL 4.0 1,245,739 2,270,929 8.60 9.58 195,223 37.56 11.50 2.69 15.78 0.87
TOTAL 3.0 1,542,728 2,806,760 7.62 9.77 213,935 37.18 11.59 2.67 15.18 0.87
TOTAL 2.5 1,684,878 3,062,636 7.22 9.89 220,988 36.91 11.61 2.65 14.97 0.87
TOTAL 2.0 1,841,140 3,341,327 6.80 9.91 227,255 36.69 11.61 2.63 14.77 0.87
TOTAL 1.0 2,140,939 3,877,552 6.07 9.98 235,511 36.53 11.61 2.62 14.67 0.87
TOTAL 0.0 2,241,150 4,056,201 5.84 10.01 236,747 36.52 11.63 2.62 14.69 0.87

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Appendix 2 Red Gully (M70/1192) Polygonal Resource Estimate

Area of influence Area of influence Area of influence Ore HM Ore HM Ore
Hole Length Width T/ness Grade Tonnage Tonnage Volume Slimes
No. (m) (m) From To (m) % (t) (t) (cu.m) %
IndicatedResource @2.5 % cut-off
RG0080 400 40 18 27 9 10.6 258,609 27,326 144,000 7.6
RG0081 400 40 18 24 6 12.9 174,685 22,447 96,000 13.5
RG0082 400 40 18 24 6 5.4 167,247 9,031 96,000 12.7
RG0083 400 40 21 24 3 2.7 82,276 2,221 48,000 9.9
RG0085 400 40 21 27 6 5.5 167,297 9,118 96,000 10.2
RG0172 400 40 12 22.5 10.5 7.5 296,377 22,271 168,000 16.7
RG0173 400 40 16.5 19.5 3 5.1 83,449 4,214 48,000 22.7
RG0177 400 40 18 24 6 6.2 168,071 10,462 96,000 7.6
RG0179 400 40 15 21 6 10.4 172,264 17,959 96,000 7.8
RG0188 400 20 19.5 27 7.5 5.8 104,754 6,034 60,000 8.1
RG0191 400 20 13.5 21 7.5 7.2 105,640 7,585 60,000 14.9
RG0198 400 40 19.5 24 4.5 5.9 125,785 7,379 72,000 8.2
RG0207 400 20 12 22 10 10.1 143,316 14,532 80,000 6.1
RG0208 400 20 15 19 4 9.5 57,114 5,426 32,000 8.3
RG0209 400 20 19 21 2 8.0 28,299 2,250 16,000 7.3
RG0210 400 20 5 11 6 3.8 82,842 3,176 48,000 19.6
RG0210 400 20 21 28 7 5.9 97,852 5,773 56,000 9.9
RG0213 400 20 18 21 3 2.8 41,163 1,153 24,000 5.4
RG0214 400 20 17 21 4 15.7 59,177 9,291 32,000 5.9
RG0215 400 20 9 19 10 9.0 142,401 12,873 80,000 17.3
RG0216 400 20 4 10 6 4.6 83,224 3,828 48,000 27.8
RG0230 300 20 16 23 7 6.7 73,745 4,951 42,000 10.0
RG0231 300 20 20 25 5 17.5 56,040 9,807 30,000 5.1
RG0235 300 20 12 23 11 7.4 116,387 8,666 66,000 13.0
RG0236 300 20 14 18 4 3.0 41,219 1,247 24,000 17.1
RG0239 300 20 19 23 4 17.2 44,751 7,686 24,000 9.0
RG0241 400 20 9 16 7 9.1 99,741 9,119 56,000 16.1
RG0242 400 20 16 20 4 7.5 56,456 4,248 32,000 7.5
RG0243 400 20 16 23 7 5.0 97,328 4,866 56,000 6.4
RG0244 400 20 14 18 4 6.6 56,140 3,691 32,000 9.9
RG0244 400 20 19 22 3 8.4 42,561 3,575 24,000 5.9
RG0248 400 20 18 20 2 3.0 27,467 810 16,000 10.6
RG0249 400 20 18 22 4 6.4 56,090 3,604 32,000 9.4
Total Indicated
7.8
3,409,768
266,620
1,930,000
11.5
Area of influence Ore HM Ore HM Ore
Hole Length Width T/ness Grade Tonnage Tonnage Volume Clay
No. (m) (m) From To (m) % (t) (t) (cu.m) %
InferredResource @2.5 % cut-off
RG0041 800 40 21 24 3 7.3 169,144 12,348 96,000 25.8
RG0122 800 40 19.5 28.5 9 8.6 511,227 43,795 288,000 9.1
RG0130 800 20 21 25.5 4.5 6.6 126,334 8,338 72,000 9.0
RG0135 700 40 15 24 9 9.1 448,809 40,991 252,000 13.2
RG0137 700 40 16.5 25.5 9 7.9 445,533 35,123 252,000 6.0
RG0138 700 40 18 22.5 4.5 3.5 217,066 7,670 126,000 3.9
RG0144 600 30 24 28.5 4.5 10.7 145,552 15,526 81,000 9.1
RG0148 600 40 18 24 6 4.3 249,149 10,589 144,000 10.4
RG0045 600 40 27 33 6 6.7 252,818 16,939 144,000 16.2
Total Inferred
7.5
2,565,631
191,318
1,455,000
10.7
Total Indicated + Inferred
7.7
5,975,399
457,938
3,385,000
11.2