IMAGE RESOURCES NL — Annual Report 2003

Sep 29, 2003

IMAGE RESOURCES NL

ABN: 57 063 977 579

ANNUAL REPORT

FINANCIAL YEAR 2002 - 2003

CONTENTS

Corporate Directory	3
Chairman's Review	4
Review of Operations	5
Directors' Report	19
Statement of Financial Performance	26
Statement of Financial Position	27
Statement of Cash Flow	28
Notes to and forming parts of the Financial Statements	29
Directors' Declaration	43
Independent Audit Report	44
Tenement Schedule	45
Other Information	47

CORPORATE DIRECTORY

DIRECTORS

MR PETER THOMAS Non-Executive Chairman

MR ROGER THOMSON Managing Director

MR GEORGE SAKALIDIS Executive Director - Exploration

COMPANY SECRETARY Rudolf Tieleman

REGISTERED OFFICE

$2^nd$ Floor 35 Outram Street, West Perth WA 6005 Telephone (08) 9485 2410 Facsimile (08) 9485 2840

WEBSITE www.imageres.com.au

FOR SHAREHOLDER INFORMATION CONTACT

SHARE REGISTRY Computershare Investor Services Limited Level₂ Reserve Bank Building 45 St George's Terrace, Perth WA 6000 Telephone (08) 9323 2000 Facsimile (08) 9323 2033

FOR INFORMATION ON THE COMPANY CONTACT

PRINCIPAL & REGISTERED OFFICE

2^ND Floor 35 Outram Street, West Perth WA 6005 Telephone (08) 9485 2410 Facsimile (08) 9485 2840

SOLICITORS TO THE COMPANY Smyth & Thomas

10 Walker Avenue, West Perth WA 6005

BANKERS

National Australia Bank Hay Street, West Perth WA 6005

STOCK EXCHANGE Australian Stock Exchange

COMPANY CODE IMA (Fully paid shares)

ISSUED CAPITAL 48, 716, 257 Fully paid ordinary shares 15,512,191 Options excisable at 25 cents by 25 August 2006 1,100,000 Options excisable at 25 cents by 4 July 2007

CHAIRMAN'S REVIEW

Dear Shareholder

I am delighted to present to you the Annual Report for Image Resources NL ('Image') for its first full year since listing.

Image capitalized on its substantial interest in Magnetic Minerals Limited following the takeover of this Company earlier this year by Ticor that delivered \$5.8 million to Image shareholders as well as \$1.2 million to Image.

Following its successful listing on the ASX on 4 July 2002, Image embarked on an ambitious exploration programme, mainly for gold and sulphide nickel, on its projects in Western Australia and the Northern Territory.

Drilling and/or sampling programmes were carried out on twelve projects in the Pilbara, Peak Hill, Murchison and the Eastern Goldfield regions. Encouraging results were obtained from several of the projects and further work is planned in these areas as outlined in the Project Review.

During the year Image acquired a 90% interest in the Emu Lake nickel project near Kalgoorlie where existing high-grade drill intersections and downhole EM anomalies provide attractive drilling targets for sulphide nickel. Image also identified and acquired/applied for a number of other target areas utilising its core competency and competitive advantage, namely, its aeromagnetic database and in house expertise in interpreting same.

Significantly, Image has recently announced a number of joint ventures with aggressive mid-sized and junior companies to farm in on several of Image's exploration projects. These joint ventures are important to Image as they underpin its business strategy of leveraging its ability to indentify and acquire virgin projects using its key competitive advantage and then adding value to them, sometimes at the expense of and in partnership with companies with relevant expertise. The joint ventures are expected to result in a high level of activity in the coming year, allowing Image to participate in significant exploration upside while reducing the depletion of its cash reserves.

I take this opportunity to encourage shareholders to register for email updates of the companies progress and to visit our website at www.imageres.com.au for more detail and commentaries on current activities.

It is pleasing to see that the market has reacted favourably to Image's progress during the year, resulting in a firming of its share price. I look forward to another busy and successful year for Image in its quest to discover high value mineral resources and add value for shareholders.

PETER THOMAS CHAIRMAN

PROJECTS SUMMARY

PROJECT LOCATIONS

Image Resources currently holds 23 projects totalling 3,600 sq km in area ranging from grass roots to advanced exploration projects with drilling targets. This large portfolio of projects is focused on gold and nickel and ranges in location from the Pilbara, Peak Hill, Eastern Goldfields, Southern Cross and Forrestania regions in Western Australia to the Tennant Creek area of the Northern Territory. Recently, Image has been concentrating on the Laverton-Leonora region and a number of tenements have been applied for. Two of the granted project areas in the this region have been advanced to the drilling stage and drilling programmes will be completed by the end of October 2003.

REVIEW OF OPERATIONS And ALL AND REVIEW OF OPERATIONS

Laverton Region Aeromagnetics Projects & Joint Ventures

In keeping with its strategy of maintaining a high level of activity on its large tenement holding and yet conserving funds for new project generation and acquisition, Image has farmed out several of its projects to companies with the skills and financial resources to effectively explore and add value to these projects. These joint ventures include the Emu Lake JV (nickel, Jubilee Mines 60%); Trojan JV (gold and base metals; Troy Resources earning 60%); Lake Percy JV (nickel, Western Areas earning 60%) and Jilbadgie JV (gold and nickel, Westonia Mines earning 65%).

Image is continuing its gold exploration at the following projects:

• Mt Elsie (Image 66.5% 100%) ·
• Mt Hays (Image 90%) ·
• Wilthorpe (Image $90\%$ ) ·

• Jarbora Hill (Image 100%) · $\bullet$

• Bullfinch (Image 90%) · ٠

• Epenarra/Murchison Range, NT (Image 100%) $\blacksquare$

Other projects where work is pending the grant of tenement applications include Warrawoona (gold, Image 90%) and Ruby Well (gold, Image 60%). New 100% owned projects, where tenements have recently been applied for, include Bronco Plains (gold), Mt Remarkable (gold), Junction Lake (gold), Top Well (gold), Camel Hump (gold), and Windarra North (nickel), all in the Eastern Goldfields region of Western Australia.

JOINT VENTURES

Emu Lake JV

The Emu Lake project comprises two exploration licences situated about 70km northeast of Kalgoorlie and 30km east of the Silver Swan nickel mine.

Under the terms of the joint venture agreement Sir Samuel Mines NL (a wholly owned subsidiary of Jubilee Mines NL) will manage the project, and earn a 60% interest in the tenements by payment of \$100,000 cash (which has been received), whilst sole funding exploration and committing to the completion of a bankable feasibility study by December 2008. Image and the vendor will retain a 30% interest and 10% interest respectively, free carried to completion of the feasibility study.

$10$

The project area covers 54 sq km and contains approximately a 10km strike length of ultramafics known to be prospective for nickel sulphide mineralisation. Work by explorers in the 1970's located several gossans containing elevated values of nickel, copper and PGE pathfinders at what is now termed the Gossan Zone. Subsequent drilling intersected significant widths of low-grade disseminated nickel sulphide mineralisation.

Emu Lake JV Gossan Zone Drill Section 48720N (local grid)

More recent exploration by Outokumpu - MPI returned high-grade nickel sulphide intercepts from RC and diamond core drilling at the Gossan Zone. These include 0.3m @ 7.55% Ni (ELD5: 256.4 -256.7m), 0.17m @ 7.08% Ni (ELD5: 277.06 - 277.23m), and 1.0m @ 2.28% Ni (ELRC10: 192.0 -193.0m). These intercepts confirm that the ultramafic units contained within the project area are prospective for high-grade nickel sulphides. Downhole EM surveys at the Gossan Zone have identified several significant off-hole conductors that provide targets for further drilling. In addition, several other zones of anomalous geochemistry indicative of both nickel and gold mineralisation have been identified.

Trojan JV

The Trojan JV comprises four projects totalling 560 square kilometres of tenements and includes 100%-owned projects at Woongaring, Adam Range and Scorpion Well and, where Image is earning a 75% interest, the Mt Zephyr JV.

Under the terms of the agreement Troy can earn a 60% interest in the tenements (45% in the case of the Mt Zephyr JV) by means of cash payments totalling \$75,000 and sole funding \$2 million of expenditure within five years.

Woongaring JV Soil Geochemistry

Woongaring JV Tenement Area

It is anticipated that exploration will commence immediately on identified targets at Adam Range, 25km northeast of Laverton, and at Mt Zephyr, 55km west of Laverton. Upon grant of tenement applications, exploration will progress to Woongaring, 140km northwest of Southern Cross, where a 10km-long anomalous gold and base metal corridor has been outlined. This area is considered to have potential for intrusion-related gold mineralisation of the Boddington or Wallaby styles.

Exploration is then expected to commence at Scorpion Well, 15km south of the 2M oz Darlot gold mine, where a poorly explored section of greenstone belt has been identified.

Adam Range JV
Geochemistry

At Adam Range recent geological mapping and sampling by Image has identified sub outcropping ferruginous quartz veining with grades up to $9.5g/t$ Au adjacent to a 1.5km-long gold anomaly previously outlined by Image using vacuum drilling. This encouraging result confirms the excellent gold prospectivity of this area. In addition, Image has lodged an exploration licence application over an adjacent area covering a possible 3.5km extension of the gold-anomalous zone.

A recent ground magnetic survey at the Mt Zephyr JV has defined an annular magnetic feature some 800m in diameter and obscured by extensive colluvial cover. This target will be explored for intrusion-related gold mineralisation similar to the 7M oz Wallaby deposit near Laverton.

Lake Percy JV

Image's 100% owned Lake Percy project in the Forrestania- Emily Ann region of Western Australia has been farmed out to Western Areas NL. The project tenements total some 500 square kilometres

in area and cover several regional magnetic features which may represent part of the prospective ultramafic sequences linking the Forrestania and Emily Ann nickel districts. The Lake Percy area is extensively sand covered and is relatively unexplored for nickel sulphides.

Under the terms of the joint venture agreement Western Areas may earn a 60% interest in the tenement by sole funding exploration expenditure of \$700,000 before February 2006. Western Areas is committed to spending \$75,000 before it can withdraw from the joint venture.

Aeromagnetics

The next phase of exploration at Lake Percy is scheduled to commence in October 2003 and will be managed separately from Western Area's ongoing exploration and feasibility work at Forrestania.

Jilbadgie JV

Following the discovery of nickel sulphide mineralisation at Westonia, Image entered into a joint venture agreement with Westonia Mines Limited on Image's 100%-owned Jilbadgie project. Under the terms of the JV agreement Westonia may earn a 65% interest in the 225 square kilometre of project tenements (some of which are applications) by expenditure of approximately \$297,000.

The Jilbadgie project, situated 30km south of Southern Cross, in the southeastern part of the Westonia greenstone belt, is interpreted to cover an extensive sequence of ultramafic rocks on which little nickel exploration has been completed. The discovery of nickel sulphides at Westonia is considered to have significantly increased the mineral potential of the Jilbadgie project.

CURRENT PROJECTS

Wilthorpe (Image 90%)

Two gold targets have been outlined at this 12 square kilometre project situated 40km south of the Fortnum gold mine in the Peak Hill region of WA. At the northern prospect RAB drilling by Image confirmed a broad zone of gold mineralisation over an east-west distance of 70m with best intercepts of 2m at 3.3 g/t Au from 46m, 13m at 1.4 g/t Au from 35m, 3m at 13.1 g/t Au from 3m and 2m at 4.7 g/t Au from 50m. Drilling 100m to the south intersected 6m at 1.2g/t Au from 30m. Further investigation of the geometry of this mineralised zone is in progress.

The southern prospect, about 2.5km south of the northern prospect, is a new discovery related to a cross-cutting zone of quartz veins. Shallow geochemical drilling confirmed anomalous gold values over a 400m distance with a peak value of 25.2 $g/t$ Au. Limited RAB drilling in this area intersected 3m at 2.4 $g/t$ Au from 24m and 3m at 2.3 $g/t$ Au from 65m. Further work is planned in this area.

Mt Elsie (Image 66.5% - 100%)

This 18 square kilometre project is situated 70km northwest of Nullagine in the Pilbara region. The core of this project comprises a large sheeted quartz vein system hosted by a mafic volcanic unit within a sequence of Archean mafic and ultramafic rocks. The vein system occurs within a 300mwide corridor some 3.5km in length. Systematic rock sampling of the vein outcrops returned grades up to 31.1 $g/t$ Au clustered into seven prospect areas. Four of these prospects (termed Camp, Lapelerie, T3 and T4) were drilled. The remaining three projects were not drilled because of difficult access. Significant RAB drilling results include:

Hole No		Coordinates	Azimuth From		То	Interval	Grade	Prospect
ERB	N	E		m	m	m	$g/t$ Au
298	7282	50851	090	37	40	3	7.8	Ŀ
300	7275	50905	090	11	12	1	14.1
303	7321	50905	090	38	40	2	2.8	L
311	7345	50833	090	47	51	4	$1.4\,$
314	7406	50877	090	44	46	2	2.4	L
321	7389	50783	360	2	4	2	2.5	C
322	7342	50794	157		3	2	3.4
327	7106	51075	090	27	30	3	1.7

331	7215	51137	090	10	15	5	2.2	T 4
336	7284	51223	090	$\overline{2}$	3	1	9.9	T 4
349	8428	50508	315	12	20	8	3.7	T4
including				12	15	3	7.2	T 4
350	8429	50515	340	20	23	3	2.2	T 4
352	8465	50536	300	2	19	17	3.7	T 4
including				4	10	6	7.3	T 4
355	8457	50536	270	20	21	1	4.3	T 4
				34	36	$\overline{2}$	2.8	T 4
358	8576	50534	270	13	16	3	1.9	T4
365	8688	50326	090	8	17	9	2.0	T 3
				50	61	11	1.5	T 3

Holes inclined at 60 degrees , 1m samples, uncut, L: Lapelerie prospect, C: Camp prospect

The drill results confirm significant gold mineralisation in at least four locations within the vein system. The Camp and Lapelerie prospects are situated at the southern end of the vein system and the T3 and T4 prospects occur approximately 1.2km and 1.0km to the north respectively.

Following the withdrawal of Mines and Resources Pty Ltd from the project Image's interest in the three remaining joint ventures comprising the project increased to 66.5%, 90% and 100% respectively. Further work is being planned to assess the potential of the mineralised zones identified to date.

Mt Hays (Image 90%)

Mt Hays is situated near the Mt Elsie project and about 60km east of Nullagine. This 56 square kilometre project covers a sequence of Archean sedimentary rocks of the Mosquito Creek Formation. These sediments form an east-west belt east of Nullagine and host the high grade Blue Spec and Golden Spec gold mines plus numerous small gold deposits in the Eastern Creek, Mosquito Creek and Nullagine mining centres. Geochemical soil sampling to follow up anomalous stream sediment and rock sample results outlined several strong gold anomalies the largest of which is at least 1,000m in length with peak values of 1,727 ppb Au and 1,417 ppb Au compared to background values of less than 10 ppb Au.

Geochemical mapping of this area defined a zone of quartz veining and stockworks over a 1,200m strike length. The intermittently outcropping quartz veins occupy a zone 10m to 20m wide within deformed metasediments.

A scout RAB drilling programme of 11 holes intersected quartz veins and stringers in weathered metasediments. Most of the drill holes intersected anomalous gold values with best intercepts of 4m at 2.6g/t Au from 34m (including 1m at 8.1g/t Au) and 4m at 1.3g/t Au from 46m (including 2m at 2.0 $g/t$ Au).

Elsewhere on the project soil sampling has outlined several smaller gold anomalies with peak values up to 1,915 ppb Au which have yet to be assessed.

Jarbora Hill (Image 100%)

This 33 square kilometre project is situated at the northern end of the Tallering greenstone belt and about 150km west of Mt Magnet in the Murchison region. The tenement is about 17km along strike from Giralia Resources' Snake Well project where a number of significant gold intersections have recently been reported. Shallow geochemical drilling by Image tested a number of complex structures within the greenstones interpreted from aeromagnetic data.

The geochemical sampling outlined three coincident gold-arsenic anomalies associated with the aeromagnetic targets. Scout RAB drilling of these anomalies intersected anomalous gold values in several areas with best intercepts of 1m at 4.2g/t Au from 35m (end of hole), 4m at 0.3g/t Au from 33m and 2m at 0.3g/t Au from 40m. Further investigation of these encouraging early results is planned.

Bullfinch (Image 90%)

The 80 square kilometre Bullfinch project is situated 35km northwest of Southern Cross and covers the eastern margin of the Bullfinch-Parker Range greenstone belt and the adjacent granitoids. The 1.4M oz Copperhead gold mine is located near the western margin of the tenement. Several areas of old gold workings occur in the granitoid which have not been drill tested or subject to modern exploration. High gold grades in quartz veins have been obtained at the Bottom and Golden Frog prospects and also at the recently acquired Withers Find prospect where gold workings in granitoid can be traced for 1.5km.

Shallow geochemical drilling has defined a 1km-long gold anomaly near Withers Find. Scout RAB drilling in this area intersected gold mineralisation in weathered granite with a best intercept of 3m at 0.4 g/t Au from 37m, however most of this soil covered anomalous zone remains undrilled. Geological mapping and sampling to define drilling targets is continuing.

Epenarra/Murchison Range, NT (Image 100%)

This large, 889 square kilometre, project is situated 100km southeast of Tennant Creek in the Northern Territory. The tenements cover a sequence of Proterozoic sediments considered similar to those hosting the high-grade copper-gold deposits of Tennant Creek. The area contains very little basement outcrop and the surficial rocks are mainly younger sediments of the Georgina Basin. Interpretation of aeromagnetic data has identified several targets considered prospective for iron-oxide-copper-gold mineralisation of both the high-grade Tennant Creek style and the large,

Iower-grade Olympic Dam style. Image has carried out gravity, ground magnetic and geochemical surveys over several targets with significant results summarised as follows:

• MT12: coincident magnetic, gravity and gold anomaly
• FT5: magnetic anomaly adjacent to a gravity ridge with coincident Au, Bi, Sb and As geochemical anomalies
• ET4: magnetic anomaly with coincident Au and Bi response
• E5: defined magnetic anomaly (no geochemical sampling yet completed).

Epenarra & Murchison Range Projects Regional Aeromagnetic Setting

The coincident geophysical and geochemical anomalies outlined over the selected targets are a most encouraging start to this programme and are expected to provide early drilling targets for iron-oxide-copper-gold in this unexplored region where many other targets remain untested. Image is seeking a joint venture partner to participate in the drilling of these targets.

NEW PROJECTS

Image's extensive aeromagnetic database continues to be interrogated and interpreted to identify new exploration targets and opportunities for Image.

Recent tenement applications in the Eastern Goldfields region of Western Australia include:

• Bronco Plains, 105 sq km, 140km east of Kalgoorlie. Target: gold $\bullet$
• Top Well, 36sq km, 100km west northwest of Leonora. Target: gold and nickel $\bullet$
• Mt Remarkable, 145sq km, 120km southwest of Leonora. Target: gold. $\bullet$ .
• Junction Lake, 62sq km, 130km southeast of Kalgoorlie. Target: gold
• $\bullet$ Camel Hump, 84sq km, 30km north of Laverton. Target: gold
• Windarra North, 343sq km, 25km northwest of Laverton. Target: nickel. $\bullet$

Image is continuing to use innovative methods of processing and interpreting aeromagnetic and gravity data in its search to add value for shareholders.

DIRECTORS' REPORT WEEKS

Your directors present their report on the Company for the year ended 30 June 2003.

DIRECTORS

The following persons were directors of Image Resources NL ("Image") during the whole of the year (unless otherwise stated) and up to the date of this report:

Mr George Sakalidis Mr Peter Thomas Mr Roger Thomson

PRINCIPAL ACTIVITIES

The principal activities of the Company during the year were the exploration of mineral tenements in Western Australia and the Northern Territories.

RESULTS FROM OPERATIONS

During the year the Company recorded an operating loss of \$759,994 (2002: \$356,048).

DIVIDENDS

No amounts have been paid or declared by way of dividend by the Company since the end of the previous financial year and the Directors do not recommend the payment of any dividend.

REVIEW OF OPERATIONS

A review of operations is covered elsewhere in this Annual Report.

EARNINGS PER SHARE

Basic Loss per share for the financial period was 1.56 cents (2002: 1.12 cents). Diluted Loss per share is not significantly different from Basic Loss per Share.

SIGNIFICANT CHANGES IN STATE OF AFFAIRS

Significant changes in the state of affairs of the Company during the financial period were as follows:

On 13 May 2002, the Company lodged a Prospectus with the Australian Securities and Investment Commission comprising an offer to subscribe for up to 20,000,000 fully paid ordinary shares at \$0.20 per share. An amount of \$3,057,400 was raised pursuant to the capital raising and the offer was closed 14 June 2002. The Company was admitted to the official list of Australian Stock Exchange Ltd ("ASX") on 2 July 2002 and trading on the ASX commenced 4 July 2002.

Image capitalized on its substantial interest in Magnetic Minerals Limited following the takeover of this company earlier this year by Ticor that delivered \$1.2 million to Image.

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL PERIOD

The Company has entered into various joint ventures subsequent to balance date whereby it has transferred the tenement expenditure commitments to the joint venturers as part consideration for farming in to tenements at Adam Range, Woongaring, Scorpion Well, Mt Zephyr, Jilbadgie, Lake Percy and Emu Lake. This has the effect of decreasing Image's exposure to the statutory annual expenditure requirements applicable to its tenements by an amount of \$341,100.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

Likely developments in the operations of the Company and the expected results of those operations in future financial years have not been included in this report as the directors believe, on reasonable grounds, that the inclusion of such information would be likely to result in unreasonable prejudice to the Company.

ENVIRONMENTAL ISSUES

The Company carries out operations in Western Australian and the Northern Territory which are subject to environmental regulations under both Commonwealth and State legislation in relation to its exploration activities.

The Company has formal procedures in place to ensure regulations are adhered to. During or since the financial period there have been no significant breach of these regulations.

INFORMATION ON DIRECTORS

Mr Peter Thomas

Chairman

Mr Thomas is a practising Solicitor with more than twenty years national and international experience in the resource sector (both oil and minerals) specialising in the provision of general contractual and corporate advice to both miners and explorers. He has been responsible for the structuring, restructuring and reconstruction of a number of companies and has been a director of a number of listed companies. He is also chairman of the Anthem Software group of companies and was a director of Magnetic Minerals Limited until it was taken over, delivering substantial value to its shareholders.

Mr Thomas has an interest in 180,000 ordinary fully paid shares and 1,000,000 options exercisable at \$0.25 each by 25 August 2006, of which 60,000 shares and all options are subject to escrow provisions until 4 July 2004.

Mr Roger Thomson

Managing Director

Mr Thomson is a geologist with more than thirty years experience in mineral exploration, mining geology and management in Australia, Africa, South America and SE Asia. Mr Thomson has held the positions of General Manager Exploration with Delta Gold Ltd and Sons of Gwalia Ltd and has been responsible for, or closely associated with, making economic discoveries of gold and tantalum in Australia. He successfully managed the programme that led to the discovery of the multi-million ounce Sunrise gold deposit, near Laverton in Western Australia. Mr Thomson is an Associate of the Royal School of Mines, a Member of the Australasian Institute of Mining and Metallurgy and a Member of the Society of Economic Geologists. He is a director of unlisted Mariana Resources NL.

Mr Thomson has an interest in 150,000 ordinary fully paid shares and 2,000,000 options exercisable at \$0.25 each by 25 August 2006, of which 93,750 and all options are subject to escrow restrictions until 4 July 2004.

Mr George Sakalidis

Exploration Director

Mr Sakalidis has been an exploration geophysicist for over twenty years during which time his career has included extensive gold, diamond, base metal and minerals sand exploration. Mr Sakalidis has been involved in a number of discoveries including the world class Silver Swan nickel deposit, the Three Rivers gold deposit and the Rose gold deposit. He was instrumental in the design of the ground magnetic surveys which led to the acquisition and delineation of the Dongara mineral sands deposit.

DIRECTORS' REPORT

He has had previous experience at board level in the exploration industry as a director of North Star Resources NL and as a founding director of the successful, recently taken over mineral sands explorer Magnetic Minerals Limited.

Mr Sakalidis has an interest in 6,217,370 fully paid shares and 2,505,925 options exercisable at \$0.25 each by 25 August 2006, all of which are subject to escrow provisions until 4 July 2004. He also holds, through an associated entity, an interest in 104,000 fully paid ordinary shares which are not subject to escrow provisions.

AUDIT COMMITTEE

At the date of this report the Company does not have a separately constituted Audit Committee as all matters normally considered by an audit committee will be dealt with by the full board.

MEETINGS OF DIRECTORS

During the financial period ended 30 June 2003, there were 10 meetings of directors which were attended by all the directors.

DIRECTORS AND EXECUTIVES EMOLUMENTS

The Company's policy for determining the nature and amount of emoluments of board members and senior executives (if any) of the Company is as follows:

The remuneration structure for executive officers, including executive directors, seeks to emphasise payments for results through providing various reward schemes, for example the incorporation of Share Option Incentive Schemes. The objective of the reward schemes is to both re-inforce the short and long term goals of the Company and to provide a common interest between management and shareholders.

The emoluments of each Director and each executive officer for the financial period are as follows:

Executive	Position	Directors Fees	Super- annuation	Consulting Fees/Services	Total
Peter Thomas	Non-Executive Chairman	\$40,000		\$18,433	\$58,433
Roger Thomson	Executive Managing Director		\$15,108	\$167,863	\$182,971
George Sakalidis	Executive Director		\$2,943	\$114,785	\$117.728
Rudolf Tieleman	Company Secretary			\$45,921	\$45,921
Total		\$40,000	\$18,051	\$347,002	\$405,053

EMPLOYEES

The Company employed three employees at 30 June 2003 (2002: No employees).

CORPORATE STRUCTURE

Image Resources NL is a no liability company limited by shares and is incorporated and domiciled in Australia.

INDEMNIFICATION & INSURANCE OF DIRECTORS AND OFFICERS

The Company has entered into agreements indemnifying, to the extent permitted by law, all the directors and officers of the Company against all losses or liabilities incurred by each director and officer in their capacity as directors and officers of the Company. The Company has negotiated insurance cover in respect of Directors' and Officers' Liability Insurance contracts for current officers of the Company. The liabilities insured are for damages and legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the Company. A premium of \$11,818 was paid during the year ended 30 June 2003.

DIRECTORS' REPORT MELLOW REALLY

OPTIONS

As at the date of this report there are the following options over un-issued ordinary shares in the Company;

1,100,000 exercisable at \$0.25 per option on or before 4 July 2007. The options were issued pursuant to $(a)$ the Company's Employee Share Option Plan.

15,512,191 exercisable at \$0.25 per option on or before 25 August 2006. $(b)$

No options have been issued during the year or exercised since the end of the financial year.

CORPORATE GOVERNANCE

The board of directors of Image Resources NL is responsible for the Corporate Governance of the Company. The board guides and monitors the business and affairs of Image Resources NL on behalf of the shareholders by whom they are elected and to whom they are accountable.

The Board of Directors

Shareholder approval is required on the composition of the board which is determined in accordance with the following principles and guidelines:

• the Board should comprise between three and ten directors; $\bullet$
• the Board should comprise directors with an appropriate range of qualifications and expertise; and
• the Board should meet periodically during the year and be provided with sufficient information to ensure all directors are made aware of and have available all necessary information, to participate in an informed discussion of all agenda items.

Remuneration, Audit and Other Issues

All board members participate in considering of audit and remuneration issues.

The board as a whole ensures compliance with statutory responsibilities relating to accounting policy and disclosure by review of half-yearly and annual financial statements. The board as a whole also reviews the remuneration of external auditors, their terms of engagement and the scope and quality of the audit. The auditors may communicate at any time with either the Chairman or any other member of the board.

The board presently delegates to management the review of corporate compliance, environmental, health and safety, and risk management procedures. Reporting on these issues to the board occurs in the context of regular management briefings and reports. The remuneration and terms and conditions of employment for senior executives are reviewed and approved by the board after seeking professional advice.

Independent Professional Advice

Directors have the right, in connection with their duties and responsibilities as directors, to seek independent professional advice at the Company's expense. Prior approval of the Chairman is required, which will not be unreasonably withheld.

Board Responsibilities

As the board acts on behalf of the shareholders and is accountable to the shareholders, the board seeks to identify the expectations of the shareholders, as well as other regulatory and ethical expectations and obligations. In addition, the board is responsible for identifying areas of significant business risk and ensuring arrangements are in place to adequately manage those risks. The board seeks to discharge these responsibilities in a number of ways.

The responsibility for the operation and administration of the Company is delegated by the board to the Managing Director and the executive team. The board ensures that this team is appropriately qualified and experienced to discharge their responsibilities and has in place procedures to assess the performance of the Managing Director and the executive team.

The board is responsible for ensuring that management's objectives and activities are aligned with the expectations and risks identified by the board. The board has a number of mechanisms in place to ensure this is achieved. In addition to that referred to above, these mechanisms, include the following:

• board approval of a strategic plan, which encompasses the entity's vision, mission and strategy $\bullet$ statements, designed to meet stakeholders' needs and manage business risk;
• the strategic plan is a dynamic document and the board is actively involved in developing and $\bullet$ approving initiatives and strategies designed to ensure the continued growth and success of the entity;
• implementation of operating plans and budgets by management and board monitoring of progress $\bullet$ against budget. This includes the establishment and monitoring of key performance indicators (both financial and non-financial) for all significant business processes;
• appointment of executives to report on environmental issues and concerns, and occupational health and $\bullet$ safety; and
• procedures to allow directors, in the furtherance of their duties, to seek independent professional advice at the Company's expense.

DIRECTORS' REPORT

Monitoring of the Board's Performance and Communication to Shareholders

In order to ensure that the board continues to discharge its responsibilities in an appropriate manner, the performance of all directors is reviewed annually by the chairperson. Directors whose performance is unsatisfactory are asked to retire.

The board of directors aims to ensure that the shareholders, on behalf of whom they act, are informed of all information necessary to assess the performance of the directors. Information is communicated to the shareholders through:

• the annual report which is distributed to all shareholders;
• the annual general meeting and other meetings so called to obtain approval for board action as $\bullet$ appropriate.

RM THOMSON Managing Director Perth 30 September 2003

STATEMENT OF FINANCIAL PERFORMANCE For the Year Ended 30 June 2003 the community of the community of the community of the community of the community of the community of the community of the community of the community of the community of the community of the community of the community of

Notes	2003 (5)	2002 (5)
	107,210	8,760
2	1,150,008	(25, 265)
2	(202, 237)	(189,572)
2	(1,814,975)	(149, 971)
	759,994	356,048
3
	759,994	356,048
	759,994	356,048
6 6	(1.56)	(1.12) (1.12)
		(1.56)

The accompanying notes form part of these financial statements.

STATEMENT OF FINANCIAL POSITION As at 30 June 2003

	Notes	2003 $($ \$)	2002 (5)
Current Assets
Cash Assets	7	2,444,428	2,955,236
Receivables	8	3,409	25,817
Prepayments	9	7,133	7,327
Other financial assets	10	5,111	117,614
		2,460,081	3,105,994
Non-Current Assets
Plant and equipment	11	62,813	6,002
Aeromagnetic database	12	2,240,007	2,426,667
Mineral interests	13	1,520,921	1,538,131
		3,823,741	3,970,800
TOTAL ASSETS		6,283,822	7,076,794
Current Liabilities
Payables	14	117,773	150,751
NET ASSETS		6,166,049	6,926,043
Equity
Contributed equity	15	8,056,261	8,056,261
Accumulated losses		1,890,212	1,130,218
TOTAL EQUITY		6,166,049	6,926,043

The accompanying notes form part of these financial statements.

STATEMENT OF CASH FLOWS For the Year Ended 30 June 2003

	Notes	2003 $($ \$)	2002 (5)
CASH FLOWS FROM OPERATING ACTIVITIES
Receipt from customers		160,919	47,723
Cash payments to suppliers and contractors		(533,744)	(238, 839)
Interest received		107,210	8,760
Net cash (used in) operating activities	16	(265, 615)	(182, 356)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment		(72, 388)
Payments for exploration and evaluation		(1,271,970)	(219,753)
Purchase of new prospects		(61, 464)
Purchase of investments		(35,000)	(20, 114)
Proceeds on sale of investments		1,297,510	87,978
Net cash (used in) / provided by investing activities		(143, 312)	(151,889)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from new issues of shares			3,388,650
Share issue expenses		(101, 881)	(188,992)
Net cash provided by financing activities		(101, 881)	3,199,658
Net (decrease) / increase in cash held		(510, 808)	2,865,413
Cash at the beginning of the financial period		2,955,236	89,823
Cash at the end of the financial period	7	2,444,428	2,955,236

The accompanying notes form part of these financial statements.

NOTE₁ STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Accounting

The financial report is a general purpose financial report that has been prepared in accordance with Accounting Standards, Urgent Issues Group Consensus Views and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has been prepared on an accruals basis and is based on historical costs and does not take into account changing money values or, except where stated, current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets.

Where appropriate, figures for the financial year ended 30 June 2002 have been restated to make them comparable with amended classifications adopted for the financial year ended 30 June 2003.

The following is a summary of the material accounting policies adopted by the Company in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

(b) Changes in Accounting Policies

The accounting policies adopted are consistent with those of the previous year.

(c) Goods and Services Tax (GST)

Revenues, expenses and assets are recognized net of the amount of GST except:

• where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognized as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
• receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position.

Cash flows are included in the Statement of Cash Flow on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(d) Income Tax

The Company adopts the liability method of tax-effect accounting whereby the income tax expense shown in the profit and loss statement is based on the operating profit before income tax adjusted for any permanent differences.

Timing differences which arise due to the different accounting periods in which items of revenue and expense are included in the determination of operating profit before income tax and taxable income are brought to account as either a provision for deferred income tax or an asset described as future income tax benefit at the rate of income tax applicable to the period in which the benefit will be received or the liability will become payable.

NOTE₁ STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt. Future income tax benefits in relation to tax losses are not brought to account unless there is virtual certainty of realisation of the benefit.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the Company will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

(e) Exploration and Development Expenditure

Exploration, evaluation and development expenditure incurred is accumulated in respect of each separate identifiable area of interest. These costs are only carried forward where the right of tenure of the area of interest is current and to the extent that they are expected to be recouped through the sale or successful development of the area or where exploration and evaluation activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves and active and significant operations are continuing.

When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. When an area of interest is abandoned, or the directors decide that it is not commercial, any accumulated costs in respect of that area are written off in the financial period the decision is made. When expenditure carried forward is deemed to no longer contribute to the entity's ability to successfully develop or exploit an area of interest, such costs are written off in the financial period the decision is made.

(f) Acquisition of Assets

The cost method is used for all acquisitions of assets regardless of whether shares or other assets are acquired. Cost is determined as the fair value of assets given up at the date of acquisition plus costs incidental to the acquisition.

Costs relating to the acquisition of new areas of interest are classified as either exploration and evaluation expenditure or mine properties based on the stage of development reached at the date of acquisition.

$(g)$ Cash

For the purpose of the statement of cash flows, cash includes:

• cash on hand and at call deposits with banks or financial institutions, net of bank overdrafts; and $(i)$
• (ii) investments in money market instruments with less than 14 days to maturity.

(h) Revenue

Interest revenue is recognised on a proportional basis taking into account interest rates applicable to the financial asset.

NOTE₁ STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(i) Employee Entitlements

Wages and Salaries and Annual Leave - Liabilities for wages and salaries and annual leave are recognized, and are measured as the amount unpaid at the reporting date at current pay rates in respect of employees' services up to that date. There is no liability to Long Service Leave entitlements.

(j) Earnings Per Share

• Basic Earnings Per Share Basic earnings per share is determined by dividing the profit from $(i)$ ordinary activities after related income tax expense by the weighted average number of ordinary shares outstanding during the financial year.
• (ii) Diluted Earnings Per Share Diluted EPS is calculated as net profit attributable to members, adjusted for:
• costs of servicing equity (other than dividends);
• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognized as expenses; and
• other discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares.

(k) Non-current Assets

The cost of each item of plant and equipment is written off over its expected economic life, adjusted for any salvage value, if applicable. Estimates of remaining useful lives range between 4 and 5 years. The aeromagnetic database is depreciated on a straight-line basis over 15 years, being the period of expected benefit. Ongoing costs of maintaining and improving the technology are expensed as incurred.

(I) Recoverable Amount

Non-current assets are not carried at an amount greater than their recoverable amount, and where carrying values exceed this recoverable amount, assets are written down. In determining recoverable amount the expected net cash flows have not been discounted.

(m) Financial Instruments

Financial Assets: Security deposits are recognised at their fair value. Other receivables are carried at nominal amount due less any provision for doubtful debts. An estimate of doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred. Sundry debtors and other receivables are non-interest bearing and have repayment terms between 30 and 90 days.

Financial Liabilities: Liabilities for trade creditors and other accruals are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Company. Trade creditors are normally settled on 30 day terms.

(n) Contributed Equity

Ordinary share capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

NOTE₁ STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(o) Joint Ventures

Interest in joint venture operations are brought to account by including in the respective classifications, the share of individual assets employed, liabilities and expenses incurred and revenue from the sale of joint venture output. Interest in joint venture operations are brought to account by including assets and liabilities in their respective classifications.

NOTE 2 OPERATING LOSS	2003 $($ \$)	2002 (5)
Operating loss before income tax includes:
Net Gains
Profit/(loss) on sale of investments	1,150,008	(25, 254)
Expenses
Depreciation and amortisation	202,237	189.572
Provision for diminution in value of shares
/(Provision no longer required)		(35, 186)
Exploration and related expenses	1,370,162	28,096
Occupancy costs	35,368	12,470
Filing and ASX Fees	2,398	28,930
Corporate and Management	143,452	51,670
Other expenses from ordinary activities	263,595	63,991
	1,814,975	149,971
NOTE 3 INCOME TAX	2003 (5)	2002 (5)
The amount of income tax provided for in the accounts differs from the amount prima facie payable on the operating loss. The difference is reconciled as follows:
Loss from ordinary activities before income
tax	759,994	356,048
Prima facie tax benefit attributable to loss from ordinary activities before income tax at
30% (2002: 30%)	227,998	106,814
Less: Tax effect of Non-allowable items
- Amortisation of Database	55,997	55,998
- Other	925	(10, 554)
Tax losses not brought to account as future
income tax benefit	(171,076)	(61,370)
Income tax attributable to operating loss

NOTE 3 INCOME TAX (Continued)	2003	2002
	(5)	(5)
Unbooked future income tax benefits

The Company has accumulated tax losses of \$1,252,104 (2002: \$681,252).

The potential future income tax benefit of these losses (\$375,631) will only be realised if:

• the Company derives future assessable income of a nature and of an amount sufficient to enable the benefit from $(i)$ the losses and deductions to be released:
• (ii) the Company continues to comply with the conditions for deductibility imposed by the law; and
• (iii) no changes in tax legislation adversely affect the Company in realising the benefit from the deductions for the losses.

NOTE 4	REMUNERATION AND RETIREMENT BENEFITS	2003 (5)	2002 (5)
(a)	Directors Remuneration
	Income paid or payable to all directors of the Company and entities of which they are directors and any related
	parties	359.134	181.728

The following income bands apply in respect to directors of the Company.

			Number	Number
\$10,000	$\tilde{\phantom{a}}$	\$19,999
\$20,000	$\tilde{\phantom{a}}$	\$29,999		2
\$40,000	$\blacksquare$	\$49,999		1
\$50,000	$\tilde{\phantom{a}}$	\$59,999	1	$\overline{\phantom{a}}$
\$60,000	$\tilde{\phantom{a}}$	\$69,999		1
\$110,000	$\blacksquare$	\$119,999	1	$\overline{\phantom{a}}$
\$180,000	$\omega$	\$189,999

The names of directors who have held office during the financial year are:

George Sakalidis Peter Thomas Roger Thomson

$(b)$ Executive Remuneration

Two executive officer of the Company had income of \$100,000 or more during the year (2002: Nil).

Retirement and Superannuation Payments $(c)$

Prescribed benefits were provided by the Company to two directors by way of superannuation contributions to complying superannuation funds during the year. These benefits were limited to the statutory requirements.

AUDITORS REMUNERATION NOTE 5	2003 $\left( 5\right)$	2002 (5)
Amounts received or due and receivable by the auditors of the Company for:
Auditing and reviewing the financial report	15,513	7,304
Other services	$\overline{\phantom{a}}$	5.455
	15,513	12.759

Other services relate to the preparation of an independent accountant's report provided during the 2002 year.

NOTE 6 EARNINGS PER SHARE	2003 $($ \$)	2002 $($ \$)
The following reflects the income and share data used in the calculation of basic and diluted earnings per share
Net (loss)	(759, 994)	(356,048)
Adjustments:
Nil
Earnings used in calculating basic and diluted earnings per share	(759, 994)	(356, 048)
Weighted average number of ordinary shares used in calculating basic earnings per share	48,716,257	31,697,750
Effect of dilutive securities:
Share options
Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share	48,716,257	31,697,750

The Company had 15,512,191 (2002 - 15,312,191) options over fully paid ordinary shares on issue at balance date. Options are considered to be potential ordinary shares. However, they are not considered to be dilutive in nature as their exercise will not result in a diluted earnings per share, which shows an inferior view of the Company's earnings performance compared to the basic earnings per share stated above. The options have not been included in the determination of diluted earnings per share.

Since the end of the financial year no ordinary shares have been issued pursuant to the employee share incentive scheme.

There have been no other conversions to, calls of, or subscriptions for ordinary shares or issues of potential ordinary shares since the reporting date and before the completion of this financial report.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS Funding Team Ended 30 June 2003

NOTE 7	CASH ASSETS	2003	2002
		$($ \$)	(5)
Cash at bank		21,160	40,825
Deposits at call		2,423,268	2,914,411
		2,444,428	2,955,236
NOTE 8	CURRENT RECEIVABLES	2003	2002
		(5)	(5)
Other receivables		3,409	25,817
NOTE 9	OTHER CURRENT ASSETS	2003	2002
		(5)	(5)
Prepayments		7,133	7,327
NOTE 10	OTHER FINANCIAL ASSETS	2003	2002
Current		(5)	(5)
	Securities in listed corporations - at cost	5,111 5,111	117,614 117,614
	Market value of securities The market value of the listed securities at 30 June 2003 was \$5,111 (2002: \$1,145,304)
NOTE 11	PLANT AND EQUIPMENT	2003 $($ \$)	2002 (5)
Plant and equipment		107,495	35,107
	Less: Accumulated depreciation	44,682	29,105
		62,813	6,002
	Reconciliations of the carrying amounts of plant and equipment at the beginning and end of the current and previous financial years.
	Plant and Equipment
	Carrying amount at beginning of year	6,002	8,908
Addition		72,388
Disposals
	Depreciation expense	15,577	2,906
	Total plant and equipment at end of year	62,813	6,002

AEROMAGNETIC DATABASE NOTE 12	2003 (5)	2002 (\$)
Aeromagnetic database - at cost	2,800,000	2,800,000
Less: Accumulated depreciation	559.993	373,333
	2.240.007	2,426,667

The ultimate recoupment of costs carried forward in respect of the aeromagnetic database is dependent upon the Company's ability to utilise the database in its exploration programmes or alternatively by a sale of the database.

2003 (5)	2002 (5)
1,538,131	1,301,378
1,352,952	236,753
1,370,162
1,520,921	1,538,131
2003	2002
$($ \$)	(5)
117,773	150,751
117,773	150,751

ISSUED CAPITAL NOTE 15	2003 (5)	2002 (5)
Contributed Equity - Ordinary Shares
At the beginning of reporting period 48,716,257 (2002: 30,779,257)	8.056.261	4,962,495
Issue of 2,650,000 shares at \$0.125		331,250
Issue of 15,287,000 shares at \$0.20		3,057,400
Share issuance costs		(294, 884)
Closing balance: 48,716,257 (2002:- 48,716,257) ordinary shares	8,056,261	8,056,261

As at 30 June 2003 the Company had on issue 15,512,191 options over un-issued capital exercisable on or before 25 August 2006 at \$0.25 per option and 1,100,000 employee options over un-issued capital exercisable on or before 4 July 2007 at \$0.25 per option. No options were issued during the year.

Terms and condition of contributed equity

Ordinary shares have the right to receive dividends as declared and, in the event of winding up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of, and amounts paid up on, shares held.

On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

NOTE 16 CASH FLOW INFORMATION	2003 (5)	2002 (5)
Reconciliation of operating loss after income tax with funds used in operating activities
Operating loss after income tax	(759,994)	(356,048)
Depreciation and amortisation	202,237	189,572
Exploration expenditure written off	1,370,162
(Profit) / loss on sale of investments	(1,150,008)	25,266
(Profit) / loss on sale of tenements
Proceeds on sale of tenements
Provision for diminution in value of investments / (provision no longer required)		(35, 186)
Changes in operating assets and liabilities:
(Increase) / Decrease in receivables	34,866	(8,786)
(Increase) / Decrease in prepayments	195	(7,327)
Increase / (Decrease) in payables	36,927	10,153
	(265, 615)	(182, 356)

NOTE 17 CAPITAL AND LEASING COMMITMENTS

The Company has entered into certain obligations to perform minimum exploration work on leases held. These obligations vary from time to time in accordance with contracts signed. Tenement lease rentals and Department of Minerals and Energy minimum expenditure obligations which may be varied or deferred on application and these expenditures are expected to be met in the normal course of business. The minimum statutory expenditure requirements on the granted tenements for the next twelve months amounts to \$658,140. Of this, \$341,100 is expected to be met by JV participants as a result of various joint ventures entered into subsequent to balance date.

The Company entered into a lease for office premises in West Perth. The lease expires 30 September 2005.. The lease commitment for the year ended 30 June 2004 is \$26,775 and the second year, \$29,112.

NOTE₁₈ SEGMENTS

The Company operates only in one business, being the exploration for and development of minerals. Geographically, the Company's activities are conducted mainly within Western Australia and the Northern Territory.

NOTE₁₉ JOINT VENTURES

The Company has interests in the following exploration unincorporated joint ventures:

Name of Project	$\frac{1}{2}$	Carrying
	Interest	Amount
Ruby Well (Peak Hill)	51	\$12,579	Image sole funding to earn additional interest
Mt Elsie	66.5 to 90	\$351,987	Image sole funding to earn additional interest
Bullfinch	90	\$59,856	Image sole funding
Mt Hays	90	\$155,897	Image sole funding
Wilthorpe	90.	\$104,420	Image sole funding

NOTE 20 SUPERANNUATION COMMITMENTS

Superannuation contributions are made at the minimum statutory rate on all employees' income. All contributions were made to accumulation type funds selected by the employee and accordingly actuarial assessments were not required.

NOTE 21 EVENTS SUBSEQUENT TO REPORTING DATE

The Company has entered into various joint ventures subsequent to balance date whereby it has transferred the tenement expenditure commitments to the joint venturers as part consideration for farming in to tenements at Adam Range, Woongaring, Scorpion Well, Mt Zephyr, Jilbadgie, Lake Percy and Emu Lake. This has the effect of decreasing Image's exposure to the statutory annual expenditure requirements applicable to its tenements by an amount of \$341,100.

NOTE 22 RELATED PARTY TRANSACTIONS

George Sakalidis, Peter Thomas and Roger Thomson were directors during the financial year.

• (a) Remuneration and retirement benefits: Information on remuneration and retirement benefits is disclosed in Note 4.
• (b) Transactions of directors and director-related entities concerning shares or share options are as follows:

2003
Entity	Director	Purpose	No of Shares	Amount
PS Thomas	PS Thomas	Purchase on Market	20,000	\$2,200
G Sakalidis	G Sakalidis	Purchase on Market	635,000	\$71,997
Leeman Pty Ltd	G Sakalidis	Purchase on Market	64,000	\$8,694
2002
Entity	Director	Purpose	No of Shares	Amount
PS Thomas	PS Thomas	Subscription	160,000
Thomson Family	RM Thomson	Subscription	150,000
Trust

Directors' Interest in the Company	2003	2002
	Number	Number
Fully Paid Shares
Opening Balance	5,868,370	5,558,370
Acquired during the financial year	719,000	310,000
Disposals during the financial year
Held at the end of the financial year	6,587,370	5,868,370
Options
Opening Balance	5,505,925	2,505,925
Acquired during the financial year	٠	3,000,000
Disposals during the financial year	$\overline{\phantom{a}}$
Held at the end of the financial year	5,505,925	5,505,925

(c) Other transactions with directors and director related entities

The directors and/or companies associated with Peter Thomas, Roger Thomson and George Sakalidis provided geological, geophysical, legal and administrative services to the Company during the financial period on normal commercial terms and conditions. All amounts paid are included in directors' emoluments in note 4. Total amounts owing to directors or their associated entities at 30 June 2003 was \$40,000 (2002: \$4,481).

NOTE 23 CONTINGENT LIABILITIES

Native Title

The Company has been notified of a number of native title claims under the Commonwealth Native Title Act 1993, covering areas in Western Australia.

Until further information is available and State legislation is finalised, the Company will not be in a position to assess the likely effect, if any, of any claim on the Company. However, the directors expect that existing exploration activities will not be materially affected by any claim or the claims in aggregate.

NOTE 24 FINANCIAL INSTRUMENTS DISCLOSURE

(a) Interest Rate Risk

The Company's exposure to interest rate risk, which is the risk that a financial instruments value will fluctuate as a result of changes in market rates and the effective weighted average interest rates on classes of financial assets and liability, is as follows:

2003	Floating Interest Rate	Non Interest Bearing	Total
Financial Assets
Cash Assets	2,444,216	212	2,444,428
Other Receivables		3,409	3,409
Total Financial Assets	2,444,216	3,621	2,447,837
Weighted Average Interest Rate	4.48%
Financial Liabilities
Payables		111,773	111,773
2002	Floating Interest Rate	Non Interest Bearing	Total
Financial Assets
Cash Assets	2,955,224	12	2,955,236
Other Receivables		25,817	25,817
Total Financial Assets	2,955,224	25,829	2,981,053
Weighted Average Interest Rate	4.70%
Financial Liabilities

(b) Credit Risk

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is the carrying amount, net of any provisions for doubtful debts, as disclosed in the Statement of Financial Position and notes to the financial statements.

The Company does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the Company.

(c) Net Fair Values

For assets and liabilities, the net fair value approximates their carrying value.

No financial assets and financial liabilities are readily traded on organised markets in standardised form other than listed investments.

DIRECTORS' DECLARATION

The directors of the Company declare that:

• $\mathbf{I}$ the financial statements and notes as set out on pages 26 to 42
• (a) comply with Accounting Standards and the Corporations Act 2001; and
• (b) give a true and fair view of the financial position at 30 June 2003 and performance for the year ended on that date of the Company.
• $2.$ in the directors' opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors:

Roger M Thomson DIRECTOR

PERTH Dated this 30th day of September 2003.

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF IMAGE RESOURCES NL

Scope

We have audited the financial report of Image Resources NL comprising the directors' declaration, statement of financial performance, statement of financial position, statement of cash flows and notes to and forming part of the financial statements for the financial year ended 30 June 2002 as set out on pages 26 to 43. The Company's directors are responsible for the financial report. We have conducted an independent audit of this financial report in order to express an opinion on it to the members of the Company.

Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance as to whether the financial report is free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion as to whether, in all material respects, the financial report is presented fairly in accordance with Accounting Standards, other mandatory professional reporting requirements and statutory requirements so as to present a view which is consistent with our understanding of the Company's financial position and performance as represented by the results of its operations and its cash flows.

The audit opinion expressed in this report has been formed on the above basis.

AUDIT OPINION

In our opinion, the accompanying financial report of the Company is in accordance with:

• $(a)$ the Corporations Act 2001, including:
• $(i)$ giving true and fair view of the Company's financial position as at 30 June 2003 and of its performance for the financial year ended on that date; and
• $(ii)$ complying with Accounting Standards and the Corporations Regulations 2001; and
• (b) other mandatory professional reporting requirements.

SOMES & COOKE Chartered Accountants

JOHN COOKE Partner

Perth WA Dated^.

TENEMENT SCHEDULE

Tenement	Nature of Interest	Equity (%)
	12103ARA
P45/2370	Granted	90
P45/2371	Granted	90
P45/2372	Granted	90
M45/964	Application	90
M45/966	Application	90
M46/258	Application	90
P45/2303	Granted	66.5
M45/776	Application	66.5
P45/2304	Granted	66.5
P45/2305	Granted	66.5
M45/777	Application	66.5
P45/2362	Granted	100
P45/2363	Granted	100
P45/2364	Granted	100
P45/2365	Granted	100
M45/935	Application	100
E46/504	Application	90
E46/409	Granted	90
M46/280	Application	90
E45/2447	Application	90
	GASCOYNE
E51/856	Application	51
E52/1453	Granted	90
	ЕОЈООКА
E39/1020	Application	100
E39/1059	Application	100
	LEONORA
E29/547	Application	100
E37/745	Application	100
	NORTHERN TERRITORY
E10178	Granted	100
E10177	Granted	100
E23764	Application	100

TENEMENT SCHEDULE

Tenement	Nature of Interest	Equity (%)
	LAVERTON
E38/1606	Application	100
E39/1058	Application	100
E39/1056	Application	100
E39/1061	Application	100
E39/1057	Application	100
E39/738	Granted	75
E39/998	Application	100
P39/4271	Application	100
P39/4270	Application	100
E38/1130	Granted	100
E38/1585	Application	100
	MURCHISON
E59/879	Granted	100
	SOUTHERN CROSS
E77/1179	Application	100
E77/1144	Application	100
E77/1172	Application	100
E77/914	Granted	90
P77/3368	Granted	100
P77/3369	Granted	100
P77/3370	Granted	100
E77/572	Granted	100
E77/1059	Application	100
E77/1132	Application	100
E77/893	Granted	100
E63/628	Granted	100
E63/842	Application	100
E63/843	Application	100
E70/2366	Application	100
	KURNALPI
E27/168	Granted	30
E27/84	Granted	30
E28/1377	Application	100
	WIDGIEMOOLTHA
E28/1328	Application	100

The following information was applicable as at 29 August 2003.

Share and Option holding

Category (Size of Holding)	Fully Paid Ordinary Shares	Options 25 August 2006	Employee Options 4 July 2007
1 to 1,000		0
1,001 to 5,000	27	0
5,001 to 10,000	119
10,001 to 100,000	340	8
100,001 and over	40	21	3
Total	527	30	3

The number of shareholdings held in less than marketable parcels is 1.

The names of the substantial shareholders listed in the Company's register as at 29 August 2003:

Shareholder Name:	Number:	$\frac{0}{0}$
George Sakalidis	6.153.370	12.63
Frederick Denis L'Aime Ribton	5.632.611	11.56
Barrington Dance	5.451.703	11.19
Invia Custodian Pty Ltd	4,533,338	9.31

Twenty largest fully paid shareholders:

		Number of	% of Issued
	Shareholder Name	Shares	Share Capital
1.	George Sakalidis	6,153,370	12.63
2.	Frederick D L Ribton	5,632,611	11.56
3.	Barrington Dance	5,451,703	11.19
4.	Invia Custodian Pty Ltd	4,533,338	9.31
5.	Abergold Pty Ltd	1,984,470	4.07
6.	Cairnglen Investments Pty Ltd	1,846,752	3.79
7.	Noel Mattocks (As Trustee)	1,000,000	2.05
8.	Gilpin Park Pty Ltd	966,670	1.98
9.	Paticoa Nominees Pty Ltd	699,110	1.44
10.	Ranger Minerals Ltd	690,000	1.42
11.	Armada Trading Pty Ltd	500,000	1.03
12.	Mark J Thompson	500,000	1.03
13.	Stadjoy Pty Ltd	410,000	0.84
14.	VC and J Wheatley (As trustee)	400,000	0.82
15.	Paticoa Nominees Pty Ltd	399,702	0.82
16,	Hou Liang Wong	375,000	0.77
17.	Mimi Hou Wai Wong	375,000	0.77
18.	Bond Street Custodians Ltd	370,000	0.76
19.	Roger G R Harris	360,000	0.74
20.	Skeet Nominees Pty Ltd	309,933	0.64
	Total	3,295,7659	67.66

OTHER INFORMATION

Twenty largest option-holders - Unquoted Options expiring 25 August 2006:

		Number of	% Held
	Shareholder Name	Options
1.	George Sakalidis	2,505,925	16.15
2.	Frederick D L Ribton	2,205,925	14.22
3.	Barrington Dance	2,005,925	12.93
4.	Roger M Thomson	2,000,000	12.89
5.	Invia Custodian Pty Ltd	1,511,113	9.74
6.	Peter S Thomas	1,000,000	6.45
7.	Abergold Pty Ltd	608,157	3.92
8.	Jon Davies	533,333	3.44
9.	Rudolf Tieleman	400,000	2.58
10.	Matthew V Hogan	284,850	1.84
11.	Terence W Hogan and Evelyn D Broadley	284,850	1.84
12.	Gilpin Park Pty Ltd	266,668	1.72
13.	Ranger Minerals Ltd	266,667	1.72
14.	Swancove Enterprises Pty Ltd	266,667	1.72
15.	Ray English	250,000	1.61
16.	David Zohar	250,000	1.61
17.	Mark J Thompson	166,667	1.07
18.	Paul L Ailakis	142,222	0.92
19.	Cairnglen Investments Pty Ltd	133,333	0.86
20.	Palatium Pty Ltd	133,333	0.86
	Total	15,215,635	98.09

All Employee option-holders (being less than 20 holders)

Unquoted Employee Options expiring 4 July 2007:

		Number of	% Held
	Optionholder Name	Options
	Rudolf Tieleman	600.000	54.55
2.	Barrington Dance	300.000	27.27
З.	Alex Romanoff	200.000	18.18
	Total	1,100,000	100.00

There is a total of 48,716,257 (2002: 48,716,257) fully paid ordinary shares on issue, 32,211,564 (2002: 31,334,064) of which are listed on Australian Stock Exchange Limited (ASX). Securities classified as Restricted by ASX consist of:

Restricted until 4 July 2004:

16,504,693 fully paid ordinary shares held by 5 shareholders 10,087,475 options exercisable at \$0.25 by 25 August 2006 held by 7 optionholders

Voting Rights

The voting rights attaching to ordinary shares are governed by the Constitution. On a show of hands every person present who is a Member or representative of a member shall have one vote and on a poll, every member present in person or by proxy or by attorney or duly authorised representative shall have one vote for each share held. None of the options have any voting rights.

OTHER INFORMATION

Use of Funds

Since admission to the official lists of ASX, the Company has used its cash and assets in a form readily convertible to cash in a way that was consistent with its business objectives.