IMAGE RESOURCES NL — Interim / Quarterly Report 2004

Jan 22, 2004

QUARTERLY REPORT

For the Quarter Ended 31 December 2003

SUMMARY

JOINT VENTURES

• . A significant new joint venture announced with Western Areas NL on Image's newly acquired, 100%-owned, Windarra North nickel project. Under the terms of agreement Western Areas may earn a 60% interest in the tenements by expenditure of \$2 million.
• Emu Lake (nickel): Jubilee Mines has identified several new surface and down-hole electromagnetic anomalies worthy of follow-up drilling. In particular, two off-hole conductors at the Gossan Zone, adjacent to the known high-grade stringer mineralisation, are interpreted as possible massive sulphide targets. Drilling is scheduled to resume in the March quarter.
• Lake Percy (nickel): Western Areas is line clearing preparatory to commencing its delayed RAB drilling programme to the north of the Emily Ann nickel mine.
• Jilbadgie (nickel): Westonia Mines is completing infill geochemical sampling to complete the definition of three nickel and copper-anomalous areas with potential for nickel sulphide mineralisation.
• Trojan (gold and nickel): The focus of this multi-project joint venture is moving to the Woongaring project where potential for intrusion-related gold mineralisation has been identified.

NEW PROJECTS

• Image has acquired a substantial new ground position in the emerging Forrestania nickel district of WA, comprising 300 square kilometres of tenements west and south of the Flying Fox-Daybreak nickel trend.

JOINT VENTURES

Image continues to attract new joint ventures on its extensive ground holdings, in keeping with its strategy of maintaining active exploration programmes yet conserving its funds for new project generation and acquisition. In the meantime exploration is continuing on Image's existing joint ventures.

Windarra North (Image 100%)

As recently announced, agreement has been reached with Western Areas for a joint venture on Image's 557 square kilometre Windarra North nickel project near Laverton in Western Australia. Under the terms of the agreement Western Areas may earn a 60% interest in the project by expenditure of \$2 million within four years from the date of grant of at least three of the five tenement applications comprising the project and by cash payments totalling \$60,000. Western Areas is required to spend at least \$200,000 on exploration before the right of withdrawal.

Image has identified three target trends which could represent extensions of the prospective Windarra ultramafic sequences below extensive alluvial cover. These target zones comprise coincident magnetic trends and gravity ridges extending north from the Mt Windarra nickel mine, north west from the South Windarra nickel mine and north west from the Woodline Well nickel sulphide occurrence.

The WMC-owned Windarra North nickel mines (Mt Windarra and South Windarra) produced 7 million tonnes grading 1.61%Ni, containing approximately 113,000 tonnes of nickel metal during the period from 1973 to 1989, confirming the high nickel prospectivity of the ultramafic rocks in this district. There is little evidence of previous nickel exploration on the project area and upon grant of the tenements (subject to ministerial approval) the joint venture plans to start drilling to test the potential for repetitions and extensions of the prospective Windarra ultramafic sequences in this under-explored district.

Emu Lake (Image 30%)

Jubilee Mines completed moving loop and fixed loop ground electromagnetic (EM) surveys followed by five diamond drill holes (ELD10 to ELD13 plus an extension to previously drilled ELD01). The drilling totalled 1,496.8m mainly testing geological and geophysical targets at the Gossan Zone. Down-hole EM surveys were completed in all five drill holes to test for near-miss targets.

Drill hole ELD11, testing down-dip from previous high-grade intercepts of 0.3m at 7.55%Ni and 0.17m at 7.08%Ni in hole ELD05, intersected stringer sulphides at 364m grading 0.05m at 3.52%Ni close to an ultramatic contact. This intersection suggests continuity with the mineralisation intersected 80m up-dip in hole ELD05. The remainder of the holes intersected the target zones but no significant nickel sulphides were encountered.

As previously announced, the ground EM surveys, together with reprocessing of earlier survey data, identified three new EM anomalies at the Gossan Zone plus a new off-hole conductor in this area in hole ELD11. A fourth ground EM anomaly was identified at Zone C about 3km north west of the Gossan Zone in an area of ultramafic rocks interpreted to be part of the Gossan Zone sequence.

Significantly, since the previous announcement, results of the down hole surveys in drill holes ELD01 and ELD12 at the Gossan Zone have confirmed a strong off-hole conductor near the base of ELD01 and identified a new off-hole conductor in nearby ELD12. Both of these conductors are interpreted as possible massive sulphide targets lying close to the main ultramafic contact. The ELD01 conductor is consistent with a down plunge continuation of the conductor in ELD12 and a previously identified conductor in hole ELRC04. The high-grade stringer mineralisation previously intersected at the Gossan Zone occurs about 100m to the south of these target conductors and may represent the margins of more extensive massive sulphide mineralisation.

The off-hole conductors in ELD01 and ELD12 provide attractive drilling targets between 150m and 300m below surface. It is anticipated that further drilling of this prospective part of the Gossan Zone will be carried out during the next quarter in conjunction with drilling of the EM target at Zone C and a number of strong nickel-copper-PGE anomalies outlined from previous shallow aircore drilling.

Lake Percy (Image 100%)

Following rain delays to its nickel exploration programme scheduled for the previous quarter, Western Areas is completing line clearing over several geological and geophysical target areas about 25km to the north of the Emily Ann nickel mine. Commencement of a 50-hole RAB drilling programme on these targets is now scheduled for the March quarter. Western Areas' recent exploration success at Flying Fox, situated about 40km south west of Image's Lake Percy project, continues to underpin the prospectivity of the emerging Forrestania - Emily Ann nickel district.

Jilbadgie (Image 100%)

As previously reported. Westonia Mines has completed an extensive geological survey over this poorly exposed section of the Westonia greenstone belt situated 30km south of Southern Cross. Three distinct nickel anomalies have been identified summarised as follows:

• 1. 1,000m x 250m, peak value 640ppm Ni
• 1. 500m x 200m, open in one direction, peak value 930ppm Ni
• 1. 600m x 250m, open in one direction, peak value 3,510ppm Ni

The nickel-anomalous areas are associated with anomalous copper values and in places with anomalous PGE values, indicating potential for nickel sulphide mineralisation. Infill geochemical sampling is in progress to further evaluate these anomalies.

Trojan (Image mostly 100%)

An aboriginal heritage agreement has been signed as part of the process of expediting the grant of exploration licence applications over the prospective Woongaring gold and base metal project. This project is situated is about 150km north west of Southern Cross in an under-explored area of extensive sand cover on the margins of the WA wheatbelt.

Reconnaissance sampling of aeromagnetic targets by Image has outlined a 10km-long gold-anomalous zone with coincident anomalous copper, lead and zinc values. These large, geochemically anomalous areas coincide with a regional aeromagnetic lineament transecting interpreted folded greenstone stratigraphy with at least one circular intrusive feature evident. The juxtaposition of these geochemically anomalous zones with such aeromagnetic features suggests a potential for intrusion-related gold mineralisation similar to the 26Moz Boddington gold deposit in WA.

Upon grant of the tenements Troy Resources plans to implement a RAB drilling programme to investigate these attractive targets and to carry out further geochemical sampling where the existing anomalies are open ended.

NEW PROJECTS

As announced in November, Image has applied for a substantial new ground position in the emerging Forrestania nickel district of WA.

The tenement package comprises two exploration licence applications totalling 300 square kilometres situated west and south of the Flying Fox-Daybreak nickel trend. The northern end of the tenements is situated 5 kilometres west of the Flying Fox nickel deposit and extends for a further 60 kilometres to the south. These new applications augment Image's existing 500-square kilometre land holding in the Forrestania-Emily Ann area about 40 kilometres to the north east.

Using its aeromagnetic database and other geophysical information. Image has identified several target zones below sand cover which could represent metamorphosed ultramafic rocks prospective for nickel sulphides. In addition, Image has identified a north-south trending gravity ridge some 40 kilometres in length which may represent an extension to the Forrestania greenstone belt and thus provide further nickel exploration targets.

Upon grant of the tenements (subject to ministerial approval) Image intends to carry out geophysical surveys to test these extensive target areas.

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

Please direct enquiries to: Roger Thomson Managing Director Phone (08) 9485 2410 Mobile 0419 969 183 Email roger@imageres.com.au

George Sakalidis Executive Director - Exploration Phone (08) 9485 2410 Mobile 0411 640 337 Email george@imageres.com.au

The information on mineralisation contained in this report accurately reflects the information compiled by Mr Roger Thomson BSc(Hons), MAIG, MAusIMM, who is a competent person (as defined by the Australasian Code of Reporting of Identified Mineral Resources and Ore Reserves) with relevant experience in relation to such mineralisation.

MINING EXPLORATION ENTITY QUARTERLY REPORT

Name of entity:

Image Resources NL

ABN:

57 063 977 579

Quarter ended ("current quarter")

31/12/2003

Consolidated statement of cash flows

		Current quarter	Year to date
Cash flows related to operating activities		\$AUD'000	$(6$ months)
			\$AUD'000
1.1	Receipts from product sales and related debtors	81	81
1.2	Payments for:
	(a) exploration and evaluation	(60)	(231)
	(b) development
	(c) production
	(d) administration	(245)	(419)
1.3	Dividends received
1.4	Interest and other items of a similar nature received	47	66
1.5	Interest and other costs of finance paid
1.6	Income taxes paid
1.7	Other (provide details if material)
	Net Operating Cash Flows	(177)	(503)
	Cash flows related to investing activities
1.8	Payment for purchases of:
	(a) prospects	(28)	(91)
	(b) equity investments
	(c) other fixed assets	(3)	(3)
1.9	Proceeds from sale of:
	(a) prospects		150
	(b) equity investments (c) other fixed assets
1.10	Loans to other entities
1.11	Loans repaid by other entities
1.12	Other (provide details if material)
	Net investing cash flows	(31)	56
1.13	Total operating and investing cash flows (carried forward)	(208)	(447)

1.13	Total operating and investing cash flows (brought forward)	(208)	(447
	Cash flows related to financing activities
1.14	Proceeds from issues of shares, options, etc.	971	1,500
1.15 1.16	Proceeds from sale of forfeited shares Proceeds from borrowings
1.17 1.18	Repayment of borrowings Dividends paid
1.19	Other (provide details if material) - Share issue expenses	(50)	(50)
	Net financing cash flows	921	1,450
	Net increase (decrease) in cash held	713	1,003
1.20 1.21	Cash at beginning of quarter/year to date Exchange rate adjustments to item 1.20	2,734	2,444
1.22	Cash at end of quarter	3,447	3,447

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

		Current quarter \$AUD'000
1.23	Aggregate amount of payments to the parties included in item 1.2	(189)
1.24	Aggregate amount of loans to the parties included in item 1.10

$1.25$ Explanation necessary for an understanding of the transactions $N/A$

Non-cash financing and investing activities

Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows $2.1$

$N/A$

$2.2$ Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest

$N/A$

Financing facilities available

		Amount available \$AUD'000	Amount used \$AUD'000
-3.1	Loan facilities	۰
-3.2	Credit standby arrangements	۰

Estimated cash outflows for next quarter

	Estimated cash outflows for next quarter
		\$AUD'000
4.1	Exploration and evaluation	(122)
4.2	Development
	Total

Reconciliation of cash

follows.	Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as	Current quarter \$AUD'000	Previous quarter \$AUD'000
5.1	Cash on hand and at bank	447	489
5.2	Deposits at call		2,245
5.3	Bank overdraft
5.4	Other (provide details) – Short Term Deposit	3.000
	Total: cash at end of quarter (item 1.22)	3,447	2,734

Changes in interests in mining tenements

		Tenement reference	Nature of interest	Interest at beginning of quarter	Interest at end of quarter
6.1	Interests in mining tenements relinquished, reduced or lapsed	EL10178	Relinquished	100%	0%
6.2	Interests in mining tenements acquired or increased	E77/1192 E70/2366 E77/1193 E70/2620 E74/316 E28/1400 E28/1377 E16/307 E37/776 E23764 E45/2555	Application Application Application Application Application Application Application Application Application Application Application	0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%	100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 90%

			Issued and quoted securities at end of current quarter
--	--	--	--------------------------------------------------------	--	--	--	--

		Total number	Number quoted	Issue price per security (cents)	Amount paid up per security (cents)
7.1	Preference securities	N/A
7.2	Issued during quarter	N/A
7.3	Ordinary securities	54,966,257	38,461,564
7.4	Issued during quarter	6,250,000	6,250,000	$24$ cents	24 cents
7.5	Convertible debt securities	N/A
7.6	Issued during quarter	N/A
$\overline{7.7}$	Options			Exercise price	Expiry date
	Non-employee Options	15,512,191 2,000,000	Not Quoted Not Quoted	\$0.25 \$0.335	25.8.2006 27.11.2008
	Employee Options	1,100,000	Not Quoted	\$0.25	4.7.2005
7.8	during Issued quarter	2,000,000	Not Quoted	Nil	N/A
7.9	Exercised during quarter	Nil
7.10	Expired during quarter	Nil
7.11	Debentures	N/A
7.12	Unsecured notes	N/A

Compliance statement

• This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to $\mathbf{1}$ ASX.
• $\overline{2}$ This statement does give a true and fair view of the matters disclosed.

Rudolf Tieleman (Company Secretary)
Date: 23 January 2004