IMAGE RESOURCES NL — Interim / Quarterly Report 2007

Mar 15, 2007

ABN 57 063 977 579

HALF-YEAR FINANCIAL REPORT

31 DECEMBER 2006

ABN 57 063 977 579

CONTENTS

HALF-YEAR FINANCIAL REPORT

Page No.

Directors' Report	3
Auditor's Independence Declaration	$10\,$
Income Statement	11
Balance Sheet	12
Statement of Changes in Equity	13
Statement of Cashflows	14
Notes to and forming part of the Financial Statements	15
Directors' Declaration	21
Independent Review Report	22

ABN 57 063 977 579

DIRECTORS REPORT

Your directors submit the financial report of the company for the half-year ended 31 December 2006.

DIRECTORS

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

Mr Peter Thomas Mr Roger Thomson Mr George Sakalidis

REVIEW OF OPERATIONS

The loss for the half-year ended 31 December 2006 was \$1,482,991 (2005 - \$701,657).

The company's activities during the six month period are summarised as follows:

COOLJARLOO (Image Earning 70%)

Extensive aircore drilling of ground magnetic targets at Cooljarloo continued to confirm the presence of deep thick channel-like features which host significant heavy mineral (HM) concentrations in the eastern part of the Cooliarloo project area. At least four main channels have been identified with a possible accumulative strike length of more than 10km. Significant channel drill results include (see map below):

Hole No	HM Intersection	From m
267	14m @ 3.26	20
268	22m@6.1%	18
269	14m @ 5.3%	18
270	$30m @ 4.6\%$	18
271	40m@4.4%	18
277	42m@2.8%	18
524	16m @ 4.0%	12
533	$10m @ 5.5\%$	24
709.	18m @ 3.4%	16
713	12m@3.8%	18
725	16m @ 3.0%	16
799	14m @ 5.3%	2
907	66m @ 2.1%	14
908	67m @ 2.1%	14
915	22m @ 3.0%	54
930	28m @ 2.5%	38

Ongoing interpretation of detailed ground magnetics, together with the results of both recent and historical drilling has identified several more potential HM channels, increasing the number of channel targets to 20 over a cumulative strike length of 50km. Modal analyses from the northeast of the channel sections indicate the valuable heavy mineral content of the HM to be 85%, comprised of 68% ilmenite, 11% zircon, 3.3% rutile and 2.6% leucoxene.

DIRECTORS' REPORT

Cooljarloo Project - Ground Magnetic Interpreted Strandlines

Image Tenements North Perth Basin

ABN 57 063 977 579

DIRECTORS' REPORT

Infill aircore drilling on the northern part of the 35AHD strand confirmed shallow-high grade HM concentrations, with intersections including (see map):

Hole No	HM Intersection	From m
351	8m @ 13.4%	2
369	8m@5.0%	4
378	8m@5.6%	2
384	$10m @ 8.0\%$	2
396	2m@12.5%	4
397	6m @ 10.9%	4
472	4m @ 10.7%	6
474	2m@10.4%	6
492	$10m @ 7.0\%$	4
493	10m @ 12.0%	2
511	2m@8.6%	8
514	4m @ 8.3%	6

Modal analyses of composite samples from the 35 AHD strand indicate an average valuable HM content of 75% composed of 55% ilmenite, 8% rutile, 8% zircon and 4% leucoxene. The high-grade parts of the 35 AHD strand average an 80% valuable HM content composed of 65% ilmenite, 6% rutile, 6% leucoxene and 3% leucoxene

Infill drilling was also completed on the southern 2km of the 3km-long 28,000 strand. Several shallow, high grade intersections were made including:

Hole No	HM Intersection	From m
573	4m@9.1%	0
580	4m@7.2%	4
590	4m @ 15.8%	0
591	8m @ 19.0%	0
605	6m@10.4%	0
606	4m@7.9%	0
609	8m@9.4%	0
625	4m@26.0%	2
637	4m@13.6%	$\overline{2}$
645	4m@5.7%	2

Modal analyses of a composite sample from the higher grade parts of the 28000 strand indicate a valuable HM content of 72% composed of 59% ilmenite, 5% rutile, 7% zircon and 1% leucoxene.

To date drilling by Image has been carried out over a 3.7km length of the 35 AHD and 28000 shallow highgrade resource strands and over a 7km length on the channel targets, representing about 10% of the targets outlined so far. Further drilling is planned.

During the period Image confirmed a 51% interest in the project and elected to continue sole funding to earn a 70% interest.

COOLJARLOO NORTH (Image 100%)

83 line km of detailed ground magnetic surveys were completed over the project area during the period. Four high priority HM targets were identified with an aggregate strike length of more than 12km. Historical drilling results from this area reported shallow HM intersections coincident with the magnetic targets. Following grant of the tenement and signing of access agreements with landowners drilling commenced on the magnetic targets.

ABN 57 063 977 579

DIRECTORS REPORT

COOLJARLOO SOUTH (Image 100%)

During the period Image applied for a 40sq km exploration licence about 20km SE of Tiwest's Cooljarloo mine covering aeromagnetic targets along strike from the mine and interpreted to have potential for HM strandlines.

BIDAMINNA (Image 100%)

Environmental permitting for the 1.5km strike extension south of Image's previous drilling in the Callisto HM strand is in progress. Callisto is situated about 15km NW of Gingin and forms part of Image's Bidaminna project covering known HM resources outlined by historical drilling. During the period Image applied for two exploration licences to the south of Bidaminna, Gingin and McKinley. Historical exploration completed over the area of the tenements includes an aeromagnetic survey and limited wide-spaced drilling. Interpretation of the aeromagnetics has identified several new targets warranting follow up.

NORTH PERTH BASIN (Image 100%)

Following its successful HM exploration at Cooljarloo, Image extended the scope of its exploration targets to the older basement Mesozoic sediments east of the Gingin Scarp. The thick channel-style mineralisation discovered at Cooljarloo is interpreted to occur within these older sediments beneath the shallow younger Pleistocene sediments which have been subject of most of the HM exploration in the North Perth Basin to date. Image applied for three tenements totaling 1,100sq km, effectively tripling its land position in the North Perth Basin to 1,660sq km - see map.

EMU LAKJE JV (Image 100%)

During the period joint venturer Jubilee Mines carried out a detailed surface EM survey over the Gossan Zone where the best nickel sulphide intersections have been obtained to date. Additional geochemical sampling was also completed.

GLEN HERRING (Image 90%)

Image completed geochemical soil sampling over a zone of cinnabar-bearing quartz veining and defined a large coherent 800m x 250m mercury anomaly (peak 11.6ppm Hg compared to a background of 0.5ppm Hg). Scout open hole percussion drilling (43 holes, 710m) in five shallow traverses across the anomaly intersected anomalous Hg values on all lines with a best intercept of 9m at 177ppm Hg at end of hole.

BRONCO PLAINS JV (Image 100%, diluting)

Processing and interpretation of aeromagnetic data over the project by Troy Resources was carried out during the period.

TROJAN JV (Image 100%)

Troy Resources withdrew from the joint venture and Image re-appraised the Woongaring, Scorpion Well and Adam Range projects.

MT HAYS (Image 90%)

A 10-hole, 300m shallow open hole percussion drilling programme was completed to test the extent of gold mineralisation up dip or adjacent to previous drill intersections. The shallow drilling tested a 200m-long section within a 650m-long zone of quartz veining and stockworks.

KAMBALDA WEST (Image 100% diluting)

Image has reached agreement with Kambalda nickel miner Mincor Resources NL for a joint venture on ten granted, 100%-owned Image tenements in the Nepean district south of Coolgardie and west of Kambalda see map below.

The tenements were acquired by Image immediately following the release of new state government aeromagnetic data which identified potential for ultramafic rocks prospective for nickel sulphides. In particular, the 725sq km tenement package is considered to have potential for high-grade Nepean-style nickel sulphide mineralisation.

Under the terms of the agreement Mincor may earn a 51% interest in the tenements by expenditure of \$750,000 within three years and may elect to increase this by a further 19% interest by expenditure of an additional \$750,000 within a further two years, i.e. up to 70% for \$1.5million.

Kambalda West Joint Venture Tenements

DIRECTORS' REPORT

METEORIC JOINT VENTURE (Image 100% diluting)

Image has concluded an agreement with Meteoric Resources NL for a joint venture on three 100%-owned Image gold projects at Scorpion Well, Top Well and Mt Remarkable in the Eastern Goldfields of WA. Image has carried out preliminary exploration at Scorpion Well, 10km southeast of the +2Moz Centenary gold mines and confirmed the presence of host rocks favourable for Centenary-style gold containing anomalous gold values. The drilling obtained best intercepts of 8m at 4.5g/t Au from 4m and 4m at 3.0g/t Au from 8m

MAGNETIC RESOURCES NL

During the period Image confirmed its intention to farm out a large package of tenements (64 exploration licences) totaling 6,704sq km in the Yilgarn Craton of Western Australia to Magnetic Resources NL and to assist Magnetic to list on ASX.

Project Location

DIRECTORS' REPORT

INDEPENDENCE DECLARATION BY AUDITOR

The lead auditor's independence declaration under section 307C of the Corporations Act 2001 is set out on page 10 for the half-year ended 31 December 2006.

This report has been signed in accordance with a resolution of directors. For and on behalf of the Directors

G SAKALIDIS Director 15th March 2007

AUDITOR INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF IMAGE RESOURCES NI.

Auditor's Independence Declaration to the Directors of Image Resources Limited

In accordance with section 307C of the Corporations Act 2001. I am pleased to provide the following declaration of independence to the directors of Image Resources Limited.

As audit partner for the review of the financial statements of Image Resources Limited for the period ended 31 December 2006, I declare that to the best of my knowledge and belief, there have been no contraventions of:

• the auditor independence requirements of the Corporations Act 2001 in relation to the $(i)$ review: and
• $(ii)$ any applicable code of professional conduct in relation to the review.

SOMES and COOKE

K. C. Somes Partner 1304 Hay Street West Perth WA 6005

16 March 2007

INCOME STATEMENT FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

	Notes	Half Year Ended 31 Dec 2006 (3)	Half Year Ended 31 Dec 2005 $($ \$)
Revenue from ordinary activities		156,166	116,990
Depreciation expense		(10, 413)	(10,893)
Exploration and tenement expenses written off		(832,203)	(494, 162)
Other expenses from ordinary activities		(360, 941)	(305, 562)
Share based payments	$\overline{2}$	(435,600)	(8,030)
Loss from ordinary activities before income tax expense		(1,482,991)	(701, 657)
Income tax expense relating to ordinary activities
Loss from ordinary activities after related income tax expense		(1,482,991)	(701, 657)
Loss from ordinary activities after related income tax expense attributable to members of Image Resources NL		(1,482,991)	(701, 657)
Basic loss per share (cents per share) Diluted loss per share (cents per share)		(2.0019) (2.0019)	(1.1894) (1.1894)

BALANCE SHEET AS AT 31 DECEMBER 2006

		31 Dec 2006	30 June 2006
	Notes	( \$)	(3)
Current Assets
Cash assets		4,370,784	2,125,507
Receivables		113,051	187,421
Prepayments		16,882	10,570
Total Current Assets		4,500,717	2,323,498
Non-Current Assets
Plant and equipment		41,770	45,983
Other financial assets	3	1,516,175	1,246,115
Total Non-Current Assets		1,557,945	1,292,098
TOTAL ASSETS		6,058,662	3,615,596
Current Liabilities
Payables		29,512	87,152
Provisions		15,306
Total Current Liabilities		44,818	87,152
TOTAL LIABILITIES		44,818	87,152
NET ASSETS		6,013,844	3,528,444
Equity
Contributed equity	4	14,499,972	11,163,498
Reserves		1,978,010	1,346,093
Accumulated losses		(10, 464, 138)	(8,981,147)
TOTAL EQUITY		6,013,844	3,528,444

STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 31 DECEMBER 2006 ilin minimumin minimumi

	Notes	Share Capital	Available for Sale	Employee Benefit	Accumulated Losses	Total
		(5)	Financial Assets Reserve Capital (3)	Reserve $(\mathbb{S})$	$($ \$)	(3)
Balance at 1.7.2005 Shares issued during		9,911,943			(7,092,101)	2,819,842
the period		1,067,472				1,067,472
Share based payments				8,030		8,030
Loss for period					(701, 657)	(701, 657)
Balance at 31.12.2005		10,979,415		8,030	(7,793,758)	3,193,687
Balance at 1.7.2006 Options exercised		11,163,498	1,051,493	294,600	(8,981,147)	3,528,444
during the period at
\$0.25 each		3,336,474				3,336,474
Share based payments Changes in fair value of available for sale				435,600		435,600
assets			196,317			196,317
Loss for period					(1,482,991)	(1,482,991)
Balance at 31.12.2006		14,499,972	1,247,810	730,200	(10, 464, 138)	6,013,844

STATEMENT OF CASH FLOWS FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

	Half Year	Half Year
	Ended	Ended
	31 Dec 2006	31 Dec 2005
	(5)	(9)
CASH FLOWS FROM OPERATING ACTIVITIES
GST refunds received	69,585	48,282
Payments to suppliers and contractors	(242, 638)	(265, 015)
Interest and dividends received	122,934	84,591
Net cash provided by / (used in) operating
activities	(50, 119)	(132, 142)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment	(6,200)	(3,545)
Payments for exploration and evaluation	(808, 415)	(473, 604)
Proceeds on sale of
tenements/recoupments		(22, 297)
Short term loans advanced	(77, 985)
Purchase of investments	(91,856)	(107,305)
Purchase of new prospects	(75, 566)	(106, 300)
Proceeds from sale of investments	18,946
Net cash provided by / (used in) investing activities	(1,041,076)	(713, 051)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from new issues of shares	3,336,473	1,096,433
Share issue expenses		(28,961)
Net cash provided by financing activities	3,336,473	1,067,472
Net (decrease) / increase in cash held	2,245,278	222,279
Cash at the beginning of the financial period	2,125,507	2,659,488
Cash at the end of the financial period	4,370,784	2,881,767

ABN 57 063 977 579

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

NOTE₁ SUMMARY OF ACCOUNTING POLICIES

Basis Of Preparation

The half-year financial report is a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standard AASB 134 - Interim Financial Reporting, Urgent Issues Group Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board.

The interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2006 and any public announcements made by the Company during the interim reporting period in accordance with the continuous disclosure requirements arising under the Corporations Act 2001.

(a) Revenue

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

(b) Employee Entitlements

Wages and Salaries and Annual Leave - Liabilities for wages and salaries and annual leave are recognised, 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.

(c) Exploration and Evaluation Expenditure

All exploration and evaluation expenditure is expensed to profit and loss as incurred. The effect of this write-off is to increase the loss incurred from ordinary activities as disclosed in the Income Statement by \$832,203 and to decrease the carrying values in the Balance Sheet to \$Nil.

(d) 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.

ABN 57 063 977 579

NOTES TO THE HNANCIAL STATEMENTS FOR THE HALL-YEAR ENDED 31 DECEMBER 2006

NOTE 1 SUMMARY OF ACCOUNTING POLICIES (Continued)

(e) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised 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 recognised 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 Balance Sheet.

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.

$(f)$ Income Tax

The change for current income tax expenses is based on the profit for the year adjusted for any nonassessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognized to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised.

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 economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

$(g)$ 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 30 days to maturity.

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

SUMMARY OF ACCOUNTING POLICIES (Continued) NOTE₁

(h) Impairment of Assets

At each reporting date, the company reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset's fair value less costs to sell and value in use, is compared to the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to the income statement.

(i) Earnings Per Share

• (i) Basic Earnings Per Share Basic earnings per share is determined by dividing the profit from 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, adiusted 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 recognised as expenses; and
• other discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares.

(i) Non-current Assets

Items of plant and equipment are recorded at cost, being the fair value of consideration provided plus incidental costs. This cost 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.

(k) 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.

$(1)$ 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.

Available-for-sale Financial Assets: Available-for-sale financial assets include any financial assets not included in the above categories and are initially measured at cost being the fair value of the consideration and including acquisition charges associated with the investment. Unrealised gains and losses arising from changes in the fair value of the investment are taken directly to equity.

NOTES TO THE FINANCIAL STATIMENTS FOR THE HALF-YFAR ENDED 31 DECEMBER 2006

NOTE₁ SUMMARY OF ACCOUNTING POLICIES (Continued)

(m) 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.

(n) Share-based Payments

Share-based compensation benefits are provided to directors as approved in general meeting by members.

No expense is recognised in respect of share options granted prior to 1 January 2005. The shares will be recognised when the options are exercised and the proceeds are received and allocated to share capital.

In respect of share options granted after 1 January 2005, the fair value is recognised as an employee benefit expense with a corresponding increase in equity. The fair value of the options are calculated at the date of grant using either Black-Scholes or Geske option pricing models and expensed directly to profit and loss. The resultant values used in the models have been adjusted, based on management's best estimates, for the effects of non-transferability, exercise restrictions and behavioural considerations. Upon the exercise of options, the balance of the share-based payments reserve relating to those options is transferred to share capital.

(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.

(p) Comparative Figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial period.

NOTE 2 SHARE BASED PAYMENTS	Half Year Ended 31.12.2006 (\$)
Options issued to directors pursuant to approval granted at the
Company's 2006 Annual General Meeting
Expensed fully at the independent valuation obtained	435,600
	435,600

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

NOTE 3 OTHER FINANCIAL ASSETS		Half Year Ended 31.12.2006 (5)
Available for sale assets
Balance 1 July 2006		1,246,115
Purchases – at cost		91,856
Sales at carrying value		(18, 113)
Increase in fair value		196,317
Balance 31 December 2006		1,516,175
NOTE 4 CONTRIBUTED EQUITY
	Number	\$
Ordinary Shares
Balance 1 July 2006	60,687,085	11,163,498
Options exercised during the period	13,345,893	3,336,474
Total Shares Issued at 31 December 2006	74,032,978	14,499,972
Listed Options exercisable at \$0.25
Balance 1 July 2006	13,264,393
Options exercised by 25 August 2006	13,210,893
Options expired and unexercised	53,500
	Nil
Unlisted Employee Share Option Plan
Balance 1 July 2006	1,035,000
Exercised during the period	(135,000)
	900,000
Other Unlisted Options
Exercisable at \$0.335 on or before 27 November 2008	1,850,000
Exercisable at \$0.39 on or before 26 November 2009	2,000,000
Exercisable at \$0.37on or before 26 November 2010	2,000,000
Exercisable at \$1.80 on or before 16 November 2011	2,500,000
	8,350,000
Total Options issued at 31 December 2006	9,250,000

NOTE 5 SEGMENT INFORMATION

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, Northern Territory and South Australia.

ABN 57 063 977 579

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

NOTE 6 EVENTS SUBSEQUENT TO REPORTING DATE

In August 2007, Image became the sole founding shareholder of Magnetic Resources NL ("Magnetic") and has funded the costs associated with the preparation of an IPO Prospectus. Pursuant to a Listing Support Agreement, Image will be reimbursed the costs incurred immediately after the listing of Magnetic on the ASX. The amount incurred to 31 December 2006 totals \$44,781.

Subsequent to 31 December 2006, Image has entered into a Joint Venture Agreement with Magnetic whereby Magnetic will be required to incur joint venture expenditures in order to earn an interest in a package of sixty-four tenements. This agreement is conditional upon the listing of Magnetic on the ASX.

Other than noted above, there have been no matters or circumstances that have arisen since 31 December 2006 that has significantly affected or may significantly affect:

• (a) the Company's operations in future years; or
• (b) the results of those operations in future years; or
• $(c)$ the Company's state of affairs in future years.

NOTE 7 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.

The Company is not in a position to assess the likely effect, if any, of any claim on the Company.

DIRECTORS DECLARATION the contract of the contract of the contract of

The directors of the company declare that:

• $\mathbf{1}$ . the accompanying financial statements and notes:
• (a) comply with Accounting Standard AASB 134 : Interim Financial Reporting and the Corporations Regulations 2001; and
• (b) give a true and fair view of the financial position of the company as at 31 December 2006 and its performance for the half-year ended on that date.
• $2.$ 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:

Signed at Perth:

George Sakalidis Director

Dated this 15^th day of March 2007.

1304 Hay Street West Perth WA 6005 PO Box 209 West Perth WA 6872 Tel: (08) 9426 4500 Fax: (08) 9481-5645 admin@somesar@cooke.cam.ou www.somesanda.coke.com.co.

Independent review report to the members of IMAGE RESOURCES NI

Scope

We have reviewed the accompanying half-year financial report of Image Resources NL (the Company), which comprises the condensed balance sheet as at 31 December 2006, and the condensed income statement, condensed statement of changes in equity and condensed cash flow statement for the half-year ended on that date, a statement or description of accounting policies, other selected explanatory notes and the directors' declaration.

Directors' Responsibility for the Half-Year Financial Report

The directors of the Company are responsible for the preparation and fair presentation of the half-vear financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes designing, implementing and, maintaining internal control relevant to the preparation and fair presentation of the half-year financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor's Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Company's financial position as at 31 December 2006 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of the Company, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

Partners Keván Somes FCA John Cooke FCA ACIS

Associates

Suite Aumy CA Rochelle Rose CA CEP^x

$-$ Page 22 $-$ Chartered Accauntants, Business Consultants and Financial Advisers.

Independent review report to the members of IMAGE RESOURCES NL (Continued)

A review of a half-year financial report consists of making enguiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of the Company on 16 March 2007, would be in the same terms if provided to the directors as at the date of this auditor's review report.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-vear financial report of the Company is not in accordance with the Corporations Act 2001 including:

• $(a)$ giving a true and fair view of the Company's financial position as at 31 December 2006 and of its performance for the half-year ended on that date: and
• $(b)$ complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001.

Somes & Cooke Chartered Accountants

Kevin Clarence Somes Partner Perth

Date: 16 March 2007